Seeking Alpha

Jared Sleeper

 
View as an RSS Feed
View Jared Sleeper's Comments BY TICKER:
Latest  |  Highest rated
  • Auxilio Inc. Has Multi-Bagger Potential And Downside Protection [View article]
    Hi Jeff,

    Thanks for the comment, it is spot on. The dry spell was under a different CEO, and Mr. Flynn has done a great job so far... he impresses me quite a bit which is one reason I am so confident in AUXO's potential. I also agree that it has reached a critical mass in terms of recognition and customer count.
    Regarding the large equipment sellers becoming more aggressive, this is possible but the bottom line is that any large seller managing their own products will tend to inflate their own margins over time given the switching costs involved. All of Auxilio's current contracts have been won via RFPs against those companies, and I expect its success to continue though again, it is possible things become more difficult down the road.
    On the working capital, I'm curious to see what happens to it going forward, but overall I don't think their is reason for alarm. The company's burn rate is falling, and it is projected to go cash flow positive this, which tells me that there is a good chance that its $1.3 million of cash and $1.4 million LOC will hold them over (that's $2.3 million total since they need to maintain 400k in a bank account per the covenants of the LOC). They burned just over $1 million in the first 9 months of 2012, and that's at a very rapid roll-out rate. I would expect that as the margins for the new accounts improve they stand a better chance at nabbing non-dilutive financing. It would be great to see the LOC increased or another transaction that doesn't dilute shareholders to fuel the growth, but either way they're financing for the right reason.
    Again, spot on of the warrants/options. I had meant to mention this, and it does impact the long term somewhat though not really material against the potential growth.
    Completely agreed on the lack of price response to sales growth... weary shareholders, low liquidity, etc. all contribute to the market largely ignoring the massive growth, but that doesn't make it any less real. I'm certainly not in the camp that the company should slow down its growth right now to build up profitability and get more attractive financing. EMR and the current sales momentum give them reason, IMO, to go for every last RFP they can... if that means the company needs additional financing to finance the growth that's okay with me, because they're building up a roster of contracts that will be profitable for a long, long time.
    Regarding acquisition potential, I agree that that would be a nice exit and have heard others mention that as well.
    Jan 16, 2013. 08:06 PM | Likes Like |Link to Comment
  • Q2 Box Office Dip Creates Upside Opportunity In Reading International [View article]
    Mr. Shapiro,

    Let's boil this down. We both seem to agree (as the textbooks do) that Reading should buy back stock so long as the return to shareholders from that buyback is greater than or equal to the potential return from other means of investment. We also both agree that Reading is trading at a 50% discount to its sum of parts value (roughly $12 per share). By my reckoning, that means that any alternate form of investment must return 100% to be competitive with buybacks. You give one example of such an investment (theater upgrades) but I find it highly, highly unlikely that the company is truly earning a 100% return on these (or any other investments), even with economies of scale and operating leverage, which is precisely why I think it should be aggressively buying back stock. If you can provide more details on how RDI's current investments exceed that threshold I would be thankful, though if it is to much of a bother no worries.
    Also, I will point out that my numbers indicate that during 2011 RDI's shares outstanding actually increased slightly (a record high, in fact),meaning the buybacks were less than enough to cover shares issued for compensation.
    I'm in complete agreement that Reading has assets that are significantly undervalued, though the NAV gains are worthless if not realized in a timely manner, especially since property prices in many places are essentially flat over the past half decade. Despite these gains, the stock is flat since 2003, under-performing many other investments in that time. I fear that this will continue to be the case until RDI convinces investors that it is serious about monetizing its assets, many of which it has put up for sale (Burwood, the Manhattan properties, etc.) only to later retain, leaving substantial returns available to shareholders. That lack of buybacks is symptomatic of a management team that is more concerned about building a family business than providing a strong return to investors, which, in my opinion, is why RDI is fairly undervalued relative to its current asset value. At this point, it is really up to investors do decide how much they trust the Cotter's, with a history of (openly conducted, for what it is worth) related party transactions, failed attempts to sell prized assets like Burwood, and refusals to buy back stock despite an extremely attractive return relative to alternatives, etc. I think there are more attractive options out there given this, though should I see strong shareholder moves out of RDI management my mind could change on a dime. Thanks for your time, hopefully anyone reading will have learned something about Reading.

    Best,

    Jared
    Aug 20, 2012. 10:06 PM | Likes Like |Link to Comment
  • Q2 Box Office Dip Creates Upside Opportunity In Reading International [View article]
    Mr. Shapiro,

    Thanks again for the reply, it is much appreciated. I believe you that Union Square wasn't for sale, though I'm not sure why Capstone would describe it as such. Regarding posting negative things about a company in which you own shares, I would encourage you to reread my post. I said that Capstone, as a large shareholder, wouldn't publish negative comments for "no reason." Meaning I see no reason for them to fabricate the fact that the company was so negligent about replying to their correspondences ( aka why would they lie to try to make the management of a company they own look bad when the management controls the company and thus is essentially untouchable?) . That's all I was referring to, and I completely understand (and understood) that shareholders often post negative things about their companies in order to spur positive changes in them, as is the case with this Capstone note. Thanks again for taking the time to reply.

    Best,

    Jared
    Aug 20, 2012. 12:28 AM | Likes Like |Link to Comment
  • Q2 Box Office Dip Creates Upside Opportunity In Reading International [View article]
    Mr. Shapiro,

    Thanks for the reply, it is much appreciated, unlike the threat to derail my future employment prospects you send me in a private message, which was shameful.

    1) We probably won't agree on this in the end, but I remain convinced that the Capstone situation reflects negatively on the company, which apparently ignored both certified mail and phone calls from Capstone for over a month. If this has the result of a HQ shift that changes things somewhat, but there is still no excuse for a company that claims to be selling property not taking the steps to make accommodations for interested buyers with its old address/info (mail/call forwarding, etc.). In addition, it seems from Capstone's letters that Reading had originally been open to selling property B (Union Square theater) but then changed its mind. Again, I am fine with rejecting the offer, but it's hard not to agree that it appears they were difficult to work with from Capstone's side. After all, they are a shareholder and have little incentive to post negative things about management for no reason.

    2) The textbooks are there for a reason, because they tend to be right. I agree that it is complicated somewhat by timing, but the fact is at this current time Reading's shares are worth twice what they are trading for if liquidated. Now, it is possible that the NPV of those properties can be greater than 2X if they are well managed and developed in a timely way, but there's little evidence that they will be (it's been a long long while for many of these properties), and there is plenty of evidence that management has a preference for the long term route regardless of what is actually in the best interest of shareholders, given the fact that RDI is a family business and they draw substantial salaries from the company. No complaints there, that's their right and I'll defend it to the end, but it also opens up a scenario in which the return to shareholders could lag what one would expect based on the undervalued assets, or even the return that could be realized right now via a liquidation. All investors in RDI are essentially deciding based on their internal odds of that happening, which is why the price remains substantially below the company's value despite numerous articles and lots of attention from various funds. After reading the Capstone letter and the article I linked to above, from someone who I know to be impartial (i.e. he has no substantial position to justify and no reason to admit that he was wrong), my estimate of the odds of a market-beating return on this stock went down significantly. Good luck with your investment, though, there's definitely lots of room for profit here given the attractiveness of those assets. If RDI gets serious about monetizing them in a timely manner (via a concrete announcement not just statements) I'll happily take another look and reconsider.

    All best,

    Jared
    Aug 19, 2012. 10:07 PM | Likes Like |Link to Comment
  • Q2 Box Office Dip Creates Upside Opportunity In Reading International [View article]
    Mr. Shapiro,

    It is interesting that you accuse me of trying to provide clicks to my classmate (and him of click-mongering), when you are clearly attempting to draw attention to RDI's by publishing articles in its favor on even the most minor news items (this article, in particular, largely repeats previous analysis without any event-based justification). Everyone wants their stuff read, and he's no more guilty of that than you, especially since your articles rarely reference the bear case for the company that he provides.
    What's amazing is that you're bringing political rhetoric like "flip-flopping" into an investment discussion. My classmate met the company's CFO in person for an interview, and was unimpressed. His complaints are valid, as Reading clearly is not managing its capital to benefit individual investors (share buybacks are clearly more attractive that any additional investments into operating businesses right now, given the undervaluation which we both agree with), no matter how much lip service the company pays to individual shareholders, and has no intention of fixing that anytime in the near future. THAT is what his "flip-flop" (read: investment decision based on additional information) is primarily based on. He's right. RDI certainly has tremendous value, but if takes a decade to unlock it the resulting return may indeed be subpar.

    Also, your article addresses the reasons for rejecting the Capstone proposal, which on the surface sound reasonable. But it does not address the lengthy delays and many unreturned correspondences Capstone went through in its attempt to purchase the property. Rejecting a deal for business purposes, I can understand, but failing to respond to an interested party in a timely manner is a very grave thing indeed, no matter how up front and
    open management is a meetings.

    So, my questions would be:

    1. Do you have any information/justification for the gigantic delays when Capstone was communicating (or trying to, rather) with RDI about the proposed deal?

    2. Do you think the company is pursuing the appropriate capital management strategy? Specifically, given the extreme undervaluation, shouldn't it be buying back stock?

    Look forward to continuing this discussion without any more inflammatory language, as I do think RDI is a very interesting company to research given its innate undervaluation. If evidence arises that it will be unlocked then it can be very compelling indeed, but there's little evidence of that so far.

    Best,

    Jared
    Aug 18, 2012. 10:22 PM | Likes Like |Link to Comment
  • Q2 Box Office Dip Creates Upside Opportunity In Reading International [View article]
    Great article, here's the problem with Reading though:

    http://bit.ly/S45Gqp
    Aug 17, 2012. 10:57 AM | Likes Like |Link to Comment
  • Does Microsoft Have A Master Plan? [View article]
    Exactly. I was a big believer in the "Microsoft is doomed" camp until I saw Surface and the Metro interface.
    Aug 17, 2012. 10:23 AM | 1 Like Like |Link to Comment
  • Does Microsoft Have A Master Plan? [View article]
    To clarify since there was plenty of confusion about this, I've edited the article to use "well" instead of perfectly.
    Aug 17, 2012. 09:43 AM | Likes Like |Link to Comment
  • Does Microsoft Have A Master Plan? [View article]
    I measure execution in results, not a temporary hardware issue that can occur at most product role-outs with beta software which MS had no control over. In terms of successfully introducing the Surface to the public, the role-out was perfect, and the freeze up was a side-story quickly buried by positive press about the keyboard. No one is talking about that now. Surface is now the most anticipated and talked about tablet since the iPad, bar none, and that is largely because of the perfectly executed release. Who knows why the tablet froze, but if MS hadn't done a stellar job on everything else that day it might have been the dominant story. It wasn't, and that tells you all you need to know.
    Aug 17, 2012. 09:05 AM | 1 Like Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Ricard,

    I would look to KB Home and Toll Brothers as companies that have lines of business roughly similar to what Xinyuan might do here, but of course we really don't know what they're planning. I agree that it would be mostly beneficial for legitimacy's sake, but I think XIN might be able to craft a competitive advantage in the U.S. The market for luxury property in New York and L.A. is HOT right now, primarily because of Chinese buyers. I imagine that many Chinese buyers could be tempted by the idea of a development, built for, aimed at and largely populated by Chinese buyers (Chinatowns, on the whole, are not well suited for these types of luxury buyers), so maybe Xinyuan can break in well their by greasing the wheels for the growing demand for homes in the U.S. from Chinese families. Just thinking aloud here though.
    Jul 5, 2012. 07:50 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    I understood what you meant by "best case scenario," should have clarified that in my post. I agree about the land purchase, I've been trying to put myself in the company's shoes (assuming they are legit) to try to think of things they can do to demonstrate that fact to the public. Sensible dividends and share buybacks don't work, with the flaws that you've pointed out. Firing management wouldn't help, reporting stellar results in China doesn't carry much weight, etc. Taking capital to the U.S. makes sense, though my fear is that they will say something about Chinese capital export restrictions and then raise money some other way to fund the U.S. expansion... but surely they realize that no one will trust them if they do that. Regarding the REIT issue, I'm not sure your comparison is apt:

    "To be a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends."

    If XIN did that its yield would be far in excess of 10%, but I don't think they have any intention of doing so now or in the near future.
    Jul 5, 2012. 03:36 PM | 1 Like Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Fair points!

    1) XIN certainly isn't on the radar of the short sellers for now, as there are surely bigger fish to fry. Still, I think the Evergrande report is useful as it gives us an idea of what a Chinese Real-Estate take down would look like. I think I've made the case quite convincingly that if XIN is a fraud it doesn't seem to be an Evergrande-type fraud. Those patterns just aren't there, in fact in most cases it is the opposite.

    2) I'm not sure that the rise from penny-stock status reflects short seller disinterest as you suggest. It could easily have been a result of many other factors. The stock going up, overall, is a positive omen for XIN's legitimacy. Could be very weakly positive, neutral at worst, but an increase in the PPS is not a fraud red flag, at least in my mind.

    3) I think the "best case scenario" you give is a bit far fetched. Firstly, XIN's outlays are far more than just the dividends. They've paid down $60 million of long term debt, and their recent land purchases check out in every way I can do so (i.e. they mention that the land is adjacent to their existing projects and I can confirm that such adjacent land does exist and is empty). Most importantly, though, the model you're suggesting they're trying to follow with their fraud here simply won't work anymore. After the recent blow-ups, concern such as yours is commonplace. Were Xinyuan to abruptly cancel its dividend because investment is more attractive (after saying over and over again that they want it to be sustainable) or issue new shares or a new public debt offering or anything else like that, they would need to justify it against their massive cash hoard and highly profitable underlying financials, and they would almost certainly fail. Put another way: if they announced tomorrow that they were issuing 10 million new shares to finance a lucrative investing opportunity, the stock would collapse and they would pull in peanuts. If management is smart enough to run a fraud for over a decade (half of that under public scrutiny), then they ought to be smart enough to know that the jig is up... investors are on to the games these Chinese cos have played in the past.

    Now, on a related note, the company has mentioned recently (repeatedly) that they are looking in to a development deal in the U.S. I'm curious (to see what the market would think independent on my own views) what you would think if XIN plopped down $100 million on a parcel of land or piece of property in the U.S. in an (obviously) verifiable way. If the company is legit as I suspect, I think this may be an ingenious move on the part of management to reassure investors, not to mention the potential benefits of a Chinese realtor selling U.S. property direct to Chinese citizens. Seems like a great way to dispel the idea that their cash isn't actually there. Thoughts?
    Jul 5, 2012. 01:24 PM | Likes Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    Do you think his resignation would send the share price higher? You're horribly mistaken if you do. XIN needs to continue paying a dividend, performing well and issuing cleanly audited 20-Fs. That will unlock the value here. A resignation by the CFO would be a disaster for investors, no matter how checkered his past appears.
    Jul 5, 2012. 11:28 AM | Likes Like |Link to Comment
  • Xinyuan Real Estate: Still the World's Cheapest Stock? [View article]
    I've owned a stake in Xinyuan since well before the original article was published back in March, and added to it a little over a week ago. I reevaluated the position from the ground-up after the Evergrande report came out, that's scary for anyone owning Chinese Real Estate Cos, but the checks came back positive which is why I'm a buyer (up to my risk tolerance, of course) at these levels.
    Jul 5, 2012. 10:10 AM | Likes Like |Link to Comment
  • 2 Sectors To Consider If Romney Wins [View article]
    I agree that Republicans don't want big government, however my general feeling is that the American public is generally quite hawkish about China. Its hard not to look at China's economy, demographics and government system and feel at least a little threaten, and in the past those sorts of threats have often turned into arms races... you may be right, but I think that Mitt Romney's policy of building a 15 ship navy is a direct response to China, and that the public would likely support that move purely because of China's status as a rising power.

    Thanks for the comment,

    Jared
    Jan 6, 2012. 10:21 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
58 Comments
20 Likes