HNZ Group Inc

On my other blog I am today writing about the Dividend Payout Ratios...continue...

I do not own this stock HNZ Group Inc. (TSX-HNZ.A, OTC-CDHPF). I read an article in 2011 in the Financial Post called "Screening for small-caps" by Richard Morrison. This is a stock he mentioned. This stock has come up in Daily Buy and Sell Advisor of MPL Communications. Also, the Dividend Ninja Blogger mentioned this stock in a blog entry talking about High Yield Canadian Stocks. This company used to be called Canadian Helicopters Group (TSX-CHL.A)

This company is another old income trust which converted at the end of 2010 to a corporation. They did not change the dividends at that time. They do not have much of a history of dividends and only one real dividend increase of 5% in 2007.

Dividend Payout Ratios are fine with the 5 year median DPR for EPS at 52% and for cash flow at 41%. The DPR for the 2012 financial year were even lower at 33% for EPS and 23% for cash flow.

Before converting from an income trust, dividend yield were in the 11 to 12% range. They have been declining since then and are currently at 4.9%. It was felt at the time when the government announced the changing tax rules for income trust that a combination of dividend decreases and stock price increases would put the yield for old income trust companies in the 4 to 5% range.

The company peaked in 2011 with Revenue, EPS, cash flow and stock price all declining since then. Since the company only because a stock company in 2005, I only have some 7 years data except for Revenue. Even with value falling, the last 5 years grow rates are good.

Revenues have grown at 12% per year, EPS at 10% per year, stock price at 10% per year and cash flow at 11% per year over the past 5 years. However, analysts expect most of these values to decline somewhat in 2013.

This company has good debt ratios, with the current Liquidity Ratio at 2.16 and the current Debt Ratio at 3.13. The current Leverage and Debt/Equity Ratios are also very good at 1.47 and 0.47.

This stock has always been quite cheap. The 5 year low, median and high median Price/Earnings per Share Ratios are 4.23, 6.30 and 7.94. (The P/E Ratio has seldom broken above 10.) The current P/E Ratio is 6.91 based on a stock price of $22.31 and EPS estimate of $3.23 for 2013.

I get at Graham Price of $37.10. The 10 year low, median and high median Price/Graham Price Ratios are 0.40, 0.52 and 0.66. (A P/GP Ratio of 1.00 or below is generally considered cheap.) The current P/GP Ratio is 0.60. The 10 year Price/Book Value per Share Ratio is 1.06 and the current P/B Ratio is 1.16 a value some 9% higher.

I cannot do a Dividend Yield stock test because the dividend yield has been declining because the company changed from an income trust to a corporation. However, all my other stock price tests say the stock price is relatively reasonable, although on the high end of reasonable.

When I look at insider trading, I find $2.1M of insider selling and no insider buying. Insiders seem to be cashing in stock options and also selling shares that they owned. That is insider ownership is dropping. This is not particularly inspiring if you are thinking about buying this stock.

When I look at the analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendation would be a Buy. The 12 month consensus stock price is $26.30 and this implies a total return of 22.83% with 4.94% from dividends and 17.88% from capital gains.

The Petty Cash blogger has a good recent review of this company. He gives the company a pass at present because of high customer concentration. They also supply military support in Afghanistan. There are recent post on Canadian Money Forum about this company.

Loss of large customers could be a blow to this company. They also are giving the military support in Afghanistan and the war (or at least the west's part in this war) is winding down. I agree with Dean of Petty Cash. It might be wise to sit on the sidelines and see what happens. See my spreadsheet at hnz.htm.

HNZ Group Inc. is an international provider of helicopter transportation and related support services with fixed primary operations in Canada, Australia, New Zealand and regions of Southeast Asia. The group also delivers contracted on demand support in Afghanistan and Antarctica. Its web site is here HNZ Group.

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.