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Anthony Cambeiro

 
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  • GSI Technology Struggles Amidst A Fading Market [View article]
    I've written GSI up previously. I must admit that my expectations were too lofty and have not been met. I thought the opportunity from Samsung would be larger and more immediate than it has proven to be. The issue is that former Samsung customers have not elected to perform qualifications on a new supplier... Thus, whomever was the second source to Samsung now likely has 100% of that socket. It would stand to reason during this time that CY would be doing better than GSIT, since they are likely to be in more sockets with Samsung than GSIT. Overtime, I think there will be a share pickup by GSI, but timing is uncertain and has already taken longer than even the company expects.

    Also, CY's business is more diversified than GSIT. GSIT's ship is tied to the sails of the networking/telecom markets. Those markets have not been strong. And in the case of Cisco, they have been especially weak in networking telecom...they've been strongest in Data Centers where there is little if any SRAM.

    In the case of ISSI, their end markets (industrial and automotive) have been quite strong. I think that can help explain part of the growth differential.

    You're correct in pointing out GSI's strong cash balance. The stock buyback they had in place lapsed on April 30th. I expect we should hear something soon from them about re-initiating a buyback or even a tender. They have more than enough liquidity to do a sizable repurchase of shares and have the dry powder to do an acquisition should something come up.

    The latest news from MOSY/GSI is positive, although the immediate revenue impact is nil. What's interesting is that MOSY has a $140mm enterprise value on $4mm in sales. The whole valuation is based on the potential. Given the recent announcement, GSI bascially has a call option on 20-40% of MOSY's market opportunity! Yet, GSI's valuation barely budged on the announcement. If the market thinks that the opportunity in front of MOSY is worth a $140mm EV, shouldnt the announcement that GSI is a second source given GSI a boost of $40mm+ in EV (net out some of the SigmaQuad 4 opportunity that MOSY now has)?

    Finally we have LLDRAM. This has been long delayed, but should start contributing $200-300k in revenues in the coming quarters. The company is undergoing a very long qualification with one of the top LLDRAM users. Once this is complete, along with another Tier 1 customer that has begun a qual on GSIT, this product line should generate between $2-5mm per quarter in high margin revenue.

    I think that GSI will do well when the telecom cycle turns again. Once customers come back around to the belief that they need second sources, GSIT should stand to benefit. The customers that were named in the ITC suit have already given GSI better allocations than they had prior, however the market is on a cyclical downturn so that is not translating into revenues yet.
    May 30, 2014. 09:35 AM | Likes Like |Link to Comment
  • Suntech Reorganizes While Sector Stabilizes [View article]
    http://bit.ly/181REMw

    perhaps the wait will be over soon
    Sep 16, 2013. 06:14 PM | Likes Like |Link to Comment
  • Suntech: A No-Brainer Short [View article]
    http://bit.ly/181REMw

    perhaps resolving soon...
    Sep 16, 2013. 06:13 PM | Likes Like |Link to Comment
  • Sources Suggest Suntech Power's Convertible Bondholders Won't Get Any Money From The Restructuring [View article]
    http://bit.ly/181REMw

    we might be near a resolution....
    Sep 16, 2013. 06:10 PM | Likes Like |Link to Comment
  • GSI Technologies - A $17 Stock Wearing A $5 Halloween Costume [View article]
    GSIT won the Final Determination.

    From Bloomberg:
    ITC affirms judge’s finding GSI,
    Cisco, Avnet didn’t infringe Cypress patents on memory chips
    that store data, agency says in notice on its website.
    • Cypress had claimed infringement of f patents on SRAMS; sought to block imports of Cisco routers and Avnet products that had GSI SRAMs
    • ITC terminates investigation with finding of no violation
    • Cypress settled with other GSI customers
    Link to http://tinyurl.com/pcv...
    Jun 10, 2013. 09:58 AM | Likes Like |Link to Comment
  • Amira Nature Foods - Underfunded And Overvalued [View article]
    Great article Howie. I've looked at this one for the past 6 months. Clearly there are numerous red flags and the nature of the business in my opinion does not warrant a premium valuation as it currently has. I don't really see the difference between ANFI and the Indian peers justifying the large valuation discrepancy. I think the short thesis outlined above is pretty compelling.

    Jon6539, welcome to the seekingalpha website. It looks like this was your first comment and you've not provided a bio or any other information about yourself...
    Jun 4, 2013. 02:04 PM | 1 Like Like |Link to Comment
  • GSI Technologies - A $17 Stock Wearing A $5 Halloween Costume [View article]
    I also saw the material in CY's annual report. Yes, the market has deteriorated over time, primarily at the low end (where GSIT doesn't play). However, I think other players in the industry would disagree with CY's numbers. Both ISSI and GSI believe the market to be larger ($800mm-$900mm in 2012). Even CY has given contradictory numbers in their earnings calls where they say they are $400mm in revenue and 40% of the market, implying a $1.0B market size. So who knows for sure... I suspect the market is in the $700-$1.0B range.

    One item that I under-appreciated was the importance of the Final Determination in the ITC Case. Several customers, Alcatel and Ericsson for example, signed deals with CY which got them out of the case in exchange for not buying from GSI until the Final Determination was complete. So this action (in addition to the badmouthing done by CY) has put a damper on GSI's revenues. I had thought once the Initial determination was complete, business would resume quickly. Now it appears that we have to wait for the FD at the end of June. I expect no changes to the ruling.

    Regarding DRAM overcoming Very Fast SRAMs, I think that to be unlikely based on conversations I've had. I think DRAM has physical limitations preventing them to get to the speeds of SRAM. For example, GSI makes SRAMs with under 5 nanoseconds of latency, with the fastest stuff being 1.3ns. The RLDRAM3 has 8ns latency. So for applications where speed is paramount, RLDRAM won't be able to cut it. However, it has already made inroads in applications where price is more important than speed.

    Regarding Samsung, I don't think anyone has precise figures. My numbers were estimates based on conversations. Yes, the lifetime buys done buy Samsung customers will reduce the available revenue from Samsung for that product's current generation. However, a second generation product from that customer would open up an opportunity for a GSI, ISSI, CY to enter. Short term the lifetime buys reduces the opportunity, longer term i don't think it changes much.

    I don't think the high end SRAM market is declining anywhere near the speed of the total SRAM market...and if that view is correct, over the next several years that should hopefully become apparent.

    What the market is willing to pay for GSI should they grow revenues to $150mm and earn 18-20% EBIT margins could easily range from 6x to 10x+ EV/EBIT. Either way there is upside if they hit those targets.

    Thanks for your questions and I hope that was helpful.
    May 6, 2013. 01:23 PM | Likes Like |Link to Comment
  • Linn Energy: Are The Accounting Issues Much Ado About Nothing? [View article]
    Looks like they've done a good job of changing the conversation with this acquisition of BERY using high priced paper. I'm sure the stock works higher now.

    Not that this matters today... but my calculation for their coverage ratio:

    Assumptions: Remove $80mm of Net OCF from Acquisitions & divestures, effective date through closing since this is just moving a cash outflow from investing to a cash inflow on the EBITDA line.

    Reduce Adjusted EBITDA by the amortized value of the Put Premiums for the year of $244mm.

    Results in Distributable Cash Flow of $376mm and a coverage ratio of 60%.

    Now it seems clear why they did this BERY deal. Kudos to the management team.
    Feb 21, 2013. 08:59 AM | 1 Like Like |Link to Comment
  • Linn Energy: Are The Accounting Issues Much Ado About Nothing? [View article]
    Thanks JP. Hasn't LINN boxed themselves into purchasing puts to maintain the "stability" of the cash flows which allows them to receive an MLP preimum over what is really an E&P cash flow stream?

    What would happen tomorrow if they said, we're not going to buy puts anymore... Wouldn't the stability of their cash flows be called into question and thus the market demand a higher coverage ratio?

    This is a delicate business structure. In order for them to keep growing, they need to acquire additional assets. In order for them to do that, they need to tap the capital markets regularly for debt and equity. And for them to be able to pay the prices they pay for these assets, the need to maintain the MLP preimum valuation. To do that, they must show they have stable cash flows and a high coverage ratio.

    I think that illustrates the incentives they have to remove the cost of the puts from their distributable cash flow. If they include the cost of the puts, the math does not work out so well as can be easily illustrated.

    I have yet to hear a good argument as to why it makes sense to not include the cash cost for the puts in calculating how much cash the company has left over to pay out distributions. If they regularly buy puts to hedge future production to maintain stable cash flows, then that cost should be considered maintenance capx and deducted from distributable cash flow. When you make that simple calculation you'll see they cannot cover their distributions.

    If they stop purchasing puts forever more, then the stability of the cash flows should be called into question and thus the company should have a higher coverage ratio. (Read: lower distribution)

    Either way, their distribution per unit should fall.


    The company noted they have only purchased in-the-money puts on 7 occasions, yet they neglected to tell us the dollar amount. The # of times is irrelevant if the magnitude of those purchases is significant. The reason attention should be paid to in-the-money put purchases is because these instruments allow the company to 'manufacture' Adjusted-EBITDA and Distributable Cash Flow...bronte did a good job of explaining these dynamics.

    Hopefully for the sake of all the retail investors out there, this is all much ado about nothing. This company is NOT a zero...it has real assets and cash flow...just not as much as their Non-GAAP numbers would lead you to believe.
    Feb 20, 2013. 12:38 PM | 1 Like Like |Link to Comment
  • Linn Energy: Are The Accounting Issues Much Ado About Nothing? [View article]
    How will they remain 100% hedged 5 years out, if the current puts expire and they do not purchase new puts on the existing production??

    And remember, the "effective life" of the puts is 2.5 years since they are spread over 5 years. So really they need to buy new puts regularly...(as they have done historically).

    While you say the puts are "financed with the sale of units/debt" you are forgetting that CASH is fungible. We can just as easily say that cash is used to buy the puts...and since they now don't have enough to cash left over to cover their distribution they borrow more money or raise more equity to fill the hole and cover their distribution.

    I contend the purchasing of puts is part of operations and not a capital investment. As such the cost of those puts should be deducted from their distributable cash flow.

    If you notice, that is how the company treats the purchase of these puts for GAAP... It is deducted from OPERATING CASH FLOW.

    Look up the cumulative cash from operations for the company since 2006 through Q3 2012: $1.489B

    Look up the cumulative distributions (keeping in mind this is in arrears): $2.039B

    They have distributed $551mm more in cash than the business has generated from operations!

    The company has a cash shortfall that is only plugged by issuing debt: $6.545B and equity: $4.671B = $11.216B

    They spend $10.708B on cash from investing, leaving $516mm left over to fund the shortfall in cash available for distribution.

    Feb 20, 2013. 10:51 AM | 2 Likes Like |Link to Comment
  • Linn Energy: Are The Accounting Issues Much Ado About Nothing? [View article]
    Ask yourself this question. Do the puts cost actual cash? If so, should that cash expense be excluded or included when calculating how much cash the company has to pay out distributions?? Today, the company does not account for the cash cost of the puts when calculating distributable cash flow. They exclude this cost which overstates how much capital they have to distribute. They tell you it is a "capital investment" like buying a property. Ask yourself this question... What happens in 5 years when the current puts are all gone. Will the company NOT buy additional puts? If they will buy more puts, then shouldn't we really think of these purchases as a 'maintenance capx' cost which SHOULD be deducted from distributable cash flow... It is fairly simple logic here. When doing this, they do not cover their distribution.
    Feb 20, 2013. 09:37 AM | 3 Likes Like |Link to Comment
  • GSI Technologies - A $17 Stock Wearing A $5 Halloween Costume [View article]
    ptrmolinari,
    i think the pre-released number was very good. The news came out after the close on 1/14/13. Based on the performance today, the stock has reacted positively to the news.

    It would seem that this better number was driven by strength/catchup at Cisco. The market share story has yet to begin... I still believe there is a good deal of upside left in the name.
    Jan 15, 2013. 10:19 AM | Likes Like |Link to Comment
  • GSI Technologies - A $17 Stock Wearing A $5 Halloween Costume [View article]
    Thanks for the comment.
    As per last quarter press release on Oct 26th, 2012.
    Cash - $34.844mm
    Marketable Securities- $32.239mm
    Long Term Investments - $26.088mm
    Total Cash & Equiv = $93.171mm

    As per the 10Q: Note 5
    All of the Company’s short-term and long-term investments are classified as available-for-sale. Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations.

    So I believe it is appropriate to use the cash & equiv number calculated above when computing EV.

    Regarding your catch of the $58mm EV vs. $61mm EV. This document was written over the course of a few days and as the stock bounced around the EV changed. In my final read through, I failed to catch that.

    To clear it all up, let's calculate the EV as of this moment where the stock is trading at $5.58

    Price: $5.58
    Shares Outstanding: 27.2mm (per bloomberg)
    Market Cap: $151.78mm
    Cash & Equiv: $93.171mm
    EV: $58.61mm

    I think it is important to keep in mind that to get to a normalized earnings power for this business, you should exclude legal expenses. Or at least exclude the HIGH level of legal expenses they had over the last 15 months as it is unlikely they will repeat. Over the last 12 months, GSIT has generated $10mm of EBIT excluding legal expenses.

    Lastly, regarding Cisco. I did highlight the relationship with Cisco in the risks section. High customer concentration is always a risk, and at times a very meaningful one. There are lots of ways that risk could be manifested company to company. I think it is very unlikely that Cisco drops GSIT. There are sockets that GSIT supplies that no one else could supply today. Also, I think the history of this industry also makes it unlikely that there will be a sudden dramatic price drop. As noted, there are modest price declines every year...that is the nature of the ASP curves for this market but it is quite stable.

    I hope this helps.
    Nov 1, 2012. 09:44 AM | 1 Like Like |Link to Comment
  • World Acceptance Has the Goods; Citron Doesn't [View article]
    I have one question. Why do they not disclose the # and amount of loans that are "refinanced" from day 30 to day 45?? They will tell you the "delinquent" renewals after 45 days, but last I checked, delinquency starts at 30 days.... So I want to know what happens in those 15 days. I've asked the company and they won't tell me. It seems to me that if there is a high % of their renewals happening at that time that is a cause for concern.

    Also, explain why their average loan balance has grown faster than the rate of inflation? Have these borrowers become better credits over time? I think not. I would submit the most probable explanation is that they keep rolling customers into higher loan balances to cover up bad loans.

    I think the best way to determine if WRLD has a sustainable business is to look at how the RUN-OFF portfolio would perform. Any guess there??? Do you think their reserves are adequate for a run-off portfolio of loans??
    (As an aside, the subprime mortgage business looked great for a long time because of all the re-financing that was done. However, when that music stopped, the run-off book of subprime loans was a disaster as we know). This is the same concept to use when thinking about WRLD.
    Oct 14, 2009. 03:58 PM | 1 Like Like |Link to Comment
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