Granite Real Estate 2

On my other blog I am today writing about Income Investing in September 2013...continue...

I do not own this stock Granite REIT (TSX-GRT.UN, NYSE-GRP.U), but I used to. I first bought some of this stock in 2003. It was a company connected with Frank Stronach and Magna. TD bank also had an Action Buy Call (Strong Buy) Call on this stock. By the December 2006, it was doing well and my stock was up some 15% per year. I bought some more. The year of 2006 was the last time I did well on this stock. It kept going down and I sold in 2009; being discourage it would ever do well.

Since this stock changed its symbol this year (from GRT to GRT.UN), the insider trading information is only back to the beginning of this year, rather than for the year ending in today. The insider trading report shows that there is $0.6M in insider selling and 0.5M in net insider selling. So there is a minimal amount of insider buying. The report also shows a minimal amount of insider ownership and no outstanding options.

Some of my normal stock price tests are useless here. I cannot use the dividend yield test as this stock changed to a REIT and greatly increased the dividend. I cannot use the Price/Earnings Ratios stock test because the company had negative earnings in 2007, 2008 and 2009 and this gives 5 year median P/E ratios that are not logical.

With the change in accounting and the changes from a corporation to a REIT, the Book Value has greatly increased, so I do not that a P/B Ratio test will tell us much. The Revenues have declined considerably over the past 5 and 10 years. (The decline in revenue is caused by the drop in revenue from Magna Entertainment Corp. (MEC)). However, I can say that the current Price/Sales Ratio is very high at 8.81.

If you look at Price/Funds from Operations, I get a current P/FFO Ratio of 11.25 and this is slightly below the 5 year median P/FFO of 13.10 and this test suggests that the stock price is cheap.

When I look at analysts' recommendations, I find Buy and Hold. The consensus recommendation would be a buy. The 12 month consensus stock price is $38.70. This implies a total return of 15.23% with 9.32% from dividends and 5.93% from capital gains.

The REIT Spot blog talks about recent changes to this company. Canaccord has a recent report on Granite REIT. They maintain a Hold rating on this company.

This company has changed so much that I do not think we can get useful information from the annual reports to make a decision on it. It is like a brand new company that has just started up. Also, since they have gotten rid of Frank Stronach, it is difficult to say how the new managers will do. See my spreadsheet at grt.htm.

This is the second of two parts. The first part was posted on Thursday, September 12, 2013 and is available here.

Granite is a global real estate operating company engaged principally in the acquisition, development, construction, leasing, management and ownership of a predominantly industrial rental portfolio of properties in North America and Europe leased primarily to Magna and its automotive operating units. Members of the Magna International Inc. group of companies are our primary tenants. Its web site is here Granite Real Estate.

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.