Alliance Grain Traders Inc

I want to review all the income trust 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 the last Income Trust (TSX- AGT) that I got from the Money Show. This stock has already converted to a corporation. Since then the yield has declined from around 7% to around 2%.

This income trust was established in April 2005, so it has only financials since 2005. Some of the growth figures look very good. For example, the revenue has grown by 241% per year over the last 4 years; the earnings have grown by 148% per year over the same period; and the dividend has increase almost 12% per year during this period. If you look at the Book Value per shares, this has also increased nice by some 23% per year.

Now, what I do not like about this stock. Because the number of shares has increase at an average per year rate of 144%, the revenue per share has only increase by 71% per year. This is still a good increase, but not anywhere near the actual revenue increase. The Cash Flow from Operations has been negative over the last two years, and I find this troubling. Also, if you look at the Accrual Ratio, this has always been very high. High is anything over 5% and this ratio was almost 38% in 2008. It has come down slightly to 25%, but this is very high. If you include the Financial Activities Cash Flow into this ratio, it comes down to 6% but again, this is still very high.

If you look at the Liquidity Ratio and the Asset/Liability Ratio, these ratios are not bad. The Liquidity Ratio has been ok, and was 1.91 at the end of September 2009. It has a lower average of 1.18, which is acceptable, but not great. The Asset/Liability Ratio has always been good. At September 2009, it is 3.00 and the 4 year average is 1.83. For these ratios, anything at 1.50 or above is good.

This looks like an interesting stock and might have good potential as a great dividend paying growth stock, but I will not be buying it for myself at this time. I will continue to follow this to see how it turns out over the next few years. Tomorrow, I will talk about what the analyst say.

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. and Australia 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 www.alliancegraintraders.com. See my spreadsheet at www.spbrunner.com/stocks/agt.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.