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Melcor's Buybacks Provide Low Risk Entry Point For 4% Yielder

Published Fri, 11 Jan 2019 18:53:28 -0500 on Seeking Alpha

Melcor Developments (OTCPK: MODVF) is a diversified real estate development and asset management company with operations primarily in Alberta. It has been around since 1923 and paid dividends for over 40 consecutive years. The stock got hit hard after the oil price crash in 2014 and has been a big disappointment for investors.
MRD data by YCharts
Looking out further back though, this has been one impressive performer and delivered returns well in excess of the indices.
MRD Total Return Price data by YCharts
The current sideways movement might have frustrated investors but we see a deep value play that can provide rich returns. We explain why below.
The Business
Melcor is involved with all aspects of property development and management. Community development provides the bulk of the revenues (and profits) and that is where they have been stuck in a funk.

Source: Melcor Developments Presentation
The investment properties which are predominantly owned by a controlling stake in Melcor REIT (MR.UN:TSX) are doing relatively well, but also face headwinds in the office space section. Both divisions problems can be tied to Alberta where Melcor derives 85% of its revenues and has the biggest land holdings.

Source: Melcor Developments Presentation
Q3-2018 results
Year to date, funds from operations (FFO) came in at 76 cents/share, a bit below 2017 numbers. Q3-2018 FFO was almost identical Q3-2017.

Source: Melcor Q3-2018... Read more