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Adib Motiwala

 
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  • AT&T Melts Down Again, Will Apple Ever Learn? [View article]
    I have had no problems using my iphone on ATT service in DFW.
    Jun 15, 2010. 05:37 PM | 7 Likes Like |Link to Comment
  • Philip Morris International: Overleveraged Balance Sheet Leaves Limited Upside [View article]
    I own PM. I would say the author has some valid points that have to be kept on the radar for share holders.

    Currently, 100%+ of FCF is used for dividends and buybacks. It is fine as the company throws out so much cash and capex needs are minimal. This is what consumer franchises do.

    Currently, interest is well covered as the author says. The main area of concern is the ability to grow dividends and maintain buybacks. With almost $10b in FCF, I think both are currently safe. Dividends cost ~$5b currently ($3.08 * 1.7b shares). So, about $5b is left for buybacks. As the company buys back shares, the dividend per share can be increased in the same proportion. The dividend may not increase as fast...unless FCF continues growing at high single digits rate.

    Without the growth, maybe the buybacks may have to be pared down or maybe they will take on more debt...remains to be seen. However, debt is well covered and ~2x FCF.

    Net Debt per share is $9-$10 currently.
    FCF per share is $6.
    So the stock is at 15x P/FCF and 16-17x EV to FCF (ex interest). Not cheap. But, for a predictable business that is growing, leading market share in most countries and share holder friendly capital allocation, I would not say its a rich price. I would say its fairly valued currently.

    My dilemma has been to hold to a fairly valued company that is growing intrinsic value per share 10% a year or to sell out. I have decided to hold currently as I do not have a lot of good replacements of this quality. Time will tell whether it was a wise decision or not.

    The risks are that the stock and the sector is loved now. There have been times when litigation risk and decreasing smoking habits have made them out of favor. If the perception changes or litigation becomes a bigger issue again, the P/E multiple on PM ( and the sector) will shrink.

    Other thoughts welcome
    Aug 31, 2012. 11:55 AM | 5 Likes Like |Link to Comment
  • Outerwall, Inc: An Attractive Out Of Favor Business [View article]
    Good work!

    A small error in this sentence " Coinstar currently operates at a loss and is expected to break even by 2015,"..it should be ecoATM

    Long OUTR
    Aug 13, 2014. 10:06 AM | 4 Likes Like |Link to Comment
  • Cloud Computing: The Next Bubble? [View article]
    Dave,

    I actually ran a 10 year DCF on all these companies to see what were the expectations priced in to the stocks. There is a book called "Expectations Investing" which talks about this approach. Instead of forecasting cashflows for 10 years, I entered a 10 year FCF growth rate so that the intrinsic value = current stock price. I also assumed a low 9% discount rate and a 3% terminal growth rate.

    For CRM, i got 30% FCF growth rate is needed to even justify the current stock price. I think that is a really high FCF growth rate for 10 years to achieve. And remember, that only gets me to the current stock price of $100.

    Even assuming that CRM can do 30% FCF growth rate for 10 years, its fully prized in. For me to be interested I would have to purchase it at a 'discount' to this price. I require atleast 20-30% discount.
    Jul 26, 2010. 05:26 PM | 4 Likes Like |Link to Comment
  • Just One Stock: The Cloud Leader Due for a Return to Earth [View article]
    If you like growth that much, you should then look at the PEG ratio rather than the P/E ratio. If the PEG ratio is less than 1, then you are getting a bargain. However, a PEG of 3 means you are paying 3x for growth.

    Remember, 'growth' by itself does not mean more profits for the company and for shareholders. You profit from stocks when you buy them cheaper than what they are worth. So, if you can buy growth cheaper in this case, then it would be an attractive buy. At current valuations, you are paying up for growth and hope it continues at the same pace as in the past.

    Check my article on two other companies in this space
    seekingalpha.com/artic...
    Jul 27, 2010. 10:41 AM | 3 Likes Like |Link to Comment
  • Quartet Merger Rights: 40% Upside For A Short-Term Event Driven Investment [View article]
    Thanks for sharing an interesting idea.

    You have included cash from Quartet. How about the cash/debt from Pangaea?

    question on the vote. If unit/common shareholders do not vote or vote No, then cash stays with Quarter and they can look for a deal till Nov 2015? Rights are worthless only if no deal is made till then?
    Sep 8, 2014. 11:36 AM | 2 Likes Like |Link to Comment
  • Why Verizon Could Have 30% Upside In 12-18 Months [View article]
    Good to have you back Thomas. Missed your high quality well researched articles here. Ofcourse investors can take advantage of your research via the mutual fund you now manage.
    Aug 18, 2014. 09:17 AM | 2 Likes Like |Link to Comment
  • Cheap Stocks Always Have A Story: Outerwall [View article]
    I understand. However this company has significant net debt. You have to look at cash, ST investments, ST debt and LT Debt to determine net cash. In this case, if you actually add Net Debt, P/E will be higher.

    http://1.usa.gov/1mvCgNB

    Cash is $250m
    Debt is about $1b.

    So net debt is higher.

    That is the problem when you use any automated tool or non-SEC filings to determine
    numbers...

    These tools are good for a starting point. However you have to use original source numbers.
    May 29, 2014. 12:43 PM | 2 Likes Like |Link to Comment
  • Coinstar Has Asymmetric Upside: Get Redbox Instant And Rubi For Free [View article]
    Thanks for writing. What do you think of the recent acquisition of ecoATM for $350m? Looks like dividends and buybacks are a lower priority...

    http://bit.ly/14qMNlC
    Jul 3, 2013. 12:41 PM | 2 Likes Like |Link to Comment
  • GameStop Presents an Excellent Valuation Play [View article]
    Good post Nikhil. Alex has a good argument. The only thing I would say about BestBuy is that they announced their intention to sell used games ( for the nth time in last few years) and have yet to kick that off. They will be partnering with another company to manage that business ( pricing and inventory) for them. It remains to be seen how good that will work out.

    Please also look into the infrastructure that goes behind the used games business. GameStop has several refurbishment centers that bring the games back to good condition along with quality testing. They have developed their pricing and supply chain over 10+ years in the business. I doubt it is something that can be developed over night.

    I also doubt BestBuy is really serious about video games in general. When I visit their store, I dont even find an employee in the video game aisles most of the time. I have to seek out some body. Try the same in GameStop.
    Aug 23, 2010. 02:08 AM | 2 Likes Like |Link to Comment
  • Netflix vs. GameStop [View article]
    Stock price does not immediately reflect the worth of the underlying business. Just like how a company can be over valued for months and possibly years, a company can also be under valued for a long time. Investing with confidence comes from understanding the business fundamentals and assessing an estimate of its intrinsic worth. If the stock is trading cheaply does not mean you should sell it.

    All i said here was that GameStop is trading cheaply. Do you think it is rich even at current valuations?
    Jul 19, 2010. 04:06 PM | 2 Likes Like |Link to Comment
  • Collapsing Oil Price Leads To Excessive Sell-Off In Prosafe SE [View article]
    Good work. Only argument against this is the 75% payout. If their utilization and day rates are what your model has then I doubt they would be increasing that payout so high..

    Also the debt to ebitda would be very high in both base and low case. Over 5x debt to ebitda even in base case. They would like to keep payout low and delever, dont you think?

    In the past declines, their day rates have not suffered as much. its the utilization tha t has tended to go down. Ofcourse, this time could be different. But if we see those kind of day rates, then the upside would be limited.

    Lets see if the 2 vessels that are coming off contract end of year with Pemex get renewed. That would be a good outcome near term.
    Dec 25, 2014. 01:18 PM | 1 Like Like |Link to Comment
  • Visteon hammers out deal to sell climate controls business [View news story]
    Market Cap $4.6B

    $3.6b Received on deal ( tax possible.)

    EV = $1B ( net cash offset by pension)

    EBITDA of remaining business $200M.

    You get rest of biz at 5x EBITDA..
    Dec 17, 2014. 09:48 AM | 1 Like Like |Link to Comment
  • Apple: $800 Done, $1,000 Pre-Split Next? [View article]
    Why the fascination with round figure share prices...

    "As a matter of a fact, since August 2011, we had published several articles calling for Apple to reach pre-split targets of $400, $500, $600, $700, $800, all of which materialized"....
    Nov 26, 2014. 06:13 PM | 1 Like Like |Link to Comment
  • Motiwala Capital Q3 Review Letter [View article]
    Thanks for the comments guys.

    I am cautious on VOD given its business performance and its large exposure to areas of Europe. India and S.Africa are bright spots but do not make up for the weakness in Europe. Capex is going to be high and dividend is not currently covered via free cash flow. Balance sheet is not as pretty as it was after the VZW sale.

    On CTCM, I am awaiting developments. There are several concerns the biggest being the law change on foreign ownership of Russian media company. Other risks include Russian economy recession risk affecting Ad Market, Currency risk etc. They have a year to comply with the new media ownership laws. CEO said outcomes include delisting and ownership restructuring among others. Positive include nice cash flow generation, strong balance sheet and dividend payments.
    Oct 30, 2014. 10:09 AM | 1 Like Like |Link to Comment
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