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David Chan

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  • Enterprise Bancorp Is An Undervalued Bank With No Analyst Coverage [View article]
    I think another consideration in your thesis is also the liquidity of the shares. On Friday only ~8000 shares traded hands and daily volume is in the 15k share range. Thats less than $300,000 worth of volume per day.

    Anyone who gets into this name with that kinda volume is taking a gamble that they have a solidly accurate fundamental view on the business. I'd be paranoid about the possibility of surprise misses or shortfalls of any kind.
    Nov 17 03:05 AM | Likes Like |Link to Comment
  • Another Chance To Dip Into Take Two Interactive: Convertible Bond Drama [View article]
    It is a "possible" dilution. You yourself is stating it is a "absolue" dilusion -IF- we are above the redemption price. So until we are trading above $21.52 it is just a possibility. Neither you or I know for a fact whether it will be trading above $21.52 by then. So until that occurs I am not going to treat it as fact.

    LEAP options don't suggest anything. The option market unless there's significant activity on a specific issue wouldn't be telling you anything, and there's hardly any volume in TTWO's long dated options anywhere for me to make that same decisive conclusion.

    All I have at the facts in front of me. The bonds are refinanced at a lower rate for longer terms, and there's a possibility we have a dilution at a far higher price. Both of which are favorable for current holders of the stock.

    Now, I also have no doubts they will be able to raise the $250 mil at 1%. They've already done so in 2011 issuing 250 mil at 1.75%. That has a conversion price at $19+. You've already stated TTWO is already incredibly liquid, so why doubt their ability to raise more money for highly attractive rates if you also agree they are highly solvent??

    Also, senior debt holders are always made whole before common shareholders....... but are you suggesting if GTA5 is not going to perform that TTWO is going bankrupt? As if by loading up another 112 million of cheap long term debt is going to tip it overboard? All at the same time it's sitting on 420 mil cash and looking to generate around 1 billion of GTA5 sales? That's just silly. If GTA5 doesn't perform of course the common will suffer regardless. But that's already a risk that is known. The debt issue didn't change that, and the main point of the article above is to suggest the drop was a massive overreaction.

    Anyone who is into gaming knows GTA5 will be on their wishlist. As per my previous article, it is smart that they are not releasing GTA5 on new hardware. You have a huge already installed base of the current generation. That means the potential customer base is much larger than seeking out the early adopters of the new generation. A new GTA title is long overdue, it's been 5 years since GTA4. You either delay the release of the title for another year and wait for hardware adoption to catch up or you make the best of what you can right now by catering to the largest consumer base which is the current generation hardware.

    And of course the industry is on the decline. We are at the end of a hardware cycle. Stocks are forward looking and the recovery we've had is based on the assumption there is a renewed sense of interest on the horizon with more powerful hardware.

    Stocks are forward looking, and I will only make comments that goes with that.
    Jun 13 11:51 AM | Likes Like |Link to Comment
  • Another Chance To Dip Into Take Two Interactive: Convertible Bond Drama [View article]
    Just hit the wires. The $250 mil is priced at 1% with a redemption price at $21.52.

    My talking points:

    Upside
    1) The 2014 dilution is averted.
    2) The interest expense is lowered by ~$3.5 million a year.
    3) The long term balance sheet debt is now over half cheap debt at 1% interest.
    4) The company now has so much cash they have no liquidity concerns even if they were to double their buyback.

    Downside
    1) Overall debt level is increased
    2) Possible dilution at $21.52 in 2018.

    The stock is at 15.34 as I type this. I still think the near term catalysts and strengths of the company's balance sheet outweighs the long term risks. Again, this is a trading stock, not a buy and hold perpetually. Right now we have a buying opportunity.
    Jun 13 09:57 AM | 1 Like Like |Link to Comment
  • Another Chance To Dip Into Take Two Interactive: Convertible Bond Drama [View article]
    My call here is that TTWO could very well increase their buyback in the coming week or in the next earning call just prior to GTA5.

    My argument is that yesterday's move is an overreaction to the possible dilution in 2018. TTWO is a fast moving company. Fundamentals by 2018 could be completely different by then. The next GTA would already be right around the corner, and I am not even sure if TTWO will remain a public company by then as I do still feel confident that the firm is still a fantastic takeout candidate.

    The market may attempt to "price in" a future dilution in 2018. But that's almost like asking an investor in 2006 whether a Lehman stock buyback in 2011 was going to boost the stock or not.

    We are trading in 2013 and TTWO's story is playing out right now. I think anyone following the stock should ask whether the fundamentals of the firm has changed, which I do not believe it has.
    Jun 13 09:42 AM | Likes Like |Link to Comment
  • Take-Two Interactive: A Chance To Play The Coming Consolidation Of The Video Games Industry? [View article]
    There simply isn't any other titles released recently that has the appeal of GTA worth comparing to.

    Take a look at the top 50 of this list: http://bit.ly/XsopMD

    GTA titles appears multiple times on this list (4 games taking 16, 23, 31, 48), and other than Super Mario and Pokemon I dare say the GTA series probably is the marquee series for video games in recent history along side the Call of Duty series (3 games taking 30, 32, 33, 35, 39, 49). Comparing GTA to anything else outside of COD simply wouldn't do it justice.

    Then take a look at the installed base of Xbox 360s from Q4 2009 (around 29 mil units) to today (around 76 million units, supposedly.) If GTA was able to sell to around 50% of the installed base then, I don't foresee selling 18 million copies to <25% of the installed base this year is too much a challenge.

    Onto Vivendi-Activision, I do not see that situation resolving itself anytime soon. We are on the cusp of a new hardware cycle and Vivendi has sat itself out for long enough. Mid year 2012, talks to sell ATVI broke down due to the offers all not being high enough. Fortunes for the industry are starting to turn with excitement of the new hardware releases generating interest, along with the share prices of all the players in the sector.

    Unless ATVI wishes to buy itself back at an even higher premium I can't see why Vivendi would accept. Also, its an $10+ billion deal at current prices. It's not something that either ATVI or Vivendi can ink easily. Vivendi is most likely stuck with ATVI, and they might as well considering we are coming out of a trough.

    ATVI is the most likely acquirer in my opinion of TTWO. Even at current valuations they can still get a deal done for less than what ATVI holds in cash.

    As for other acquirers, i am thinking outside the video game industry. Sure, MSFT can buy TTWO just to get the GTA exclusive (and they have showered them with money in the past for deals like that), and they can afford it. But MSFT could have moved in years ago if they wanted to, and I have a feeling they have bigger fish to fry. Sony is in no position to really make a move due to their troubles with their core divisions either.

    Looking at the insider transactions recently, I would actually be putting my bet on either privatization or LBO by a hedge fund. The valuations aren't that demanding and given the new hardware cycle, wouldn't it make a lot of sense to re-IPO at a later point when the sentiment improves?

    As for Rockstar Games, I am not enough of an insider to know what really goes on inside the studio. But I am sure given the creative successes that team is known to generate, unless SZ has some insanely good programming skills at his hands, the football team might have just taken over the principle's office. But that's just my 2 cents.
    Feb 19 02:42 PM | Likes Like |Link to Comment
  • Chris Katje's Annual Top Ten Stock Picks For 2013 Part II [View article]
    With you on LF and TTWO. Own both. TITN is on my watch list. Unusual our watch list has that much overlap.

    What's your take on basic materials? I don't see any names in that space in your picks. Thoughts on Occidental Petro (OXY)?
    Jan 7 02:15 PM | 1 Like Like |Link to Comment
  • Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date [View article]
    Very. I was thinking of going in with 10k shares just as a "all bets on red" sorta thing. Toups had a very questionable history with a few delisted Chinese firms was why I had little conviction other than playing the PR rebound.

    But after AIG, you learn to tame your itchy trigger fingers. lol
    Jan 3 10:01 PM | 1 Like Like |Link to Comment
  • Another Downgrade For Skullcandy And Another Oversized Response [View article]
    I bought in at 8.4 also but unloaded *everything* when it failed to break above the moving averages at around 8.2. Tried this twice but the symbol keeps failing to break thru and I took small losses each time.

    Is the stock undervalued? Maybe, I am inclining to say it's "cheap". But there's no conviction (me included) to play this name beyond the quick trades. I have a high risk appetite on the limited amount of money I had put into SKUL and I am fine with losses here. I knew what I was in for. It was a technical trade, nothing else mattered. It works, or it doesn't.

    However, it seems like a lot of the chatter was to wait for the short squeeze. Buy and hold. Unless there's some sort of fundamental improvement in the business model the chance of that happening is low. Investors need to realize that turnarounds aren't just caused by a positive Seeking Alpha article.

    There needs to be catalysts where you have strong convictions in to justify a thesis, especially in the face of strong established downward trends. I don't see any of that here. Management can say anything they want but until you execute some results all that is is just talk and all you are doing is making a gamble. SKUL's management is one that I view has low to no creditability, shown thru insider trading activity and their shareholder friendliness (or lack thereof). I dropped the ticker from my watchlist as a result.

    Is SKUL back on my watchlist? Sure. Again, as a technical trade. But will I "invest" in it?

    Nope. Never at least according to what I am currently looking at.
    Jan 3 06:27 PM | Likes Like |Link to Comment
  • Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date [View article]
    I almost bought into this thing a month ago. Even though it ran up 20% or so afterwards I didn't feel like I missed out. The threat of something like this is always there with emerging market tickers.

    And this story just shows you cannot trust what you read blindly. I bought AIG in 2007 thinking it was a smart investment. When management deceive nothing matters.

    Knowing how weak corporate governance controls are in mainland China, this comes as no surprise. Job well done sir on the expose.
    Jan 3 11:56 AM | 2 Likes Like |Link to Comment
  • Take-Two Interactive: A Chance To Play The Coming Consolidation Of The Video Games Industry? [View article]
    They have released Max Payne 3, Borderlands 2, and NBA Live 2k13 in 2012 to prop their numbers up this year.

    These 3 titles are part of the broad roster of titles Take Two has in their armory that illustrates their current content strategy on focusing on building content franchises, rather than 1 hit wonders:

    With Max Payne 3 and Borderlands 2, these are 2 titles that are sequels to titles released several years ago that have developed a loyal following. They pick 2-3 of these titles a year to advance, similar to movie sequels to develop new plots/chapters/storylines in the story, and also updating the franchise technologically and content wise to make sure it stays relevant.

    NBA Live 2k13 is part of their sports games strategy that keeps churning out updates annually to reflect changes in the real life sporting space. While I am not particularly keen on the annuity release concept, I do think with sports they can get away with the interest corrosion that you might experience with a drama/story driven franchise.

    Going forward, Take Two's creative team has shown themselves to be very talented content producers if you look at the reviews of their key pipelines games in the last year or two, most games often score review scores in the 80%+ regions. There are numerous titles in their roster that are due for a new renditions.

    The company was able to generate a profit due to these mini-hits. In 2008, if you ask anyone about Take Two, they will respond Grand Theft Auto, with just 1 or 2 titles in the pipeline that gets people talking.

    Today, I could name 8 franchises that gets the gaming media excited and jumping around in anticipation for a new release. I believe this number will continue to grow with time, the team at TTWO is capable.

    As long as they have what it takes to create relevance in the marketplace, with new hardware just on the horizon, the firm should be able to capitalize on the goodwill and content they are seeding today. The next hardware cycle I believe will renew consumer interest by offering new features and tech upgrades, and with the right content mix, they could very well capitalize on that recovery.
    Dec 31 06:04 PM | 1 Like Like |Link to Comment
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