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  • Miller Energy Resources Looks Massively Undervalued [View article]
    I would suggest you read our article carefully. First, MILL has robust financing from Guggenheim to finance its business plans. So MILL isn’t merely “burning” through cash; it is drawing on its credit lines to finance vital capital expenditures. Also, keep in mind that net income for a resource company like MILL subtracts substantial noncash charges such as depreciation/depletion, so the company’s operational cash burn is actually much smaller than the net loss would imply.

    Second, these capital expenditures are being directed toward getting Rig 35 on its Osprey offshore platform operational. As our article details, these are existing shut-in wells that MILL is reviving. Over the next few months, these wells will produce thousands of barrels of oil per day and will generate very strong cash flows. (MILL was recently able to move its oil pricing from WTI to Alaska North Slope – Brent. This will further boost its cash flows!).

    Third, your point about share dilution is misguided; MILL has a highly aligned leadership team that owns one-third of the company. They are heavily incented to avoid share dilution. This is borne out by the fact that they painstakingly avoided any share dilution in their development financing plans with Guggenheim.
    Mar 21, 2012. 10:58 AM | 1 Like Like |Link to Comment
  • Miller Energy Resources Looks Massively Undervalued [View article]
    Hello Lawyer-Investor-Reader, thanks for your interest in the article. We are actually more bullish than ever on MILL, especially as the company achieves some of the key milestones we have outlined, especially the recent announcement of successful production using their new offshore rig. Would recommend you listen to their conference call earlier this week. We expect that those who have waited patiently will be richly rewarded. While we believe the stock has plenty of upside, please note that it is 80% above the level when the article was written.
    Nov 1, 2012. 08:22 PM | Likes Like |Link to Comment
  • Unisys: A Cheap, Successful Turnaround [View article]
    Thank you all for your comments. Some responses:

    Convertible: We fully agree that the convertible preferred stock is a very good deal – a safe dividend with equity upside. In fact, the preferred is what originally piqued our interest in the company. We ultimately decided the stock had much more upside, especially given our increased confidence in the operational turnaround. But the preferred should be attractive to income-oriented investors. Also, one of the comments mentioned the increase in the diluted share count in the last couple years: the convertible preferred is the reason for this, not share issuance or options grants. Our valuation analysis above takes into consideration the fully diluted share count associated with a potential conversion of the preferred.

    Earnings Trends: Please remember that reported EPS, especially for a company in transition like Unisys, has many distortions from gains/losses from asset divestitures, charges for early debt repayment etc. For example, underlying 2011 earnings were actually much better than 2010 (which in turn were better than 2009), but the company took an $85M charge for paying down high-coupon debt ahead of schedule (which we applaud). So, you need to dig into the details, look past these distortions and see the underlying operating improvement. In addition, even without these one-time distortions, sequential-quarter and year-on-year comparisons may be misleading due to large swings Clearpath and 3rd party technology sales. We believe sequential trailing-twelve-month (TTM) free-cash flows are the best measures of operational performance.

    Pension: E Nuff Sed has correctly pointed to the phantom pension liability as the reason for Unisys’ negative book value. Our article discusses this issue in detail, and the $35 intrinsic value calculation already bakes in this pension overhang. The company’s true balance sheet strength is better viewed from its strong net-cash position. Milhouse indicates that will be at least 2-3 years before long term rates rise, and the full value of the company is revealed. He might be right: value investors need to keep a 2-3 year time horizon anyway. But some catalysts noted could pan out in the next 6-12 months. For example, Unisys will soon refinance its remaining debt at much lower interest rates. This should boost profits and the value of its NOL assets.

    Inside ownership: As far as insider buying and selling is concerned, Coleman has bought significantly in the past, and has good skin in the game. But we would certainly like to see greater insider buying among senior management and the Board.

    Reverse stock split: Yes, there was a 10-1 reverse stock split in October 2009. This is fully comprehended in the article’s analysis and diluted share count. Of course, whether you have 500 million shares at $2 each or 50 million at $20 each makes no difference at all.
    Aug 7, 2012. 05:35 PM | Likes Like |Link to Comment
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