MI Developments

I had read some favorable reports on this stock (TSX-MIM.A, NYSE-MIM)) in 2003 by TD Newcrest and so I bought some stock. I also bought more in 2006. I was sort of trying it out. I sold my shares in 2009. I decided that this stock was going nowhere and was not the sort I wanted in my portfolio. I lost 22% per year on this stock. Good job I did not invest much in it.

No one over the past 5 or 8 years has made much money on this company. Those that bought at the beginning, as this company has only been trading since 2003, have basically broken even on the share price and made just over 2% in dividends since 2003. Dividends would have been a problem with this company for Canadians as they are paid in US$. They remained flat in US$ between 2006 and 2009 until they were decreased by 1/3 in 2010. However, in CND$ terms the dividends would have fluctuated a fair bit.

Of course, this stock is in real estate, and we all know the recent recession has not been kind to real estate companies. Also, this company is closely tied to Magna and Magna hasn’t done that well over the past 5 and 10 years either. As far as I can see, the only growth figures for this company are for cash flow and this for the last 5 years. Cash Flow has grown at the rate of 6% per year and cash flow exclusive of non- case items has grown at the rate of 15% per year. This is not a bad showing.

This company has had no earnings since 2007 and it is not expected to have any for 2010. I know that since it is a real estate company people like to look at FFO (Funds from Operations) rather than earnings. However, even though the FFO is positive, the growth in FFO over the past 5 years is -12% per year. There is also no growth in revenues or in book value. It does not matter if you look at the US$ figures or the CDN$ figures, there is no growth.

The really only good thing to report on this stock is the good debt ratios. The Liquidity Ratio is at 1.66, which is a good ratio. (However, this ratio has fluctuated quite a bit over the years.) The Asset/Liability Ratio is great at 4.53. This ratio has always been good and the 5 year average is 3.15. The Leverage Ratio is also good. In the case of the Leverage Ratio, the lower the better and at1.43, this ratio is low.

In the newspapers, I have been reading lately that this company and Magna are paying a lot to get rid of Frank Stronach. You have to ask yourself whether it is worth it. I know that the stock soared after Frank agreed to give up his control. However, can someone else run this company better? You have to wonder.

It reminds me of the action to get rid of Conrad Black from Hollinger International. No matter what you might think of the man, the average shareholder lost when he left. The newspaper business is a tough business, but he produced returns of around 8% per year for the shareholder. The people that took over bankrupt the company. They spent more time going after Conrad than looking after the company. The average shareholder lost big time as they do whenever a company goes bankrupt.

Tomorrow, I will look at what analysts are saying about this stock. However, there are few following this stock compared when I first bought it in 2003.

This is a real estate company that currently owns, leases, manages and develops a predominantly industrial rental portfolio. Almost all of their income producing properties is leased to Magna and its subsidiaries. It also holds 53% equity and 95% voting interest in Magna Entertainment Corp (MEC.A). Its web site is here MI Developments. See my spreadsheet at mim.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.