Seeking Alpha

porthos

porthos
Send Message
View as an RSS Feed
View porthos' Comments BY TICKER:
Latest comments  |  Highest rated
  • Linn Energy Shows Wisdom With Updated 2015 Guidance [View article]
    ""Wow, an actual SANE commenter here. Be prepared for hostility, these LINE bulls love losing Money and blaming it on shorties.""

    Obviously this isn't a short issue. I'm guessing more than a few analysts/investors failed to anticipate the demise of energy. Linn happens to be non diversified, higher leveraged LLC and not a major and got stung quite a bit harder than Exxon or Chevron from energy's hysterical return trip to 2008. No-one here thinks the shorts are behind it --give credit where credit's due and it goes to the Saudis, the strong dollar, oversupply, slowing demand & a few more-- fill in your own ideas here. It wasn't the shorts. While oil was in a more "normal" range shorts had pretty much lost interest in Linn. Linn's failure was in not anticipating $50 oil, but then who did?
    Jan 3, 2015. 01:50 PM | 4 Likes Like |Link to Comment
  • Avoid Linn Energy LLC And These Other MLP Value Traps [View article]
    IIRC Linn's strategy from the outset was to acquire fields mostly developed, already producing and immediately accretive to earnings. The acquisition of properties requiring more intensive exploration capex was an aberrant direction and not congruent with the company's previous business strategy.Selling it would be less an admission of tenuous capitalization and more in line with how they manage most of their fields historically.
    Jan 2, 2015. 02:33 PM | 1 Like Like |Link to Comment
  • Linn Energy Suffers Another Blow [View article]
    if oil goes north of $60 per barrel will Linn still be going south of $10?
    Jan 2, 2015. 01:39 PM | 1 Like Like |Link to Comment
  • Linn Energy: Something's Got To Give [View article]
    the reaction is likely to be vigorous??

    It's already been vigorous and the dividend cut has been factored in at the recent $9 per share.

    Potential default is the bigger overhang
    Dec 18, 2014. 10:24 AM | 5 Likes Like |Link to Comment
  • 5 Myths About SeaDrill That Could Cost You Real Money [View article]
    great article--it was good

    Is there a better time to buy stock than near the bottom? Unless you have some company specific reasons why SDRL won't be around when the dollar goes soft, supplies drop, demand strengthens and drilling resumes, then there is no reason not to put Seadrill on a list of companies worth buying. Buying at the bottom of the cycle and getting shares almost 50% lower than the 52-week highs is exactly what an investor should be considering. Not rehashing the macro-list of bear arguments.

    SDRL is highly leveraged--you should have that at the top of your list. It's staggered over the nest six years but the bulge is coming due 2017-2018. There is a definite bear argument that is company specific. it may come to a tug of war between paying the debt and the dividend--very company specific. But by 2017-2018, oil may be up, the dollar weaker, supplies lower and demand heavier and Fredriksen will meet his obligations. Question is is the price low enough to take a chance on his precocious abilities to keep finding capital?
    Oct 18, 2014. 11:06 AM | Likes Like |Link to Comment
  • The "New Normal" Equals More Downside For Netflix [View article]
    normally like your articles.
    Wonder why you are adding back non cash items to your definition of free cash flow. Free cash flow is by its very nature "cash". Future obligations and options expense are not cash expenditures and rightfully left out.

    Now you can go further and estimate what they will need to come up with to cover content costs and work through current and concurrent obligations on the balance sheet. But those are obligations and not a drain on current cash flow.
    Oct 17, 2014. 12:21 PM | 1 Like Like |Link to Comment
  • CARBO Ceramics: Difficult Outlook For Ceramic Proppant Margins [View article]
    thanks for the EOG ticker. Pioneer is another co going this way.
    Frac sand is quartz and different than beach sand but even raw frack sand isn't as porous as ceramic and I can't imagine stuffing more cracks with double volume is going to allow much long term flow. As flow pressure slows the sand should be an effective clog. I have yet to see any comparisons of production curves for the new high volume sand vs ceramic. Mostly I see how much cheeper it is to drill and initiate production. Has anyone seen the output curves for these bad boys?
    Sep 25, 2014. 10:05 AM | Likes Like |Link to Comment
  • CARBO Ceramics: Difficult Outlook For Ceramic Proppant Margins [View article]
    new high volume sand fracking can use up to 10 million pounds per well. Does anyone know if the ceramic proppant fracking would consume that much tonnage? Cost of raw sand was around 3¢ and ceramic 33¢ but if you are using less and getting higher rates of flow it would/might be worthwhile. The new high volume sand fracking seems to be the fad of the day but has been around for several years without the widespread frenzy it's currently creating. Carbo has weathered a few such downturns. I don't know what the staying power is of the 10 million pounds per well model is. It sounds inefficient since raw sand is the bottom of the proppant food chain with lower production. Any one know how much better this works than ceramic?
    Sep 24, 2014. 06:18 PM | 1 Like Like |Link to Comment
  • Allergan And Valeant: Lessons From The Go-Go Years [View article]
    i did the ROIC for VRX and came out at 4%
    You can't give them a pass on amortized intangibles and use EBITA. It's a distortion.
    Sep 20, 2014. 01:23 PM | 3 Likes Like |Link to Comment
  • Misleading Statements In The Ruane, Cunniff, Goldfarb Annual Meeting Transcript Regarding Valeant And Allergan [View article]
    good article one point

    Medicis was already six feet underground before Valeant acquired them. It was a crap business about to get even worse and bailed out by Valeant. Just one of many bad acquisitions engineered by Pearson
    Sep 3, 2014. 11:07 PM | 2 Likes Like |Link to Comment
  • AMC Networks And Netflix: How The Resurrection Of 'The Killing' Impacts The Media Industry [View article]
    you might want to expand your thinking beyond AMC

    FX is on fire right now with Fargo, The Americans, Tyrant and the Strain

    WGN just launched Manhattan that looks great after Salem

    USA always is in there with Suits, White Color Royal Pains

    TNT has the new hit last Ship as well Major Crimes, Rizzoli and Isles and Perception

    Most of these draw more than the AMC shows you mention except for Walking Dead

    All of them split audience attention and rely heavily on DVR playback.
    Not that Netflix isn't a great service and a superb addition to cable but cable isn't dead and Netflix still has to wait for a year or more for new seasons of acquired content. Still waiting for Bones 9

    I do deeply appreciate their resurrection of the Killing--one of my all time favorite series
    Aug 3, 2014. 11:48 AM | Likes Like |Link to Comment
  • Cutting Through Valeant's Story [View article]
    <<porthos, How did you compute VRX's CFFO?<<

    CFFO is just cash flow from operations and can be found at the bottom of the cash flow statement's first section right before cash from investing activities
    Jul 17, 2014. 09:39 AM | Likes Like |Link to Comment
  • Cutting Through Valeant's Story [View article]
    I do think this will happen with Ackman and Paulson accumulating shares.Not sure Pyott (Allergen CEO) has any power to thwart it. It's in the hands of shareholders once VRX gets the 25% needed to send the vote to shareholders. It may take a few rounds of voting but it feels like they will get a majority. Allergan tried to educate shareholders on the evils of being stuck with Valeant shares but I am betting it didn't take. The cash portion of the offer will get some votes.

    The debt situation gets infinitely more interesting if Valeant's hostile takeover is successful. While debt to capital stays around 77%, the debt goes from $17 billion to an astounding $36 billion. There is $7.7 billion due between 2016 and the end of 2019. In 2020 $5.3 billion has to be paid or rolled forward meaning CFFO is going to have to do some amazing growth over the next 5 years. Allergan had CFFO of $1.7 billion in 2013 and add that to the $1 billion in Valeant CFFO you can see the problem that's developing as they roll up more acquisitions and more debt. There have been no big maturities paid yet out of CFFO. They have been able to make payments by issuing debt, paying some off and ending up net a little more in the hole with each transaction. I think at $36 billion in junk notes and bonds, rolling forward will not be an option, making bigger acquisitions will be out of reach and cash flow will be stretched thin trying to cover maturities.

    So I guess I believe the Allergan deal is a short term stop gap to keep non-GAAP EPS high, keep the share price high and maybe give them the opportunity to sell a lot of equity and even some assets to cover debt. They were extraordinarily lucky to get $1.4 billion for the Medicis aesthetics from Nestle.
    Jul 2, 2014. 11:07 AM | 1 Like Like |Link to Comment
  • Cutting Through Valeant's Story [View article]
    this was a good article and points I have looked at seem to be in agreement with the authors

    Specifically I get the same ROIC of 4% and don't expect VRX to find enough Allergan R&D and SG&A to cut. R&D was a little over $1 billion in 2013 and SG&A was $2.5 billion. valiant will never be able to find enough synergies to pay the extra $1 billion in interest and start paying off debt in 2016 (around $500 million) Much of SG&A is the sales force and Valeant has learned they can't fire reps and make money especially in aesthetic derm

    J. Michael Pearson
    "
    We plan to keep -- one thing that we've learned in the Medicis and B+L acquisitions is don't touch the sales force, right? I think in Medicis, we did touch the sales force, and that was problematic for a period of time. Our sales force in dermatology now has been stable for a few quarters, and quite frankly, all of our promoted products in dermatology are growing. And so that was a lesson we learned."

    Deep cuts are going to be hard to do. By the time debt starts coming due in 2016, cash flow will be strained and there will be no more acquisitions of any size. They are in a payment free grace period 2014-2015 so they are desperate to get a deal done that lets them appear to continue to grow

    They need a good profitable acquisition to create both immediate acquired growth and jump start their organic growth. Total organic growth in 2013 was zero. The developed market was a (5)% and 74% of their revenue. The acquisitions that have entered and will enter their same store sales base are generally poor quality because J Michael Pearson the consultant made a series of stupid value destroying acquisitions including Medicis Obaji Elidel Zovirax Ortho etc. Allergan is their last best hope and I get the feeling they will do anything to make it happen. They are racing against the debt countdown.


    And for the record there are large cap pharma's that create value

    JNJ has an ROIC of 21%
    Novartis is at 11%
    Allergan is 24%

    There are probably more Beating Valeant's 4% is a low bar. The Valeant acquisition model is proving to be less durable and creating lower value than the companies Pearson dismisses
    Jul 1, 2014. 06:42 PM | 7 Likes Like |Link to Comment
  • Valeant Left Important Questions Unanswered; Allergan Shareholders Beware [View article]
    the calculation for ROIC is not one I have ever seen and I think youre not capturing the essence of the shaky capital structure and the overspending on non-producing assets. Where did you find your definition of roic?

    I would use NOPLAT in the numerator which is net operating profit less adjusted taxes. The taxes are adjusted by putting them on a cash basis.

    In the denominator you need to total up these assets

    Working capital
    PP&E net
    intangibles
    goodwill
    net other assets
    Adjust cash

    Net debt levels aren't a suitable proxy for invested capital

    This formula gives an ROIC of 4% and VRX has a WACC of 10% so it's quite clear they are not creating any value. Allergan has an ROIC around 16%.
    Jun 18, 2014. 05:18 PM | Likes Like |Link to Comment
COMMENTS STATS
84 Comments
81 Likes