Thursday, July 26, 2012

Granite Real Estate

I so not own this stock (TSX-GRT, NYSE-GRP), but I used to. I owned it as MI Developments (TSX-MIM.A). I bought this stock in 2003 and some more in 2006. The stock started going down in 2008 and was quite low in 2009. When it recovered a bit, I sold.

I lost about 67% of my money. I should probably have waited a bit as the stock price has recovered. I earned dividends too, so my loss is something like 59%. I had lost hope in this stock and felt that it was time to sell and move on. This was a company that Frank Stronach has multiple voting shares in and therefore he controlled the company.

Dividends have fluctuated on this stock. The dividends were initially moved down a bit in 2010, but in 2011 they were moved back up again and then there was a big increase in 2012. The current dividends are over 200% higher than what they were in 2009. The other change they have recently made in dividends is to change the dividends from US$ to CDN$ (as of the May 2012 dividend).

I do not think that past Revenue will inform us much on future growth. There was a huge drop in revenue in 2011 as the Company's Racing & Gaming Business was given to Frank Stronach to buy his multiple voting shares.

As far as earnings go, from 2008 to 2010 inclusive was years of losses. However, earnings were positive in 2011 and analysts are expecting a very nice increase in earnings for 2012. The company's recent increase in dividends would also suggest that the company is expecting a nice increase in earnings for 2012. In the first quarter of 2012, earnings were $.63 compared to consensus expected earnings of $.60.

As far as total returns over the past 5 and 10 years, this company has not done well. Over the past 5 year period, the total returns are a loss of 3.07% per year with capital loss of 4.81% per year and dividends at 1.74% per year. The 10 year period was not great with total returns of 4.27% per year with capital gains of 2.2% per year and dividends of 2.07% per year. Dividends were almost 49% of the total returns over this period.

Cash flow was better with the 5 and 10 year growth rates of 16.5% per year and 4.4% per year, respectively. There was no growth in book value and it was down substantially over the past 5 and 10 years.

However, considering the recent big change in management, what this stock has done or not done in the past may have no value now in determining how the future may go. The other recent big change is that the past financial reports were using US currency, but the most recent quarterly report was in CDN currency. This quarterly report was still using US GAAP rules.

For Return on Equity calculation, I am using the earnings on continuing operations as most analysts' are. That gives an ROE of just 6.62%. The 5 year median ROE is below 0%, as there have been a number of years of losses.

The current Liquidity Ratio is 1.48 and this is a fine ratio. The 5 year median ratio is 1.33, which is a bit low. The liquidity ratio has often moved around a lot over the years. The Debt Ratio is very good at 3.50. The Debt Ratio has a very good 5 year median ratio 3.70.

Current Leverage and Debt/Equity Ratios are also good at 1.40 and 0.40 respectively. Their 5 year median ratios are also good at 1.60 and 0.60.

It is hard to say how well this stock is going to do. I have read reports year after year of how great a company this was as an investment, but none of this has come true. Maybe this stock will now live up to the potential some analysts have felt it had over the past few years. Management is certainly optimistic amount the company's future with their recent dividend increase.

Granite is a global real estate operating company engaged principally in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe leased primarily to Magna and its automotive operating units. Members of the Magna International Inc. group of companies are our primary tenants. Its web site is here Granite Real Estate. See my spreadsheet at grt.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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