Melcor Developments Updated August 12, 2017

Melcor Developments is updated and rated (lower) Strong Buy at $14.50. Those of us who have put a material amount of our portfolios into this stock are no doubt frustrated by this stock. Despite posting what would appear to be good results in Q1 and now Q2 of 2017 and despite recent improvements in the Alberta economy the stock is unchanged year to date. And it is down significantly from its 2014 highs.

I rate it a (lower) Strong Buy for all the reasons indicated in the report including the 3.6% dividend yield and the fact that it is trading at just 49% of book value (and where the assets are primarily investment properties and land). The Alberta economy appears to be recovering. I am willing to hold this stock and collect the dividend. I expect the price to move closer to book value at some point. Of course there are no guarantees. It is always possible that home building will plummet, that lot and land prices will plummet and/or that the rents and vacancies on its retail and office rental buildings will cause a loss of value. But the company has a very long history of profitability and growth in book value over time. It seems to me that the opportunity to buy in at half of book value is a good opportunity. Due to the low trading volume and due to the history of the stock often trading under book value, investors who buy should be prepared to hold for some years.