Seeking Alpha
View as an RSS Feed

Kerrisdale Capital Management  

View Kerrisdale Capital Management's Comments BY TICKER:
Latest  |  Highest rated
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    The Section 179 and bonus depreciation credits have probably helped pull forward sales, but it's unclear by how much. They probably had a bigger impact on tractor sales than irrigation equipment. Farmers wanted to have the latest make/model Tractor, so they would purchase new equipment every 2-3 years and rolling forward the depreciation benefit. The effect is probably less pronounced for center pivots since the technology doesn't change as much year-to-year. Farmers were aware of the Section 179 benefits ahead of the growing season.

    I'm not sure regarding the timing of when the tax rulings were extended and what type of impact that may have had.
    Nov 5, 2013. 07:49 PM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    There are no direct costs to Lindsay to run the dealer network. Independent dealers buy product from Lindsay and gross up the retail price to make a profit. Think of it like a car dealership. On it's income statement, Lindsay recognizes the net revenue it earns from the dealers or direct end-market sales.
    Nov 1, 2013. 02:00 PM | 1 Like Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    We are proposing that Lindsay immediately deploy its cash into more productive activities. Whether that be tuck-in acquisitions at 20-30% ROE, internal capex to expand international manufacturing plants, or opportunistic buybacks to take advantage of their own undervalued stock, almost any use is better than a <1% bank account.

    We then argue that if Lindsay wanted to add a third-leg or stray too far from the irrigation, this would be better done as a private company with a shareholder base that supports the transformation.
    Nov 1, 2013. 01:55 PM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    Looking purely at installation costs, gravity is least expensive, requiring little if any initial capital outlay, whereas a mechanized pivot can cost $50-100k+. But farmers should recoup that initial capital outlay with improved crop yields and forgone labor costs within 3 - 7 years with the system lasting 20-30+ years.

    On large fields, the installation and upkeep costs association with drip make it more expensive than mechanized. Drip systems are typically only economical for smaller vegetable plots or irregularly shaped fields.
    Oct 27, 2013. 08:44 PM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    It's possible. Hopefully, some investors are realizing that if management puts the cash to better work, and with an active investor encouraging management to do so, some additional value can be created.
    Oct 25, 2013. 03:12 PM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    Yes, we issued that letter.
    Oct 25, 2013. 02:36 PM | 1 Like Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    On balance, I viewed the Claude Laval (Lakos) acquisition positively. LNN spent $29m to acquire this $25-30m revenue filtration business and management believes Lakos will be accretive to FY2014. Any accretive acquisition is preferable to holding low-return cash.

    On their FQ4 call, LNN mentioned that only 30-35% of Lakos' end-market is related to irrigation, with the rest coming from industrial filtration applications. A move outside of Lindsay's core competency can be concerning, but I generally defer to management's judgement with tuck-in acquisitions like these.
    Oct 25, 2013. 02:30 PM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    We released our letter today addressing the issues you point out: http://prn.to/HjwXmq
    Oct 25, 2013. 02:00 PM | 1 Like Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    I have no opinion on VMI unfortunately. I haven't done enough work on their non-irrigation business.
    Oct 25, 2013. 09:40 AM | Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    I think some investors are short LNN as a proxy for shorting corn, and others are bearish on 2014 numbers. We're making the calculated guess that international growth will compensate for the US slowdown, and that over the long-term, this company has a bright secular growth runway, and that the market will ultimately see past 2014 numbers, and focus on the long-term opportunity available to Lindsay internationally.
    Oct 25, 2013. 09:40 AM | 1 Like Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    Toro produces simplistic drip irrigation parts, which is a similar business to the one that John Deere is divesting. Drip irrigation is a commoditized, lower-margin technology that makes sense for certain crop types (vineyards, orchards, small vegetables), but not for the large fields that mechanized irrigation services.

    Jain is the same story. If you take a look at their product page you'll see that this is a very low-end technology with little product differentiation:
    http://bit.ly/1d3n9r9
    Oct 24, 2013. 04:04 PM | 1 Like Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    1) We don't have a precise statistic, but its safe to assume that the vast majority of center pivot customers in the U.S. are growing corn. If corn prices fall, some may rotate their fields to soybean or wheat, but these crops require less frequent hydration. Therefore, a soybean farmer may not consider advanced irrigation an urgent priority.

    Usage also varies by country. In Brazil pivots are frequently used for the sugar crop. In Russia, it's sunflowers/vegetable oils. You can see from the chart below that irrigation drastically increases yield no matter the crop.
    http://bit.ly/1d3n32H

    2) The consensus right now is that U.S. growth falls in F2014 as farmers defer purchases because of lower crop prices.

    Historically, 1/3 of Lindsay's business is dryland expansion, 1/3 is conversion from less efficient irrigation systems, and 1/3 is replacement of expired equipment. While dryland expansion should slow, old systems will still be replaced and farmers remain economically incented to upgrade from the gravity method.
    Oct 24, 2013. 04:03 PM | 2 Likes Like |Link to Comment
  • Lindsay Corp.: Irrigating The Emerging Markets With A Modest Valuation [View article]
    We're on the same page. We'll probably write a letter to that effect shortly.
    Oct 24, 2013. 03:15 PM | 1 Like Like |Link to Comment
  • Morgans Hotel Group: Woeful Operations And Board Circus Mean Sell [View article]
    Sounds good, I understand. I guess we'll see. It's not very easy to create strong luxury boutique hotel brands, and the Mondrian and Delano are two of the better ones. The amount an international operator would be paying is just not that much. With a $7.50 bid already previously submitted, the thinking is that there are buyers for this company that justify an investment at the current share price.
    Aug 30, 2013. 03:58 PM | Likes Like |Link to Comment
  • Morgans Hotel Group: Woeful Operations And Board Circus Mean Sell [View article]
    Hi Josh, a strategic acquirer submitted a $7.50 unsolicited bid for the company late last year and earlier this year. The hotel market is hotter now than it was then. Operationally, the company's hotels are doing better than they were last year. I feel that the value in this company is in its ability to provide a platform off of which a strategic acquirer can build out an international luxury boutique hotel chain. Given that a bid was put in at $7.50, the thinking is that this stock is worth $7.50 or higher in a competitive sale process. As for whether the company will be put up for sale, the shareholder base here strongly wants a sale process. Either this board will undertake it, or another one will replace it to conduct a sale process.

    disclosure: long
    Aug 26, 2013. 03:06 PM | 1 Like Like |Link to Comment
COMMENTS STATS
176 Comments
97 Likes