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  • Female Health Company: Putting The Brazil Tender In Perspective [View article]

    Yes, you are currently correct, however, the company's new strategy will make the customer mix look different in the future.
    Oct 15, 2014. 03:50 PM | Likes Like |Link to Comment
  • Female Health Company: Putting The Brazil Tender In Perspective [View article]
    Also I'd like to highlight the power of the SA community. In our previous article, TMT Investor linked to Brazil's official announcement of the tender a week before FHCO made their official announcement.
    Oct 15, 2014. 03:47 PM | 1 Like Like |Link to Comment
  • Cherokee Group: Brand Management ATM [View article]

    I think the best way to compare CHKE and ICON is to look at each other at similar stages in their brand management strategy life cycle. Iconix did not start out with brands that were >50 years old: Candies, Bongo and Badgely were all created in the 80's and likely did not have the same brand recognition they do today. It took years for them to build those brands to where they are today. Only later in their lifecycle have they acquired a few long standing brands, but I agree most have been highly recognizable brands. I think CHKE will follow in the same footsteps, so I think saying Cherokee's brands currently don't have the same oomph as Iconix brands today is short sighted.
    Sep 25, 2014. 09:43 AM | Likes Like |Link to Comment
  • Update: New Hire Executive Vice President Of Global Operations Shows Female Health Company Is Getting Right People On The Bus [View article]

    Very interesting find. Only one nitrile female condom manufacturer, and only one with the capacity for 50 million units, FHCO. Curious how did you came about this?
    Sep 24, 2014. 01:26 PM | Likes Like |Link to Comment
  • Cherokee Group: Brand Management ATM [View article]

    Many investors have the same reaction. In a lot of situations CEO's are horrible at allocating capital be it through acquisitions, capital reinvestment or share repurchases, but with a CEO like Henry Stupp (refer to the comment above #3) and a business model that can generate large returns on minimal capital, it is probably a better bet that they can compound capital at higher rates then we investors can.
    Sep 23, 2014. 05:21 PM | Likes Like |Link to Comment
  • Cherokee Group: Brand Management ATM [View article]

    Good questions.
    1. Target kicked out Cherokee Adult apparel in 2005 which was generating $1 billion in total sales due to then Cherokee's business state. Since Cherokee has come a long way since 2005 in terms of infrastructure and relationships, the adult apparel line was brought back to Target US in Spring 2014. So, the key to them going forward with organic growth is through new category introductions. Specifically I got the double digit metric from Sequential Brand's CEO who stated that they can easily gain double digit organic growth. Stupp is a bit more conservative, but both companies have very similar strategies so it is likely they can achieve similar organic growth. Refer to the 29 or so minute mark in CHKE's most recent investor presentation webcast for more details on the organic growth.

    2. Each new brand might require some additional marketing or personnel but not as much to make a large dent in costs. The platform is highly scalable and I believe the it takes time to grow acquired brands organically through product introductions and expand geographically, so it will take time for margins to expand from TH and LL. I utilize Iconix as a model for the 60% EBITDA margins since they have a very similar business model to CHKE.

    3. Using historical numbers of only US your calculations would be correct, but the question is how much can CHKE drive from international and category introductions with the brand. Future returns are likely to be much higher.

    Also, I really like Stupp's comments from the Q&A of the investor presentation today where he said he is very patient and willing to be very opportunistic with acquisitions and will not over lever. He said he wants CHKE in the position to have the clean balance sheet to take advantage when other brands might be having problems. This is a good thing to hear from a CEO when there is an acquisition spree happening at the moment.
    Sep 23, 2014. 05:16 PM | Likes Like |Link to Comment
  • Cherokee Group: Brand Management ATM [View article]

    By that logic Hershey's 40-50% ROE on $6.94 of equity per $93 isn't impressive. Low asset, high touch businesses might not have the downside protection from physical assets, but that means they don't have to reinvest those dollars in physical assets. The check can be written to investors or fully reinvested. Cherokee has downside protection from minimum royalty guarantees with each brand they own, plus there are intangible assets that are not on the balance sheet that provide downside protection as well.
    Sep 22, 2014. 05:03 PM | Likes Like |Link to Comment
  • Cherokee Group: Brand Management ATM [View article]

    Thanks for your comments. Doing DD in stores gives good data points, but the premise of this investment is not how many Cherokee branded items can be sold in the US. I would agree there are not many people who go to Target to specifically get Cherokee branded items. Same could be said with Candie's, Bongo and Badgley Mischka brands which Iconix started out with in the 90's. It was the company's ability to utilize a brand management strategy by acquiring brands, at good prices, and expanding upon them that led to Iconix's business performance over the last decade. Cherokee is following in the same path, and there continues to be low competition in the brand management space while there are many underutilized brands.

    This is a bet on the business model, opportunity and the management.
    Sep 22, 2014. 04:52 PM | Likes Like |Link to Comment
  • Platform Specialty Products: Rare Opportunity Continues To Be Available [View article]

    Bill Ackman is a close friend of Martin Franklin, the chair of PAH's board, and invested in the original SPAC Platform Acquisition Holdings because Ackman knows very well of Franklin's track record. It is likely Pershing will be in it for the very long-term as a passive shareholder. Mid-term and long-term price targets are hard to gauge with a serial acquisition company, but I think there is a very good chance the company will be much larger than today in 5-10 years. If Franklin and Leever can continue finding acquisitions that accrete >20% in immediate value, then there is a very high likelihood the stock will produce the same results.
    Sep 4, 2014. 09:15 AM | Likes Like |Link to Comment
  • Wizard World: Obscure Marketing Machine Offers Attractive Risk/Reward [View article]

    Good points. According to the latest Q Philadelphia, Chicago, New Orleans, Columbus, Portland, Nashville, Austin, and St. Louis have reached operating profitability. New shows are likely to take time in reaching full profitability unless the company is able to successfully draw in attendees quicker.

    The number of comic cons per market is a good question. The company has previously stated that they do not plan on putting on shows in the markets where there are established events such as non-profit San Diego's International comic con since those events already have a following and competition would be high.

    Since the smaller shows do not attract the same caliber of celebrities, I see how there can be room for a big player in the 52 week schedule for an area. You are right that smaller shows might not have the same economics as existing shows but of all of the new shows announced only Greenville, Rosemont and Ft Lauderdale are under 200k population. So, the mix of new shows is likely to be similar.

    The juries out on sustainability of expansion, and you are right profitable growth could be hard to come by. I see this as a marketing roadshow/tour for celebrities and others, so this could also possibly be changed into other formats as well.
    Sep 3, 2014. 11:38 AM | Likes Like |Link to Comment
  • Wizard World: Obscure Marketing Machine Offers Attractive Risk/Reward [View article]
    I agree that dilution is never the best for all shareholders, however, the capital was raised to get the company rolling. We'll see how dilution happens in the future, but I'm guessing dilutive equity raises are likely not to persist too often in the future, since the company is on the cusp of continued profitability, will generate large cash flows and needs little capital to expand.

    Hard to say exactly who was a part of the both offerings but management and affiliates were a part, but not whole part. There were 12 individuals in the second preferred and warrant offering so likely there were other individuals as well. Note that management owns large stakes, but CEO purchased shares for a ridiculously low price. Affiliates like Bristol Investment is also a large shareholder buying on the open market, participated in the offerings and was fine with the dilution.
    Sep 2, 2014. 08:11 PM | 1 Like Like |Link to Comment
  • Female Health Company: Disaster Du Jour With Attractive Risk/Reward [View article]

    Good comments. Will respond to each:

    1. Valid and would agree on the previous dividends.

    2. Buy back is less of a risk than executing an acquisition profitably. Refer to our reply from 8/10 #3. Do agree that using too much money in a buy back could risk the company, however, FHCO management likely has better insight to the likely near term orders and cash than the market.

    3. You estimate an extra $2 million in cash by the end of the year. Curious where that number comes from.

    4. Agree that inventory management should be more efficient, but we have to remember three important factors. Global health organizations will be buying from the female condom producer that has the capacity to fill large orders giving FHCO the ability to continue receiving the largest orders above Cupid and the Chinese competitors. Also, unlike many other items that are manufactured FHCO has to test their condoms before shipment leading to greater lead time and longer time on the balance sheet. Lastly, Female Health Company is actively seeking ways to increase their ability to efficiently monetize their inventory through marketing to global consumers. Again, they have utilized nearly 0 marketing in the past so this is a large lever for the company to pull. The market has yet to see the plan so the uncertainty is priced in. It is likely efficiency of inventory turnover will be unlike the past.

    “Operating margin improve this quarter was manipulated they pushed back an investment or had a higher expense the last quarter.”

    Can you back this statement up?

    “2014 EPS will be about 15 to 20 cents. Company enterprise value is at about 105mm (current market cap less cash at year end) which is a net income yield of about 5.5%, why would I own this at such a low yield with no dividend, bloated inventors, high receivables and only one product with no idea what the next product is going to be.”

    This is what the market is saying, but the true value of the company is not based on the earnings in the next few quarters but in the long-term. Undoubtedly the new marketing program will need time to ramp up to see the potential, but the market is ascribing no value to it and is even more pessimistic to the prospects of the public health division than it was in the last year. Why? Lumpy earnings and a dividend cut.

    “Do you believe the management has the ability to improve the the operations to reduce inventories and receivables?”

    We’ll see, but the decision to suspend the dividend to spend more on marketing is a good indication that the company is headed in the right direction.

    “Do you believe the new marketing person is really going to do a better job of marketing their current product and whatever new product they plan to have?”

    Again we’ll see, but FHCO spent only $2.5 million on marketing for the last 14 years or an average of $178k a year. That sets the bar very low. The company did not have to market before, so having a dedicated person to lead a marketing strategy and say a yearly $1-2 million in budget is likely to easily outperform FHCO’s previous marketing.

    “What are your expectations for sales next year? Will it be higher, flat or lower and if so why would I pay so much for a flat or down next year? At this price the sales would need to be at least 20% higher to justify the current year owner yield given how low it is.”

    Expectations for next year should not be our focus. Expectations for cash in 5 years is what we look for and in the short-term use the lumpiness and negativity to serve us as an opportunity. Instead of trying to lob up a number, which is likely to be off widely, a company majority owned by insiders, with quality economics (consistently ROA and ROE above 20% since FHC2 and even during FHC1), with first mover advantage, underfollowed micro-cap, uncertainty in the details of the strategy and a recent sell off due to a dividend cut is likely to lead to undervalued shares. I could be wildly off the mark, but FHCO could have more than $100 million in revenue in the next 5 years.

    Anyway, thanks for your thoughts.
    Sep 2, 2014. 01:46 PM | Likes Like |Link to Comment
  • Wizard World: Obscure Marketing Machine Offers Attractive Risk/Reward [View article]
    New Capital,

    Thanks for reading and the comments. Using the trailing shares number is misleading since prior to Dec 2010 the company was GoEnergy, a shell company with no real operations. Subsequently on Dec 2010 KTC Corp, the Wizard related company with comic con rights, was acquired and an exchange agreement was enacted where 33.4 million of KTC shares were exchanged. The rest of the dilution is mainly from a preferred share conversion and warrant conversion on Aug 2013.
    Sep 2, 2014. 08:09 AM | Likes Like |Link to Comment
  • Female Health Company: Disaster Du Jour With Attractive Risk/Reward [View article]

    Thanks for the link. I agree, RoosterNY definitely looks like it could get some attention. Will be interesting to see who FHCO picks, and I'm guessing the strategy is likely to be announced in the next few weeks.
    Aug 29, 2014. 06:20 PM | Likes Like |Link to Comment
  • Tracking Small-Cap Super Investor MSD Capital - Q2 Update [View article]
    Looked back and you are correct. Interesting that the filing did not show up in the 13F's after the 13G was filed and only in the most recent 13F many quarters later. I'll have to make an edit.
    Aug 26, 2014. 09:09 AM | Likes Like |Link to Comment