Seeking Alpha

adlee2303

adlee2303
Send Message
View as an RSS Feed
View adlee2303's Comments BY TICKER:
Latest  |  Highest rated
  • TiVo Settlement Ends Bull Case [View article]
    Vince, hoping you can clarify something you wrote:
    "Net loss has averaged over $17 million quarterly (excluding litigation proceeds) over the same period..."

    Does this mean the loss is $17 before litigation is included, or after it's included? Trying to figure out if the gap they have to close is really $17MM/QTR or something closer to $5MM/QTR. Thanks.
    Jun 7, 2013. 02:30 PM | Likes Like |Link to Comment
  • Diamond In The Rough: Part III - Post Earnings [View article]
    Warrant gain is not in EBITDA line, it's below the line. I think (hope) they excluded that from adjusted EBITDA, if not that's a big whoopsy
    Mar 13, 2013. 02:16 PM | Likes Like |Link to Comment
  • Diamond Turnaround Coming - Part 2: Pre-Earnings [View article]
    Jim,
    agree they can't simply go out and issue new debt. A refinance would entail issuing a loan package that would entirely replace the current one (i.e. think of refinancing a loan on your house).

    I am not active in the debt markets, but I would bet they could get better rates, and possibly better terms (interest coverage, etc) by pursuing this route. Who knows, I could be wrong. But junk bond indexes are at the lowest yields ever
    Mar 12, 2013. 10:10 PM | Likes Like |Link to Comment
  • Diamond Turnaround Coming - Part 2: Pre-Earnings [View article]
    I'm not assuming they can do 112MM of EBITDA in next 12 months, but I am saying they don't need to. I'm assuming $90MM as go forward full year EBITDA (if that is aggressive, please let me know where that's off, as that is obviously a key assumption)

    Ok, let's talk debt reduction. I agree on current senior debt levels. At my $90MM EBITDA, senior debt would need to be ~$290MM. This comes from two sources:
    1) Oaktree warrant exercise (just occured): 4.4MM shares @ $10 = $44MM cash inflow
    2) free cash flow 1.25 yrs = ~$40MM (given a set of assumptions I'm using which may or may not be accurate)

    Agree you can't annualize the working cap release in 1H13, so I've ignored that. I also haven't given them any benefit for their claimed "operating efficiency" bets.

    I'm actively writing puts on this name, so I'm ok with it going lower, but I was just surprised the market is spooked by the walnut issues (if in fact that's the driver). The biggest risk I see is management not acting like an owner and issuing equity during a time of loose capital markets.
    Mar 12, 2013. 10:08 PM | Likes Like |Link to Comment
  • Diamond Turnaround Coming - Part 2: Pre-Earnings [View article]
    I agree it is disheartening that they aren't talking to banks pretty actively about refinancing given the current environment. They still indicated they are looking to get something done this year (or at least that's how I took it), and I think the EBITDA normalization will still be helpful in that process. I also think it was promising that they took the working capital savings from not chasing low/zero margin business and used that to pay down the revolver. At least it shows they are looking at it somewhat.

    I think this is a pretty stable company that is now trading like a discounted LBO. The expected free cash flow that I model, when used to pay down debt, accrues value to the equity at a decent rate, making the current price decently attractive. The relative stability of this type of company means that you can be conservative in your assumptions and have a decent level of confidence in them.

    I plan to share my model by the end of the week and make the case that going forward the IRR on this stock should be pretty attractive. But I wanted to comment quickly on two items you posted above:
    1) Issuing equity at these prices (or any prices in this range) is NOT attractive. Yes the company is levered, but the interest and debt coverage ratios are fine, and will improve more as time goes on. Focus should be on paying down(off) Oaktree debt, either with cash or as part of total refinance package
    2) barring some economic calamity, this thing is not going BK, and management is not trying to put it there. CEO's don't automatically get a higher stake because a company goes into/comes out of BK, and highly doubt this guy would still be there in that scenario
    Mar 12, 2013. 05:34 PM | Likes Like |Link to Comment
  • Diamond Turnaround Coming [View article]
    HL, agree with your approach. This what I was trying to suggest to Jim earlier...a P/S analysis is just not very useful. I'm happy you reiterated that point and provided a valuable alternative.

    I agree even using conservative assumptions that shares don't appear to have much downside at current levels.

    Layering in an LBO framework (which the company basically has already, given its leverage) would really demonstrate the potential accretion to equity that might occur in the next couple of years assuming management can hold/grow slightly and company can refinance to lower interest payments and de-lever over time
    Mar 7, 2013. 03:57 PM | Likes Like |Link to Comment
  • Diamond Turnaround Coming [View article]
    Jim,
    while I agree that you want to break out the parts of DMND when doing a valuation test, as each businesses economics are unique, I think the P/S analysis is very lacking. Sales do not matter, it's the margins (gross, net, etc) that drive valuation. I know nothing about the comparison companies you selected, but I would guess these companies are not perfect representations of each segment (i.e. not 100% nuts), let alone be comparable on a capital structure basis.

    Speaking of capital structure, the second issue with your approach is that you use P/S to derive a market cap, when in actuality you want to calc an enterprise value (EV), and then subtract debt to arrive at an equity valuation. I don't know if you've done that and its just embedded, but I think it's better to lay it out plainly.

    While I agree that it appears they are delivering on the commercial side, I believe most of the value increase for 2013 is going to come from clarity on the debt. For a company their size, assuming they are a B2-type credit, they should have a total cost of debt of ~6-7%, I think, which is far lower than what they pay today. Refinancing would alone add substantially to EPS, delivering value for shareholders.

    Sorry to be critical, I just think your analysis is off-base, but I do agree with your conclusion that shares are cheap.
    Mar 4, 2013. 06:01 PM | 1 Like Like |Link to Comment
  • Full House Resorts: One Casino Stock With Great Odds [View article]
    I agree this stock is cheap, and have owned it since it traded around $1.10. What you are missing in your analysis, though, are a couple of things:
    1) The Harrington deal is not likely to be renewed, IMO. The whole point of the royalty was to buy out FLL from managing the place, so at its expiration the company is out.
    2) I do not think the Firekeeper's management contract will be renewed beyond its term, either. The whole point of these deals is to help a tribe get the financing it needs, lead the development, get the casino running properly, train staff and management, and then leave the casino in the tribe's hands. Very few of these deals are ever renewed, and the fee shrinks substantially (not just 5%) for those that do.

    In the end, I think your per share estimate of value is too high, but the stock is cheap. When I first bought the stock, I thought it was worth anywhere between 3.50-4.50, depending on the performance of Firekeepers. I think 4.50 is the better estimate.
    Jul 5, 2010. 02:57 PM | Likes Like |Link to Comment
COMMENTS STATS
8 Comments
1 Like