Friday, July 6, 2012

HNZ Group Inc 2

I do not own this stock (TSX-HNZ.A; TSX-HNZ.B). This stock was formally Canadian Helicopter Group (TSX-CHL.A; TSX-CHL.B) but is changing the name effective in July 2012.

From the insider trading report, I find $2.09M of insider selling and $2.06M of net insider selling. So you can see there is a very small amount of insider buying. Buying seems to be all under the company plan. Insiders do own shares, but they do not seem to have any stock options. Buying is done via a company plan.

There are 16 institutions holding 49% of the shares of this company. Over the past 3 months they have reduced their exposure to this company by 5.2%, but there was 1 net new buyer of these shares. This is a negative, but you do not know why stock is being sold.

Price/Earnings Ratios on this stock has always been quite low. The 5 year low, median and high P/E Ratios are 4.14, 5.37 and 6.61. The current P/E Ratio is 7.61. This ratio is relatively high for this stock, but it is still quite a low actual ratio.

I get a Graham Price of $37.28. This stock’s price is generally below the Graham price. The 10 year low, median and high Price/Graham price Ratios are 0.39, 0.50 and 0.66. The current P/Gp ratio of 0.78 is relatively high. However such a ratio shows a rather low actual stock price. A good stock price is one at or below the Graham Price.

The 10 year Price/Book Value Ratio is 1.05 and the current P/B Ratio of 1.82 is some 74% higher. What you want is a current one around the 10 year P/B Ratio to show a reasonable current stock price, or one 80% lower to show a very good current stock price. The current ratio shows a relatively high stock price. However, the 10 year P/B Ratio is quite low and the current one is a good ratio.

The 5 year median dividend yield is 9.5% and the current yield of 3.77% is a lot lower. Generally, you are looking for a current one higher than the 5 year median. However, it was expected the dividend yields would go lower on companies switching from income trusts to corporations.

So what all my stock price tests show is that the stock price is relatively high for this stock. However, you can also see from these ratios that this stock has in the past had actually quite low ratios. When the income trust companies changed to corporations you would expect the dividend yields to come down, but you would not normally expect changes to the other ratios. So my conclusion is that the stock is selling at a relatively high price compared to its past.

When I look at analysts’ recommendations, I find recommendations of Strong Buy, Buy and Hold. The consensus recommendation would be a Buy. The 12 months stock price target is $37.80. This implies a total 12 month return of 33.05%, with 3.77 from dividends and 29.27% from capital gain. The expected return for this stock is quite high over the next 12 months.

An analyst with a Hold rating gave a 12 months stock price at $32.00. This would still be a very decent 13.21% return with 9.44% from capital gains.

The company has contracts for helicopters in Afghanistan and in Canada’s natural resources sections. It is felt that these might be at risk in the future. Everyone seems to feel that their purchase of Helicopter (NZ) Ltd. was a good move. One analyst with buy recommendations noted the low ratios for this company as a reason to buy. Another mentioned it low debt and its low Dividend Payout Ratios as a reasons to like this company.

Others are concerned about a downturn in resources in the near future and feel that their contracts in Afghanistan will come to an end as the US is pulling out.

It does seem like a very good company, with very good growth rates at a time that a lot of companies are having a hard time growing. This is all to the good. It probably had low ratios in the past because it was a small company and ratios should normalize as it grows.

I still prefer stock that increase dividends over time. I think that this stock is at a place where it could do this if it so desires.

HNZ Group Inc. is an international provider of helicopter transportation and related support services with fixed primary operations in Canada, Australia, New Zealand and regions of Southeast Asia. The group also delivers contracted on demand support in Afghanistan and Antarctica. Its web site is here HNZ Group. See my spreadsheet at hnz.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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