Melcor Developments updated May 14, 2018

Melcor Developments is updated and remains rated Strong Buy at $15.40 (That was the price earlier today although it closed at $15.70). Earnings are volatile so perhaps the attractive P/E of 8.6 is not all that relevant. But the fact that the shares trade at 50% of book value seems relevant. That discount provides a good margin of safety. It is always possible that land values are about to plummet in Alberta but so far it appears that land values have held up well.

The shares are very thinly traded and the company receives little to no attention from analysts or the financial press. These shares should rise in value over time as the book value rises. At some point if the company gets some positive news coverage then the multiple to book value should increase. The company believes that investors are under valuing the sharers because of a lack of confidence about the Alberta economy.


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