Alliance Grain Traders Inc

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 (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%.

The current dividend yield is 4.32% (as stock price has dropped). The 5 year median dividend yield is lower at 2.84%. The 2011 financial year was not a good year for this stock as it lost money. This stock is in the grain business which can be volatile.

The Dividend Payout Ratio is expected to be around 88% for EPS in 2012. The 5 year median DPR for adjusted cash flow is 42%. The DPR for adjusted cash flow for the financial year of 2011 is 54%. The dividends were raised in 2011 by 11.1%. There has been no dividend raised for 2012.

The total return over the past 5 and 7 years is at 40.01% and 28.53% per year, respectively. The dividend portion of this return was 16.97% and 20.92% per year, respectively. The capital gain portion of this return was 33.22% and 22.56%. On a go forward basis, the dividends will be lower as dividend yield has dropped and will not go back up to the value it was when this company was an income trust.

Shares have increased because they have been issuing new shares. Shares are up 71% and 64% per year over the past 5 and 6 years. Revenues have grown by 128% and 114% per year over the past 5 and 6 years. Revenues per Share have grown nicely at 33% and 29% per year over the past 5 and 6 years. The difference between revenue increase and revenue per share increase is because of the new shares being issued.

I can give no growth for Earnings per Share as the company has a loss for the financial year of 2011. They are expected to have positive earnings this year and so far the first two quarters have had positive earnings. The growth in book value per share is also good with the 5 and 6 year growth at 23% and 20% per year, respectively.

Until 2011, the Return on Equity was quite good. The 5 year median ROE is 12.1%. The ROE is expected to be around 9.9% for 2012. The ROE based on comprehensive income is not quite as good with the 5 year median being lower at 10.9%. (However, a good ROE is considered to be between 10% and 15% so this company is not doing badly).

The Liquidity Ratio has been rather low lately and it basically has not been very high. The current assets can cover the current liabilities, but not with the comfort I like. The Liquidity Ratio for 2011 is 1.26 and the current ratio is 1.29. I would prefer this to be 1.50.

The Debt Ratio is much better with a 2011 ratio of 1.65 and a current ratio of 1.65. Both the current Leverage and Debt/Equity Ratios are fine at 2.54 and 1.54, respectively.

I expect this stock to be rather volatile and I think it is risky. Whether investors will do well over the long term and be paid well for taking the risk of this volatile stock is unknown. This stock has not been around very long.

There is a couple of warnings because the accrual ratios are quite high (over 5.00%) and the EPS/CF Ratio has a couple times, in the past 5 years been higher than 1.00. These do not point to any particular problem, but show that investors should be cautious. There have been studies that show statistically companies with these characteristics to not do well over the long term. See article on accruals and article cash flow and earnings. Both these articles talk about work done by Professor Richard Sloan.

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.