Seeking Alpha

Trent Tillman's  Instablog

Trent Tillman
Send Message
Trent Tillman is President and co-founder of SyndicateTrader LLC (www.syndicatetrader.com). He has over 16 years of investment and research related experience, on both the buy side and sell side. He has served as both a trader and an analyst within U.S. equity, equity options, and bond markets,... More
My company:
SyndicateTrader LLC
My blog:
Trent Tillman's Blog
View Trent Tillman's Instablogs on:
  • Kinder Morgan Looks to Continue a Bright Start to 2011 Private Equity Backed IPOs
    Kinder Morgan Inc. (KMI: NYSE) priced their much anticipated IPO of 95.5 million shares at $30 per share (original terms were for 80M shares @ $26-29). The $2.87B raised in this offering makes KMI the largest energy IPO in over a decade. On the heels of a successful $1.64B IPO of Nielsen Holdings N.V. (NLSN: NYSE), KMI represents the second large private equity backed IPO in the last few weeks to receive solid market interest. A strong debut from KMI would surely be a boon to private equity firms that reportedly have a large backlog of deals to bring public, including a few other high profile names that have already filed in 2010 such as HCA and Toys R Us. 
     
    KMI owns the general partner and approximately 11% of the limited partner interests in Kinder Morgan Energy Partners, LP. (a publicly traded pipeline limited partnership: KMP: NYSE). The general partnership interest drives the majority of the cash flow to KMI, approximately 86%. The underlying entity, KMP (from the prospectus): Is one of the largest energy transport and storage companies in North America based on market cap; they are the largest independent transporter of petroleum products in the U.S. (by barrels transported = approx 1.9M per day); they are the 2nd largest transporter of natural gas in the U.S.; the largest transporter of carbon dioxide in the U.S.; and the second largest crude producer in Texas.
     
    The offering is being led by underwriters Goldman Sachs and Barclays. All of the shares in the offering are being sold by selling shareholders including: Goldman Sachs, Carlyle Group, Riverstone and Highstar. Post offering the public will own 11% of KMI, the sponsors will own 52%, and the management/original shareholders will own 37%.
     
    Despite none of the proceeds going to the company there has been strong investor interest in the offering from the start, which can typically point to the fact that the offering was upsized and priced above the range. Kinder Morgan Inc. offers many investors an opportunity to invest in a company like Kinder Morgan Energy Partners LP that typically do not have the opportunity because of the MLP structure and tax related issues. KMP has had a solid track record of cash distribution growth at a 40% CAGR from 1996 to 2011 (estimate), from $17M in 1996 to $2.63B. This has translated into a 52% CAGR for the cash distribution received by KMI. Based on the $30 pricing, the KMI is estimating a 3.87% forward dividend yield.
     
    Friday’s trading of KMI will be the tell-tale sign of how successful the offering turns out, but the early view looks positive, and the private equity firms are chomping at the bit.


    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in KMI over the next 72 hours.
    Tags: KMI, KMP, IPO
    Feb 11 12:27 AM | Link | Comment!
  • Camelot Information Systems (CIS) leads off this week’s IPOs, while Green Dot Corp.’s (GDOT) IPO will steal the headlines

     

    Like last week, there are 4 IPO’s expected for the week of 7/19/10, Camelot Information Systems (NYSE:CIS), Ameresco, Inc. (NYSE:AMRC), Green Dot Corp (NYSE:GDOT), and SurgiVision, Inc. (SRGV). 
     Camelot Information Systems (CIS) is offering 13.33M common shares in their IPO at $11.00-$13.00, representing a mid point market cap of $526M (expected to price Tuesday for Wednesday trade).  Camelot is a leading domestic IT service provider in China. They focus on 2 business lines: Enterprise application software (EAS) and Financial industry IT services (NYSE:FIS). They are the leader in China’s EAS market with the largest pool of SAP consultants and a 12% market share. Their FIS business includes many of the largest financial institutions in China, including the Peoples Bank, all 5 of the state owned commercial banks, 2 of 3 policy banks, all 12 national commercial banks, and 33 of 37 commercial banks in Taiwan. There is some customer concentration with IBM representing approximately 32% of revenue, and their top ten customers representing approximately 63% of revenue in ’09. The company has grown revenue at a 50% CAGR from ’05 to ’09 to $118M. They are profitable and had a net margin of 15.6% in ’09. Chinese IPOs have been spotty in 2010, with only 4 of 11 closing in positive territory on day one, and 5 currently above their IPO price. This company, however, has a shot based on the industry and forward P/E discount to Chinese peers VIT and LFT. The company, based in Beijing, China, is. Lead Underwriters include Goldman Sachs and Barclays.
     Ameresco, Inc. (AMRC) is offering 8.7M common shares in their IPO at $14.00-$16.00, representing a mid point market cap of $606M (expected to price Wednesday for Thursday trade).  The company, based in Framingham, MA, is a leading pure play energy efficiency and solutions company in North America. Energy efficiency makes up 80% of their revenue, and consists of the development, installation and arrangement of financing for energy efficiency projects. Renewable energy projects make up the other 20% of their revenue. They have 54 offices in 29 states and 4 provinces, and over 2000 customers served.   Energy efficiency is the least costly supply option and has the most effective environmental impact versus other options such as solar PV, solar thermal, wind, natural gas, and etc.   The energy efficiency industry is expected to grow 26% annually from ’08 to ’11. The company has experienced organic revenue CAGR of 40% from ’01 to ’09, with $428.5M in revenue for ’09, and they have been consistently profitable over the last 9 years. Lead Underwriters include BofA Merrill Lynch and RBC Capital.
     Green Dot Corp (GDOT) is offering 3.85M shares in their IPO at $32.00-$35.00, representing a $1.35B market capitalization at the mid point (expected to price Wednesday for Thursday trade).  The company, headquartered in Monrovia, CA, is the pioneer in general purpose reloadable prepaid debit cards (GPR cards). They are currently the largest in the U.S. with over 3.4M active cards and distribution through over 50,000 retail outlets including: Wal-Mart, Walgreens, CVS, Rite Aid, 7-Eleven, Kroger, K-Mart, Meijer and Radio Shack. According to Mercator Advisory Group’s “Prepaid Market Forecast 2009 to 2012” research report, $8.7 billion was loaded onto GPR cards in the United States in 2008 and $118.5 billion is expected to be loaded onto GPR cards in the United States in 2012.Revenue has grown at a 51% CAGR from ’06 to ’09 from $74.7M to $258.5M. EBITDA over the same period has grown at a 116% CAGR from $8.2M to $82.8M.Wal-Mart is their largest customer, representing 63% of revenue in 1Q10. They have been an exclusive partner with Wal-Mart since 2007, when Wal-Mart introduced their Wal-Mart MoneyCard program. They recently extended their contract with Wal-Mart which under the new terms will increase their sales commission to Wal-Mart to 22% from a previous 5% to 7.9%. However, based on growth in sales volume they see the decline in EBITDA margin only going to the mid 20% range versus 32% for ’09. This market is fast growing and highly competitive (comp NetSpend just filed their $200M IPO on July 15), but based on the fast growth and current market leading position, as well as small offering size, this offering should see considerable interest. Lead Underwriters include JPMorgan and Morgan Stanley.
     SurgiVision, Inc. (SRGV) is offering 2.5M shares in their IPO at $13.00-$15.00, representing a $142M market cap at the mid point (expected to price the week of July 19).  Based in Memphis, TN, they are a medical device company that provides real-time MRI guided therapy platforms which enable minimally invasive procedures in standard existing MRI suites. Their ClearPoint system became FDA approved on 6/16/10 for general neurological interventional procedures. The system is based on a razor/razorblade model in which the company charges no up front capital to the hospital for the hardware (costing approximately $150k), but rather utilizes a pay per procedure approach. Then they charge for the disposables (which run approximately $7k per case). Their initial target market is a subset of the total neurological interventions (estimated to be approx 130k procedures per year in the U.S.). SurgiVision has two additional products in their pipeline: ClearTrace and SafeLead Technologies.  ClearTrace focuses on applying MRI guided technology to cardiac procedures. With ClearTrace they have a mutually exclusive co-development partnership w/ Seimens Healthcare, and are targeting a European market intro in the 2nd half of 2012. SafeLead Technology focuses on improving the MRI safety profile of implantable leads. This product is under co-development w/ Boston Scientific. SurgiVision has received a $13M upfront payment in this product, with potential milestones of an additional $21.6M. They also have a potential per unit royalty for all leads incorporating the SafeLead technology. The company is currently operating at a loss, and they have cash burn of approximately $950k per month. Prior to the offering they have approx $3.5M in cash, and anticipate using the proceeds for sales & marketing, research & development and working capital purposes.  Lead Underwriters include Goldman Sachs and Barclays. Lead Underwriters include Canaccord Genuity and Rodman & Renshaw.


    Disclosure: No Positions
    Tags: CIS, AMRC, GDOT, SRGV, IPO
    Jul 20 3:06 AM | Link | Comment!
  • SMART Technologies (SMT), Qlik Technologies (QLIK), RealD Inc. (RLD), and Oxford Resource Partners (OXF) IPO’s Poised to Ignite 2H’10 IPO Market

    There are 4 IPO’s expected for the week of 7/12/10, Oxford Resource Partners LP (NYSE:OXF), SMART Technologies Inc (NASDAQ:SMT), Qlik Technologies Inc (NASDAQ:QLIK), and RealD Inc (NYSE:RLD).  All 4 look to be attracting interest: one as a yield play, and the other three as growth stories.

     Oxford Resource Partners LP (OXF) is offering 8.75M common units in their IPO at $18.00-$20.00, representing a mid point market cap of $391M (expected to price Tuesday for Wednesday trade).  The company, based in Columbus, OH, is one of the largest surface miners of coal in Ohio, and operates 8 mining complexes, comprised of 17 individual mines, in the Northern Appalachian and Illinois Basin.  They are amongst the lowest cost producers in the region, have approximately 92 million tons of reserves, and have close to 100% of their coal sales tonnage committed for the next 2 years (97.6% in ’10, and 101.5% in ’10).  The company will attract a strong retail interest due to their high estimated dividend yield of approximately 9.2% for the 12 months ending 6/30/11.

     SMART Technologies Inc. (SMT) is offering 35.3M common shares in their IPO at $16.00-18.00, representing a mid point market cap of $2.1B (expected to price Wednesday for Thursday trade).  The company based in Calgary, Canada is the leading provider of interactive whiteboards for classrooms and meeting rooms.  The company has close to a 50% market share, with their closest competitor Promethean about ½ their size.  The company has grown revenue at a CAGR of 31% from FY’08 to FY’10 to $648M from $379M, and has grown revenue at a CAGR of over 30% for the last 10 years.  Though they booked a large foreign exchange gain in FY’10 (of approx $90M) they were net income positive for FY’10 and would have been without the gain.  Growth prospects continue to look promising with only a 7% global whiteboard penetration rate currently, and it appears this is translating to strong early demand.

     Qlik Technologies Inc. (QLIK) is offering 11.2M shares in their IPO at $8.50-9.50, representing a $675M market capitalization at the mid point (expected to price Thursday for Friday trade).  The company, originated in Sweden and now headquartered in Radnor, PA, provides a new type of user driven business intelligence (BI) software that utilizes their associative technology which can scale from small business users to large enterprises.  Another growth company which is also currently profitable, QLIK has experienced a revenue CAGR of 59% from ’05 to ’09 (from $24.5M to $157.4M).  With many of their primary BI comps being acquired in ’07 (such as Hyperion by Oracle, Cognos by IBM, and Business Objects by SAP), QLIK will be one of the only remaining public pure-play BI companies.  The company has grown their client base from 1500 in ’04 to approximately 15k currently, and they claim to add approximately 70 new clients each business day.  In a market looking for profitable, growth technology companies, QLIK also looks poised for a solid debut, and early demand also is strong.

     RealD Inc. (RLD) is offering 10.75M shares in their IPO at $13.00-15.00, representing a $667M market cap at the mid point (expected to price Thursday for Friday trade).  Based in Beverly Hills, CA, the company is the global market leader in 3D enabled movie screens.  They have over 5900 screens deployed in 51 countries with an additional 5100 under long term contracts to be installed.  RealD has contracts with 17 of the 18 world’s top motion picture exhibitors, including AMC, Cinemark, ODEON, Regal, and Warner Mycal.  They license their RealD systems to motion picture exhibitors through multi-year agreements, and receive royalties on every attendee of a 3D film on a RealD enabled screen.  The company is also trying to leverage the success of recent 3D cinema into the large consumer electronic market.  They have entered agreements to provide their RealD Format, active and passive eyewear, and display and gaming technologies to leading consumer electronics manufacturers, including Panasonic, Samsung, Sony, Toshiba, and JVC.  Revenue has grown at a tremendous pace in the last year from $45M for FY end March ’09 to $189M for the same period ending FY’10.  This can be attributed to the correlation of the growth in RealD enabled screens, plus the growth in the number of 3D films.  While the company has yet to turn a profit, the top line growth looks to continue to run at a rapid pace, as they look to double the number of screens in the next few years (based on the additional 5100 screens already contracted) as well as the significant increase in anticipated 3D films (there were 27 3D films total from ’05 to ’09, and there are currently 55 announced 3D films for 2010 and 2011).  While the lack of current profitability may deter some investors, the recent hype (with success of films such as Avatar) of 3D technology has garnered enough interest to make this a relatively hot offering.  The question is will this hype be enough to ignite the stock to successful debut only to see the share sell off in the days after, ala Tesla?

     We’ll see how the group performs this week, but early indications appear that this group will lead the IPO market to a successful start of the second half of 2010.



    Disclosure: No positions
    Tags: SMT, QLIK, RLD, OXF, IPO
    Jul 14 2:45 AM | Link | Comment!
Full index of posts »
Latest Followers

StockTalks

More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.