Thursday, November 6, 2008

more Yellow Pages

I have added to my position in Yellow Pages Income Fund (YLO.UN) today. Earnings, which came out today were up 20%. Organic online revenues were up 38%. Distributable cash per unit was up 8.8%. Earnings and margin from paper directories were both up.

Their current distribution is solid according to their CEO, Marc Tellier. Stock is currently trading at a P/E of under 8x, and yielding 14.6% in distributions. This purchase lowered my ACB significantly. I am confident in their future ability to continue to pay out a significant yield. I also believe that at their current unit price YLO is priced for a severe recession, while a recession will not hurt their earnings as much as is expected because of the staple-type nature of their advertising offerings.

A very high yield combined with earnings and margins that continue to grow made this purchase hard to resist.

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Anonymous said...

nice healthy yield + trading near 52 week bottom with low p/e sounds like a bargain indeed! Good luck!

joeb said...

I am a ylo.un holder as well and am thinking about building my position. Given the current market I started thinking about book value and tangible book value. Hoping someone can help me understand why YLO.un has so much intagible and goodwill on it's balance sheet.. resulting in a negative tangible book value.
as of Sep 30, 08:
Book Value per share: $10.83
Tangible Book Value per share: -$6.03

sep 30/08 ylo.un financial statements

Frog of Finance said...

Do you think the low price (and resultant high yield) might have something to do with a possible conversion to a corporation?

A couple of trust have come out and annouced their conversion to corporations, and it seems their dividend after the conversion will be only 60% of their current distribution.

MG (moneygardener) said...

Joe, The reason YLO has so much intangible and goodwill is due to the nature of their business. Think about what they do. What assets does this require? The answer is brands, and more brands, the access and rights to publish phone directories, websites, etc. They have also acquired a lot of these type of assets through acquisition. I would argue that the Yellow Pages, Canada411, autotrader, etc. brands ARE worth a signifcant amount of money.

Frog, Yes I do. This adds to uncertainly even though YLO has stated their goal of being able to continue dists and divs. post 2011, similar to what IPL.UN has stated.

Dividend Growth Investor said...

Call me "new fashioned", but do you really see a future for a traditional phone book directory business?

MG (moneygardener) said...

DGI, I see that business migrating online extremely slowly. I am online a lot and I turn to the yellow pages whenever I need a plumber, concrete work, etc. What about not so tech saavy people? Boomers? Paper directory organic earnings and revenue growth continues to grow quarter after quarter.

Also Yellow Pages is already the leader at finding local stuff online including actually phone numbers in Canada.