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  • TIM Participações: As The Chess Pieces Move In Europe, Double-Digit Upside In Brazil [View article]
    At this point it is difficult to say. Telefonica has made it clear that it wants to double down on its investment in TI (whether or not that move is a good idea or not is an issue for another day). But by doing so, it has brought down the attention of Brazilian regulators, and if it does not reduce its presence in the country, it runs the risk of seeing its licenses revoked. Therefore, if the status quo is preserved, the prime loser will be Telefonica. As for TI and TIM, the outcome largely depends on price; if TIM is sold for too little, TI's goal of deleveraging is impacted, and Telefonica will likely see lawsuits over undue influence over TI. And TIM will also be impacted, since it will be sold for less than it should. But, if they push for an absurd premium, then no deal will be done, and that runs counter to what TI needs to do.
    Dec 28, 2013. 02:34 PM | Likes Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    Southwest/AirTran already fly to Cancun, Mexico City, and San Jose Cabo from a variety of destinations within the US, and to date, it does not appear that this has been an issue for Volaris. Volaris also has an employee profit sharing program, so they do get a chance to participate in the airline's upside
    Dec 13, 2013. 01:56 PM | 1 Like Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    Book value is 4.08 pesos as of Q3 2013, so Volaris' P/B is around 4.67
    Dec 13, 2013. 01:54 PM | Likes Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    From what we understand, the reason Aero California's operations were suspended for unpaid debts to the government.
    Dec 13, 2013. 01:46 PM | Likes Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    Aero California ceased operations in 2008 as its operations were suspended by the Mexican government and employees went on strike
    Dec 12, 2013. 08:08 AM | Likes Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    While a takeover is theoretically possible, we doubt that there will be one in the near to medium term. Consolidation between low-cost airlines has been a relatively rare occurrence, and for legacy carriers, a deal of this size would be unlikely to move the needle. In any case, Mexican law bars foreign companies from owning more than 25% of an airlines (, so the only theoretically possible outcome for Volaris would be either a takeover by AeroMexico or a merger with Interjet, assuming that Mexico's restrictions on foreign ownership of airlines are maintained.
    Dec 11, 2013. 06:31 PM | 2 Likes Like |Link to Comment
  • Pacific Sunwear: Finding Sunshine Amidst Teen Retail Gloom [View article]
    So far, it appears that the line has been fairly successful, but the Kendall & Kylie holiday line only launched in November, so we'll have to wait until Q4 results to see just how well it did over the whole of the holiday season. But given that PacSun's women's division posted 5% comparable sales growth in Q3, it stands to reason that the line has been successful since its launch earlier this year, and management has said that brands like Kendall & Kylie have helped drive the company's recovery.
    Dec 11, 2013. 12:51 PM | Likes Like |Link to Comment
  • Volaris: The Spirit Airlines Of Mexico Is Poised To Soar [View article]
    Interjet is currently private (but has been trying to proceed with an IPO after shelving it in 2011), so there's not as much data on it as Volairs. Based on market share, Interjet has been a success, as it is just behind Volaris in terms of share within Mexico. And their decision to mix Sukhoi Superjets into their fleet has been an interesting one, given that very few other carriers have incorporated in into their fleets. If they decide to proceed with an IPO, we'll most likely see better data in their F-1 (assuming they list in the US as well), which would allow for a better analysis.
    Dec 11, 2013. 12:45 PM | 1 Like Like |Link to Comment
  • Commtouch Software: A Return To Earnings Growth To Reward Investors [View article]
    Commtouch's receivables as of the end of Q3 were actually slightly below their end of 2012 level, so we hesitate to state that the company isn't collecting; virtually every company will have some level of receivables on their balance sheet. As for their credit line, the company's 20-F does not explicitly define the covenants the require. Commtouch is currently in an investment phase, and as a result, operating cash flow has declined year-over-year. To date, however, the company has managed to secure the capital needed to invest in its growth, and in 2014, cash flow should improve alongside profitability; Q4 results in January should feature commentary about the company's cash balances and capital forecasts.
    Nov 29, 2013. 06:34 PM | Likes Like |Link to Comment
  • Spirit Airlines: A Solid Derivative Play On The US Airways-American Airlines Deal [View article]
    It depends on both the airline in question and their customer mix. For business-heavy airlines, such an arrangement may prove difficult to pass onto customers, while it may be easier to pass onto at a more consumer-focused airline such as Hawaiian. Spirit is able to add more seats to its Airbus aircraft thanks to a lack of first class seating, which is a large source of revenue for legacy airlines. Therefore, cramming extra seats onto existing aircraft may require airlines to rethink the delicate balance of first/business class to coach seats within their fleets, something that takes a great deal of time
    Nov 17, 2013. 06:03 PM | Likes Like |Link to Comment
  • Pericom Semiconductor: Recovering Business & Cash Deployment To Drive Upside [View article]
    Pericom's competitors cover a large swath of the semiconductor industry, and the most notable are TI, Maxim, Fairchild, and Analog Devices (within integrated circuits); their FCP competitors are primarily Japanese and Chinese-based companies, ranging in size from multinational Kyocera to local Chinese companies
    Nov 14, 2013. 01:45 PM | 1 Like Like |Link to Comment
  • Alaska Air Group: A Valuable Investment, Either As A Standalone Airline Or A Takeover Target [View article]
    We would venture that part of the reason has to do with competitive concerns. Alaska's west coast niche is a profitable one, and competitors have made no secret of a desire to gain more share in that market. Although Alaska has a long track record of fending off such competition, the concern does exist, even if we think it is unfounded.
    Nov 12, 2013. 04:04 PM | Likes Like |Link to Comment
  • Commerzbank: Substantial Value In Germany's 2nd Bank [View article]
    As we noted below, the shipping portfolio is of course something to watch, but so far Commerzbank has shown that it is able to manage the wind down of these assets. Q3 earnings are due on November 7, but we don't think there will be talk of a dividend, that's something that will likely be left for 2014. But Commerzbank is making progress in boosting capital and winding down its non-core assets, and as those two goals move closer to being completed, there will be more and more room for the dividend to be reinstated.
    Nov 2, 2013. 06:10 PM | Likes Like |Link to Comment
  • Commerzbank: Substantial Value In Germany's 2nd Bank [View article]
    Our upside scenario already takes into account a reduction to book value of Commerzbank's expected losses over the lifetime of its portfolio, as well as a sizable reduction to account for its non-core segment. In total, these two reductions trim Commerzbank's book value by over 28% relative to its stated book value, but even that leave room for meaningful upside. A degree of conservatism is certainly important, but there comes a point where conservatism no longer becomes prudent. We went through Commerzbank's interim report for H1 2013 to quantify an appropriate discount to book value, but we don't believe that simply discarding book value by virtue of the fact that it is provided by management. Furthermore, not all book values are the same. National Bank of Greece, for example, may trade at a P/B ratio of around 0.2x, but would we recommend buying shares? Probably not, given that their book value is based on a myriad of Greek assets. Commerzbank's book value, however, is based on primarily German assets, and even its central & eastern Europe portfolio is performing relatively well. Our point is that Commerzbank's P/B multiple is valuing it at levels assigned to PIIGS banks, despite our view that its assets are, on the whole, of far higher quality.

    Though the shipping loan portfolio is something to watch, Commerzbank is making progress. The portfolio was trimmed by 7.1% in Q2 2013 (, and with Q3 results due November 7, we expect further reductions in the portfolio, as well as the rest of their non-core assets. While there is certainly more work to be done in winding down these non-core assets, we believe so far, the bank has shwon good progress in doing so, with around €10 billion in further assets to be shed during the last 2 quarters of the year.
    Nov 2, 2013. 06:07 PM | 3 Likes Like |Link to Comment
  • Christian Dior: A Better Way To Invest In Louis Vuitton [View article]
    To our knowledge, the dividend does indeed get passed through from LVMH to Dior, and Dior itself pays a dividend (€2.90 in fiscal 2013) as well. There's about €6.2 billion in net debt at Dior, though much of that is attributed to LVMH itself, including its 2012 $850 million debt offering. THe maturities are spread fairly evenly through 2018, and Dior's debt-to-equity ratio has been coming down (down to 22% in fiscal 2013 fro 24% in 2011). Many European holding companies do trade at discounts, but in this case we believe that the discount is unwarranted, given that the assets in question are functionally equivalent to one another, and the value of Dior's stake in LVMH is easily valued, whereas the assets of many other European holding companies can be more difficult to value.
    Oct 22, 2013. 05:01 PM | 1 Like Like |Link to Comment