TSX:LIQ.DB.B - Post by User
Post by
Stormanon Nov 24, 2015 1:47pm
219 Views
Post# 24320502
Not sure I agree with all his arguments.
Not sure I agree with all his arguments. He is suggesting Albertan are leaving their urban areas, and that Liquor stores are mainly located in oilfield towns which I don't think is the case.
Liquor Stores of North America (LIQ):
"This is a company we cover at 5i Research (Peter Hodson news letter) and it holds a 'C' rating (we use a report card rating system) largely because we do not trust the dividend. The aptly named company, which operates liquor stores, has a large majority of stores located in Alberta (71 per cent as of September, 2015). The alcohol business has been thought to be somewhat recession resistant and we would agree with this notion but it is hard to sell alcohol if no one is around to buy it. Higher hotel vacancies and less activity in oil sand areas means less traffic coming into stores and simply less people living in these areas. To LIQs defense, they are trying to diversify into the U.S., and recently announced some acquisitions, but when you have a high payout ratio and declining sales in your core geography while trying to spend money on growth; something has to give. As of the September results, LIQ had cash of $2.8-million, nine month operating cash flows of ~$0.7-million and dividends paid of $20.3-million over a nine-month period. Year-end 2014 results were a bit better, but the payout ratio was still over 100 per cent even when it is just calculated on operating cash flows which is typically more generous as it does not include capital expenditures that the company makes to grow and maintain the business. LIQ may find a way to maintain the dividend, but we think it will be at the expense of either growth (cutting cap-ex) or current shareholders (dilution from an equity raise)."
What do you think?