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  • TAL International: From Bad To Worse [View article]
    PtStanford - do you think the P/E is the right valuation metric to use given all the debt and the shielding of earnings through different depreciation schedules for tax and GAAP?

    EV/EBITDA seems more appropriate...the average EV/EBITDA since the IPO is 6.9x....TAL is trading currently at 8.2x....not sure it is a good idea to pay a premium in a negative rent roll environment...also trades at a slight premium to its historical P/TB
    Apr 26 09:23 AM | Likes Like |Link to Comment
  • Hillenbrand International: Why Shares Present A Compelling Short Opportunity [View article]
    Insider Selling accelerating (almost $3mn in last month)....certain insiders selling large portions of their total stock holdings. No insider has bought stock in almost a year!
    Mar 20 01:41 PM | Likes Like |Link to Comment
  • Hillenbrand International: Why Shares Present A Compelling Short Opportunity [View article]
    With Debt-to-EBITDA at 3.2x at the end of FY13 and HI already paying out more than 50% of FreeCF in dividends, you are right....there may not be a lot of upside in the dividend yield.
    Mar 19 09:34 AM | Likes Like |Link to Comment
  • The Downside In Textainer [View article]
    After raising the dividend for 14 straight quarters, TGH held the dividend flat. The company says they like to pay out about 50% of profits. They have been paying out more than that, including paying out 66% in the most recent quarter. A few other things to consider when evaluating the industry. One, the global shipping customers, the ones leasing the containers from TGH, have historically leased about 40% of the containers they use and buy 60%. This ratio flipped post 2008 because the shippers' balance sheets were broken. The shippers have been notably buying containers recently. With steel prices down (about 70% of the COGS of a box), shippers may continue buying, possibly moving back to the long term 40%/60%, leased vs own ratio. This would be bad for TGH and peers as day rates would continue to fall. Second, as day rates and new and used box prices rose dramatically, TGH and peers were able to sell used boxes and recognize significant gains on sale. For example, more than 25% of TAL's 2011 pre-tax profit came from gain on sale. This declined to 18% in 2012 and will continue to fall given where new and used box prices are today. Third, I would argue that P/E may not be the best ratio to evaluation the valuation given that these companies shield earnings by depreciating boxes at very different rates for GAAP and tax purposes. EV/EBITDA is probably better, especially given the significant debt balances carried by these companies. The current EBITDA multiple is typically reserved for periods of rising day rates...with day rates falling, the multiple should probably be a couple of turns lower. I agree the dividend is attractive, but these companies are burning hundreds of millions of $ in FreeCF and then borrowing more to pay the dividend. Also, you may want to see how many players in the industry have changed residual values of boxes, changed depreciation useful lives, and changed the way they calculate utilization rates...all to their benefit. Hope this is helpful.
    Nov 18 08:52 AM | 4 Likes Like |Link to Comment