March 29, 2016 12:30 pm eastern time

The Toronto stock market is down about 0.6% today as Oil is down to $38.

Melcor Developments is out with an announcement of a new Normal Course Issuer Bid whereby it apparently intends to repurchase some shares given that it “believes that its common shares have been trading in a price range which does not adequately reflect the value of such common shares in relation to the business of Melcor and its future business prospects.”

They announced much the same thing last year and then did not follow through except to an extremely minor extent. This time however, they have arranged permission to allow (at Melcor’s discretion) for automated purchases by a broker following certain parameters during “black out periods”. Black out periods occur from the end of each quarter until earnings are released which in Melcor’s case covers perhaps 80% of the year.

Melcor’s press release could be considered misleading in that it indicates permission to repurchase up to 5% of the shares or 1.66 million shares. BUT, it goes on to state that the daily limit is 1433 shares (which would be due to its low Trading volume). That would put the limit at more like 200 times 1433 = 287,000 shares or les than 1% of the shares. Possibly, the limit will increase if the volume increases over the year.

Tentatively, this repurchase plan is good news. Melcor did not follow through last year but that may have been out of caution regarding the low oil prices (Alberta recession) and therefore a need to conserve cash. This year they have cut the dividend by 20% which frees up some cash. Also if they curtail development activities this year that should lead to some buildup of cash as they spend less and collect payments for lots sold last year (there is about a one year lag). Given the low volume, even a modest amount of repurchases could certainly push the stock up somewhat.