GoEasy is a provider of non-prime consumer loans in Canada. The stock has sold off for the obvious reason that there is a clear risk that their bad debt experience could increase over the next few quarters as Canadians experience job loss due to the pandemic. The company has always shown very strong lending controls and has managed bad debts extremely well in previous difficult periods (including its exposure to Calgary over the last few years with the prolific job losses in the energy sector). The company’s borrowing base is committed and secured. I have spoken to the company more than once over the last few weeks and am increasingly comfortable with the company’s ability to manage through this environment. We have added to the position during the March sell-off.

The three names that had the most positive contribution to the portfolio in the quarter included Xebec Absorption Inc, Kinaxis Inc. and Semafo Inc. Collectively these three names added +0.5% to the portfolio. This number does put in perspective how bad markets were over the course of the first quarter.

Semafo Inc. is a gold producer operating in Burkina Faso with two assets. Semafo was taken out by Endeavour Mining at a significant premium. Endeavour is also a gold producer located in West Africa. The combination of these two companies results in a significant West African gold producer with multiple low-cost assets diversified across various regions incredibly well financed and managed and positioned for growth. Semafo had suffered a material adverse event last year when their workers were attacked by ISIL. The mine was shut down to introduce stricter security protocols (fly in fly out). Endeavour has been an aggressive acquirer in the region and worked closely with Semafo during this difficult time. The deal is accretive, and we owned both companies when the deal was announced. With the market downdraft we have added to our gold positions including Endeavour.

Kinaxis is a SaaS company providing cloud-based supply chain planning, monitoring and response solutions for their clients. Their customers are from diverse industries and varying sizes. The company has a strong balance sheet with a recurring revenue model. Most installations do not require on-site access, but sales may be impeded given travel restrictions and other more pressing issues within their client base and new prospective clients. By and large we believe Kinaxis’s business will be minimally impacted by the coronavirus versus other industries. We have continued to add to the position with the sell-off in the market.

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