Tuesday, May 23, 2017

Mullen Group Ltd

I did my first blog entry on May 21, 2008, so I am now being doing this for some 9 years. It has been fun. I have always reviewed my stocks once a year and also looked at stocks I was interested in. Writing reviews forces me, sometimes at least, to think more clearly about what I am investing in.

Sound bite for Twitter and StockTwits is: Dividend Paying Industrial. I would think that the best stock price testing would be using the P/B Ratio and the P/S Ratio. They say that the stock price is reasonable with one below the median and one above the median. Price is probably reasonable rather than cheap even though the stock price is relatively low compared to past history. I am comfortable holding on to this stock at this time. 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 has decreased it dividends. The reduction in dividend brought the Dividend Payout Ratios down to a place that would allow for the company to begin growing again.

This stock has also been cutting their dividends lately. They did another cut in 2016 of some 70%. It is never a happy investment when a company cuts dividends, especially since I live of my dividends. However, they are trying to get dividends down to where they can cover them by the earnings. Dividends have gone up and down over the past and I expect that to continue.

The company in the past was a unit trust. These companies are all having a hard time getting to the right dividend level once they are a corporation. I understand the need to have dividends at the right affordable level. Analysts believe that once earnings pick up, the company will again start to increase the dividends. This company does service the oil and gas industries and as such you have to expect volatility.

They have been moving to strengthen their balance sheet. The Liquidity Ratio for 2016 is 8.28 and the Debt Ratio is 2.05. What I normally expected are ratios of 1.50 or higher. The Leverage and Debt/Equity Ratios are also good at 1.95 and 0.95 respectively. Murray Kenneth Mullen is the Chairman and CEO. He has over 3M shares worth almost $50M.

I have lost on this stock. My total return is a loss of 7.67% per year with a capital loss of 11.84% per year and dividends at 4.17% per year. I have had this stock for just over 2 years. Dividends have paid for $9.7% of the cost of my stock. I started off earning a dividend yield of 5.96% and now on my original purchase I am earning a dividend yield of 1.79%.

The 5 year low, median and high median Price/Earnings per Share Ratios are 18.93, 24.73 and 30.52. The corresponding 10 year values are 12.51, 14.81 and 17.11. The historical ones are 12.04, 15.05 and 18.29. The current P/E Ratio is 25.97 based on a stock price of $15.32 and 2017 EPS estimate of $0.59. The recent P/E Ratios have been up recently because the EPS has dropped. This stock price testing suggests that the stock price is relatively expensive. However, when a company is having earning problems the P/E Ratios are going to be high. This may not be the best test to judge the current stock price.

I get a Graham Price of $11.12. The 10 year low, median and high median Price/Graham Price Ratios are 1.03, 1.18 and 1.33. The current P/GP Ratio is 1.38 based on a stock price of $15.32. Since part of the formula for the Graham Price is EPS and the EPS is currently low, this test may not be a good one either. This stock price testing suggests that the stock price is relatively expensive.

The 10 year Price/Book Value per Share Ratio is 1.92. The current P/B Ratio is 1.65 a value some 14% lower. The current P/B Ratio is based on a stock price of $15.32 and BVPS of $9.31. This stock price testing suggests that the stock price is relatively reasonable and below the median.

The dividend yield test may not be great either. This is because this company used to an income trust and the high dividends it had as an income trust will probably never occur again. Also, the company has been lowering dividends lately. However, if I adjust the historical median dividend yield for the decline in dividends due to the change to a corporation, I get an historical median dividend yield of 1.11%. The current dividend yield is 2.35% based on dividends of $0.36 and a stock price of $15.32. The current dividend is some 41% below the adjusted historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.

The 10 year median P/S Ratio is 1.33. The current P/S Ratio is 1.39 which is some 5% higher. The current P/S Ratio is based on 2017 Revenue estimate of $1,144M and Revenue per Share estimate $13.14. This stock price testing suggests that the stock price is relatively reasonable but above the median.

When I look at analysts’ recommendations I find Buy and Hold recommendations. There are slightly more Hold and Buy recommendations and the consensus recommendation is a Hold. The 12 months stock price is $18.67. This implies a total return of 24.22% with 21.87% from capital gains and 2.35% from dividends based on a current price of $15.32.

On May 17, 2016 they did a private placement of shares at $13.30 per share. See the announcement on Market Wired. Jonathan Ratner on the Financial Post says Andrew Bradford, an analyst at Raymond James has lowered his rating on this stock to market perform (Hold) and decreased the 12 month stock price to $16.25. Renee Jackson at The Cerbat Gem says Mullen director Philip Scherman acquired 3,200 shares of the company’s stock at $15.38 recently. Stephen Takacsy thinks that Mullen is a well-run company according to an item on Stock Chase

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 Canadian Utilities Ltd (TSX-CU, OTC-CDUAF)... learn more. The next stock I will write about will be Hardwoods Distribution Inc. (TSX-HWD, OTC-HDIUF)... learn more on Wednesday, May 24 around 5 pm. Today on my other blog I will write about The Elmer Approach... learn more on Tuesday, May 23, 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. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits. I am on Instagram. Or you can just Google #walktoronto spbrunner8166 to see my pictures.


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  2. Congratulations on 9 years of writing on your blog! Your insights and information have been very helpful. May there be many more years of fun writing!!