Friday, August 31, 2012

Rogers Sugar Inc 2

I do not own this stock (TSX-RSI). This stock was brought to my attention by Dividend Ninja. This company used to be a Unit Trust (TSX-RSI.UN) but it has converted to corporation.

There is little insider trading, with some insider selling and some insider buying with a small net of insider selling. Belkin Enterprises Ltd. owned by Alton Stuart Belkin owns around 13% of the outstanding shares worth around $70M. Most insiders have some shares or debentures. There are some use of options, but very little.

There are 13 institutions that hold some 28% of the outstanding stock. Over the past 3 months they have very marginally increased their shareholdings. Because the increase is so small it tells us that they are just holding on to their shares.

I get 5 year low, median and high median Price/Earnings Ratios of 8.06, 9.42 and 10.40. The current P/E is 12.12 based on a stock price of $6.18 and a 2012 EPS of $0.51. Although this is not a particularly high P/E Ratio, it is certainly relatively high for this stock. (Using 10 year median P/E Ratios would not help as these are very close to the 5 year P/E Ratios.)

However, companies transitioning from an income trust to a corporation are expected to have stock price increases and dividend decreases or a combination so that the dividend yields go to a 4 to 5% yield. The yield on this stock is above this 4 to 5% range coming currently in at 5.83%, this might suggest that the stock price may not be that high.

I get a Graham Price of $5.86 and 10 year low, median and high median Price/Graham Price Ratios are 0.69, 0.78 and 087. This means that the Graham Price is usually higher than the stock price. The current P/GP Ratio is 1.05. This means that the stock price of $6.18 is relatively high.

I get a 10 year Price/Book Value Ratio of 1.38. The current P/B Ratio is 2.07, a value some 50% higher than the 10 year median. This test shows that the stock price of $6.18 is relatively high. As with all income trusts, this book value growth is non-existent or very low. Most income trusts cannot pass this test.

The dividend yield test would also say that the stock price is relatively high. This is because the 4 year median dividend yield is 10.18% and the current dividend yield is 5.83%, a yield that is some 43% lower. However, this stock went from an income trust to a corporation and it was expected that a combination of dividend decreases and stock increases will lower dividend yields on these companies to a 4 to 5% dividend yield.

Part of the decrease in dividends is due to the fact that dividends were initially reduced by some 26%. The stock price has also gone up and this stock shows a dividend yield above the 4 to 5% range. This is implies that the stock price has not risen or the dividend has not been cut as much as expected or some of both. It may also imply that the stock may not be overpriced. Sometimes these things are not a clear cut as we might like them to be.

When I look at analysts' recommendations, I find only a few analysts following this stock and they all have the same rating which is a Hold. The consensus recommendation would be a Hold. It would seem that the consensus 12 months stock price is around $6.00. This implies that the analysts do not expect much in capital gain over the next 12 months. In fact they expect a capital loss over the next 12 months.

One analyst with a Hold recommendation thinks that the stock price is too high. Another analyst complained that that sugar prices can vary so much over time. A few mentioned that one of their main inputs is natural gas, and natural gas is currently very cheap. (The energy they use is from natural gas.)

Although this blog report is from last year, it is from a blogger than likes this stock and he has some interesting things to say about it. See Divestor Blog.

I must admit this is not a stock that I would buy. It is a mature and low growth stock, but I perceive it as rather risky. If I want a risky stock with dividends, I go for fast growing stock with dividends. I do favor tech companies.

I perceive this company as risky as sugar is a commodity and prices of commodities are generally volatile and I do not invest in commodity is any sort of big way. For example, I have very little in oil and gas investments. I admit that in these sorts of investments you can sometimes make a lot of income, but it is volatile and I do not like my income to be volatile.

Rogers Sugar Inc. was established to hold all of the common shares and notes of Lantic Inc. Lantic Inc. is a refiner, processor, distributor and marketer of sugar products in Canada. Its web site is here Husky. See my spreadsheet at rsi.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. Susan, I enjoyed reading your two posts on Rogers Sugar (RSI). You are completely correct, RSI is a yield hog with little potential for capital growth. But then I though the same thing about K-Bro Linen as well a year ago. LOL

    I've owned Rogers Sugar (RSI) for 15 months now, and I've made a total return (ROI) of 21.8%. That gives me an annual total return of 17.44%. Quite impressive I would say. :)


    The Dividend Ninja

  2. Did you read Divestor's comments that I linked to. He also rather likes this stock.

    My trouble with it is that I see it as risky and not a buy and ignore type of stock.


  3. Hi Susan,

    I sold my Rogers Sugar stake at around the 5.40 price range. It is now trading around 6.20. The last time I did purchase them was in early 2009 when they were trading in the low 3's per unit.

    Rogers Sugar is a well run company, but the potential for appreciation from current values is quite limited. Also the chase for yield in the low interest-rate environment has resulted in them being bidded up to their existing levels. I don't regard them as a good risk-reward ratio at this price.

    Thanks for the mention.