Friday, October 6, 2017

K-Bro Linen Inc.

I spent a lot of time today on other things. Firefox updated and I got the dreaded blue screen. I uninstalled and reinstalled Firefox and it seemed ok but then via Outlook I could not click on any email link and have it linked to the site on Firefox. This really sucked. I googled the exact message and got some suggestions. The only one that worked was editing the registry.

I am glad for the lots of sites that help you though problems. I have found that there is always someone else that has and had the same problem and there is an answer. I was glad that the instructions were clear and step by step.

It seems that everything is a computer nowadays. My modem, my PVR and even by smart TV. They all get into difficulties and you have to do a hard reboot. Even my computer does not have an off switch. I had to unplug and then plug it in to get out of the blue screen.

Sound bite for Twitter and StockTwits is: Dividend paying consumer. It is currently not a dividend growth stock but I suspect it will become one again. Price is current probably reasonable even though the P/E is rather high for this sort of stock. See my spreadsheet on K-Bro Linen Inc.

I do not own this stock of K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF). People were talking about this stock at the 2009 Toronto Money Show. This was one income trust being touted as currently a good buy with very good yield. It was also recommended by Aaron Dunn who is the Senior Equity Analyst for Keystone Publishing Corp, a publisher of Canadian investment newsletters.

This used to be a dividend growth stock although even at that the dividend growth was inconsistent. Dividend growth tended to be low and not for every year. Since 2014 dividends have remained flat. This was probably because they were payout out too much of the earnings in dividends. Some analysts expect that dividends will grow again over the next little while, but most seem to feel they will not in the short term.

The outstanding shares have grown by 2.8% and 3.9% per year over the past 5 and 10 years. Therefore if you are looking at growth, you should look at per share growth. For example, Revenues have grown at 6.4% and 9.4% per year over the past 5 and 10 years. Revenue per Share has grown at 3.5% and 5.3% per year. The true growth is that of Revenue per Share.

Because the earnings are volatile, it is a good idea to look at the running average over the past 5 years. That is comparing the 5 year average to date and the 5 year average to 6 years ago. The 5 year running average for Revenue over the past 5 years is 8.3%. The 5 year running average for Revenue per Share over the past 5 years is 5.6%.

The Dividend Payout Ratio for 2016 is 83% with 5 year coverage of 77%. The DPR for 2017 is expected to be around 103% then moving to around 57%. It is a good idea for this type of the stock for the DPR to be in the 50 to 60% range.

The 5 year low, median and high median Price/Earnings per Share Ratios are 21.54, 24.69 and 27.84. These are rather high for this sort of stock. The corresponding 10 year values are 15.05, 17.20 and 19.57. The 12 year values are the same as the 10 year ones. The current P/E Ratio is 33.53 based on a stock price of $38.90 and 2017 EPS estimate of $1.16. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $21.62. The 10 year low, median and high median Price/Graham Price Ratios are 1.16., 1.36 and 1.55. Here again I think that the ratios are too high for this type of stock. The current P/GP Ratio is 1.80 based on a stock price of $38.90. This stock price testing suggests that the stock price is relatively expensive.

I get a 10 year median Price/Book Value per Share Ratio of 2.46. The current P/B Ratio is 2.17 based on a stock price of $38.90, Book Value of $171M and BVPS of $17.90. The current P/B Ratio is some 12% lower than the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.

This stock used to be an Income Trust so that makes testing by the dividend yield harder. Since they became a corporation, the median dividend yield is 3.13%. The current dividend yield is 3.08% based on dividends of $1.20 and a stock price of $38.90. The current dividend yield is some 1% below this median dividend yield. 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 (4) and Hold (3) recommendations. The consensus recommendation would be a Buy. The 12 month stock price consensus is $42.61. This implies a total return of 12.62% with 9.54% from capital gain and 3.08% from dividends based on a stock price of $38.90.

There is an interesting article on Textile World about this company earning the Hygienically Clean Hospitality certification. Devin Koller on Simply Wall Street says some interesting things on dividends, but he seems to be confusing the currencies. As far as I can see his $1.09 EPS is in US$ and the $0.10 dividend is in CDN$. Be careful of US sites talking about Canadian stock as this confusion of currencies seems to occur quite often. A TCT Contributor says on Twin City Telegraph says the Schaff Trend Cycle indicates a likelihood of a near term pullback for this stock. This press release on Market Wired talks about this company doing an equity offering at $38.00 a share. See what analysts are saying about this stock on Stock Chase. Their views are mixed.

K-Bro is the largest owner and operator of laundry and linen processing facilities in Canada. K-Bro provides a comprehensive range of general linen and operating room linen processing, management and distribution services to healthcare institutions, hotels and other commercial accounts. K-Bro currently has seven processing plants in six Canadian cities: Quebec City, Toronto, Edmonton, Calgary, Vancouver and Victoria. Its web site is here K-Bro Linen Inc.

The last stock I wrote about was about was Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF)... learn more. The next stock I will write about will be Linamar Corporation (TSX-LNR, OTC-LIMAF) ... learn more on Tuesday, October 10, 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.

1 comment:

  1. Technology can be so frustrating, and a 'waste' of valuable time. Like you, I am grateful for sites that walk me through glitches. I don't have a smart phone, but can see that one will be needed (as opposed to 'wanted') in a few years.
    Thank you for your insights and research. Much appreciated!