Wednesday, March 9, 2011

Canadian Helicopters Group

I recently read a favorable report about this stock (TSX-CHL.A), so I decided to investigate it and see if it was indeed this company would make a good investment. I picked it up from Financial Post. The Financial Post had an article about screening for small caps. This company has recently changed from and income trust (TSX-CHL.UN) to a corporation. The dividends or distributions seem to be holding steady.

The dividends are one reason I would currently not buy this stock. There has really only been one dividend increase (2008) of 4.5% since this company started to pay dividends as an income trust in 2005. Before that date, the company seems to have been a private one. However, the current dividend is a very healthy one at 6.3%. But, I prefer stocks that have a habit of increasing their dividends.

This company has only been public since 2005, so I only have 5 years of data on my spreadsheet. I can see why this stock was chosen, as the total return on this stock is around 20%, with 10% of this return coming from dividend income. The company also has a relatively low payout ratios averages for the last 5 years, with an Earnings Payout Ratio at 62% and a Cash Flow Payout Ratio of 43%. Low payout ratios give confidence that dividend payments can be maintained and possibly raised.

Some of the growth figures on this stock are ok, but not great. Take the growth in revenue per share, as this has only grown at the rate of 5.5% per year and 5% per year over the past 5 and 8 years. (As the company was established before it went public as an income trust in 2005, I have revenue figures back to 2002.) The growth in book value is also rather low at 6.6% per year for the last 5 years. However, it is rather typical of income trusts to have very low or even negative book value growth.

The growth in cash flow has been uneven and is at negative 11%. However, the growth in cash flow excluding working capital is at 30% per year over the past 5 years. As this stock ages, and we get more statistics, these growth figures might change for the better.

An important thing for a small cap stock to have is good debt ratios. This is the case for this stock. The Liquidity Ratio currently at 3.57 and the company has a 5 year average at 2.10. The current Asset/Liability Ratio is 4.23 with a 5 year average of 3.62. For these ratios, anything over 1.50 is very good. The Leverage Ratio is 1.68 with a 5 year average of 1.81 and a Debt/Equity Ratio of 0.40 with a 5 year average of 0.54. For the last two ratios, lower is better. Both the ratios are good.

The last thing to talk about is the Return on Equity. The financial year ending in December 2009 had a ROE of 16.7% and the 9 month financial period ending in September 2010 has a ROE of 13.7%. The 5 year average is 15.3% and this is good.

There are not many analysts following this stock, but I will talk tomorrow about analyst recommendations. I will also talk what my spreadsheet says about the stock market price.

Canadian Helicopters Limited is the largest helicopter transportation services company operating in Canada. Canadian Helicopters provides helicopter services to a broad range of sectors, including emergency medical services, infrastructure maintenance, utilities, oil and gas, mining, forestry and construction. In addition to helicopter transportation services, Canadian Helicopters operates two flight schools, provides third party repair and maintenance services in Canada and provides military support in Afghanistan. Its web site is here CDN Helicopters. See my spreadsheet at chl.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.

1 comment:

  1. Hey Susan,

    I with you on this one, "the dividends are one reason I would currently not buy this stock."

    I like getting predictable pay, increasing pay over time is even better :)

    Thanks for the review, it was interesting!