I am an accredited or eligible investor as defined in National Instrument 45-106.




Liis Palmer, Cassels Investment Management Inc.

Last week the Marquest Monthly Pay Fund (A units) closed at $5.34, down from $5.41 the previous week. The TSX lost 1.6 percent in the same period. Despite its traditional position as a safe haven during geopolitical tensions, gold traded down US$12 on the week to US$1,287. Comments from the US Federal Reserve indicated concern about low levels of housing activity. Consequently, rate hike expectations diminished for the time being. Stronger trade data out of China for April supported a strong copper price.

Leading contributors in the portfolio were Pembina Pipeline (up 2.9 percent), Bell Aliant (up 2.1 percent) and Allied Properties REIT (up 3.0 percent). Pembina reported a very strong Q1. EBITDA was $316 MM, above consensus expectations of $252 MM. The marketing business results were exceptional and conventional pipelines and gas processing were better than expected. New projects have been integrated well and margins and cash flow from existing businesses have improved. The Phase III Peace Pipeline expansion will support continued long term cash flow growth. The simple payout ratio in the quarter was 51 percent. Pembina increased its dividend by 3.6 percent.

Laggards in the portfolio were Bonavista Energy (down 4.7 percent), Wajax (down 7.0 percent) and Black Diamond (down 9.8 percent). Black Diamond is in the remote accommodations business. Their customers are in the conventional oil and gas, infrastructure and oil sands industries. They are currently bidding on tenders covering 20,000 beds associated with LNG development. Their Q1 EBITDA was less than expected ($43 MM versus consensus of $44 MM) due to revenue mix and this accounted for the stock price weakness, but EBITDA is expected to grow by 40 percent over the next 2 years.

The information above is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this paper are derived from proprietary and non-proprietary sources deemed by the author to be reliable. The information is not necessarily all-inclusive and is not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any way for errors and omissions is accepted by Marquest, its officers, employees or agents. This paper may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. We caution you not to place undue reliance on these statements as a number of important factors could cause actual events or results to differ materially from those expressed or implied in any forward-looking statement contained herein. All forward-looking statements are subject to change and are provided in good faith but without legal responsibility. © 2014 Marquest Asset Management Inc. All rights reserved.

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