I was attracted to this stock by a recent article that listed companies over $100 million market cap that had solid insider buying (and no insider selling) over the past 6 months. IBG was on the list.
Upon coming to this BB, however, I did find it a bit disconcerting to see that the only person who had posted this month was likely a 4 year old girl (who else would post Wheeeee?).
Nevertheless, CIBC has a $8.50 price target (att is their report from 17 Dec 12) so together with an 8% dividend, it seemed like a good time to jump in. GLTA
IBI Group Inc.
Dividend Cut No Surprise, Provides More Financial Flexibility
? IBI announced a 50% cut to its common dividend and partnership distributions. This announcement is not unexpected (although somewhat higher than we had modeled); we had built a 33% cut into our forecast given weak financial results and an unsustainably high dividend payout.
? IBI's dividend yield has recently been ~16%, suggesting the market was also pricing in a dividend cut. We believe a yield of 7%-8% is more appropriate once liquidity concerns have been put to rest. IBI's dividend payout has been >100% of earnings and cash flow for several years.
? The dividend cuts will save ~$13 mln in cash annually - a meaningful amount given our F13 estimated operating cash flow of only $24 mln. The cut should allow IBI to fund dividends ($13 mln) and capex ($3 mln) from internal cash flow, and potentially even pay down some debt.
? The dividend cut was largely anticipated (as noted by the stock's 16% yield). The company has struggled to achieve financial targets, but should now be able to meet financial obligations. We look to more stable financial results to further support this view. Maintain SP / $8.50 PT.