Thursday, May 2, 2013

Melcor Developments Inc 2

I just bought Michael Pollan's new book called "Cooked". If you love food, you will love books by Michael Pollan. Pollan is always a great read.

I own this stock of Melcor Developments Inc. (TSX-MRD, OTC-MODVF). I first bought this stock in 2008 and some more in 2009. I have made a return of 13.86% per year with 2.69% from dividends and 11.17% per year from capital gains. Dividend on this company is paid twice yearly.

When I look at insider trading I find $0.3M of insider selling and no insider buying. This is very little. It would seem that the Melton family owns a little over half of the outstanding shares in this company. Melton Holdings Ltd. has 48% of outstanding shares and Timothy Charles Melton owns just over 5% of the outstanding shares.

The CEO has shares worth $24.6M and has options are worth $2.1M. The CFO has some shares and has options worth $0.8M. An officer has shares worth $0.8M and has options worth $2.4M. A director has some shares and no options. This is just to give you an idea on insider share ownership and option values.

I rather not use the Price/Earnings ratios to look at reasonableness of stock price. The estimated EPS for this stock have been off quite a bit over the past couple of years. There seems to be only 1 analyst following this stock.

I get a Graham Price of $30.62. The 10 year low, median and high median Price/Graham Price Ratios are 0.43, 0.61 and 0.78. The current P/GP Ratio is 0.58 on a stock price of $17.80. This shows a relatively reasonable stock. It also shows a cheap stock price as any P/GP of 1.00 or less says that the stock is cheap on an absolute basis.

The 10 year Price/Book Value per Share Ratio is 1.04. The current P/B Ratio is 0.78. The current ratio is just 75% of the 10 years ratio and says that the current stock price is cheap. (It is also considered that any P/B Ratio below 1.00 shows a stock price that is absolutely cheap.)

The 5 year median Dividend Yield is 3.02%. The current dividend yield is lower by 14% at 2.58%. What you want is a current dividend yield higher than the 5 year median dividend yield. The higher the current dividend yield is above the 5 year median, the cheaper the stock price. Currently, the dividend yield is not far off the 5 year dividend yield, so this shows a relatively reasonable price. (Note that dividends tend to fluctuate on this stock.)

When I look for analysts' recommendations, I only find one and that recommendation is a Buy. It comes with a 12 month stock price of $27.00. This stock price is some 52% above the current stock price.

This stock is mentioned in a value stock article in a G & M article of a few months back. There is also a recent article in Edmonton Journal on Melcor deciding to set up a REIT. There is a short blog about this company at 24 Seven Finance.

I like this rather small Real Estate company. It is not your typical Real Estate investment, but I believe it will do well for me. Price is looks cheap to reasonable by my tests, although I think it is rather cheap. See my spreadsheet at mrd.htm.

This company is primarily engaged in the acquisition of land for development and sale of residential communities, multi-family sites and commercial sites. It operates western Canada and the US. The company also develops, owns and manages commercial income properties, as well as four golf courses. Its web site is here Melcor.

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.

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