Chemtrade Logistics Income Fund

Sound bite for Twitter and StockTwits is: Dividend paying materials. I see a number of things I do not like about this company. However, there is insider buying which is generally considered a good sign. See my spreadsheet on Chemtrade Logistics Income Fund.

I do not own this stock of Chemtrade Logistics Income Fund (TSX-CHE.UN, OTC-CGIFF). I decided to investigate this stock after reading an article in the G&M in February 2012 about investing in small cap stocks that pay dividends. This was one of the stocks mentioned that I had never heard of before.

When updating the spreadsheet what I found that I really do not like is that they restated values for 2015 without stating this in the 2016 report. For example in the 2016 statements they said Revenue for 2015 was $1,127.466M when the 2015 statement said it was $1,203.396M. They do not mention that Revenue was restated on the statements nor in the notes and they should. They should not only say a value was restated, but give the reason for it.

Bye the way, unless there is a very good reason, I do not change other year's values just because new statements do. I do not consider changing values just because a company has sold off a business. In any event that would only correct the prior year, not the others years I have.

I compare long-term debt to the company's market cap. You do not want the resulting ratio to be close or past 1.00. In the first quarter of 2017, long term debt was increased by 72% and the Long Term Debt/Market Cap Ratio was 1.10. For the second quarter of 2017 this was decreased a bit and the Long Term Debt/Market Cap retreated to 1.04. Here I have included Long Term Debt and Convertible Debentures as long term debt. This is not a good situation. Problem is that a company is vulnerable if any problems crop up.

Another thing I compare to the market cap is goodwill and intangible assets. This company has intangible assets and for the first and second quarters these were increased. For the second quarter the Intangible Assets/Market Cap Ratio is 1.07. It is not good to have intangible assets on the balance sheet worth more than the company. This is vulnerability and often leads to intangible assets being written down.

Because the company is increasing the number of share outstanding, the true check to see if they are growing is the per share values. This company has increased outstanding shares by 10.7% and 7.5% per year over the past 5 and 10 years. In Revenue, there is growth of 3.9% and 6.8% per year over the past 5 and 10 years. However, Revenue per Share is down by 6.1% and 0.7% per year over the past 5 and 10 years. This shows that revenue is declining not growing.

However, a positive note is that the Net Insider Buying is on the high side. NIB for 2017 is at 0.04%. Last year it was at 0.06%. A more normal value would be closer to 0.1% or 0.02%. When people are buying it is because they have a positive view of their company. In selling, people can sell for all sorts of reasons including they just need some money.

The 5 year low, median and high median Price/Earnings per Share Ratios are 15.40, 16.79 and 18.17. The corresponding 10 year values are 8.05, 10.33 and 13.13. The Historical values are 13.16, 14.88 and 16.60. Current P/E Ratio is 35.65 based on a stock price of $18.54 and 2017 EPS estimate of $0.52. This stock price testing suggests that the stock is relatively expensive.

It is rather unusual to have higher historical values than 10 year values. However, between 2008 and 2011, the P/E Ratios got quite low. In this period revenue went down but earnings went up but share prices did not keep pace.

I get 10 year low, median and high median Price/Graham Price Ratios of 0.98, 1.11 and 1.27. The current P/GP Ratio is 1.33 based on a stock price of $18.54. This stock price testing suggests that the stock is relatively expensive.

I get a 10 year Price/Book Value per Share Ratio of 1.66. The current P/B Ratio is 1.12 based on a stock price of $18.54, Book Value of $1,143M and BVPS of $16.53. The current P/B Ratio is some 32% lower than the 10 year median ratio. This stock price testing suggests that the stock is relatively cheap.

The reason why both the P/E Ratio and P/GP Ratio tests show the stock expensive is because EPS is low. EPS is negative in 2016 and has a low estimate in 2017. Also the EPS for the 5 year running average is down over the past 5 and 10 years at negative 15.7 % and 37.9%. However, comprehensive income up if you look at the 5 year running average over the past 5 and 10 years at 8.5% per year for both periods.

If you look at comprehensive income to the end of the second quarter, it is up by 6.5% and 33% per year over the past 5 and 10 years. This is mostly why the Book Value is up. BVPS is up by 6.2% and 4.2% per year over the past 5 and 10 years. If EPS is temporarily depressed there will not be a good showing on tests that rely on EPS.

The above explains why this stock shows well in the P/B Ratio test. That is comprehensive income is going up and book value is going up. Because increasing comprehensive income and increasing book value is a better measure of how the company is doing, this explains why this might be a better test.

This company used to be an income trust. Therefore the historical dividend yields are much higher than they could ever be in the future. Another problem is that the dividends have been flat since 2007. This dividend yield median for the past 6 years makes for a better test. That dividend median is 6.93%. The current dividend yield is 6.47% based on dividends of $1.20 and stock price of $18.54. The current dividend yield is some 6.6% below the above median dividend yield. This stock price testing suggests that the stock price is relatively reasonable, but above the median.

The 10 year median Price/Sales (Revenue) Ratio is 0.70. The current P/S Ratio is 0.85 a value some 20.4% higher. The current P/S Ratio is based on 2017 Revenue estimate of $1517M, Revenue per Share of 21.93 and stock price of $18.54. This stock price testing suggests that the stock price is relatively expensive.

The expensive level comes in when the current P/S Ratio is 20% higher than the 10 years median. So this test shows the stock just coming into an expensive level. P/S Ratio testing is important because revenue is what ultimately drives earnings. Earnings or the hope of them drives stock price.

When I look at analysts' recommendations I see Buy and Hold recommendations. Most are a Buy recommendations and the consensus recommendation is a Buy. The 12 months stock price consensus is $21.19. This implies a total return of 20.775 with 14.295 from capital gains and 6.47% from dividends. It is what people expect in share price in the future that in the short term future pushes a stock price up.

There is a news release on Cision that talks about this company's second quarterly results and recent sells and purchases of companies. Andy Nguyen on Simply Wall Street talks about the fact that the company's EPS cannot cover their dividends. This is true. See what analysts are saying about this company on Stock Chase. They like it and feel that the dividend is sustainable.

Chemtrade Logistics Income Fund is a global supplier of sulphuric acid, liquid sulphur dioxide and sodium hydrosulphite and a processor of spent acid, particularly in the U.S. Gulf Coast region. Chemtrade is also a regional supplier of sulphur, sodium chlorate and phosphorus pentasulphide, and also produces zinc oxide at three North American locations. Its web site is here Chemtrade Logistics Income Fund.

The last stock I wrote about was about was Badger Daylighting Ltd. (TSX-BAD, OTC- BADFF)... learn more. The next stock I will write about will be Alimentation Couche-Tard Inc. (TSX-ATD.B, OTC-ANCUF)... learn more on Tuesday, September 5, 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.