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Cabeza Howe

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  • First Internet Bancorp: Focus On Longer-Term Growth [View article]
    If you look at one of the charts above, Q2 EPS was back to early 2011 level. So market is definitely very disappointed. But Mr. Becker got to be nuts not to let go the more than half people hired since then if he's going to let this company remain stagnant at the Q2 level. He is a successful entrepreneur, however. He sold two of his companies to Open Solutions (now part of FiServ) and Digital Insight and still owns two or three other companies than INBK. The reason he is holding on to the expanded work force is because he is actually growing INBK fast. The growth takes time to show up after the refi bust that took away the bulk of non-interest income. INBK is actually now past the inflection point to growth again. Market should see it soon.

    Mr. Becker got to grow or trim fat aggressively, such that efficiency ratio is reflective of the branchless banking model. In the unlikely event of growth/efficiency/ROE stalling other than very briefly, I would be a seller too (maybe at sightly higher price level). I don't see that happening now. But nobody can be sure about the future. We will see.
    Oct 21 11:03 AM | Likes Like |Link to Comment
  • Discovery Laboratories: Collaboration With Battelle Is Validation Of Aerosurf's Potential By A Sophisticated Third Party [View article]
    "Capillary aerosol generator drug device combination has been successful in lamb and pig models"

    Can you detail what metrics came out of the models that proved CAG to be able to deliver to lungs effectively? Did the lamb/pig models have respiratory syndrome/deficiency? Thanks.
    Oct 20 09:54 PM | Likes Like |Link to Comment
  • First Internet Bancorp: Focus On Longer-Term Growth [View article]
    Management has target asset growth of 25-30%. If you have read my last article, Mr. Becker believes that INBK should reach $3-5B total assets in the next five-years time window. That implies a 30+% target in his mind actually.

    For 3Q14, I actually couldn't go below 17.7% growth in my model without assuming negative QoQ deposits and loan growth. And that's what I did in the model. Just accept 17.7% YoY asset growth and allow loans and deposits to stay stagnant for a quarter which means the company only bothered to replace maturing loans and deposit withdraws in the past quarter. I just hated to accept loan and deposits net outflow for this company. Of course all the other 9 subsequent quarters through 4Q16 were modeled at constant 15% growth.

    In maintaining this constant 15%, I never have a single quarter that reaches $70 million net deposits or net loan increase, something the company accomplished one year back. Plus, there are 3 quarters of 0 net deposits/loan QoQ growth. So, 15% is a very low hurdle for this company in the next couple of years.

    After all, the company more than doubled its work force from early 2011 to the end of 2013. What are those new hires for? Growth of course. And if you have read their 2Q14 earnings release carefully, you should have noticed this:

    "Our growing revenue channels and asset-generating capabilities continue to drive value for our shareholders."

    Asset-generating capabilities can't be stressed enough. That means they can quickly grow loans. For example, Mr. Becker has highlighted CTL as a much faster way to grow balance sheet than consumer loans and with lower overhead expense. CTL loans yield lower than consumer loans but higher than residential mortgage loans in their portfolio. CTL loans are also of higher quality, backed by credits of well known franchises. And C&I loans are the fastest-growing, 276% YoY growth in 2Q14.

    Here are the loan growth numbers in 2Q14:
    C&I 276% YoY
    CRE 85%, of which CTL grew 159%
    Residential RE: 111%

    In the context of this kind of breakneck growth, it should not be that hard to understand why 15% is such a low hurdle to them.

    Actually I wouldn't accept 15% unless they begins to lay off people. I don't mind lower growth. But it has to come with fast-improving efficiency ratio and ROE. Then that would work too.
    Oct 20 05:20 PM | Likes Like |Link to Comment
  • First Internet Bancorp: Focus On Longer-Term Growth [View article]
    Good question. I have modeled 15% asset growth. Results as follows and I have follow up comments separately.

    2014 2015 2016
    Revenue (thousands) $27,587 $32,384 $36,967
    Prior Year (thousands) $26,965 $27,587 $32,384
    YoY% change 2.3% 17.4% 14.2%

    Net Income (thousands) $3,537 $6,226 $8,665
    Prior Year (thousands) $4,593 $3,537 $6,226
    YoY% Change -23.0% 76.0% 39.2%

    EPS dil. $0.79 $1.38 $1.92
    Prior Year $1.51 $0.79 $1.38
    YoY% Change -48.0% 76.0% 39.2%

    Net Interest Income (thousands) $21,638 $25,746 $30,329
    Prior Year (thousands) $17,448 $21,638 $25,746
    YoY% Change 24.0% 19.0% 17.8%
    Oct 20 04:42 PM | Likes Like |Link to Comment
  • Refuting A Short-Selling Solazyme Critic [View article]
    Another nonsense or misleading point from latest TMF article: company set queue and screened questions. He also claimed that this is not uncommon practice.

    I called in to ask questions on multiple company's earnings call before. Operator took my call without problems. Muddy Waters even succeeded to ask questions on NQ's conference call. (NQ was the fraud exposed by MW.)

    Moreover, it does not really matter Brian Lee/Goldman asked the delay question. Had he not asked other analysts would have done that and management's answer would have been the same.

    Sometimes analysts collaborate with each other to ask basically the same tough question in the hope they can get answers of substance. It just didn't happen in SZYM's calls on the delay issue.

    Yes, companies might be able to instruct operator to block certain hostile participant's question. But they never block analysts covering the company, be they hostile or friendly.

    Think about it. If an analyst is screened on a earnings call he/she would amplify the issue in a huge stock downgrade alert to his/her clients. Which company would be so stupid to do that?

    A few years ago Citi's hostile analyst Mike Mayo even complained about CEO not giving him enough chances of personal communications off line. He made that an issue with the press, not just stock reports. He was never screened on conference calls though.

    For a question regarding delay, there's simply no need to dictate who and when the question was asked. Management simply got the chance to give more color on the issue, whether they are going to lie or tell the truth.
    Oct 19 12:53 PM | Likes Like |Link to Comment
  • Refuting A Short-Selling Solazyme Critic [View article]
    You can't deny that management was sloppy in meeting commercial milestones and delivering numbers. Facts are facts. But the TMF article is really biased and misleading. One example: Licari's 10b5-1. He has no control on the plan once it's effective. Third party is executing the trade. TMF author does not understand that 10b5-1 can be set up in a very sophisticated way. You can even use complex algorithms to do it.

    In Licari's case, he could have set up the plan in such a way that governs 1/3+ of position is to be liquidated in September 2014, etc. Reason can be: he had believed that 9/2014 is when stock would perform well. Or, simply because he wants more cash in the month. Once it's set up, the third party will execute it regardless of price. Of course, in the plan he could have specified that he would only sell 5% or not sell at all in September 2014 should the stock price fall below $10. But apparently he has not done that.

    A lot of insiders have a minimum price specified in the 10b5-1 and that's why it appears that the plan was canceled when stock declined. No, it's not wise to cancel a 10b5-1 once set up unless the insider wants to risk losing the benefit of affirmative defense. (I was wrong/confused before when I said that it's illegal to cancel 10b5-1.) 10b5-1 best practice calls for consistency and single plan (no double plans that can create suspicion of manipulation.) So once you have it set up, stick to it until completion. You create conditions in the plan to cause stop of execution instead of canceling plan.
    Oct 19 01:45 AM | 1 Like Like |Link to Comment
  • Refuting A Short-Selling Solazyme Critic [View article]
    Adding to KQ's comments on Passport Capital ownership. This firm has been betting really really big on SZYM this year, apparently counting on commercial success:

    1Q14: added 5,325,277 shares
    2Q14: added 906,850 shares, plus $13 million Solazyme NOTE 5.000%10/0 (which was 10% of all 5.00% convertible offered)
    3Q14: added 1,656,545 shares.

    Total SZYM shares added Q1-Q3: 7,888,672 shares
    Total SZYM convertible notes bought: $13 million

    Passport started investing in SZYM in 4Q12, added shares to a total of 953,613 in 1Q13, then gradually REDUCED ownership to end 2013 at just 200,000 shares. Then came this monster bet on SZYM in 2014.

    Let's see if it has made the right bet.
    Oct 19 01:09 AM | 3 Likes Like |Link to Comment
  • Alibaba's IPO Is A Beginning, Not An End [View article]
    $BABA is entitled to share 37.5% of consolidated pretax net income of SMFSC (Alipay's parent company), which means pretax profit from Alipay AND OTHER businesses owned by SMFSC. In the event SMFSC or Alipay is IPO'ed, $BABA can choose to acquire 33% equity interest (funded by SMFSC payout to $BABA) or share 37.5% pretax profit in perpetuity (until 33% equity interest is acquired).

    Obviously, the so-called equity interest would still need to be in the form of VIE given Chinese government regulation. Now it's your freedom to trust or not trust Chinese government. To me, trusting Jack Ma is easier than trusting the authoritarian government.
    Oct 1 11:21 PM | Likes Like |Link to Comment
  • First Internet Bancorp: Record Revenue And Net Income Are In Sight [View article]
    As far as eyes can see now, any new offices will be serving the purpose of earning-assets generation only. Depository base will still mostly be from online customers, except for business deposits they are building. Very long term, it might make sense they have depository branches (de novo or acquired). But that's anybody's guess and probably beyond my horizon. Besides, I'm hoping it will get acquired by some larger institutions when it gets to the $3B or so size. Mr. Becker is a serial entrepreneur and some of his former ventures were eventually sold. So it wouldn't surprise me that he sells INBK before he retires.
    Sep 29 07:04 PM | 1 Like Like |Link to Comment
  • First Internet Bancorp: Record Revenue And Net Income Are In Sight [View article]
    1. If you meant "brokered deposits," very little exposure (lower than typical banks), 2.4% of total deposits as of end of Q2.

    2. Consumer loans (RV/horse trailer + a very tiny portfolio of credit cards), CRE including CTL, C&I, and residential real estate.

    3. Smart financial institutions don't sacrifice quality for near-term profit. They compete on yields but still adhere to strict underwriting principles. So you make a little less profit but won't have loans that might blow up down the road.

    One reason their yield is not high in the industry is that they would rather earn lower yield on quality assets (e.g. CTLs which are backed by credit quality of well-known franchises or brands) than higher yield on risky loans. Their asset quality metrics have been improving consistently.
    Sep 29 03:38 PM | 1 Like Like |Link to Comment
  • First Internet Bancorp: Record Revenue And Net Income Are In Sight [View article]
    They do realize the advantages of on-the-ground teams and thus have opened Portland and Tempe offices for C&I loans. They originate all CRE loans themselves, including CTL loans nationwide. In the long run, I wouldn't be surprised to see them increase their presence in other regions. They are learning from traditional banks. The valuation discount relative to other banks should disappear once ROE excels.
    Sep 28 09:16 PM | 1 Like Like |Link to Comment
  • Comparing Alibaba To Other Tech Giants [View article]
    BABA looks fairly valued at $89. Growth set to slow due to spiking marketing cost on sellers, according to some experts. There's policy uncertainty around Alipay which might or might not impact TMall/Taobao sales down the road, as disclosed in Prospectus. But moat is wide and there's likely a lot of room for further growth in the next few years. P/E and P/B both look fair compared to FB.

    People might have got BABA's book value wrong, because they have looked at stated shareholders' equity. Instead, I believe one should look at "Pro forma as adjusted" (P.23, 424B4). This would give you $17.459B. On top of that, you also need to add the net proceeds from the additional 26.144 million shares offered for over-subscription, which added about $1.76B. Altogether, $BABA Group shareholders' adjusted pro forma equity after this IPO should then stand at $19.22B, translating into $7.71/ADS. P/B at $89 = 11.5, on par with $FB (~11) if Yahoo! got it right.
    Sep 25 03:35 PM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Many thanks for catching that, Dr. Z. I'm also so amazed at how fast SA's Corrections Team responded even after midnight. Kudos, Seeking Alpha.
    Aug 21 09:05 AM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Only that P/E ratio was so backward looking. Also, there's no reason why a profitable bank with earnings power to grow ahead to be trading at below book (in particular tangible book) at all.

    Had you used P/E on S&P in recent history, here's what conclusion you would have reached in early 2009: a market trading at P/E (ttm) north of 120 which was supposedly insanely expensive and you would have bailed or stayed on the sideline in one of the best buying opportunities in one's lifetime. P/E ratio by itself is insanely misleading, friend.
    Aug 20 04:16 PM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Thanks for the comment, toddro. This is a grossly-misunderstood stock as of now and current share price is definitely a bargain. It does not make sense at all for it to trade below book value which is $21.25.
    Aug 20 11:36 AM | Likes Like |Link to Comment