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  • Titanic Assets Worth More Than The Company That Owns Them

    (click to enlarge)According to appraisal specialist, Alasko, the collection of artifacts from Premier Exhibitions Inc.'s (NASDAQ: PRXI) unit RMS Titanic is now valued at $218 million. The recent appraisal does not include the value of intellectual property and archeological assets compiled during the company's 2010 dive, which includes the first comprehensive map of the wreck site and other 3D imagery. The collection of more than 5,000 artifacts was valued at $189 million in 2007.

    In addition to the Titanic exhibits, the company's assets include: Bodies, Tutankhamen, The Golden King and the Great Pharaoh, Extreme Dinosaurs and Real Pirates.

    The company has been trying to sell the Titanic artifacts on a piecemeal basis, but the expected price for these artifacts has not been met. If you look at the market cap of almost $40 million, the value of these assets alone would be more than 5 times its market cap. However, it looks like the company needs to dispose these assets before a strong boost to the market price will happen.

    Funding Needed

    One of the obstacles to the company's growth has been its lack of available cash to pursue growth opportunities. As of the recent quarterly report, it has cash of around $4 million with minimal debt. If it could immediately sell these assets, this would provide a boost to its war chest to pursue acquisitions or value-added expansions.

    Recently, the company has tapped into an $8 million short-term credit facility with an interest of 12 percent and maturity in 2015. The credit facility is secured by corporate assets and non-dilutive to shareholders.

    Samuel Weiser, Executive Chairman of PRXI, said that the credit facility will give the company necessary funds to secure new content for its presentation. Further, the funds also provide the company with time to refocus on how they will monetize the Titanic assets. He also added that the company would pursue sources for longer-term facility to give it necessary funds to execute its capital. Over the past four years, the company has been posting relatively flat earnings.

    Analysts are expecting that PRXI will be able to post 15 percent growth over the next five years. However, this is dependent on the company getting more funding in order to pursue its growth plans and re-establish profitability.

    Pure Asset Play

    Investors buying shares of PRXI are betting on the company to unlock the value of the Titanic artifacts. Entertainment stocks are getting good valuations in the market. In fact, International Speedway Corp. (NASDAQ: ISCA)is valued at 24 times earnings with a market cap of $1.42 billion. On the other hand, The Madison Square Garden Company (NASDAQ: MSG) trades at 44 times earnings and carries a market cap of $4.89 billion.

    It will probably take a few more years to unlock the Titanic assets. Patient investors could make a ton of money if the asset sale can be realized. As of now, the stock seems like dead money for enterprising investors.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: PRXI, Titanic
    Nov 11 11:59 AM | Link | Comment!
  • Asbury Automotive Capitalizes On Subprime Lending To Report Record Earnings

    (click to enlarge)Asbury Automotive (NYSE: ABG) in October reported net income for the third quarter of 2014 of $32.5 million. This not only marked a new milestone for the Duluth, Georgia based auto retailer, but was also a remarkable 43 percent improvement when compared with a net income of $22.7 million from the third quarter of 2013.

    Asbury Automotives' other major operational highlights during the quarter include an 8 percent increase in total revenue to $1.5 billion. Asbury Automotives' impressive performance during the quarter was attributable to easier access to credit by customers. This helped drive up the sales of new and used vehicles.

    Subprime lending continues to feature strongly in the U.S. auto sector. This is because Wall Street has now joined the fray. A report on the New York Times, says that Wall Street is now supplying auto firms with funds to avail money for loans. Moreover, Wall Street is bundling subprime auto loans into complex bonds that are being sold as securities to public pension funds, insurance firms and mutual funds, the report adds. This has created intense demand for subprime auto loans, providing a means for auto firms like Asbury Automotive to tap into a class of customers who would have ordinarily been denied a car loan.

    Lower Segment

    Asbury Automotive appears it will continue to concentrate its efforts on the lower segments of the market. It is not only loosening credit standards to rope in customers with less than stellar credit, but it is also increasing its exposure in the used car segment. This will allow it to appeal to bargain hunters who don't want to bear the burden of paying off the usurious interest rates of up to 24 percent that typically accompany subprime debt.

    In its earnings report, Asbury revealed that as a strategic move, it would open up a third stand-alone used vehicle store branded "Q auto" in Ft. Meyers Florida in the fourth quarter of fiscal 2014. This strongly suggests that the company's two other "Q auto" stores, which it opened in Florida during the third quarter, are doing well. Asbury's decision to open a third used car outfit further highlights the growing demand for used cars in the U.S. In a video report, CNBC's Phil LeBeau argues that used cars have become increasingly profitable for dealers over the past few years.

    Going forward, Asbury Automotives' focus on the lower segment of the market will pay off. Moreover, the delicate balance between subprime lending and second hand dealerships allows it to spread its risks while still pursuing the same class of customers. There is still more upside ahead.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 10 9:30 AM | Link | Comment!
  • Independent Oil And Gas Company Struggling To Survive

    (click to enlarge)Crude oil is down over 17 percent year-to-date so far, as gasoline prices hit two year lows and natural gas is down over 14 percent for the year. As consumers, we cheer for lower gas prices, and being that a majority of the U.S. economy relies on consumer spending, this is very good news and should help bolster retail sales over time. However, the fall in oil and gasoline is bad news for drillers, refiners, the shale boom, and really anyone who relies on the high price of petroleum products. One company that has been getting slammed this year is Quicksilver Resources Inc. (NYSE: KWK). Quicksilver is an independent oil and gas company that deals in acquisition, exploration, development, production and sale of natural gas and oil in the U.S.

    Turning to the fundamentals, Quicksilver has a market cap of $113.40 million and is rated a "Sell" by analysts. The company is not profitable and is not forecast to reach profitability within the next year. Price to sales is undervalued at .24, and price to cash is weak at 3.51. According to the company's balance sheet, Quicksilver has total cash holdings of $32.27 million and total debt holdings of $1.80 billion, giving the company a weak current ratio of 1.29.

    Earnings are forecast to rise 106.70 percent this year, fall 20.70 percent next year and remain flat over the next five years. Sales quarter-over-quarter have tumbled 32.80 percent and earnings per share have dropped 115.30 percent during the same period. Insiders have been liquidating long positions, which can be seen with an insider transaction rate of -57.97 percent. Institutional investors continue to have an ownership of 55 percent of the stock. Short sellers have taken advantage of the poor performing stock, with a short float of 24.64 percent; watch for this number to rise. Performance has been extremely lousy for the stock: down 74.90 percent in the past year and down 79.48 percent year-to-date.

    Ultimately, I do not see Quicksilver being able to revive itself from its fall from grace. Once trading above $3.50 in February 2014, the stock has seen an unprecedented fall and the quarter-over-quarter earnings show you that the company has fallen off track. With the underlying commodities seeing falling prices, I think it only puts more pressure on Quicksilver and ultimately, I am placing Quicksilver on my bankruptcy watch list. The overwhelming debt load, lack of cash, poor petroleum commodity performance and falling earnings are too much for the company to handle at this point.

    Be sure to do your own research before investing.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Nov 10 9:17 AM | Link | Comment!
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