Bob Mowry's  Instablog

Interstate Hotels & Resorts, Inc. (IHR), is the largest independent hotel operator in the world with 226 hotel properties with 46,448 rooms, enjoying ownership of 7 hotels with 2,051 rooms and ownership interest in 50 of its managed properties.

 

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Regent Communications, Inc. (RGCI) acts as a radio holding company for 62 stations (50 FM and 12 AM) in 13 markets across the US. Unsatisfied with the stock’s performance, in July 2007 Riley Investment Partners pulled the necessary 20% shareholder support to call a special meeting for the resignation of the company’s chairman, Mr. Sutter—Northwestern University Professor and principal at a VC/PE in Hopewell Ventures. On March 2009 Regent filed an 8-K displaying the new management team. Since then the stock has risen 600%, beating the Q2 0.02 EPS analyst estimate by 300% at 0.06 EPS.

 

Financial Accounting Standard 142 (FAS 142) requires non cash impairment charges for fluctuations in radio station valuations, ususally reflected in year end statements. The CFO reassures in a Q2 2007 conference call:

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In the period between our last coverage post on June 2nd and today BEE has doubled from 1.31 to 2.56.

While Bernanke points to a recession end inasmuch as the market is concerned, to many the recession isn't over while unemployment rates remain at record highs. The wealthy count on largely stock/real estate capital gains to fuel their spending. The return of the stock market to pre-correction levels is leading more travelers to discover that they can afford to breathe a sigh of relief at an opulent hotel after a tough last year.

Europeans are finding BEE's 5-star properties more affordable than ever with the Euro hitting a year high against the dollar.

Two Four Seasons hotels in Mexico saw a EBITDA decline of 82% in 2008 due to H1N1.

In the August conference call the CEO Laurence Geller points out that "an undesirable, and frankly, unfair luxury taint [was] caused by the government's comments earlier this year." The progressive US leadership has espoused a corporate direction of limited consumption under the heat of public furor over Wall St bonuses.

There are still a few question mark properties soon reaching their 2011 debt maturities. The Fairmont Chicago has formally been listed with a broker. The Intercontinental Prague may be brokered. The Hotel Del Coronado is purported to have "some great partners with KSL and KKR," opines James Mead, BEE CFO, in the August conference call, but still remains a cash flow concern. 

Disclosure: Long BEE
 

In a sector that's enduring dwindling sales to match diving discretionary income, Nu Skin has positioned itself globally well enough to gain market share on the strength of their Spa substitute and innovative ageLOC line. Through strong branding and a committed base of direct distributors who have a built in 30% commission into the retail price, Nu Skin is positioned well within the cosmetics sector to build market share and brand awareness during this worldwide economic malaise.

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Taking a look the technicals of GME, it's clear that the Street have been hard on this former high flier. Institutional investors sold 8.9% of their shares Qtr-over-Qrt and there are 7.2% of the shares in the short position as of this writing. Clearly there's strong downward pressure but do the earnings justify this downward discrimination?

By missing the earnings estimates by 8% in Oct 08 GME paid dearly and fell into the multitude of stocks that got caught in the crosshairs of the massive sell-off. Jim Cramer purported on Mad Money that the Gamestop's of the world are destinated to see significantly slipping earings, being cast aside with the slap of a sell-sell-sell. But by beating their estimated numbers by 2.3% in April and with a monopolistic loyalty base among the under 25 crowd, the landscape of growth expected to be 8.4% in 2010 and 4.3% in 2011 warrants upward stock price mobility and appreciation of Gamestop's brick-and-mortar pricing power.

When one takes a look at the competative landscape, Blockbusters are drying up left-and-right, under siege by NetFlix and Amazon's foray into movies-on-demand, leaving Gamestop as virtually the only game in town available at local strip-malls, closer to kid-filled neighborhoods in suburbias across the country who loath going to Walmart for its size and off-putting big-box cookie-cutter environment. Gamestop espouses a much warmer atmosphere with more easily accessable Xbox 360/Wii demonstration consoles and as such has earned the loyalty of many-a-youngster. In my immediate region two more Gamestops have popped up and it's buzzing with activity with reguarlity. Further the rewards program with offering 10% off used games and offering a generous return policy for used games purchased from them invites potential buyers back into the store for trade-ins and potential additions to one's gaming collection, lured by the televisions in perma-E3 mode showing previews of new releases.

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Plum Creek Timber Co Inc (PCL) is the largest owner of timberland in the US with 7.4MM acres, enjoying a portfolio of timber that management harvests while keeping an eye on how much value is being realized for the timber sold. The price of wood pulp and paper products has a high coordination with GDP growth/constriction so during times of low demand, during a weak housing market or economic constriction dela... purchase orders, management has stepped in to cut "the 2009 harvest by approximately 500,000 tons in aggregate" of their sawlog harvest as per the Q1 conference call.

The projected harvest of ~5MM tons of pulpwood and ~6MM tons of sawlog will constitute the entirely of PCL's 2009 harvest season, providing the profitability to maintain the healthy dividend constituting an ~80 payout rate against net profits. The deferal of 1MM tons of wood to 2010 or thereafter is a play by the management that better economic times are to be expected during Q3 and Q4 of this if not next yea... the maturation of these forest in the meantime, coupled with the 500,000 new seeds planted in the northern Michigan regions of Escanaba, ... and near Marquette this year, will strengthen an already strong balence sheet and yield higher dividends when the GDP starts to move back into the black, compared to the 5.7% constriction in Q1 of 09'.

With 28% quarter-over-quarter price decline in the Pacific Northwest, management is choosing to temper harvesting amidst "mult... lows" according to David Lambert, CFO. The board has made good use of market lulls to use $87MM to repurchase 3.3MM shares, constituing 2% of the outstanding shares at an average price of $26.57 per share, an exercise that has rewarded existing shareholders with a boost in share price to the $34 we find it at today. A full $50MM is left under board authorization for further buybacks in the future. Compared to many of the overleverage ticking-time-bombs of insolvency we find violently kicking about on the market today, the $355MM cash and a $540MM line of credit provide a $900MM liqudity base ready for the tapping, positions PCL in an enviable position poised to take further advantage of investment opportunities which may fall into their purview.

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