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  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    AJ,

    1. I chose 13x because that is a modest discount to the 14-16x multiple at which the the average company tends to trade over a long period of time. Mostly a judgement call based on experience.

    2. The increase you refer to represents the difference between the average per-store EBITDA that GLN/CPW had generated historically (roughly $170k) and the lower per-store EBITDA GLN was earning at the time of the write-up (~$130K) due to the change in Canadian wireless contract lengths. I was simply assuming that as the effect of the new regulations wore off, EBITDA per store would revert to something close to the historic average.

    3. I assumed net debt would fall over time because I was assuming the free cash flow Glentel generated from operations would simply accrue on the balance sheet. In reality perhaps this cash would have been used for acquisitions, in which case net debt would not have fallen much (if at all), but conversely, in that case profit growth would also have been much higher than I'd modeled because of the addition of the profits of the acquired companies. By just assuming that the free cash flow would build up on the balance sheet, I kept things simple.
    Jan 7, 2015. 10:31 AM | 2 Likes Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    Nathan,

    Yes, you are right that the regulation's effect on consumers has been the opposite of what the government intended.

    I think the commission simply thought shorter contract lengths meant more freedom for customers, and perhaps did not consider that carriers would suffer more frequent handset subsidy losses and look to make up those losses elsewhere.
    Nov 11, 2014. 10:24 AM | Likes Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    I don't understand how you are deriving your numbers, so it is hard for me to comment. The Q2 2014 MD&A gives an adjusted EPS of $0.24, which is a long way from the $0.45 you're using. Looking at EBIT or EBITDA, the profit in Q2 2014 was more or less in line with past second quarters, and also below the typical profitability for the third and fourth quarters, which benefit from back-to-school and holiday spending, respectively.
    Sep 4, 2014. 10:58 AM | Likes Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    Thank you Elliott, I'm glad you enjoyed the research.
    Sep 4, 2014. 10:51 AM | Likes Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    Senna,

    Thank you for taking the time to read the articles.

    I am paid to evaluate "ifs". If you want to avoid all ifs you should be prepared to settle for sub-5% returns. I seek much higher returns.

    As for your comments/claims:

    "Too many missteps by management"
    To the contrary, the company's very long record of strong growth, returns on capital, and robust cash flows show how many of the right steps management has taken.

    "The company has been nothing but a value trap"
    The typical definition of a value trap is a company whose hoped-for earnings, or asset value, or business turnaround, never materialize, such that the apparent 'value' is never realized. This is not the case with Glentel: even in bad business conditions the company is generating very substantial free cash flow.

    "It's close to the bottom of its 5 year price range"
    Yes it is, and I couldn't be happier. If the stock was at a 5-year high, it wouldn't be undervalued and I wouldn't be writing about it, much less investing in it. Moreover, to judge a company's future performance based on its past stock price movements is not only illogical, it is counterproductive; a number of studies, including Tweedy Browne's "What Has Worked In Investing", have found that in aggregate, stocks that have underperformed the index for a long period of time go on to outperform it for multiple years thereafter. So, statistically speaking, GLN's recent poor share price performance is a good thing.
    Aug 25, 2014. 12:08 PM | 2 Likes Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    Poupou,

    Glentel could be bought but I think the chances are low, in part because the Skidmores own a controlling stake, and in part because there aren't a lot of natural buyers. Carphone Warehouse was acquired by a consumer electronics chain--not a business combination I would bet on happening twice. The most sensible acquirer would be a private equity firm attracted to the cash flows, but again, the Skidmores would have say on any deal.
    Aug 20, 2014. 09:59 PM | 1 Like Like |Link to Comment
  • Glentel Part 6: Normalized Earnings, Valuation, M&A And Risks [View article]
    Thank you Phil, I'm glad you liked it.
    Aug 20, 2014. 09:44 PM | Likes Like |Link to Comment
  • GTLT: See What Insiders See - A Growing Company For 5x Cash Earnings [View article]
    The release you linked to shows $9M of adjusted EBITDA in 2011. I use $8.4M because I don't add stock compensation back to EBITDA. I do, however, add back the $1M of restructuring and severance, as those costs are non-recurring expense that arise from acquisitions.
    Mar 7, 2013. 09:14 AM | Likes Like |Link to Comment
  • GTLT: See What Insiders See - A Growing Company For 5x Cash Earnings [View article]
    Unfortunately I am not aware of any other publicly-traded VNOs. Every public company I know of that offers similar services (Cogent and Level 3 are two examples in the U.S.; Colt is an example in the U.K.) operates an asset-based fiber ownership model.
    Jan 7, 2013. 09:53 AM | Likes Like |Link to Comment
  • Autoinfo: A Growing Truck Freight Broker Not Priced Like One [View article]
    Illiquidity is a risk inherent in all micro-cap investing.

    "Dead money" is a strange term for shares that have spent the past four years rising in linear fashion.
    Dec 18, 2012. 10:05 AM | 2 Likes Like |Link to Comment
  • Autoinfo: A Growing Truck Freight Broker Not Priced Like One [View article]
    AUTO's agent-based model is discussed in the article. There are a number of 3PL companies that use a mix of agents and salaried brokers, including ECHO and RLGT in the public sphere.
    Dec 9, 2012. 05:17 PM | Likes Like |Link to Comment
  • Autoinfo: A Growing Truck Freight Broker Not Priced Like One [View article]
    I don't know what price AUTO would take or XPO would offer. I don't want to speculate.
    Dec 9, 2012. 09:55 AM | Likes Like |Link to Comment
  • GTLT: See What Insiders See - A Growing Company For 5x Cash Earnings [View article]
    GTLT does not directly compete with traditional carriers. Many of the services GTLT offers are supplemental to the standard offerings from the big carriers. In fact a number of the carriers are both customers and suppliers of GTLT.

    GTLT is a middle man between 800+ telco suppliers and 1,000+ customers. It enables efficient aggregation of bandwidth and other telco services. Without a party like GTLT serving as a middle man, this network of buyers and sellers would be exponentially more complex and inefficient (imagine 1,000 customers each contracting individually with 800 suppliers). In addition, GTLT is able to improve the quality and capabilities of the telecommunications network it provides by using select physical assets of its own in order to supplement and improve the services it buys and re-sells.

    The carriers still get paid by GTLT. In essence GTLT is finding business for the carriers that the carriers might not other find, and then taking a cut of that business.
    Dec 8, 2012. 04:01 PM | Likes Like |Link to Comment
  • Autoinfo: A Growing Truck Freight Broker Not Priced Like One [View article]
    Yes. Whether there is a price that would make both sides happy is a different question.

    You can find the list of the largest truck freight brokers here:
    http://bit.ly/WQBn4m

    Of the top ten truck freight brokers, CHRW, LSTR, and ECHO are public but bigger than XPO. Hub Group and Pacer are intermodal 3PLs--not the business XPO is aiming for. Transplace and Yusen are diversified 3PLs that provide numerous services in addition to truck freight brokerage. Freightquote uses an online business model. Total Quality is a pure-play truck freight broker, but it is on the border line of being too large for XPO to acquire.

    The story is similar when you look at the brokers ranked 10th to 20th by size. JB Hunt, Matson, and BNSF are captive subsidiaries of larger asset-based transportation companies. England, Jacobson, and MIQ are diversified 3PLs. TTS specializes in trade shows.

    Out of the top 20 providers, Autoinfo, PLS, Coyote, and Allen Lund appear to be the only standalone pure-play truck freight brokers that XPO could acquire without taking on additional debt.

    So yes, I think AUTO is a valid takeover target for XPO. AUTO represents one of the best available opportunities to reach scale quickly in domestic truck freight brokerage.
    Dec 8, 2012. 03:56 PM | Likes Like |Link to Comment
  • Autoinfo: A Growing Truck Freight Broker Not Priced Like One [View article]
    I agree. On the Monte Sol website there are additional articles about 3PL and RLGT specifically.

    http://bit.ly/UiRSUH
    http://bit.ly/XypS6L
    Dec 7, 2012. 09:07 AM | Likes Like |Link to Comment
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