microcaptrader

Rex Stores: Reaching an Inflection Point in Earnings

finance.yahoo.com/news...

"Our ethanol business earned $49 million of operating income in the third quarter, more than double the second quarter results, as we increased run rates at all seven ethanol plants and captured very good margins. In October, ethanol margins have continued at strong levels.”


"Ethanol (1):

Ethanol Production (Thousand Gallons per Day) 2,116
Gross Margin per Gallon of Ethanol Production $0.59

Operating Costs per Gallon of Ethanol Production:
Ethanol Operating Expenses $0.31
Depreciation and Amortization $0.03

Total Operating Costs per Gallon of Ethanol Production $0.34"


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So...Valero reported operating profit of $0.25 per gallon on 190 million gallons for the quarter ended September 30th, 2009. RSC's quarter ends October 31st. October reportedly has seen the best ethanol crush in a while. I expect better numbers both because of higher gross margins and lower operating costs. Using the $0.25 though and assuming an %80 production rate (28 milion gal) gives an operating profit of $7 million pretax.

That's $0.76 per share for the quarter or $3.04 for a full year from Ethanol alone. Other revenues from leased property, ect... should push the number higher. Slap a PE of 10 on that and RSC should be at $30 a share.

Now all that has to happen is for the Ethanol markets to remain rational and for RSC to execute. I predict happy days ahead for investors in this company!

Rex Stores: Reaching an Inflection Point in Earnings

Thanks for your reply. My thinking pretty much mirrors yours. I'm reasonably confident Mr. Rose, assuming he buys another ethanol plant, will make any purchase on favorable terms.

One data point that would make me more comfortable increasing my RSC position would be to know the approx cost of updating Rex's current plants to whatever next generation ethanol production method comes into favor. The mandate is out there so we know that ethonal demand will continue to increase. At least over the next 3 years.

Here's hoping for a blowout 3rd quarter!

Rex Stores: Reaching an Inflection Point in Earnings

Oops! make that jayelbe @ hotmail . com

Rex Stores: Reaching an Inflection Point in Earnings

So what are we missing here Rick? Given the obvious fundamental value of rsc and the woefully misrepresentative stock price combined with Mr. Rose's opinion of the company's future over at least the next few quarters, i'm tempted to take every available penny I have and plow it into RSC shares. It seems like such an obvious intermediate term trade. Where are the hidden landmines? Email me at jaylelbe @ hotmail . com if you care to discuss offline. I've been a RSC shareholder for what seems like ages now.

Rex Stores: Low-Risk, Pure Play on Ethanol

I've been following and investing in Rex for some time now. The stock price has rarely accurately represented the fundamental value of the company.

This may have been largely due to the multi-personality nature of its business segments. Now that Rex is a pure ethanol play (albeit with some real estate assets) I'm hopeful management will find a way to return some value to shareholders.

A one time large cash distribution would suffice. Taking the company private at a fair valuation would do the job. Spinning off the Real Estate and Alt Energy assets into separate companies (or selling the Real Estate) the market might be more willing to value fairly might work as well.

So far, RSC has been a value trap. You know the value is there, but the market refuses to acknowledge it.