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Alpha Vulture

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  • Going Private Arbitrage Offers Over 70% Annualized Return With Medium Risk [View article]
    Precies, als er een succesvolle manier is om een dergelijke corporate actie aan te passen in het nadeel van kleine aandeelhouders is het een artikel op SA...
    May 9 08:44 PM | 3 Likes Like |Link to Comment
  • 10% Guaranteed Return* [View instapost]
    The best investment idea for you readers would have been a link without an affiliate code so they would have been able to pocket $150, and not $100. If you would have provided a proper disclosure people would have the chance to figure out that you don't have the right incentive to provide the best advice possible... (not to mention that you also receive royalty payments if people sign-up for one of your 'motifs')
    Feb 2 02:51 PM | 3 Likes Like |Link to Comment
  • D.E. Master Blenders 1753: A Low-Risk Squeeze-Out With An 8.2% Gross Return [View article]
    Great idea. I tried to buy this earlier this year when the spread was even more attractive, but unfortunately was unable to find a broker that could buy this.
    Mar 14 09:20 AM | 2 Likes Like |Link to Comment
  • Rella Holding: Double Share Buybacks Are Creating Shareholder Value [View article]
    If you think that the macro outlook for Danmark and Norway is negative you probably shouldn't invest in Rella. I don't have a view on that: I don't think I can predict such macro issues. And while there are of course a few things that will drive intrinsic value higher (continuing earning from the publishing business, income from the securities, share buybacks) that's not really important. If you can buy it today below intrinsic value you already have a good deal.
    Feb 7 01:55 PM | 2 Likes Like |Link to Comment
  • Conrad Industries: A Special Dividend Is Imminent [View article]
    Great article, and not only is Conrad still cheap: how shareholder friendly the company is, is also a big positive. Last year was a good litmus test for cash rich companies because of the uncertainty w.r.t. dividend taxes, and Conrad passed it in flying color by paying $2/share. Their history of steadily reducing the share count is also great, and given how fast the company is growing your valuation might be conservative. Ceteris paribus I would expect that future FCF at the cycle low would be higher than the previous cycle low point and with the backlog at a historic high it absolutely doesn't look like we are close to another low soon.
    Nov 11 11:06 AM | 2 Likes Like |Link to Comment
  • Emeco Holdings - The Bear Case [View article]
    Thanks for your article, always great to read a second opinion! But as you might have guessed I don't agree with everything you wrote though.

    * I don't think moderately declining sales at Caterpillar and Komatsu imply anything too negative for Emeco. If there is still a big market for new equipment than there should also be a market for second hand equipment, and while you can easily discount your second hand equipment Caterpillar and Komatsu cannot reduce the price of new equipment by a large amount before they start losing money on sales (they have a 25% gross margin and 10% net margin or so from the top of my head).

    * In addition to this: mining equipment has a relative short life (Emeco writes their equipment down in ~7 years) so every single year the world stock of mining equipment is depleted by ~10% (to round it down a bit to account for idle equipment). Because of the depreciation of existing equipment the resale value of old equipment should remain reasonable coupled to the production costs of new equipment. We aren't talking about ships or oil rigs that can remain in use 50+ years, and if there is oversupply it can takes a decade before a new balance is found.

    * Equipment sales this year are in fact materially higher than in previous years. The table above doesn't include disposals completed after the first half of FY14. Those add an additional A$35 million, making FY14 already the year with the highest rate of asset disposals while the year has 4 more months left (and the asset base started smaller).

    * I agree about the sensitivity of the valuation and the high downside and upside potential because of that. Because of this I haven't taken a big position.

    * I also think the new debt refinancing is negative because the company is paying a lot more interest now just to get rid of the covenants. At the low end of the FY14 EBITDA guidance meeting those covenants would have been tight. Maybe the CEO - that doesn't have a big equity stake - doesn't want to risk a possibly bankruptcy. Or maybe management has been painting a picture for that is too rosy...
    Mar 11 06:10 PM | 1 Like Like |Link to Comment
  • Rella Holding: Double Share Buybacks Are Creating Shareholder Value [View article]
    Thanks for your comment. I missed that the corporate tax rate in Denmark will be lowered a bit the next few years. Obviously not a material change, but good news nevertheless.
    Feb 6 07:51 AM | 1 Like Like |Link to Comment
  • Camelot Information Systems: 5.6% Gross Return In 1.5 Months [View article]
    Because China is/was filled with net-nets that returned exactly zero... and that wasn't some statistical fluke.
    Dec 27 02:35 PM | 1 Like Like |Link to Comment
  • Conduril: My Highest Conviction Pick [View article]
    1) I would say that revenue and net income are more or less stable the past few years (revenue is down a bit since 2011, while net income is up). Return on equity is getting lower, but also note that the amount of leverage employed is getting lower as well. The 5 year average is just a quick sanity check to see if recent results are out of line compared to the historical results: I haven't build my valuation based on the historical growth, if you would do that you would get a way higher upside number. A 8.5x PE ratio is more or less a no growth assumption.

    2) The company has 2 million shares, but 200K are held as treasury shares, so the effective share count is 1.8 million.

    3) The majority of their debt is classified as a current liability. This debt is most likely used as project financing, and paid off when a project is completed. Given the fact that their competitors employ way and way more leverage I think their debt load should be no problem: it's small, and at the beginning of the year they actually had a net cash position.

    4) Bloomberg, Reuters etc probably don't have the correct financial data because the company only releases annual reports on it's website. They don't file anything with the stock exchange and certainly no fancy xml files that those services use to aggregate financial information. Their data is probably still from 2005 or something like that...

    5) I don't have a position in CNDUF, the ADR traded in the US, but I do have a position in CDU.LS: the shares traded in Lisbon.

    Hopefully that clarifies some things :)
    Dec 3 12:23 PM | 1 Like Like |Link to Comment
  • WSP Holdings Will Reward Longs Soon [View article]
    I don't think that will be a major issue. Their lenders have been flexible since the company has been breaching certain covenants for years now, and I don't think the going private transaction is negative for the bank: if anything it should be positive if HDS is buying the equity since equity owners only get paid if the bank gets paid.
    Nov 26 12:50 PM | 1 Like Like |Link to Comment
  • WSP Holdings Will Reward Longs Soon [View article]
    Good to see that you agree with the thesis :).
    Nov 25 12:33 PM | 1 Like Like |Link to Comment
  • Just A Few ?s For… Alpha Vulture [View instapost]
    Good to hear that someone appreciates what I write :). Looking forward to the other posts in this series on your blog. Very interesting so far.
    Nov 3 03:27 PM | 1 Like Like |Link to Comment
  • Why Awilco Is Not A Slam-Dunk Investment [View article]
    I agree that most of the concerns listed here are relevant, but I do have a small remark about the book value: the two rigs were originally carried by Transocean at significantly higher prices before they took an impairment and were forced to sell the units to Awilco at fire-sale prices (as you recognize). I don't think book value is a meaning full metric since it is mostly based on that sale.

    Fwiw: Transocean used to carry the two rigs at $500 million on their books before Awilco spend $100 million upgrading them.
    Oct 27 09:35 AM | 1 Like Like |Link to Comment
  • Conduril: Halftime Update On My Highest-Conviction Pick For 2014 [View article]
    I wouldn't count on those losses getting reversed, although predicting exchange rate movements is of course pretty hard. But Conduril does business in various countries in Africa with higher interest and inflation rates and if interest rate parity holds the African currencies are expected to depreciate versus the euro.
    Jul 10 06:25 AM | Likes Like |Link to Comment
  • Conduril: Halftime Update On My Highest-Conviction Pick For 2014 [View article]
    Conduril doesn't release quarterly statements so it's unclear how they are performing so far in 2014, but Mota-Engil is for example rapidly growing in Africa, so I think this is also good news for Conduril.

    The low operating cash flow compared to earnings is mostly related to timing differences between when income is recognized and when payments are made. In 2013 deferred liabilities (mostly income to be recognized) dropped to 35 million from 55 million. That already explains two-thirds of the difference, and the other one-third is mostly related to the FX losses that bypassed the income statement. Working capital remained roughly unchanged indeed.
    Jul 9 12:56 PM | Likes Like |Link to Comment