I do not own this stock of Keg Royalties Income Fund (TSX-KEG.UN, OTC-KRIUF). This was a stock suggested by one of my readers. I like dinning at The Keg. I find the food very good. At stock forums I viewed, investors liked this company as it is guaranteed 4% of the sales at Keg restaurants as income to the fund. So, I decided to take a look at it.
When I was updating my spreadsheet, I noticed that there is a huge difference in Basic and Diluted EPS. The Basic EPS is 1.96 and the Diluted EPS is 0.59. The difference is the number of Exchangeable Partnership Units. What I have never liked about looking at this firm is that some 99% of their assets are dependent on Keg Restaurants Limited (KRL) and they do not publish KRL financial statements. The last thing I noticed is that no analysts is giving estimates in 2021. I also cannot find any analyst’s ratings.
The dividend yields are high with dividend growth maybe restarting. The current dividend yield is high (7% and higher) at 7.53%. The 5, 10 and historical dividend yields are good (5% and 6% ranges) at 5.95%, 6.12% and 6.94%. Dividends were cut in 2020 by 63% in 2020 but have since then been increased by 170% and back to the old rate given in 2019. I am assuming as the economy gets back online, the dividends will start to again be increased but they do have a mixed record when it comes to dividend increases.
The Dividend Payout Ratios (DPR) are probably fine as they get royalty income and they can pay out all that they receive. The DPR for EPS for 2020 was 109% with 5 year coverage at 126%. The DPR for CFPS for 2020 was 56% with 5 year coverage 54%. The DPR for Free Cash Flow for 2020 was 94% with 5 year coverage at 99%.
Debt Ratios are fine, but the company is totally dependent on KRL and I do not have their financials. I calculate the Long Term Debt/Market Cap ratio at 0.94. However, there could be various interpretations of what their Long Term Debt is. The Liquidity Ratio is 2.70. The Debt Ratio is 1.87. The Leverage and Debt/Equity Ratios are 2.15 and 1.15.
The Total Return per year is shown below for years of 5 to 19 to the end of 2020. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | -8.34% | -0.52% | -7.35% | 6.82% |
| 2010 | 10 | -6.63% | 7.28% | -0.68% | 7.96% |
| 2005 | 15 | -3.43% | 8.80% | -0.18% | 8.98% |
| 2001 | 19 | 0.98% | 10.81% | 1.03% | 9.77% |
The 5 year low, median, and high median Price/Earnings per Share Ratios are 13.39, 18.33 and 20.13. The corresponding 10 year ratios are 17.02, 18.98 and 24.05. The corresponding historical ratios are 11.44, 13.90 and 15.42. There are no analyst estimates for EPS and the EPS for the last 12 months is negative, which will give a P/E Ratio that is negative. We cannot do any P/E Ratio testing for this stock.
I get a Graham Price of $11.02. The 10 year low, median, and high median Price/Graham Price Ratios are 1.28, 1.43 and 1.57. The current P/GP Ratio is 1.37 based on a stock price of $15.08. The current ratio is between the low and median of the 10 year median ratios. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Book Value per Share Ratio of 1.95. The current P/B Ratio is 1.65 based on a stock price of $15.08, Book Value of $104M, and Book Value per Share of $9.14. The current ratio is 16% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get a 10 year median Price/Cash Flow per Share Ratio of 8.77. The current P/CF Ratio is 12.72 based on Cash Flow for the last 12 months of $13.5M, Cash Flow per Share of $1.19 and a stock price of $15.08. The current ratio is 70% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
I get an historical median dividend yield of 6.94%. The current dividend yield is 7.53% based on dividends of $1.135 and a stock price of $15.08. The current dividend yield is 8.5% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively reasonable and below the median.
I get an historical median dividend yield of 6.12%. The current dividend yield is 7.53% based on dividends of $1.135 and a stock price of $15.08. The current dividend yield is 23% above the historical median dividend yield. This stock price testing suggests that the stock price is relatively cheap.
The 10 year median Price/Sales (Revenue) Ratio is 7.36. The current P/S Ratio is 13.65 based on Keg Income for last 12 months of $12.54, Revenue per Share of $1.10 and a stock price of $15.08. The current P/S Ratio is 86% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.36 based on the Royalty Pool. The current P/S Ratio is 0.44 based on Keg Royalty Pool for last 12 months of $385M, Royalty Pool per Share of $33.93 and a stock price of $15.08. The current P/S Ratio is 24% above the 10 year median ratio. This stock price testing suggests that the stock price is relatively expensive.
Results of stock price testing is that the stock price is maybe reasonable or cheap, according to the dividend yield tests, but is expensive according to the P/S Ratio tests.
Is it a good company at a reasonable price? The price might be reasonable. What I do not like is that this stock is completely dependent on the Keg Restaurants Ltd for which you get little accounting information beyond the Sales.
When I look at analysts’ recommendations, I find a Sell (1). This is an old recommendation from November 2021. Most sites are saying there are 0 ratings (because analysts are not following this stock). It is never a good sign when analysts are not following or stop following a stock. There seems to be Sell (1) recommendation in September, October and November and no recommendations in December.
Analyst on Stock Chase have not review this stock since 2017 when they said it was a Hold. It is never a good sign when analysts lose interest in a stock. Stock Chase gives this stock one star out of five. Christopher Liew on Motley Fool says that management feels that the Keg will have a swift and strong recovery after the pandemic. Adam Othman on Motley Fool reviews this company in July 2021. A report from Simply Wall Street on Yahoo Finance talks about how they are concerned about this stock’s trends. Keg Income Fund talks about their third quarterly results on Newswire.
The Keg Royalties Income Fund is a Canada based company. The organization works under the Restaurant business sector. The business model of this company is that all Keg restaurants are placed under it, so the majority of its revenue is in the form of royalty income. Its web site is here Keg Royalties Income Fund.
The last stock I wrote about was about was Waterloo Brewing Ltd (TSX-WBR, OTC, BIBLF) ... learn more. The next stock I will write about will be Stantec Inc (TSX-STN, NYSE-STN) ... learn more on Wednesday, December 08, 2021 around 5 pm. Tomorrow on my other blog I will write about Dividend Stocks December 2021 .... learn more on Tuesday, December 07, 2021 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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