Wednesday, October 4, 2017

Le Chateau Inc.

Sound bite for Twitter and StockTwits is: Cheap for a reason. This company still seems to be in trouble. Analysts seemed to have started to drop this stock in 2011 and by 2015 none seem to be following it. See my spreadsheet on Le Chateau Inc.

I do not own this stock of Le Chateau Inc. (TSX-CTU, OTC-LCUAF). In June 10, 2012 I started spreadsheet because of a request from Blog reader. It was also on my list of dividend and special dividend paying stocks from a column Jennifer Dowty wrote about Dividend Paying stocks in 2010. They had given out two special dividends in 2007 and 2009.

This stock has gotten rid of the two levels of shares and there is now only one type of share, a voting share. However, they have now issued preferred shares. The other noticeable thing is the worsening of debt ratios.

The Long Term Debt/Market Cap Ratio is 5.95 for the financial year ending in January 2017. This is a problem when it is getting close to 1.00. It means that the market cap is lower than the long term debt. This is bad. In this case the ratio is very high at 5.95. For the end of the second quarter the ratio is 12.30. They took out more debt as non-current debt in the first 6 months of the 2017 financial year.

For the financial year of 2016 the Liquidity Ratio was low at 1.32 and the Debt Ratio was also low at 1.20. The Liquidity Ratio improved by the end of the second quarter of 2017 to 2.75 mainly due to short term debt moving to a longer term. The Debt Ratio was worse at 1.08.

The thing is that revenue peaked in January of 2010 and has been traveling down ever since. In the last 5 years, Revenue is down by 25% or by 5.6% per year. Revenue is down by 3.9% for the first two quarters of this year. This has to be turned around first.

I cannot do any stock price testing using the Price/Earnings per Share Ratio as there have been no earnings since January 2011. With negative earnings, I cannot calculate a Graham Price either. They have suspended the dividend so I cannot do any stock price testing using dividend yield.

The 10 year median Price/Book Value per Share Ratio is 0.99. The current P/B Ratio is 0.44 based on Book Value of $10.3M, BVPS of $0.34 and a stock price of $0.15. The current P/B Ratio is some 55.6% lower than the 10 year median. This stock price testing suggests that the stock price is relatively cheap. Also, P/B Ratio less than 1.00 says that you are buying less than the theoretical breakup value of the company. However, the book value is moving sharply south with a decline of 32.7% per year over the past 5 years.

The 10 year median Price/Sales (Revenue) Ratio is 0.46. The current P/S Ratio is 0.02 a value some 95% lower. The current P/S Ratio is based on last 12 months revenue of $217.8M, revenue per share of $7.21 and a stock price of $0.15. This stock price testing suggests that the stock price is relatively cheap. Here again the P/S Ratio is very low, but as noted above, Revenue is dropping also.

There is an interesting article by Leanne Delap in the Toronto Star about moving fashion manufacturing back to Canada. Le Chateau Inc. has about 35% of its stock made near Montreal. Francine Kopun in the Toronto Star talk about the troubles of both Reitman's and Le Chateau. There was a July 2017 news release on Market Wired talking about this company moving to TSX Venture Exchange. This press release on Market Wared talk about Le Chateau's founder Herschel Segal coming to Le Chateau's aid again.

Le Chateau is a Canadian specialty retailer and manufacturer of contemporary fashion apparel, accessories, and footwear at value pricing for style-conscious women and men of all ages. The Company has retail locations in Canada and in the Middle East. Le Chateau's web-based marketing is further broadening the Company's customer base among internet shoppers in both Canada and the United States. Its web site is here Le Chateau Inc.

The last stock I wrote about was about was Granite REIT (TSX-GRT.UN, NYSE-GRP.U)... learn more. The next stock I will write about will be K-Bro Linen Inc. (TSX-KBL, OTC-KBRLF)... learn more on Friday, October 06 around 5 pm. Tomorrow on my other blog I will write about Something to Buy, October 2017... learn more on Thursday, October 05, 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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