K-Bro Linen Income Fund

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). This stock currently has a yield of 8.3%. I have not bought this stock.

One of the problems I see with this stock is the increase in units or shares. In the annual reports, the company talks about their increase in distributions, but except for the increase in distributions between the annualized distribution of the first year and the distribution of the second year, there has been no increase in distributions per share. This is because of the increase in units.

There had been a nice increase in revenue over the last 4 years, at about 21% per year. However, if you look at revenue growth per share, this comes in rather low at 3.7% per year. The growth in book value at 2% per year is nothing to write home about either. The good growth is in Total Return and this comes in at just over 10% per year per share. The other good growth figure is the growth in Cash Flow. This comes in at just over 10% per year per shares also.

When you look at the Liquidity Ratio, it is ok, but not great, at 1.29 at the end of 2008. I would prefer it to be at 1.50. At the end of September 2009, it was much better at 1.79. However, the Asset/Liability is very good at an average of 3.02 and at September 2009 at 4.21. The next thing to talk about is the Return on Equity or ROE. The ROE has a 4 year average of 8% to the end of 2008. For September 2009, the ROE it was 9.2% and this is not bad.

This stock was hit by the recent recession, but is now back up to what it was in 2007. I will talk about what the analyst recommend tomorrow. For me, I will continue to track this stock, but I would like to see the stock perform better per share before I would buy any.

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 www.k-brolinen.com. See my spreadsheet at www.spbrunner.com/stocks/kbl.htm.

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 www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets. Also, look at other investing notes on my website at www.spbrunner.com/investing.html.