ACapitalist

Buy Opportunities Like These Do Not Come Along Very Often

Alex,
Thanks for the local color. I will keep my eye on this over the next few months.

Buy Opportunities Like These Do Not Come Along Very Often

Tim, Alex& Remington,
I was very interested in CTBK, read their 10q & K and could not find where their construction exposure is located. I called them and they told me that all of their exposure was local, nothing out of Washington and most in a couple of counties where they are located. I only have a general idea of what is going on in the Washington real estate market, but from what I read it is still one of the best markets in the country with little or no drop in prices due to the strength of tech and aerospace industries. Therefore it would seem that their construction book would be better than most banks in other regions? However, their nonperforming loans have been going up quite rapidly over the past 3qs. On the positive side, they have 17+% capital and a 6% net interest margin. Not many banks like that sell for 80% of book value. Any other thoughts or perspectives on the Washington market?
Thanks

Buy Opportunities Like These Do Not Come Along Very Often

Jack,
An investment in any of the Can Trusts is a bet on continued high oil/gas prices. If you are convinced that prices will stay high, you will have made a good investment. If prices drop, you probably will not. Why will a drop in energy prices result in a fall in the price of these stocks (as well as Penn)? The dividends include a return of capital and they do not retain enough cash to sustain production on a flat energy price basis. The trusts have to keep issuing more shares to buy more producing properties to keep their production growing or even flat. What investors should always look at with these stocks is the production and cash flow per share. In the near term, there is nothing to worry about as the numbers you present suggest. In the longer term it’s all about the price of Oil and gas. I am not saying you should not buy Penn. I may just do so.

Plane Lessors Are Headed to the Desert

Just look at what the major US airlines are taking out of service. They are all old generation 737's. A320 and MD80's. Those leasing the more modern planes should do well. The modern ones are still in high demand.

Genesis Lease: Picking Among the Rubble

Sorry to nit pic as I think your article is very good and I agree with it but you are wrong on the 8 year depreciation. I did read the 20-F to be sure (page 65,F-9, F-11). You are mixing GAAP and tax information. The 8 year deprec is for tax purposes. For financials, they use US GAAP accounting and the planes are depreciated over 20 years, the book basis you refer to is based on the GAAP numbers. I still agree with you that the value of the planes is greater than book but that is because of the devaluation of the dollar and the the good market for used planes, it does not have anything to do with tax deprecation rates. The 8 year tax life is valuable because it makes the T in EBITDA poistive operating cash flow to the company as the tax is all, or mostly, deferred for many years.

Genesis Lease: Picking Among the Rubble

I think you should check your calc on the depreciation. I have looked closly at AYR and just did a quick check on GLS and it looks like book deprec is running at about 4% year, or a 20 year life for both. This is still conservative as actual deprec is probably closer to 3%, but not in stright line. Your reference to 8 years may be tax deprec. In the US it is 7 years which creats better cash flow and a large deferred tax liab for plane owners.