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  • Nathan's Famous, Inc. Valuation: New Licensing Agreement Provides Catalyst For Future Profits [View article]
    This comment serves as a brief update and recap to what has transpired since publication of the above article. Though Nathan’s remains a relatively thinly traded stock (typical volumes around 10-20k shares) with no analyst coverage, it appears that the market is finally coming around to the lucrative licensing deal signed with John Morrell & Co, which took effect in March 2014. Since publication of the original article, shares have increased in value by more than 100%, and with good reason. In the six months following the effective date of the new licensing deal, total royalties from John Morrell were $8.4 million vs. $2.7 million under the previous licensing agreement with SMG, Inc. This increase is largely consistent with the expectations set forth in the article, and further demonstrates the strong value of the Nathan’s brand. While sensitive to a number of factors, including the price of beef, which rose 15% in the 2015 period, we expect royalties from the John Morrell deal to continue to drive growth into the future. In addition, sales growth of 17% y/y resulted from a combination of favorable pricing and an increase in volumes. As laid out in the article, a conservative 10% discount rate was used in the valuation. Given the low capital intensity of the business model, this assumption proved to be overly conservative, providing a pleasant surprise to investors. Given the strong brand recognition, lucrative licensing deal, and low capital intensity, Nathan’s has set itself up to generate a strong earnings stream for years to come.
    Jan 10, 2015. 08:12 PM | Likes Like |Link to Comment
  • DGSE Companies - Micro-Cap Gold Company With Strong Growth Catalysts [View article]
    Hi Justin,
    Thanks. Management has indicated that bullion sales have actually been very strong (see management discussion, Q2 10-Q: http://bit.ly/12tZsVh). Unfortunately, that side of the business is relatively low margin, and won't generate the strong profits that the scrap and jewelry side will.
    Aug 22, 2013. 08:10 PM | Likes Like |Link to Comment
  • DGSE Companies - Micro-Cap Gold Company With Strong Growth Catalysts [View article]
    Two issues with the valuation exhibit:
    1. The number of stores opened in 2019 was incorrectly stated as 60, when it would in fact be 35, assuming a limit of 200 stores. This would decrease the valuation estimate to around $9.
    2. Since the assumption is that the number of stores is capped at 200, there wouldn't be any store openings in 2020, and expenditures would probably be a good deal less going forward. This would increase the resulting stock price by a decent amount, possibly as much as $5-$6.

    As stated, the valuation is meant to give an example of how growth could really enhance future results and to provide a VERY rough estimate of what the stock price might look like, not any kind of definite price "target". Sorry if this caused any confusion when reading the article.
    Aug 22, 2013. 08:01 PM | Likes Like |Link to Comment
  • Transglobe Energy: Opportunity Amid Uncertainty In Egypt [View article]
    Thanks for the comment. I would be a bit hesitant to use an average of the past five years of historical data for Transglobe, as it has seen significant growth in operations during that period. The valuation presented in the paper starts with funds flow from operations (which does not take into account changes in non-cash working capital) and works off of that. While the analysis relies on management assumptions, which may or may not be conservative, the value of $145MM assumed for funds flow does represent a decrease from the value of $153MM reported for 2012.
    Jul 17, 2013. 10:33 AM | Likes Like |Link to Comment
  • Transglobe Energy: Opportunity Amid Uncertainty In Egypt [View article]
    Thanks! It is a shame that there is not more coverage on the stock by US firms.
    Jul 7, 2013. 09:43 PM | 1 Like Like |Link to Comment
  • Transglobe Energy: Opportunity Amid Uncertainty In Egypt [View article]
    Thanks for the comment. The article does not imply that the current price assumes failure is imminent, but tries to incorporate a kind of crude "discount factor" to deal with the possibility of failure through use of the Moodys five year probability of default for Egypt. Under the limited/no growth situation, the value of $6.40 given in the article is actually within your range of $6.24 - $7.28
    Jul 7, 2013. 09:40 PM | Likes Like |Link to Comment
  • Deswell: Valuation Of A Classic Net-Net [View article]
    Thank you for the insight. I apologize for implying that the value of PP&E is $0. As you lay out, it clearly is not. The motivation for assigning it a value of $0 was uncertainty over the shifting dynamic where Dongguan may no longer be the "world's factory" and not knowing how this would affect the value of PP&E. The assumption was meant to be very conservative for the case that manufacturing in Dongguan rapidly deteriorates, but as you point out, it is almost certainly overly conservative.
    Jun 25, 2013. 03:48 PM | Likes Like |Link to Comment
  • Nathan's Famous, Inc. Valuation: New Licensing Agreement Provides Catalyst For Future Profits [View article]
    Thanks. They've used their cash to aggressively repurchase shares up to this point, but with the run up in share price, I wouldn't be surprised if they switched to a dividend approach in the future.
    Mar 15, 2013. 07:22 PM | Likes Like |Link to Comment
  • Nathan's Famous, Inc. Valuation: New Licensing Agreement Provides Catalyst For Future Profits [View article]
    I don't believe that Nathan's has a significant international following. If you look at page 10 of the 2012 annual (http://bit.ly/YWErMn), you can see they are trying to make inroads internationally with their franchise business and branded products program. It doesn't seem like there has been a large amount of progress in this area, however. Also, I believe the licensing business only operates in 43 states.
    Mar 11, 2013. 06:56 PM | Likes Like |Link to Comment
  • Seahawk Drilling: Liquidation Values [View article]
    Excellent article. It would be interesting to see the liquidation value of the other GOM shallow water drillers using these assumptions. I did a back of the envelope calculation on Hercules drilling (HERO) using your values of $8 Mil scrap for cold stacked rigs and $15 Mil for other rigs. 21 operational rigs + 13 cold stacked gives 419 Mil. Add in current assets of $316 Mil (March 10 numbers) and subtract total liabilities of $1,265 Mil leaves a difference between market cap and rig liquidation value of - $814 Mil. I know they have other assets and a wider breadth of operations (international rigs, inland barges, liftboats, etc) but it still seems like the stock is way more expensive than HAWK on a liquidation basis.

    One more question. What do you think of the recent 8-K stating that the CEO and directors will receive compensation in Restricted Stock Units until the end of the year? It must be due to their anticipated cash crunch, but at least it shows the owners aren't just milking the company dry.
    Jun 30, 2010. 01:41 PM | Likes Like |Link to Comment
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