Comments on David Schrader's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/david-schrader/articles http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-794897 794897 I saw this article and was mildly intrigued. However, a brief analysis > changed my opinion. > > Breakdown of PP&E: Approximately $200m is land and buildings, > $100m is equipment, and $100m is leasehold improvements. I don’t > know any more than this, and I have no idea how these assets would > be treated in a liquidation situation. > > Cash: The large cash balance is deceiving because of the deferred > rent and deferred rental allowances. If these are subtracted from > the cash balance as they should be, cash is more like $25 million. > > > Debt: Under an operating lease, a portion of rent is essentially > considered interest, and a portion is essentially considered principal, > making it a similar instrument to debt. So the company essentially > has $102 million in debt, which offsets the $25 million in cash. > > > My concern about using an asset approach when investing in this company > is the nature of the relationship between it and Hospitality Properties > Trust (HPT), its landlord and former owner. Without investigating > the situation further, my guess is that HPT may have claims on many > of the assets listed on the balance sheet, and would receive many > of them in liquidation. > > As a result, I think the best way to value this company should be > based on its earnings power, but this is nearly impossible due to > its extremely high operating leverage. According to the most recent > conference call, it earned $60m EBITDAR in 3Q 2009 versus $88m in > 3Q 2008 (which was record high due to high retail gas spreads) versus > approximately $53m in 3Q 2007. Monthly rent expense of $58.5m (which > even in the best quarter I could find was 70% of EBITDAR, meaning > they are probably paying WAY too much) yields EBITDA of $1.5m in > 3Q 2009 and $28m in 3Q 2008. As you can see, this business has HUGE > operating leverage due to what appears to be unfairly large rent > payments. A 30% decrease in EBITDAR leads to a 95% decrease in EBITDA. > This is before factoring in maintenance capex of $6.5m, which yields > rough cash flow estimates of -$5m and $21.5m for 3Q 2009 and 2008, > respectively. > > With $102m in operating leases minus $25m in cash plus a current > market cap of $60m, I get a rough enterprise value estimate of $137m. > If you annualize the 3Q 2009 EBITDA numbers, this yields an EV/EBITDA > of 22.8, while using the record 3Q 2008 numbers yields an EV/EBITDA > of 1.2. EBITDA in 3Q 2007 was negative, so the decrease between 2008 > and 2009 is NOT primarily due to economic weakness. The volatility > in operating results is primarily fueled by retail spreads on gas > which have ranged between $0.08 and $0.12 during the time period. > > > I would argue that TA is a highly leveraged, speculative play on > retail gas spreads rather than a value play. It has an awful competitive > position as suppliers like Coke, Burger King, and Exxon reap most > of the industry profits, while the rest goes to its landlord and > former owner, HPT, due to what appear to be onerous lease agreements. > In my opinion, TA’s share price has declined precipitously not because > of the economy, but because of an outrageously priced IPO. Investors > have fled because of an increased understanding of the lopsided relationship > with HPT, not because of an overreaction to reversible changes in > TA’s expected operating results. > > While it may be possible to capture large profits in this stock due > to price volatility, I would only invest if I had reason to believe > that retail gas spreads will stay near $0.12 per gallon indefinitely.]]> Mon, 07 Dec 2009 16:10:16 -0500

On Nov 12 11:50 AM Hamilton wrote:

> I saw this article and was mildly intrigued. However, a brief analysis
> changed my opinion.
>
> Breakdown of PP&E: Approximately $200m is land and buildings,
> $100m is equipment, and $100m is leasehold improvements. I don’t
> know any more than this, and I have no idea how these assets would
> be treated in a liquidation situation.
>
> Cash: The large cash balance is deceiving because of the deferred
> rent and deferred rental allowances. If these are subtracted from
> the cash balance as they should be, cash is more like $25 million.
>
>
> Debt: Under an operating lease, a portion of rent is essentially
> considered interest, and a portion is essentially considered principal,
> making it a similar instrument to debt. So the company essentially
> has $102 million in debt, which offsets the $25 million in cash.
>
>
> My concern about using an asset approach when investing in this company
> is the nature of the relationship between it and Hospitality Properties
> Trust (HPT), its landlord and former owner. Without investigating
> the situation further, my guess is that HPT may have claims on many
> of the assets listed on the balance sheet, and would receive many
> of them in liquidation.
>
> As a result, I think the best way to value this company should be
> based on its earnings power, but this is nearly impossible due to
> its extremely high operating leverage. According to the most recent
> conference call, it earned $60m EBITDAR in 3Q 2009 versus $88m in
> 3Q 2008 (which was record high due to high retail gas spreads) versus
> approximately $53m in 3Q 2007. Monthly rent expense of $58.5m (which
> even in the best quarter I could find was 70% of EBITDAR, meaning
> they are probably paying WAY too much) yields EBITDA of $1.5m in
> 3Q 2009 and $28m in 3Q 2008. As you can see, this business has HUGE
> operating leverage due to what appears to be unfairly large rent
> payments. A 30% decrease in EBITDAR leads to a 95% decrease in EBITDA.
> This is before factoring in maintenance capex of $6.5m, which yields
> rough cash flow estimates of -$5m and $21.5m for 3Q 2009 and 2008,
> respectively.
>
> With $102m in operating leases minus $25m in cash plus a current
> market cap of $60m, I get a rough enterprise value estimate of $137m.
> If you annualize the 3Q 2009 EBITDA numbers, this yields an EV/EBITDA
> of 22.8, while using the record 3Q 2008 numbers yields an EV/EBITDA
> of 1.2. EBITDA in 3Q 2007 was negative, so the decrease between 2008
> and 2009 is NOT primarily due to economic weakness. The volatility
> in operating results is primarily fueled by retail spreads on gas
> which have ranged between $0.08 and $0.12 during the time period.
>
>
> I would argue that TA is a highly leveraged, speculative play on
> retail gas spreads rather than a value play. It has an awful competitive
> position as suppliers like Coke, Burger King, and Exxon reap most
> of the industry profits, while the rest goes to its landlord and
> former owner, HPT, due to what appear to be onerous lease agreements.
> In my opinion, TA’s share price has declined precipitously not because
> of the economy, but because of an outrageously priced IPO. Investors
> have fled because of an increased understanding of the lopsided relationship
> with HPT, not because of an overreaction to reversible changes in
> TA’s expected operating results.
>
> While it may be possible to capture large profits in this stock due
> to price volatility, I would only invest if I had reason to believe
> that retail gas spreads will stay near $0.12 per gallon indefinitely.]]> http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-757221 757221 Thu, 12 Nov 2009 11:50:25 -0500
Breakdown of PP&E: Approximately $200m is land and buildings, $100m is equipment, and $100m is leasehold improvements. I don’t know any more than this, and I have no idea how these assets would be treated in a liquidation situation.

Cash: The large cash balance is deceiving because of the deferred rent and deferred rental allowances. If these are subtracted from the cash balance as they should be, cash is more like $25 million.

Debt: Under an operating lease, a portion of rent is essentially considered interest, and a portion is essentially considered principal, making it a similar instrument to debt. So the company essentially has $102 million in debt, which offsets the $25 million in cash.

My concern about using an asset approach when investing in this company is the nature of the relationship between it and Hospitality Properties Trust (HPT), its landlord and former owner. Without investigating the situation further, my guess is that HPT may have claims on many of the assets listed on the balance sheet, and would receive many of them in liquidation.

As a result, I think the best way to value this company should be based on its earnings power, but this is nearly impossible due to its extremely high operating leverage. According to the most recent conference call, it earned $60m EBITDAR in 3Q 2009 versus $88m in 3Q 2008 (which was record high due to high retail gas spreads) versus approximately $53m in 3Q 2007. Monthly rent expense of $58.5m (which even in the best quarter I could find was 70% of EBITDAR, meaning they are probably paying WAY too much) yields EBITDA of $1.5m in 3Q 2009 and $28m in 3Q 2008. As you can see, this business has HUGE operating leverage due to what appears to be unfairly large rent payments. A 30% decrease in EBITDAR leads to a 95% decrease in EBITDA. This is before factoring in maintenance capex of $6.5m, which yields rough cash flow estimates of -$5m and $21.5m for 3Q 2009 and 2008, respectively.

With $102m in operating leases minus $25m in cash plus a current market cap of $60m, I get a rough enterprise value estimate of $137m. If you annualize the 3Q 2009 EBITDA numbers, this yields an EV/EBITDA of 22.8, while using the record 3Q 2008 numbers yields an EV/EBITDA of 1.2. EBITDA in 3Q 2007 was negative, so the decrease between 2008 and 2009 is NOT primarily due to economic weakness. The volatility in operating results is primarily fueled by retail spreads on gas which have ranged between $0.08 and $0.12 during the time period.

I would argue that TA is a highly leveraged, speculative play on retail gas spreads rather than a value play. It has an awful competitive position as suppliers like Coke, Burger King, and Exxon reap most of the industry profits, while the rest goes to its landlord and former owner, HPT, due to what appear to be onerous lease agreements. In my opinion, TA’s share price has declined precipitously not because of the economy, but because of an outrageously priced IPO. Investors have fled because of an increased understanding of the lopsided relationship with HPT, not because of an overreaction to reversible changes in TA’s expected operating results.

While it may be possible to capture large profits in this stock due to price volatility, I would only invest if I had reason to believe that retail gas spreads will stay near $0.12 per gallon indefinitely.
]]> http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-756006 756006 Wed, 11 Nov 2009 16:27:08 -0500
Please advise on your thoughts]]> http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-740089 740089 Mon, 02 Nov 2009 08:54:51 -0500 http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-733768 733768 Wed, 28 Oct 2009 09:29:11 -0400 http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-733753 733753 Wed, 28 Oct 2009 09:21:57 -0400 http://seekingalpha.com/article/169289-travelcenters-of-america-long-value-play?source=feed#comment-733086 733086 Tue, 27 Oct 2009 19:12:57 -0400 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-470394 470394 Mon, 20 Apr 2009 18:21:16 -0400
"Dumb money ceases to dumb when it realizes its limitations. But big money aint always faster than small money..."

-J. Gramer to a good friend of mine

"Tenure is a powerful weapon against reason"

-J. Cramer (the one and only.)]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-464314 464314 Wed, 15 Apr 2009 19:26:15 -0400 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-455227 455227 Tue, 07 Apr 2009 15:02:21 -0400 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-393970 393970 Wed, 18 Feb 2009 15:17:59 -0500 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-385912 385912 Thu, 12 Feb 2009 13:26:43 -0500
Looking at today's valuation - a lot of this potential fraud seems to be built into the price.

If they have anywhere near the current assets they claim - and if oil bumps up a bit and/or China keeps growing at all - its worth a small risk IMO.

China should come out of this downturn in a better position than many countries.

Any reverse in the global economy could send energy up significantly.

Feedstock for their 'product' isn't going away (Chinese have to eat) - and demand for the product should increase long term.

Only downside seems to be fraud on a VERY massive scale.

I'll take a shot with a small amount of $$$.

Should be fun to watch how this plays out...

]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-317333 317333 Sun, 30 Nov 2008 02:56:19 -0500 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-300600 300600 Sat, 08 Nov 2008 02:28:02 -0500 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-297828 297828 Schrader Trader, > > Wanted to know if you checked into the GU article mentioned by Cat. > I followed the link, then Googled "translate webpage", copied the > web address into the translator and the article was translated. > > > I did this process twice through a Yahoo and a Google translate page. > The article reads differently with each one, which is interesting, > but the jist of it is the same. > > The article is a little hard to read, as the translation is not prefect, > but it appears to suggest that the financials reported in GU's financial > report are not correct and a front to gain more business. It also > indicates that it is impossible for GU to purchase oil for 2390 yuan > per ton, as the going rate is 5000 per ton. > > Here is the link to the article. http://finance.sina.com.cn/g/20080924/03002438842.shtml > > > I would be interested to know what you think about this. There are > a few reliable stock websites that indicate GU is not only a buy, > but set to spike, ie. Zacks.com, TheStreet.com and MotleyFool.com. > Could it be that GU is not all that it appears to be and the news > has not been entirely uncovered yet? > > I am hoping not, as it seems like such a great valuation and opportunity! > > > Davis]]> Tue, 04 Nov 2008 06:28:20 -0500
I had this article translated for me. This article is written by a news reporter who went to Gushan's refineries in Fujian and Sichuan provinces. The first thing he discovered was that Gushan hired trucks to come in and out of their factory to put on a show of busy receiving and delivering (in Fujian, he saw 1 truck came into the factory, went on the weigh bridge, which read 2+ tons only, drove around the factory, went out of the factory, stopped at a PetroChina gas station, waited for 15 minutes, and then drove back to the factory for another round. The reporter noticed 3 trucks were doing the show and he recorded their plate numbers. He then found the same thing in Sichuan and the people in the neighborhood said Gushan had been doing this since last year, 4 trips/truck per day and 2 trips/day in raining days). Then he interviewed Gushan's staff and they said that their feedstock purchasing price to their branches was RMB4,200/ton and whatever the Branch managers could source for below that price was their profit, as an incentive). Gushan's factories have severe pollution and local residents were filing complaints to local gov requesting to close the factory down. etc. etc.


On Oct 30 04:01 PM Davis wrote:

> Schrader Trader,
>
> Wanted to know if you checked into the GU article mentioned by Cat.
> I followed the link, then Googled "translate webpage", copied the
> web address into the translator and the article was translated.
>
>
> I did this process twice through a Yahoo and a Google translate page.
> The article reads differently with each one, which is interesting,
> but the jist of it is the same.
>
> The article is a little hard to read, as the translation is not prefect,
> but it appears to suggest that the financials reported in GU's financial
> report are not correct and a front to gain more business. It also
> indicates that it is impossible for GU to purchase oil for 2390 yuan
> per ton, as the going rate is 5000 per ton.
>
> Here is the link to the article. finance.sina.com.cn/g/...
>
>
> I would be interested to know what you think about this. There are
> a few reliable stock websites that indicate GU is not only a buy,
> but set to spike, ie. Zacks.com, TheStreet.com and MotleyFool.com.
> Could it be that GU is not all that it appears to be and the news
> has not been entirely uncovered yet?
>
> I am hoping not, as it seems like such a great valuation and opportunity!
>
>
> Davis]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-297303 297303 Mon, 03 Nov 2008 11:49:44 -0500 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-297298 297298 Schrader Trader, > > Wanted to know if you checked into the GU article mentioned by Cat. > I followed the link, then Googled "translate webpage", copied the > web address into the translator and the article was translated. > > > I did this process twice through a Yahoo and a Google translate page. > The article reads differently with each one, which is interesting, > but the jist of it is the same. > > The article is a little hard to read, as the translation is not prefect, > but it appears to suggest that the financials reported in GU's financial > report are not correct and a front to gain more business. It also > indicates that it is impossible for GU to purchase oil for 2390 yuan > per ton, as the going rate is 5000 per ton. > > Here is the link to the article. http://finance.sina.com.cn/g/20080924/03002438842.shtml > > > I would be interested to know what you think about this. There are > a few reliable stock websites that indicate GU is not only a buy, > but set to spike, ie. Zacks.com, TheStreet.com and MotleyFool.com. > Could it be that GU is not all that it appears to be and the news > has not been entirely uncovered yet? > > I am hoping not, as it seems like such a great valuation and opportunity! > > > Davis]]> Mon, 03 Nov 2008 11:47:29 -0500
I attempted a translation as well and derived the same conclusion... what strikes me as odd (and the reason I initially was bullish on this stock) was how a firm with such great fundamental strength could be trading at such a discount.... then I remembered the saying 'if it sounds too good to be true it probably is'.

In this environment with the global discounts on virtually every company there are plenty of other places to put one's money. Even hearing the possibility of accounting fraud makes this a stock I no longer would spend time in. Too many opportunities out there to take on the potential risk. Just my opinion for what it's worth.



On Oct 30 04:01 PM Davis wrote:

> Schrader Trader,
>
> Wanted to know if you checked into the GU article mentioned by Cat.
> I followed the link, then Googled "translate webpage", copied the
> web address into the translator and the article was translated.

>
>
> I did this process twice through a Yahoo and a Google translate page.
> The article reads differently with each one, which is interesting,
> but the jist of it is the same.
>
> The article is a little hard to read, as the translation is not prefect,
> but it appears to suggest that the financials reported in GU's financial
> report are not correct and a front to gain more business. It also
> indicates that it is impossible for GU to purchase oil for 2390 yuan
> per ton, as the going rate is 5000 per ton.
>
> Here is the link to the article. finance.sina.com.cn/g/...

>
>
> I would be interested to know what you think about this. There are
> a few reliable stock websites that indicate GU is not only a buy,
> but set to spike, ie. Zacks.com, TheStreet.com and MotleyFool.com.
> Could it be that GU is not all that it appears to be and the news
> has not been entirely uncovered yet?
>
> I am hoping not, as it seems like such a great valuation and opportunity!

>
>
> Davis]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-294568 294568 Thu, 30 Oct 2008 16:01:27 -0400
Wanted to know if you checked into the GU article mentioned by Cat. I followed the link, then Googled "translate webpage", copied the web address into the translator and the article was translated.

I did this process twice through a Yahoo and a Google translate page. The article reads differently with each one, which is interesting, but the jist of it is the same.

The article is a little hard to read, as the translation is not prefect, but it appears to suggest that the financials reported in GU's financial report are not correct and a front to gain more business. It also indicates that it is impossible for GU to purchase oil for 2390 yuan per ton, as the going rate is 5000 per ton.

Here is the link to the article. finance.sina.com.cn/g/...

I would be interested to know what you think about this. There are a few reliable stock websites that indicate GU is not only a buy, but set to spike, ie. Zacks.com, TheStreet.com and MotleyFool.com. Could it be that GU is not all that it appears to be and the news has not been entirely uncovered yet?

I am hoping not, as it seems like such a great valuation and opportunity!

Davis]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-289338 289338 Fri, 24 Oct 2008 02:38:54 -0400
finance.sina.com.cn/g/...

It's in Chinese. You would need it to be translated.]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-288470 288470 Thu, 23 Oct 2008 08:15:16 -0400
Do you have a link to the article? If you're accurate with what you say then I need to mention that.]]> http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-288341 288341 Wed, 22 Oct 2008 23:18:19 -0400 http://seekingalpha.com/article/101030-expose-yourself-to-the-long-side?source=feed#comment-287649 287649 Wed, 22 Oct 2008 08:40:23 -0400 http://seekingalpha.com/article/101030-expose-yourself-to-the-long-side?source=feed#comment-287589 287589 Wed, 22 Oct 2008 03:49:44 -0400 http://seekingalpha.com/article/100855-the-long-case-for-yahoo?source=feed#comment-287442 287442 Tue, 21 Oct 2008 19:07:54 -0400
Assume 0% growth for 2009 and you've got a company trading at 6.3x 2008 EBITDA and 7.3x a Buffett-esque Owners' Earnings (Net Income + D and A - an average baseline CapEx). Not half bad, especially with an itchy Icahn on board.]]> http://seekingalpha.com/article/100855-the-long-case-for-yahoo?source=feed#comment-287436 287436 Tue, 21 Oct 2008 18:59:49 -0400 http://seekingalpha.com/article/100855-the-long-case-for-yahoo?source=feed#comment-287427 287427 Tue, 21 Oct 2008 18:47:24 -0400 http://seekingalpha.com/article/100855-the-long-case-for-yahoo?source=feed#comment-287410 287410 Tue, 21 Oct 2008 18:14:55 -0400 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-286058 286058 Mon, 20 Oct 2008 02:30:09 -0400 http://seekingalpha.com/article/100577-the-long-case-for-gushan-environmental-energy?source=feed#comment-285849 285849 Sun, 19 Oct 2008 18:23:44 -0400 http://seekingalpha.com/article/59551-why-i-m-buying-circuit-city-calls?source=feed#comment-257573 257573 Wed, 17 Sep 2008 22:07:58 -0400