Alliance Grain Traders Inc.

On my other blog I am today writing about ticket pricing lies continue...

I do not own this stock of Alliance Grain Traders Inc. (TSX-AGT, OTC-AGXXF). I wanted to review all the income trust stocks touted in the 2009 Money Show. There was a lot of talk at this show about some of the Unit Trust being currently good buys with very good yield. This stock had already converted to a corporation. Since then the yield has declined from around 7% to around 2%.

This company just went public in 2005 as an Income Trust. The dividends were always only paid quarterly and at first the dividends seemed to vary. For example in 2006 they seemed to pay two dividends of $0.12535, then one of $0.11918 and then another of $0.12535. The company changed to a corporation in 2009 without changing their dividends.

However, the dividends have not changed much or had much in the way of growth over the last little while. There was one increase of 11% in 2011 and that is it. Dividends have grown at 2% and 2.3% over the past 5 and 8years. No one expects any growth in dividends this year or next. This is probably because they have not been earning much money. Both 2011 and 2013 had earnings losses. The Dividend Payout Ratio for EPS in 2012 was at 176%. Analysts' expect DPR for EPS to be around 50% for 2014.

The total return has not been good over the past 5 year, but has been over the past 10 years. This is because the stock price has increased with the dividend yield going from 10% to 2.8% today. The Price/Earnings Ratio has also gone from an average of 9.90 to 17.47 today.

The 5 year total return is a loss of 4.24% per year with a capital loss of 6.48% per year and dividends of 2.24% per year. The 10 year total return is at 22.05% per year with a capital gain of 15.66% per year and dividends of 6.39% per year.

The outstanding shares have gone from 1M to 19M for an 8 year increase of 1886%. Over the past 5 years outstanding shares have increased by 20% per year. They have been issuing shares to raise money, but there has been some increase due to stock options. A positive is that the CEO has shares worth around 61.6M. However, he has sold some shares since I last review this stock when his shares were worth around 71.1M.

Revenue has been growing, but they have not been good at generating profits or cash flow. Revenue is up by 28% and 85% per year over the past 5 and 8years. Revenue per Share is up by 6.8% and 27.5% per year over these periods. Last year was a year of earnings losses. I have no figures of EPS except that they are down by 21% per year using 5 year running averages over the past 4 years.

The Cash Flow has been negative some years. Cash Flow is up by 5% and 51% per year over the past 5 and 8 years. CFPS is down by 12.5% over the past 5 years and up by 4.3% per year over the past 8 years. If you look at 5 year running averages over the past 4 years, CFPS is down by 2% per year.

When you are not earning profit, you are not getting any Return on Equity. The ROE for 2013 is a negative 4.1%. The ROE on comprehensive income is worse coming in at a negative 10.4%. This would suggest that losses may be worse than they initially appear.

Debt Ratios seem fine with a Liquidity Ratio of 1.53 for 2013, Debt Ratio of 1.43 for 2013 and Leverage and Debt/Equity Ratios at 3.30 and 2.30 for 2013. I would prefer the see the Debt Ratio a bit higher and the Leverage and Debt/Equity Ratios a bit lower.

On a number of bases, the stock price seems relatively high, but not so much on an absolute basis. The 5 year median Price/Earnings Ratios are 2.87, 6.99 and 1.11. The current P/E Ratio is 17.27 based on a stock price of $21.42 and 2014 EPS estimate of $1.24. Mind you, the past P/E Ratios are this stock are quite low. The EPS for the first quarter of 2014 was at $0.46 and this is higher than the earnings for 2012 which had positive earnings.

If you look at the 10 year Price/Book Value per Share ratio it is at 1.42. The current P/B Ratio at 1.69 is based on a stock price of $21.42 and current BVPS of $12.65. On a relative basis the P/B Ratio shows a relatively expense stock price as the P/B Ratio has increased by 20%. However, a P/B Ratio of 1.69 is not a high ratio.

When I look at analysts' recommendations I see ones of Strong Buy, Buy and Hold. The consensus recommendations would be a Buy. The 12 month consensus stock price is $22.20. This implies a total return of 6.44% with 2.80% from dividends and 3.64% from capital gains. The consensus stock price and the recommendations seem to be to be at odds with each other.

I will continue to follow this stock at the moment. However, I prefer to buy stocks that can earn profits. It remains to be seen if this company can. See my spreadsheet at agt.htm.

I will have only one entry for this stock as I must do on some stock because I cover too many stocks to do double entries on all that I follow.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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