Wednesday, November 18, 2009

DirectCash Income Fund 2

I want to review stocks touted in the Money Show. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yield. This is one of the stocks (TSX- DCI.UN). This stock currently has a yield of 9.3%. I am continuing my review of this stock from yesterday.

When I look at Insider Selling and Insider Buying reports, the first thing I notice is that the Gallacher family owns more than 40% of the shares of this company. A Jeffery Smith owns some 20%, but most of his shares are listed as special voting. The other thing I notice is that the CFO, some officers and some directors are buying shares in this company. A lot of this buying occurred in the early part of this year when the stock price was below $10.

When you look at spreadsheet ratios, I find that the P/E in the past has been so high as to be meaningless for a comparison with the current one. For example, the 4 year low average is 116. The estimated P/E for 2009 is 17. This is rather high. The reason it has come so low is because of the increase in earnings. In the last 12 months, this company has earnings of $.87. This is more than a 400% increase from last year’s of $16.

The yield on this stock is 9.2% compared to a 4 year average of 9.9%. The Graham Price on this stock, considering the last 12 month earnings and book value at June 2009, is $9.69. The current stock price is more than 55% above this. Also, the Price/Book Value at 3.14 is 160% above the 4 year average of 1.88. None of these ratios point to a good current price.

Globe investor gives this stock a 4 star rating. When I look at analysts recommendations, I find a Strong Buy recommendation and a Buy recommendation. The consensus recommendation will be a Buy. (See my site for information on analyst ratings.) I gather that this stock is liked because of its strong and recurring revenue stream.

This is an income trust that must change to a corporation by 2011. I have found nothing to say what they will do. However, the distribution is expected to remain at $1.38 for 2009 and 2010. The price on this stock has risen sharply lately and I wonder if it is now too high. The other thing I do not like is the lack of growth in the Book Value. In fact, Book Value has been declining at a rate of 9% per year. It has already declined almost 5% this year, so this erosion of Book Value does not appear to be coming to an end. I will track this stock for a few years and see where it goes.

DirectCash is the leading provider of ATMs, debit terminals, prepaid phone cards and prepaid cash cards in Canada. They have built a substantial technological, sales and service infrastructure that enables them to offer convenient and secure revenue streams for businesses across the country. DirectCash operates in Canada, the United States and Mexico. Its web site is See my spreadsheet 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. Also, look at other investing notes on my website at

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