Chemtrade Logistics Income Fund 2

On my other blog I am today writing about by investing experience in TransAlta...continue...

I do not own this stock 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 I look at insider trading I find a small amount of insider buying ($0.2m) and not insider selling. There does not seem to be much in the way of options or option like vehicles (except one officer has some rights). The CEO has shares worth $3M and has no options. The CFO has shares worth $0.8M and has no options. An officer has shares worth $0.7M and has no options. A director has shares worth $1.1M and has no options. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings per Share Ratios are 7.40, 9.67 and 12.98. The have been on the rise as with all x-Income Trust companies as their dividend yields decline. The lowest P/E of 2012 was at 15.40. I get a current P/E Ratio of 18.39. This is not unreasonable, but is relatively high for this company. However, this is not a good test because company used to be an Income Trust company.

I get a Graham Price of $12.96. The 10 year low, median and high median Price/Graham Price Ratio are 0.96, 1.11 and 1.27. The current P/GP Ratio is 1.32. This is relatively high for this stock. A stock is considered cheap if the P/GP is 1.00 or lower. So by this measure, this stock is not cheap.

The 10 year median Price/Book Value per Share Ratio is 1.73. The current P/B Ratio at 2.13 is some 23% higher and this test says that the current stock price is on the high side. (A P/B Ratio of 1.50 and lower is considered to show a good stock price.)

The 10 year Price/Cash Flow per Share is 6.39 and the current P/CF Ratio is 5.33 based on $3.21 Cash Flow per Share for 2013 and a stock price of $17.10. The current P/CF Ratio is some 16% lower than the 10 year median value and this suggests that the stock price is cheap.

When I look at analysts' recommendations, I find Buy and Hold recommendations. Most recommendations are a Hold and the consensus recommendation would be a Hold. The consensus 12 month stock price is $18.20. This implies a total return of 13.45% with 7.02% from dividends and 6.43% from capital gains.

Pat McKeough of TSI Network has positive and interesting things to say about Chemtrade. Canadian Dividend Blogger has a interesting and negative take on Chemtrade. He also points out that distributions are not wholly treated as dividends. For example in 2012, 20% was "Other Income" , 48% was dividends and 31% was Foreign Business Income.

Mostly my testing shows that the stock price is currently a little too high. I feel that this is a good company and might buy it if price was lower. See my spreadsheet at che.htm.

This is the second of two parts. The first part was posted on Thursday, August 29th, 2013 and is available here.

The 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.

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. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.