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Marty Chilberg
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Marty Chilberg is a seasoned financial professional with over 30 years of executive leadership, board, consulting and advisory experience.  He began his career as a certified public accountant (CPA). He moved to Silicon Valley in 1981 to begin his career in the software industry, working for... More
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  • SunEdison: Is The Bottom In?

    SuneEdison (NYSE:SUNE) has seen a massive selloff over the past few weeks/months caused by growing liquidity concerns. This fear has been stoked by a very convoluted structure and strategy. Just 2 weeks ago Deutsche Bank analyst Vishal Shah defended the stock by reiterating his buy and $28 price target, taking on career risk in doing so. After a brief rally, the stock continued on it's downward trajectory, selling off another 50% to under $3 per share. In the past few days a number of changes have been announced by the company to ease investor concerns and they appear to have finally put in a bottom. Today the stock is up 40% but is still well below the $6 price it was trading at on the day Vishal Shah provided his views.

    This one is still a very high risk stock but the risk/reward seems to tilt to the buy side. The upside potential is very high noting the recent price history over $30 and the price target support at $28. The downside risk is real. Layered risk needs to be deleveraged to reduce debt default risk or bondholders could squeeze equity out. There appears to be at least a year before that could occur. Analysts seems just as confused as investors as indicated by the price targe range of $3 to $42

    Tags: SUNE, Solar
    Nov 24 3:50 PM | Link | Comment!
  • Comtech: Initial Look Suggests Caution

    As I mentioned in my previous post about the Comtech (NASDAQ:CMTL) purchase of TeleCommunication Systems, Inc (NASDAQ:TSYS), I purchased an underweight position in Comtech. I intend to spend some time analyzing the combined company operations and liquidity over the coming weeks. A first glance look at the combined operations shows several positive attributes including cross selling opportunities, geographical opportunities, minimal product overlap and organizational synergies.

    However the leverage of the combined companies appears to suggest that Comtech will look source capital through a secondary offering post transaction to reduce their debt load. A simple back of the envelope look at the balance sheet:

    • Combined cash level today $200m
    • Projected payoff of TSYS debt $145,
    • Cash cost of tender offer $340m
    • Deal costs $30m
    • Combined capital need in excess of cash $315m
    • Credit line negotiated by CMTL to fund transaction $400m

    The bottom line is that the company will very likely decide to reduce their leverage by raising equity capital post transaction. They state in their deal presentation that they intend to retain the existing dividend payout. The following statement seems quite likely to occur: The credit facility provides that Comtech may conduct an equity offering for newly issued common shares to reduce total leverage prior to or after the close


    This looks like a combination worth watching but investors should be cautious about committing capital until this settles down a little. I sold my starter position until I learn more about any secondary offering. The integration and leverage risk is a bit too high in the short term for me given the current capital market volatility relative to credit issues. I still see some interesting upside once the balance sheet is addressed.

    Nov 24 11:57 AM | Link | Comment!
  • Comtech: TeleCommunication Systems Should Benefit Both Investor Bases

    Comtech (NASDAQ:CMTL) announced this morning that it had reached an agreement to purchase TeleCommunication Systems, Inc (NASDAQ:TSYS) in a cash transaction. This announcement led to a 10% selloff of CMTL on open. At first glance this transaction appears to be a constructive deal. I'll be analyzing the combined company in the weeks to come but given the risk/reward profile I've allocated 25% of my proceeds from this acquisition to CMTL with a purchase this morning.

    Positive attributes that led to purchase:

    • CMTL has a solid balance sheet with $150m of available cash and no debt.
    • CMTL has a solid history of paying dividends and is currently at a 5+% yield.
    • CMTL has been buying back stock indicating management belief it is undervalued.
    • The release announcement stated this deal will be cash accretive with substantial synergies to be achieved over the next 2 years.
    • There is some minimal product overlap between the companies.

    Bearish trends worth considering:

    • CMTL is a smaller company than TSYS which will make the acquisition integration a challenge.
    • CMTL saw revenue contract in F15 which led to a net income drop and missed expectations for the most recent quarter.
    • CMTL has some exposure to the oil segment.

    Also worth noting is that Mark Jordan from Noble Financial follows both companies with a buy rating for CMTL and a recent upgrade to a buy for TSYS.

    Nov 23 11:26 AM | Link | Comment!
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