Quasi Trader

Deep value, special situations, event-driven, contrarian
Quasi Trader
Deep value, special situations, event-driven, contrarian
Contributor since: 2013
This was the most 1999 article I had read since 1999.
Well articulated article on an undefollowed company. I also have a $45 target within 24 months. LXU is a large holding of mine. I see you didn't get into the nepotism which was probably a major factor in the prior mismanagement. No matter. In fact, the end result of the formerly entrenched family is why we now have this gift of an opportunity to buy this company for about 35% of what it is probably worth or soon will be. It may be worth noting that the company has traded at valuations close to what your targets are not long ago.
There is no such thing as a cash write off of good will. Depreciation is also no cash.
That said, the company is cash flow negative. But the options available to this company are at best underappreciated by most.
Here are some comments the CEO made on the call. There is a lot more in the Q&A
"We understand that our debt structure and gathering commitments add to the challenges of the commodity price environment. There are several questions out there in the market such as can Chesapeake generate sufficient cash flow to weather this storm? And can the portfolio and operational strengths overcome these significant obstacles? The answer is definitively yes. We have tremendous flexibility and optionality given the breadth and diversity of our portfolio.
I came to Chesapeake two years ago because I considered it to be the biggest challenge and thus the biggest opportunity in the industry. We've made significant improvements in our capital efficiency, cost structure and balance sheet and I'm as determined and confident today as then that we will become a top-performing E&P company.
Our portfolio offers several strategic options to enhance our cash flow and liquidity through potential asset sales, joint venture agreements and/or participation agreements. Some of which we expect to execute in 2015. Discussions have already begun with several parties and we are confident in our ability to maximize the value of our resources, both in the short-term and for the long-term.
The success we have had in improving our productivity and capital efficiency over the past two years has created the opportunity to bring additional value forward. Under any or all of these potential agreements, Chesapeake would be able to accelerate its drilling activity and production beginning in 2016 or use any potential proceeds to enhance our capital structure."
DanielHolzman, Those losses were mostly due to write downs of the carrying value of the oil and gas in the ground because of lower market prices. Their assets still outweigh liabilities by $10B and the company has $6B in liquidity. They also sit on some of the best acreage in the country. They could sell off just a portion of this acreage and wipe out all debt if they chose too. However, the company will probably sell some small non-core acreage and do some JV deals to help cover cash flow needs.
It would be well worth your time to read the conference call transcript. It would take years of much lower prices to bankrupt this company and, of course, it would be bought by a major long before then.
GNW is an asset play not an EPS play. UBS seems shortsighted. They even admit the sale would be good for the equity long term. I really don't care if I have to wait until 2018 to triple my money. I'm good with that. A divestiture here another there, before you know it Life and MI will be able to be split and the stock is $18.
X is way too cyclical for me. ;)
I doubt Vertex would want more than the 9.9% he already has. Makes you an insider. We can just keep an out for 13Gs or 13Ds. Any sale by Nierenberg or further purchase by Vertex would require a filing.
You have probably seen the results this morning. The company beat on top and bottom lines and had positive cash flow. The stock is trading up 8%
I believe I heard on the conference call that growth was expected to be 15-20% per year. The was also a question about the service segment that I think might help you. The transcript is not out yet so I can't quote it but you can listen to a replay here: http://seekingalpha.co...
As far as competition they go into that in the most resent 10-K. I ran across market share someplace but can't seem to find it now. Sorry about that. I seem to remember it was quite high. However, they make machines for several specialized industries and share probably varies from one to another.
There was discussion on the call about the Jade product which is designed specifically for the Chinese market and serves what the company called an underserved segment. It really sounds as if they have 2 or three new products that are being well received. I highly suggest listening to the CC or reading the transcript when it comes out.
With Nierenberg on the board I believe the company is running much more efficiently at the same time new products are being well received in the marketplace. As far as whether or not it's worth it, I think if you consider the company's very low valuation metrics combined with drastically improving performance, and Vertex standing by ready to sell them if they stumble, well I sure think it's worth it.
Great job on the CC today, Mike. In response to your question it sounded to me like they admitted the EPHS business is for sale. And the guy after you basically caught them low balling full year estimates. You should use those responses in your next article.
QT
This is the phone I've been waiting for. With BB Hub and BBM this would be the perfect phone. I can't believe another company has beat Blackberry to this. Millions would pay $700 - $900 for a BB phone like the Turing Phone.
Very professional article. Free from emotion or hyperbole. Unfortunately, most of your reader base is not equipped with your ability for foresight and will always miss big moves. The market is so splendidly inefficient and gives gifts to those to those willing to accept them.
The foolish and scared have not finished punishing this stock for failing to reward them in the short term. I have not yet seen the flushing of those who should stick to large cap established predictable market proxies. While some will make money on the short side of that trade, capitalizing on the weak hands, those profits will pale to what awaits the few sophisticated of your readers who can see several steps ahead.
Once again Robert, that's software AND Tech Licensing. They pulled 7 mill from service revenue in Q4 for comparative purposes to the new software and TL category. Core software was 67 and was "slightly down" this quarter.
They reclassified some service revenue to the new software and Tech Licensing. Therefore $74 compares to $137.
In the 1Q 16 report they say that software ex- tech licensing was slightly down we can conclude that number compares to the original 67. probably 66 or 65, It's and apples to apples thing.
page 10 of the Notes.
So much debate around software revenue. The facts are as follows: Q4 2015 software revenue was $67 million. Not $74 million as the author states. This can be found on page 26 here: http://1.usa.gov/1GNTelS
Software revenue net of technology licensing fell "slightly." This can be found on page 10 here:
http://1.usa.gov/1GNTelW
Chris, Just file a 13D and ask for a seat on the BOD. I say they'll give it to you. I own a fair amount of shares and I would like that very much!
-Wes
Chis, How come you're not on the board there?
Mark, Thanks for the article. Although I am long, I appreciate your perspective on BBRY.
I certainly hope you are correct as to your estimate of 2.2 million handsets sold in Q4 as that would virtually guarantee a significant revenue beat and likely subsequent share price rally.
Service revenue has been well telegraphed to fall to about $313 million. Also, the company basically told us 19 days into the quarter that software revenue will be about $83 million. Other revenue should remain steady at about $10 million.
Therefore, if they sell 2.2 million devices at an average $200 (I think closer to $220) that would mean $440 million for devices and total revenue of about $846 million. That's about a 5% beat.
The fact that the device revenue mix will be higher margin and software is likewise high margin they should collectively offset the further loss of high margin service revenue. Therefore, I would also expect a small net income beat.
With all of the negative commentary over the past three weeks from GS, MS, Wells, etc. and the share price hit over the same period, I think we could reasonably expect a rally with even a small miss. I can only imagine the rally a beat might produce. Especially if management sticks to the doubling of software revenue during FY16.
So they're hoping about 35% of the US population tunes in. I bet that's a lot lower number than the football freaks think watch it. I'm happy to be part of the 65% who doesn't watch. Haven't bothered to watch for the last 25 years. Let me know if Katy Perry has a wardrobe malfunction, though. I'll want to catch that on YouTube...
I really enjoyed reading this. Just one question. Early on you mention FN with it's great ROIC and operating margins yet it trades at a cash adjusted PE of 7. 10 and 12 trailing and forward unadjusted for cash. Why then would you expect the market to award KTCC a 15 multiple on $1.15 earnings? Why would it trade differently than it did in 2013 when it earned $1.12 and never cracked $12?
My previous post should have read: 15,650,737 shares (49.9%)
@mrabody Great comment! Saved a lot of us the trouble of explaining service revenue to this author.
Don't forget Kinder also transports gasoline. As fuel prices drop demand increases as people drive more.
The transport of NG is very likely to increase as more coal fired power plants are replaced and US LNG export begins. Also, the export of liquefied condensates is increasing and should even be helped along As prices drop along with crude.
You model 2015 revenue of $474 million with EPS of $0.84. The 5 analysts who cover the stock have average revenue estimates of $392 million with EPS of $0.56
What do you think they are missing?
In 2014 the U.S. will produce about 8.6 million barrels of oil per day. If the price fell to a level that was uneconomic for fracking and stayed there long enough then fracking would come to a halt and so would most of that oil production.
If that much oil came off the market what do you think would happen to the price?
That's right.... The price of oil will ultimately stabilize at a price where fracking is economic because it has to. Fracking is here to stay.
Little KMI would slot in there quite nicely.
Awesome due diligence, Corey!
A red Passport. Pretty cool I think..
http://bit.ly/1yqEq74
But Blackstone provided capital specifically for RTK to expand the wood pellet business and ultimately to IPO it. Blackstone also placed three adults to the BOD. I think it's finally time to give RTK a shot.
I think IO can do $.80 in 2014. Exit the year around $8-$10 per share. Those analyst targets will be rising soon.
Perhaps the best article I’ve read on SA for quite some time. I hope very few people read it. Because if too many investors begin to realize how to really make oneself rich in the stock market then this wonderfully inefficient market will become more efficient and I will find it more difficult to trounce the market.