Wednesday, September 24, 2008

Melcor Dev 2

As I said yesterday, this is another stock (TSX-MRD) that I have gotten from Mike Higgs’ list at I note that several people have a Strong Buy rating on this stock. However, there is a saying that you can be right about a stock longer than you can remain solvent. In other words, do not bet against the market. I think that this is a good stock, but it has been going down for over a year. It is not the time to buy.

However, having said that, I understand why people have a Buy rating on this stock. No one expects that this stock will have Earnings per Share (EPS) at $2.00 as this stock did in 2007, this year. However, it is expected that by the fiscal year end of 2009, this company will be again earning $2.00 or more in EPS. You can see that the people running the company have some faith in it as they have already raised the dividend by 25% this year, from $.40 to $.50.

The company was cautious in their outlook for 2008, but feels they have the assets, resources and experience to weather the current real estate market and do better in the future. Looking at charts, this company has down far worse than the TSX index or the Real Estate index over the past year. However, it has down as well as these indexes over the past 3 years and better than these indexes over the past 5 and 10 years. However, you cannot help but notice the sharp decline from mid 2007 to present. It might be wise to see some market confidence in this stock before buying.

Note that with the June 2008 quarterly report the Accrual Ratio is much better at 1.5% and even with the Financial Cash Flow included it is still less than 5%. However, I have to admit the Accrual Ratio seems to have no affect on this stocks price.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi- family sites and commercial sites. The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is See my spreadsheet at I have reloaded my spreadsheet as I have updated it with the values from the June 2008 quarterly report.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets on my web site.

No comments:

Post a Comment