Friday, December 4, 2009

Alliance Grain Traders Inc 2

I want to continue my review of this income trust (TSX-AGT) 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 the last Income Trust that I got from the Money Show. This stock has already converted to a corporation.

When I look at Insider Selling and Insider Buying reports, I see some selling, but it happened in September 2009 and it was only for $10,000. This really tells us nothing. However, what I do see in this report is that the Arslan family owns just over 25% of the stock of this company.

When you look at spreadsheet ratios, I find that the 5 year average low P/E is almost 12%. The current P/E is lower at just under 11 and the forward P/E is just under 10. Any P/E of 10 or less is low, so the P/E is not bad. The other good indicator is the Graham Price is higher than the current stock price. Any stock price at or lower than the Graham Price is a good price. However, there is little space between the Graham Price of $26.73 and the Stock Price of $26.25.

When you look at yield and Price/Book Value, you get a different view. The 5 year average yield is just over 7% and the current yield is around 2%, so this has come down a lot. At the Money Show, most of the analysts expected that when the Income Trust changed to corporation, the yield would come in between 4% and 6%. This yield is a lot lower than that. The reason for this low yield is that the stock price has climbed over 205% since the end of 2008. When I look at the Price/Book Value, I find the 5 year average to be 1.40, but the current one to be higher at 2.02. The Price/Book Value ratio points to a relatively high current stock price.

Globe investor gives this stock a 4 star rating. When I look at analysts recommendations, I find Strong Buys recommendation and Buy recommendations. The consensus recommendation will be a Strong Buy. (See my site for information on analyst ratings.) The consensus is a Strong Buy because most of the recommendations are Strong Buy. It is felt that this company has a great future and that the purchase of Arbel Group was a great move.

I like to talk a bit more about the Accrual Ratio that I do not like. This is because a high Accrual Ratio can signal that there are problems. The format of a negative Operational Cash Flow, with a negative Investment Cash Flow and positive Financing Cash Flow is not bad in itself. It is what happens on a young fast growing company. This company could be classified as such. What really bothers me is the positive earnings with the above cash flow configuration. You have to wonder how good their earnings are.

As you can see from the recommendations, no one else seems bothered about the Accrual Ratio. The reviews I have read, feel that this is a great little company. It could be. However, I think that it is probably a risky investment. You get mixed signals from the ratios as to whether or not this is a good stock price. Perhaps the Graham Price is the best one to go by and this says the price is good.

Alliance Grain Traders Inc through its subsidiaries, Alliance Pulse Processors Inc. ("Alliance") and Arbel Group ("Arbel"), is engaged in the business of sourcing and processing (cleaning, splitting, sorting and bagging) specialty crops, primarily for export markets. Alliance and its subsidiaries in Canada, U.S., Australia and Turkey handle the full range of pulses and specialty crops including lentils, peas, chickpeas, beans and canary seed through six processing plants. The company recent bought the Arbel Group of Mersin, Turkey. 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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