Monday, March 30, 2009

Melcor Development

I am reviewing this stock (TSX-MRD) today as I have just received the annual report on this stock. I bought this stock in 2008, and so far, I have only lost money on it. When I was reviewing the stock in September 2008, I got an estimate for the earnings of $1.64. However, the earnings came in lower at $1.31. Earnings estimates have since then been reduced.

I am going to continue to hold this stock. What I like about it at the moment is that the current price is below the book value. The current price is $4.50 and the book value at December 2008 is $10.41. Also, the current price of $4.50 is also almost 75% off the Graham Price of $17.52. The problem is that this company is in real estate in Calgary. This company will probably not pick up soon.

The other thing I like about this stock is the increase in dividends over the years. Over the last 5 years, it has increased its dividend some 30% per year. However, the last 10 year the dividend increases is not so impressive at 10% per year. It would appear that it plans to decrease dividends for 2009, as the last semi-annual dividend was only $.17 a share. However, it had already issued dividends for $.25 in the first part of 2008, to have an increase in dividends of 5% for 2008.

There may not be a decrease in dividends for 2009, but we will not know until the all the dividends have been declared for 2009. This company also has the happen of a habit of issuing special dividends. They have a problem in 2008 annual report, as there is a negative cash flow. A good cash flow is necessary in order to increase dividends.

The next things to discuss are the Asset/Liability Ratios and the Return on Equity (ROE). First of all the Asset/Liability ratios is healthy at 1.78, where anything over 1.50 is good This means that total assets can cover total liabilities. The ROE is much at 13.2% for December 2008 is lower than the 5 year running average of 19%.

2008 was not a great year for this company. The Earnings are lower, the ROE is lower and the Cash Flow is negative. However, this is a Real Estate company and they all are having a hard time. We are not going to see any improvements in the company until the economy picks up in Alberta.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi- family sites and commercial sites It operates mostly in B.C. and Alberta. The company also develops, owns and manages commercial income properties, as well as two golf courses. Its web site is See my spreadsheet on this company at

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.

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