Wednesday, May 12, 2010

Superior Plus Corp

I am reviewing this stock (TSX-SPB) today as the annual report for 2009 has been issued and I follow this stock. I moved in up in my review line up because I was asked to by a reader of my blog. I do not own any shares in this company. The company changed from a Unit Trust to a corporation in 2009.

The company has debt covenants that could restrict dividend payments if certain ratios are not within the requirements set forth in such debt covenants. This is normal in debt covenants. The company does not expect any future problems with dividends in regards to their debt covenants. The company says it understands the importance of dividend to their shareholders and they will continue to maintain the strict management discipline of ensuring that their short- and long-term decisions are made with the purpose of providing their shareholders with a stable long-term dividend.

The first thing I noticed when updating the spreadsheet is that 2009 was not a good year for this company as revenues, earnings and book value all declined. This puts the 5 year growth figures for these items in negative (or close to negative) growth. Even with the great dividend yield, the 5 year total return on this stock was also in negative territory.

The 10 year growth figures were much better. For example, the revenue per share grew 9.9% per year and the earnings grew 11.6% per year. Even the 10 year total return growth was quite good, coming in at 14.7% per year. I think the real problem is the volatility in cash flow. Their cash flow problems stretches back a ways, at least to 2003. The best that I can say is that, since 2008, the dividends paid has not been greater than the cash flow.

The next thing to talk about is the Liquidity Ratio and the Asset/Liability Ratio. Both these ratios are low. The current Liquidity Ratio is at 1.24 and the A/L Ratio is 1.34. These ratios are at least over 1.00; however, I would much prefer these ratios to be at least at 1.50. The point is that the company’s balance sheet is weak. I should note that I am showing the most recent ratios. Both these ratios declined from the end of 2009 when the Liquidity ratio was 1.38 and the A/L Ratio was 1.35. The 2009 ratios were not great ones, but they were at least better.

The first quarterly results of March 2010, has been in many respects quite good, with revenues, earnings and cash flow coming in better than for March 2009. The problem areas are Liquidity and A/L Ratios mentioned above and the decline in Book Value per share. The decline in Book Value per shares has more to do with the increase in shares outstanding, as Book Value increased, but not enough to cover the new outstanding shares.

Tomorrow I will talk about what the analysts say and look at spreadsheet ratios involving the stock price.

Superior Plus Corp. is a group of diversified businesses that operate within three primary divisions. Superior’s Energy Services division provides distribution, wholesale procurement and related services in relation to propane, heating oil and other refined fuels throughout Canada and the North Eastern United States. Superior’s Specialty Chemicals division is a leading supplier of sodium chlorate and related technology to the pulp and paper sector and a regional Midwest supplier of chloralkali and potassium based products. Superior’s Construction Products Distribution division is a leading distributor of walls, ceilings and insulation products to the Canadian and United States construction industry. Its web site is here Superior. See my spreadsheet at spb.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 for stocks followed and investment notes. Follow me on twitter.

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