May 15, 2017 Melcor update

Melcor Developments is updated and rated (higher) Buy at $16.50. (last trade as I post this was $16.25. As detailed in the report (see Recent Developments) the company had a surprisingly large increase in residential building lot sales in Q1. And they continue to add to land holdings which indicates confidence in the future. I am attracted to the opportunity to buy shares at 56% of book value. The P/E ratio is also not too high at 15 and the dividend yield is reasonable at 3.2%. However, the return on equity is relatively poor at 3.8% (albeit partly due writing up the value of buildings which has increased the equity). If lot sales continue to be higher than the depressed levels of the past two years then the stock price should respond. This company has required a lot of patience in the past and that may continue to be the case.

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