Tuesday, February 14, 2017

Mullen Group Ltd 2

In the spirit of never letting any work go to waste, I am publishing an updated report on this company because I did it for the investment club I belong to.

Sound bite for Twitter and StockTwits is: Buy for Diversification. I find that their shifting around with the dividend a bit disconcerting. The recent private placement at $13.30 is at some 28% lower than the current price. You have to wonder from this if the current price is not too high for this stock and the private placement is closers to a more reasonable price. I might yet regret selling Ensign to buy this stock. See my spreadsheet on Mullen Group Ltd.

I own this stock of Mullen Group Ltd. (TSX-MTL, OTC-MLLGF). I like to look at recommended small cap dividend paying stock to see if they would be a possible good investment now or in the future. The other thing to mention about this stock is that it recently converted from an income trust and decreased it dividends.

They have, unfortunately, fooled around with dividend payments. Before they became an income trust in 2005, they were paying dividends twice a year. As an Income Trust they paid dividends every month. When they changed to a corporation in 2009 they started to pay dividends quarterly. In 2013 they again switched dividends to monthly. Another thing is that the representation on their site of why to invest in the company only shows dividends to 2015. They did not show that they were decreased in 2016. This is rather misleading.

They cut the dividends in 2009 when they changed to a corporation. They started to again raise the dividends in 2011. However, this company services the oil and gain industry and unfortunately by 2011 they could no longer sustain the dividends they were paying. In 2016 they reduced the dividends by some 70%. Analysts seem to feel that starting in 2017 the company can again afford the dividends it is paying. I was hardly surprised by the dividend cuts considering the problems with the oil and gas industries.

It is hard to know what they will do with the dividends. The last time they raised the dividends, they probably raised them too fast. I am sure that they will be more cautious in the future. At least I hope they will.

A plus for this company is the strong balance sheet. The Liquidity Ratio for 2015 is 2.13. The current one is still high at 2.01. The Liquidity Ratio has always been good. The Debt Ratio at 1.80 in 2015 is lower than it has been but this is still a very good ratio. The current one is higher but it is a financial year's ratio that is most important. The Leverage and Debt/Equity Ratios is a little high but still fine at 2.25 and 1.25 for 2015.

They have increased the outstanding shares by 3.1% and 6.9% per year over the past 5 and 10 years. Shares have increased due to Share Issues and Stock Options and have decreased due to Buy Backs. They did another private placement in 2016 and increased the shares by some 13%. Actually increasing shares is not a bad thing in itself, but the thing is that per share values become the important ones.

You can see the results of increased shares when you look at Revenue and Revenue per Shares. The Revenue has increased by 3.2% and 9.5% per year over the past 5 and 10 years. The Revenue per Share has increase by 0.1% and 2.5% per year over the same time frame.

I get 5 year Price/Earnings per Share Ratios of 12.75, 15.80 and 18.85. The corresponding 10 years ratios are close at 12.04, 14.18 and 17.11. The historical median P/E Ratio is 14.90 and this is between the 5 and 10 year ratios. The current P/E Ratio is 21.74 based on a stock price of $18.48 and 2017 EPS estimate of $0.85. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $13.37. The 10 year low, median and high median Price/Graham Price Ratios are 0.89, 1.09 and 1.33. The current P/GP Ratio is 1.38 based on a stock price of $18.48. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 1.80. The current P/B Ratio is 1.98 a value some 9.8% here. The current P/B Ratio is based on stock price of $18.48 and BVPS of $9.35. This stock price testing suggests that the stock price is relatively reasonable but above the median.

This stock has an historical median dividend yield of 4.22%. The current dividend yield is 1.95%, a value some 53.8% lower. This testing also suggests that the stock price is relatively expensive.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations for this stock. There are more Buy recommendations and the consensus recommendation is a Buy. The 12 month stock price is $21.17. This implies a total return of 16.50% with 1.95% from dividends and 14.56% from capital gains.

Daniel Jordon on Sports Perspectives talks about this company receiving a Buy consensus rating from 7 Buy analysts following this stock. Six of these analysts rated it a Buy and one analyst rated it a Hold. Rives staff says on Rives Journal that the Williams Percent Range on this stock is negative 88.44. An indicator of under negative 80 means that a stock is oversold; that is cheap. Ryan Vanzo of Motley Fool puts out an interesting report on this stock.

Mullen Group Ltd. is a corporation that owns a network of independently operated businesses. Mullen is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in Western Canada and is one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen has strong business relationships and industry leadership. Its web site is here Mullen Group Ltd.

The last stock I wrote about was about was Absolute Software Corporation (TSX-ABT, OTC-ALSWF)... learn more . The next stock I will write about will be ARC Resources Ltd. (TSX-ARX, OTC-AETUF)... learn more on Wednesday, February 15, 2017 around 5 pm.

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.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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