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Matthew Dow  

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  • Railcar Makers: Deep Value In An Overbought Market [View article]
    Don't know anything about these companies, but just was looking at insider activity on GBX. Interesting how they sold like there was no tomorrow between July and Nov 2014, around $65/share. Since no sales or buys. It appears the real great opportunity was in December when the shares dipped into the 40s. But at 7x EBITDA, if prospects are really so good the next few years then it probably is still pretty cheap. I see shorts are still jumping on this, 30% of float is short.
    Mar 20, 2015. 03:30 AM | 6 Likes Like |Link to Comment
  • Railcar Makers: Deep Value In An Overbought Market [View article]
    Not sure if I read this correctly... shouldn't the title be "oversold" and not "overbought"...?
    Mar 20, 2015. 03:25 AM | 8 Likes Like |Link to Comment
  • Bloomberg: Philips close to selling 80% of lighting components unit [View news story]
    Within Lighting, there are higher growth areas, like professional solutions, as well as more conventional legacy products (old fashioned light bulbs). LEDs are growing well, but also under a lot of margin pressures. The spin-off of the components business was a move announced before the larger break-up to try and get more value out of the business. In my opinion, this spin-off and breakup will unlock a lot of value for shareholders, and the stock has upside potential of 30-40% in the next 1 to 2 years. For more detail on Philips you can read my recent top idea article here:
    Mar 20, 2015. 02:23 AM | Likes Like |Link to Comment
  • Is Apple Shifting More Toward A Luxury Brand In Some Markets? [View article]
    I suspect he is using european date format, i.e. March 11th 2015.
    Mar 19, 2015. 12:54 PM | 3 Likes Like |Link to Comment
  • Axion International Holdings Inc.: This Promoted Stock May Get Axed To Zero [View article]
    I wrote a detailed Pro article on AXIH more than a year ago. In short - I always thought they had promising technology, and could benefit from US infrastructure renewal investments. They also seemed to be slowly gaining sales momentum, which eventually should have given them scale to be profitable.
    Now with that said, it was always a very high risk stock, as they had relied for years on private funding from a few wealthy shareholders, and there was lots of warrants and dilutive instruments issued, and due to their heavy R&D spending and ramping of sales they were very cash flow negative. I haven't followed the company recently. Sales growth still looks pretty promising, as 3 quarters of 2014 brought in over $12m, more than double the revenue of 2013. However I had hoped for even better than this, but the company decided to basically stop plastics reprocessing in order to ramp up capacity for their composite products. They now claim they can support up to $30m annually in revenues with their current manufacturing facilities.

    Now In addition as this article highlights, the stock has been prone to manipulation by promoters, it has happened 3 or 4 times in the past several years. So any speculative investors here need to be holding on for the very long term, as the combination of manipulation and equity dilution means an extreme roller coster of a ride on the stock.
    As far as management 1-2 years ago, they were quite approachable I found, and the former CEO was willing to have a call with me but in the end I decided not to pursue it further and I stopped coverage on the company.
    Mar 19, 2015. 05:11 AM | Likes Like |Link to Comment
  • Announcing Seeking Alpha's First-Ever Investment Pitch Contest [View article]
    ok great thanks, just realized yes I was looking for the list on the wrong article :)
    Mar 16, 2015. 08:17 AM | Likes Like |Link to Comment
  • Announcing Seeking Alpha's First-Ever Investment Pitch Contest [View article]
    Daniel - now the contest is closed, do you have the final list of entrants? I just checked this article and notice the previous list was removed. In good fun I would like to see the final list, and also possibly comment on some I think were really good (besides my own of course!). Thanks
    Mar 16, 2015. 06:18 AM | Likes Like |Link to Comment
  • Surging greenback takes dollar index to 12-year high [View news story]
    Euros, been here almost 10 years. Fortunately a few years ago when the euro was strong I had transfered already a lot to the US to invest there, so not so bad in the end. But if I was moving a year ago instead of this year I would have done much better.
    Mar 15, 2015. 01:40 PM | 1 Like Like |Link to Comment
  • Surging greenback takes dollar index to 12-year high [View news story]
    I picked the wrong time to move from Europe back to the US! my Euro savings are getting eaten alive.
    Mar 15, 2015. 03:45 AM | Likes Like |Link to Comment
  • Entries For Seeking Alpha's First-Ever Investment Pitch Contest [View article]
    Oh no Chris!! Give the rest of us a chance to win ;) haha j/k, looking forward to reading it :)
    Mar 11, 2015. 12:36 PM | Likes Like |Link to Comment
  • Philips: Company Breakup Will Unlock Value For Shareholders [View article]
    OK, apologies for my last comment I actually also have misread the recent press releases on March 2nd. These were specifically about the Lighting components business - i.e. the Automotive & Lumileds spin-off. I had estimated this at only 1x Sales (1.2B Euro) in my analysis, but it appears private equity firms are lining up bids for about double this amount, or 2x Sales. There have not yet been any releases on the valuation of the remaining Lighting business (which I listed at about 7B euro in my analysis), and for this we should expect more details on a potential IPO or other options in May at the annual meeting.
    As I mentioned in my last comment I was conservative on this valuation of the spin-off, so this announcement only strengthens my overall SOTP valuation by adding another ~1B to it (+3%).
    Mar 5, 2015. 10:32 AM | 1 Like Like |Link to Comment
  • Philips: Company Breakup Will Unlock Value For Shareholders [View article]
    Thanks for your comments. After my article was submitted, indeed earlier this week there was some sources in news articles saying that private equity firms were going to bid about 2.5m euro for Lighting. For my higher estimate, I had taken my forward expectations for EBITDA, including depreciation and put a 10x multiple on it. My figure had included some margin improvements. We don't know what the final bid will be, but it appears to be much less. However I would point out several other things here which still make me reasonably comfortable overall in my SOTP valuation:
    1. I was conservative on the components, Lumileds/Automotive. I estimated it at only 1.2B euro, but many analysts have predicted double that price.
    2. As mentioned in response to other comments above, you can easily make a case I was conservative in Healthcare and Consumer Lifestyle, particularly Healthcare. I estimated Healthcare at 18B euro, but if you took a slightly highly sales multiple then this would easily have been a few billion euros higher.
    3. The 293m EBITA in 2014 does not include Lumileds and Automotive. They had included those as discontinued operations.
    4. I would also add that no bids have been accepted, and there were also reports they would discussion the available options at the annual meeting in May, which could also maybe include an IPO option.

    In any case, putting all the factors together and I still am confident in the overall valuation of the group.
    Mar 5, 2015. 12:22 AM | Likes Like |Link to Comment
  • Philips: Company Breakup Will Unlock Value For Shareholders [View article]
    Thanks for the nice words. Yes we will see how it does play out. I agree that these don't seem like value multiples at first glance, but It's worth noting that if you look at a lot of the comps I listed for Healthcare and Consumer Lifestyle both (so about 66% of the sales and even more of the profits), many trade for multiples well over 20x EPS.
    Mar 4, 2015. 08:39 AM | 1 Like Like |Link to Comment
  • Philips: Company Breakup Will Unlock Value For Shareholders [View article]
    Thanks for your detailed comment. You raise some points around the risk of the thesis, which of course is valid, there are always risks. Here are some thoughts to keep in mind:
    1. In terms of EPS estimates, we should remember that especially in 2014 they had a lot of one-time charges relating to several of the challenges I highlighted. EBIT dropped from about 1.8B to only 486m from 2013 to 2014, but this included a lot of restructuring costs, 366m in patent litigation costs, plus inventory write-downs related to the Cleveland incident. So again a lot of this will reverse in 2015 and 2016, which is why EPS estimates are correctly forecasted as much higher.
    2. As for the SOTP valuation, like any valuation techniques including DCF models a change in assumptions can vary the results a lot. However in terms of margin of safety I believe I was conservative in many of my values. For example in Healthcare you have a lot of comps which trade at very high multiples. I think there is even further value there, and my 2x EV Sales multiple used could be conservative for many parts of that business.
    3. For your comments on Osram and Lighting in general - yes it is a tough business. I think Philips though is doing quite well in certain segments, for example the prof. lighting solutions which is growing high double digits and is very promising. Their spin-off here will also not have the legacy conventional products, it will be all positive growth areas so they should get good value for it
    4. On consumer lifestyle I agree competition is fierce, although Philips has spent a lot of time to be a premium brand and only focus on higher margin product lines and where they have a sizeable market share.
    5. On exchange rates - To some degree you are right a higher Euro can hurt parts of Philips, but keep in mind its a very global company, and actually there are many exchange rate factors at play. For example in recent quarters they had forex issues with countries like Russia severely impacting results as well. I think the point here is that this is less likely to be a factor for PHG investors in 2015 compared to what we saw the last year. Euro could strengthen and help PHG stock, otherwise it is likely to be more flat and not have such an impact. Either way I believe the break-up and improving 2015/2016 results will be the bigger factors here leading to my forecasted upside.
    Mar 4, 2015. 06:45 AM | 2 Likes Like |Link to Comment
  • Philips: Company Breakup Will Unlock Value For Shareholders [View article]
    Thanks to everyone who commented so far. @TAS - Is your critique based on your experience in the 1980s, 30 years ago, or based on something more recent? For me, the path the current CEO is putting the company on is very responsive to shareholders and value generation. Also the stock has been paying dividends and regularly increasing them every few years for decades. So not sure I understand that part of your comment. The facts speak for themselves:
    1. See my graph in the article - CAGR of dividend rate growth in the last 20 years (1995-2015) is 9%. That is respectable.
    2. The company is committed to paying 40-50% of net income as dividends. As margins have been improving in their 5 year operational improvement program, ROIC is going up. We can logically infer here that net income is improving, which will increase the dividend rate further. They raised it in 2014, and I would expect another raise in 2016. Share outstanding have decreased overall in the past 5 years, and should decrease further as they complete their buyback program in the coming year.

    Finally I'd add that spin-offs and company break-ups are tough decisions, but often they are very lucrative to shareholders. I think Houten is the right man for the job here, as he has come in clearly with a plan to unlock value overtime, through the margin improvement program (Accelerate!), combined with breaking up the company into more logical pieces. He was also one of the key architects and CEO for the Philips spin-off of NXP Semiconductor (NXPI) about 8 years ago. He returned to Philips in 2011 to take his current role, but you can't argue with how well NXPI turned out - company went public in 2011 at about $10/share, and today it's at $98/share.
    Mar 4, 2015. 12:47 AM | 2 Likes Like |Link to Comment