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Stephen Percoco, CFA

 
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  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    According to the WSJ: New Democracy's candidate, Stavros Dimas, received 160 votes, which was at the low end of expectations. Political observers had been expecting that he would get 160-165 votes in the first round. 135 MPs voted "present"; while 5 were absent. The next vote will be held on Dec. 23.
    Dec 17, 2014. 05:19 PM | Likes Like |Link to Comment
  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    No, CCM, I have not been following the situation there as closely as you. You raise some interesting points and make a good point about a possible favorable market reaction, if the government gets 175 votes or better on the first round.

    For those who are not aware of the process: the government will vote to elect a new President on Dec. 17. If necessary, it will also hold a second vote on Dec. 23 and a final vote on Dec. 29. In order to elect a President, the government needs at least 200 members of Parliament to vote on Dec. 17 and Dec. 23, but only 180 on Dec. 29.
    Dec 16, 2014. 08:12 PM | Likes Like |Link to Comment
  • Greece Schedules A Parliamentary Election, Shares Plunge [View article]
    My repeated references to Mr. Tsipras and the fewer references to Mr Samaras were made only because I tried to focus on the key issue: the impact of the Presidential poll on the financial markets. Mr. Tsipras is clearly the protagonist. Without his pressure, the Presidential election would be a non-event. From where I sit (5,000 miles away from Athens and not immersed in the day-to-day opinions of the cognoscenti on developments in Greece), the Prime Minister has done a fine job under very difficult circumstances. I wish him success in the upcoming vote.
    Dec 14, 2014. 10:10 PM | 1 Like Like |Link to Comment
  • How Much Does It Cost To Produce One Barrel Of Oil? [View article]
    Christoph, thanks for the analysis. Your figures raise a number of obvious questions. Why are non-income related taxes so different among these four? What explains the differences in depreciation? Also, do we know anything about the dispersion of production costs within each company. For example, what might the standard deviation of production costs be within each company?

    While the average prices are interesting, it would be more meaningful to know what costs are at the margin, since that will have the most impact on price. Then, we might be able to assess the likely response of production to both price declines and price increases. I do acknowledge, however, that production cost information for marginal producers is probably tougher to obtain.
    Sep 2, 2014. 07:50 PM | 1 Like Like |Link to Comment
  • Brightcove 2014 Second Quarter Earnings Preview [View article]
    I was disappointed in the company's second quarter earnings and the change in its outlook. Brightcove essentially delivered second quarter earnings that met management guidance. I was hopeful that it would be able to deliver better earnings (or a lower loss) based upon cost cutting. However, growing revenue is the key issue.

    The loss of the Rovio account is disappointing, but the company makes the case that this was a unique customer whose usage differs from the typical target customer profile. Based upon management's comments on the call, Rovio accounts for 3.8% of total revenue - or about $4-$5 million of revenues - but 15% of its streaming volume. This suggests that it is less profitable (on an operating margin basis) than Brightcove's other customers. Still, the loss of Rovio will have a meaningful impact.

    The lowering of 2014 guidance - from revenues of $126-$130 to $122-123.5 million and the increase in non-GAAP net loss from $0.19-$0.25 to $0.24-$0.28, reflects partially the loss of Rovio, but most of the Rovio loss will show up in 2015. This will provide at least a modest headwind for 2015 results.

    Yet, the change in guidance was relatively modest. For example, the new guidance for non-GAAP loss reflects an increase in the loss of between $0.5 million and $1.5 million. Of course, this is disappointing, but it is not too surprising for a company that is still working through a big platform integration under challenging market conditions.

    In my opinion, the stock's 38% decline was due mostly to the sudden resignation of CFO Christopher Menard. His resignation is effective August 28. He will serve as a consultant to the company until November 30. Brightcove's chief accounting officer, Christopher Stagno, will serve as interim CFO until a replacement is found. We were told that Mr. Menard was leaving to pursue other opportunities, but that is obviously not the whole story. I think that the Street took the resignation pretty hard, because it views Mr. Menard as quite capable.

    Of course, the company's second half performance will determine whether the plunge in BCOV's shares is justified. Clearly, there is more uncertainty, but if you take management's comments at face value, the drop in the share price seems way overdone. That said, I suggested in this article that progress toward profitability should come through cost cutting, but we learned on the conference call that the company is still in hiring mode for sales, marketing and R&D. Perhaps this is justified, but if Brightcove does not get traction in revenues soon, it will eventually have to cut costs more aggressively.

    My first article on BCOV was entitled "Give Brightcove Some Time." I think that this advice still holds true today, even though it appears that Brightcove will need at least a little more time than I initially thought.

    Given Friday's sharp plunge in the share price, I expect that the stock will recover some of that loss in the weeks ahead. Whether it is able to hold any recovery (or ultimately go higher) now depends even more upon how things unfold over the next six months and beyond.
    Jul 27, 2014. 10:14 AM | 1 Like Like |Link to Comment
  • Brightcove 2014 Second Quarter Earnings Preview [View article]
    With the specter of a significantly lower open today, readers should note that my assessment of Brightcove's limited near-term downside risk assumes that the market does not suffer a major sell-off. I should clarify this point by asserting instead that I believe that Brightcove should not underperform the broader market significantly.
    Jul 10, 2014. 09:29 AM | Likes Like |Link to Comment
  • Starwood Waypoint: 50% Upside And A Potential 5% Yield [View article]
    Thanks for the comment. As far as I can tell, this company has only issued one earnings report and it only has one taped presentation available on its website (from the NAREIT conference in early June).

    Here's what they said about future performance in the first quarter earnings release:

    "Added Doug Brien, Co-Chief Executive Officer, 'Given our record leasing performance in the first quarter, which we expect will begin
    contributing to our results starting in the second quarter, we are well-positioned as we move through the balance of 2014. We expect that our stabilized portfolio will deliver improving operating metrics and anticipate Core FFO turning positive later this year. Further, we will continue to leverage our industry-leading operating platform, proprietary technology and local market intelligence to acquire additional single-family homes and residential non-performing mortgage loans to grow our platform, increase cash flows and create value for our shareholders.'”

    I don't necessarily doubt your assertion that the company's "projections and forecasts have not been correct to-date;" but I think that you should back up your assertion with specific examples.
    Jul 1, 2014. 11:10 AM | 3 Likes Like |Link to Comment
  • An Overview Of The Single-Family Rental REIT Sector [View article]
    Actually, my assumed average purchase price includes both the actual purchase price and estimated renovation costs. Most SFR REITs limit the upfront renovation costs. One, for example, as set the maximum renovation cost at 20% of the purchase price.
    Jul 1, 2014. 10:52 AM | Likes Like |Link to Comment
  • An Overview Of The Single-Family Rental REIT Sector [View article]
    Actually, if you pay attention to what the SFR REITs are saying, virtually all of them have developed technology platforms that cover demographic data and stats (such as income levels and crime rates) that allow them to rate neighborhoods. SWAY, for example, says that its platforms tracks 400,000 neighborhoods across the country and the data is used to determine which houses to bid on and at what price.

    Obviously, on bids for pools of homes, the SFR REITs are forced to bid for the bad stuff along with the good. But the technology platforms should help them to construct bids that allow them to identify quickly what they want to keep and what to sell and structure the bid so that they can get out of what they want to sell and still make their required investment returns on the overall transaction.

    You might be skeptical about whether all of this results in the best possible purchases all the time, but I also think that you shouldn't assume that these guys just wing it.
    Jul 1, 2014. 10:48 AM | 1 Like Like |Link to Comment
  • An Overview Of The Single-Family Rental REIT Sector [View article]
    Thanks for the comment. I agree that using predominately floating-rate financing exposes these REITs to rising interest rates, but I believe that most are targeting 50% debt-to-cap ratios, so that mitigates the risk somewhat. I have not looked to see whether they are swapping some of their exposure into fixed-rate payments yet. This can offset the risk of rising rates for awhile. Even so, it would be nice to see them layer some fixed rate debt into their capital structures over time.
    Jul 1, 2014. 09:18 AM | Likes Like |Link to Comment
  • An Overview Of The Single-Family Rental REIT Sector [View article]
    Thanks for the comment. Sales of distressed and foreclosed homes still account for more than 10% of existing home sales. That works out to more than 500,000 units annually. If I am remembering correctly, there are still two million or so properties that are classified as distressed or in default or in foreclosure. (In its most recent report, Corelogic said foreclosure inventory was down sharply, but still totaled nearly 700,000 units.) Granted, prices on these foreclosed properties have come up a lot since 2009, but I believe that the opportunity for these REITs to purchase properties profitably for the rental market still exists. Industry consolidation can also be a source of sustenance and growth for these REITs.
    Jun 30, 2014. 07:34 PM | Likes Like |Link to Comment
  • An Overview Of The Single-Family Rental REIT Sector [View article]
    Thanks for your comment. I guess the only thing that I can say is "we'll see." We'll see where the dividend rate ends up. I suggest here that 5% (at current share prices) is possible. If there really was little hope of paying a meaningful dividend, I would think that these companies would have opted for C-corp status, rather than REIT status, since that would give them greater flexibility to retain capital for future needs.

    I am not sure how your suggestion of lease options would work, so please explain.
    Jun 30, 2014. 05:51 PM | Likes Like |Link to Comment
  • Where's The Dividend Growth For UMH Properties? [View article]
    I'm not sure if I have anything to add to this conversation, except perhaps to say it in a slightly different way: I believe that UMH's stock has lagged because the core business - renting lots and selling homes - has not been profitable in recent years. The core business has also not yet shown improvement despite the more than doubling of the company's developed home sites through acquisitions.

    So far in 2014, all of the company's earnings have come from dividends and price appreciation on its REIT portfolio. UMH is therefore not generating enough cash flow to support the dividend indefinitely. Presumably, some of the lag in profitability has come because of acquisition and integration costs.

    If you believe that the U.S. economic recovery will continue, as I do, then UMH is a good bet. Its price will rise (and dividend yield will fall) as its financial performance improves. Granted you may not get dividend growth for some time, but the total return potential is still attractive.

    If, on the other hand, UMH's financial performance does not improve, then it will eventually have to cut the dividend.

    With its 8% dividend yield, I think that the Series A preferred has good upside potential (although not as much as the common) with less risk. While the REIT portfolio has served the company well over the years, a good case can be made after the significant run-up in REIT shares and with the risk of future increases in interest rates, that UMH should begin scaling down its REIT portfolio and use the proceeds to buy its outstanding Series A preferred.

    Similarly, after delivering better financial performance, UMH should consider coming to market with a new common equity offering to take out part of the Series A preferred.
    May 27, 2014. 11:20 AM | 3 Likes Like |Link to Comment
  • Detroit In Chapter 9: Orr Plays Hardball [View article]
    It may be that that this second clause of Section 24 was the catalyst for the issuance of the Certificates of Participation in 2005.
    Apr 1, 2014. 06:14 AM | Likes Like |Link to Comment
  • Detroit In Chapter 9: Orr Plays Hardball [View article]
    kidsnera points to a second provision of Section 24 which I did not see when I read it. (This was an oversight on my part. There are two clauses in Section 24. The one that I analyzed in the article and the second cited by kidsnera here. The second clause is contained in separate section entitled "Financial Benefits, Annual Funding," which I somehow overlooked.) As I have indicated above, I am not a lawyer; but this provision seems to require the State and each of its subdivisions to fund their pension benefits each year. It would be a pretty good bet that Detroit did not follow this practice and therefore violated this provision. If so, pension beneficiaries may have the right to sue Detroit, but since Detroit is now in bankruptcy, such a lawsuit would probably be stayed. I do not believe that beneficiaries would have the right to sue the state of Michigan because of Detroit's failure to follow this provision of Section 24. I apologize for my oversight.
    Mar 31, 2014. 10:17 PM | Likes Like |Link to Comment
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