Monday, November 16, 2009

K-Bro Linen 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- KBL.UN). I have not bought this stock. I am continuing my review of this stock from Friday.

When I look at Insider Selling and Insider Buying reports, I find that there has been a bit of Insider Buying by company officers. But this occurred in the early part of this year. There has been no activity since. So, this reporting tells us little.

When you look at spreadsheet ratios, I find that I have a P/E of 13.6, which is just below the 5 year average low of 14.6. The yield of 8.3% is a good one; however, the 5 year average is 8.8%. They have not raised their distributions over the last 4 years. If you look at the Price/Book Value ratio, the current one is higher than the last 4 years. (We do not have a long term one, as there are only financial records available for 4 years. However, the current Price/Book Value of 1.45 is not bad.) The Price/Cash Flow at 6 is low than the 4 year average of 9.

The last thing to look at is the Graham Price. Currently, the stock price is some 6% lower than the Graham price. The Graham Price is $14.10 and the current stock price is $13.19. Generally speaking, any stock price at or below the Graham price is a good one.

Globe investor gives this stock a 5 star rating. When I look at analysts recommendations, I find a Strong Buy recommendation, a couple of Buy recommendations and a couple of Hold recommendations. There are few of analysts following this stock. The consensus recommendation will be a Buy. (See my site for information on analyst ratings.)

This is an income trust that must change to a corporation by 2011. They seem to say that there will be no effective on their distribution policies, but they do not state this categorically. They also seem to say that a change to a corporation by December 2010 may be a suitable structure for them. Bottom line is that they really have not stated their intentions. I would feel more comfortable about this fund if they had been more clear on what they intend to do. December 2010 is not that far off.

The reason for the buy type recommendations is that this company gets 75% of its revenue from large publicly funded health-care facilities. The currently recession should have little effect on the company and the company has a strong balance sheet. With an 8% return, and perhaps modest rise in stock price, you could do well by this stock. Personally, I prefer stocks that raise their dividends and this stock seems to have no current intentions of doing so. However, it does seem to be reasonably priced.

K-Bro Linen Systems Inc., the Fund’s 100% owned operating subsidiary ("K-Bro"), is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to large healthcare institutions, hotels and other commercial accounts. 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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