Alliance Grain Traders Inc 2

On my other blog I am today writing about the Money Show in Toronto for 2012. I will be putting my notes up as I transcribe them...continue...

I do not own this stock of Alliance Grain Traders Inc. (TSX-AGT). I started to follow this stock after it was mentioned by a number of speakers at the 2009 Toronto Money Show. At that time it had already converted from an Alliance Grain Traders Income Fund (TSX-AGT.UN) to a corporation. When it converted, the stock price when up and the dividend yield dropped from almost 7% to around 2%.

When I look at insider trading, I find minimal insider buying (of $0.3M) and no insider selling. The annual statement says that the Arslan family owns some 27.5% of the outstanding shares. Some insiders have options, and the CFO and one officer has more options than shares. However, some insiders, including members of the Arslan family do own millions of dollars in shares. For example, the CEO owns some $4M in shares.

There are some 27 institutional holders and hold around 33% of the outstanding shares. Over the past 3 months they have decreased their share holdings by 5%.

The historical Price/Earnings Ratios are rather mucked up because of negative earnings in 2011 and since this company was only established in 2005, I do not have many years to look at. P/E ratios for this stock are also all over the place. The median Ratios range from a low of 4.25 and a high of 32.42 (ignoring the negative one for 2011). The 6 year low, median and high median P/E Ratios are 5.27, 8.41 and 11.54. All these are P/E Ratios or low to moderate. The current P/E ratio is 20.44. This is a bit high, but not overly so.

I get a Graham Number of $14.47. The 6 year low, median and high median Price/Graham Price Ratios are 0.78, 0.79 and 1.05. The current P/GP Ratio is 0.96. When this ratio is below 1.00, it means that the stock price is lower than the Graham Price. Theoretically, you want to buy a stock when the stock price is at or below the Graham Price. The current ratio is also between the median and high range of ratios. I think that this reasoning gives us a reasonable stock price.

The 6 year Price/Book Value per Share Ratio is 1.51 and the current P/B Ratio is 1.02. The current ratio is only 67% of the longer term ratio. This low current ratio suggests that the stock price is low.

The 5 year Dividend yield is 2.84% and the current dividend yield is 4.32%. This current dividend yield is some 52% higher than the 5 year median dividend yield and this suggests that the stock price is low.

When I look at analysts' recommendations, I find Strong Buy, Buy, Hold, Underperform and Sell recommendations. The consensus recommendations would be a Hold. The consensus 12 months stock price is $16.20 and this implies and total return of 20.86%, with 4.32% from dividends and 16.55% from capital gains.

There is an article in the Financial Post dated July 2012 talking about Canaccord upgrading this stock from a hold to a buy because of a dryer than usual monsoon season in India. A more recent article in Forbes dated October 2012 says that this company is oversold. (When a stock is oversold it means it is a good time to buy it.) The Happy Capitalism blogger has also recently written about this stock.

I still think that this stock is rather risky, but you could buy it for diversification.

Alliance Grain Traders Inc. through its subsidiaries, Alliance Pulse Processors Inc. ("Alliance") and Arbel Group ("Arbel"), is engaged in the business of sourcing and processing (cleaning, splitting, sorting and bagging) specialty crops, primarily for export markets. Alliance and its subsidiaries in Canada, U.S., Australia and Turkey handle the full range of pulses and specialty crops including lentils, peas, chickpeas, beans and canary seed through six processing plants. The company recent bought the Arbel Group of Mersin, Turkey. Its web site is here Alliance Grain Traders. See my spreadsheet at agt.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 or StockTwits.