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gabeazy

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  • Energy Transfer Partners And Equity Offer Complicated Value [View article]
    I think that's fair (and I ask because I'm working on the valuation for a company that owns a significant portion of a different MLP's general partner). How are you valuing the respective LP distribution and IDR income streams at the terminal stage? Obviously, IDRs will grow much faster in perpetuity than the LP distributions. In my case -- and I suspect this would be true for ETE as well -- you can't really assume a terminal growth rate on the IDRs because it will be higher than the terminal discount rate. So I am using terminal multiples. I think you need to use a higher multiple for the IDR (ie, bc of the GP multiplier), but would be interested to hear how you approached this aspect of the valuation.
    Jul 7, 2014. 09:39 AM | Likes Like |Link to Comment
  • Energy Transfer Partners And Equity Offer Complicated Value [View article]
    Hi Stephen - Thanks for this. For ETE, how are you valuing its IDR income stream? Are you discounting that separately / differently from the LP distributions? Much appreciated, -GB
    Jun 26, 2014. 05:27 PM | Likes Like |Link to Comment
  • Apple Q2 Review And Q3 Outlook [View article]
    "That sort of tepid growth, while ahead of expectations, would not be enough to warrant the enthusiastic response from the stock market which pushed the stock up some $40 points in afterhours' trading. That enthusiasm no doubt reflected Apple's decision to boost its dividend; increase its stock buyback; and, split its shares seven for one, bringing the share price into a range more affordable for many retail investors."

    a) Would not be enough if what? If this were 3 years ago? b) This is your opinion and your should qualify it as such, rather than stating it as fact (for credibility of your argument / points). c) I don't think you're completely wrong about this but would be remiss if I didn't point out that y/y earnings growth of only 3% could be welcomed by investors, depending on expectations. Regardless of what AAPL did a year ago, earnings came in 14% above consensus, driven by sales of its flagship product which were 16% above consensus; the market was basically looking for iPhone sales to fall y/y, ex-China. As you know (I hope) from selling short, it's all about where expectations fall, especially when there's a specific catalyst.

    Other than that you did the right thing.
    Apr 24, 2014. 08:11 AM | Likes Like |Link to Comment
  • Update: The Short Case For World Wrestling Entertainment [View article]
    @Michael Ranalli - Ok fair distinction. I was pulling that 23% increase from the insider ownership quarterly change summary. Now looking at the filing, a) you are correct that the CFO's position change resulted from the exercise of stock options at $0/share, and b) the CFO's increase in shares held was actually 18% (not 23%), as the filing indicates that his position includes 4,934 shares that were not previously disclosed due to an exemption.

    Obviously it would be fantastic (if you're long) to see that Barrios had been scooping up shares on the open market rather than getting them for free. But the important thing is that he could have sold those shares as soon as they were granted, and he didn't. The CFO -- in theory at least -- should have a better grasp of the Company's financial health, future prospects and valuation than any of us (and anyone else at the Company for that matter). So I view it as a positive that he's maintaining significant ownership.
    Apr 11, 2014. 02:58 PM | Likes Like |Link to Comment
  • Update: The Short Case For World Wrestling Entertainment [View article]
    Something I meant to include, which you prob already know: WWE's CFO increased his position in the stock by 23% in 1Q14 (when the stock was up 85% YTD and trading at all-time highs). He is currently holding more shares than ever before.

    But maybe you know the company better than he.
    Apr 10, 2014. 02:52 PM | 2 Likes Like |Link to Comment
  • Update: The Short Case For World Wrestling Entertainment [View article]
    Pardon my oversimplification. Yes, I read your original piece. And congrats on your returns on that to-date.

    Objectively speaking, a) the majority of your analysis entails discussion of and extrapolations based on WWE's historical financials, b) there are maybe 2-3 sentences regarding the TV rights contracts, and c) your valuation is opaque.

    I think your points re the network are fair, but the biggest piece of the story are the new TV rights contracts, which you glaze over, acknowledging that they could be higher -- as much as 2x the existing rate -- but won't necessarily be and won't necessarily translate into proportionately higher cash flow.

    Taking a step back, last year WWE did $161mm in TV rights revenues ($106mm domestic; $55mm abroad) and $59mm EBITDA, implying operating costs (ex D&A) of $102mm. Should the Company secure TV contracts at a higher rate than the existing, substantially all of that incremental revenue (98%, according to management) should flow through to operating income. The potentially higher TV rights fees aren’t predicated on WWE’s delivering a new product with new costs; we’re simply talking about getting more fairly compensated for its current programming (Raw and Smackdown).

    So what’s “fair?” Let’s put this into context using the most recent comp, which I’m sure you’re familiar with, in NASCAR. WWE earned $0.47 per rating point last year, or 12% of the $4.00 per rating point NASCAR will recognize under its new $850mm/yr contract (assuming flat NASCAR ratings of 154 households x 1.38 avg = 213 annually). Our diverging perspectives stem from this: you assume a goldilocks scenario of 2x the current rate, while I view that, quite frankly, as the bear case. In a vacuum, 2x sounds like a massive increase to achieve, which is perhaps why you arbitrarily slapped a 2x on there as downside to your short thesis. But in spite of less affluent demographics among its viewership, WWE would still earn only 23% of what NASCAR does on a per rating point basis, a discrepancy I believe unwarranted given WWE’s 61% higher annual ratings and largely captive audience (ie, due to the nature of its live content). So here are the assumptions behind my back-of-the-envelope bear case:

    1) WWE renews tv contracts at 2x average its current $0.47 per rating point
    -most other sports are $1.80-$5.30 per rating point
    -even if WWE gets 4x the rate (bull case), the would still fall below soccer, hockey – everything
    -WWE did its new contracts in the UK with BSkyB for 3x the rate and did its deal in Thailand for 7x the rate
    -the NBA is currently negotiating its deal (currently $1.80 per point) and consensus in the industry is that they will get 5x the rate
    -for a cable network (either incumbent NBCUniversal or someone else looking to beef up its sports content), they would be getting two of the highest rated cable shows on TV every week in Raw and Smackdown

    2) Costs of $102mm increase 20% to $123mm
    -this is an arbitrary contingency that I believe unlikely, since as I mentioned, most of the incremental rights revenue should flow through to operating profit

    3) ero contribution from the new streaming WWE network
    -I just don’t see them not getting to 1mm subs over the next year, but even if they were to come up a bit short it's unlikely to materially move the needle given 670k subs already

    That results in 2015 EBITDA of $199mm ($161mm x 2 - $123mm). I think it should trade at a 10x-12x media multiple (depending on discount given for McMahon’s control of the Company, spotty financial track record, poor demographics, etc). Call it a 10x and here is what I think it’s worth, bear case:
    ($199mm rights EBITDA / 76mm diluted shares) x 10 = $26/share
    + $1/share net cash
    =$27/share

    Or 27% above current market value
    Apr 10, 2014. 02:45 PM | 3 Likes Like |Link to Comment
  • Update: The Short Case For World Wrestling Entertainment [View article]
    Short thesis based solely on historicals and disappointing network subs, with zero acknowledgement of TV contract renegotiations? Really?
    Apr 10, 2014. 12:19 PM | 4 Likes Like |Link to Comment
  • CST Brands - Defensive Stock On The Upswing [View article]
    2 questions (I know the answer to the 2nd, but you will have a firmer grasp on CST's fundamentals / future prospects if you force yourself to address it):

    1) if you've done all this work and have conviction that CST is worth 30% more than its current valuation, why not at least start a position, and add on weakness?

    2) what is the biggest value driver for CST?

    happy to share my thoughts after I hear from you...
    Sep 25, 2013. 05:26 PM | 2 Likes Like |Link to Comment
  • Splunk: Steep Valuations And Near A Top [View article]
    jeborte, can it. you have added zero value. do you have nothing better to do than regurgitate sell-side research and press release headlines? we all have Google. if you want to be an investor then why don't you sit down and try to figure out a valuation for SPLK, bc -- and I am going out on a limb here -- my guess is that you wouldn't know where to begin. Kidding about the going out on a limb part.

    AlbyVA, your post is a joke. FV is 2 bucks a share? Don't worry about how I got there, it just is. Why don't you call whoever made the software that spat out that valuation and tell them you want your money back.
    Aug 30, 2013. 08:46 AM | Likes Like |Link to Comment
  • Splunk: Steep Valuations And Near A Top [View article]
    to author: what do you think SPLK is worth?
    Aug 13, 2013. 06:37 PM | Likes Like |Link to Comment
  • SouFun Dividend Yield Is Likely Deceiving [View article]
    I like my odds of receiving a dividend this year...

    Author: stopped out yet or have you added to your short position?
    Jul 23, 2013. 11:22 AM | 2 Likes Like |Link to Comment
  • SouFun Dividend Yield Is Likely Deceiving [View article]
    1) do you have evidence to support their stated FCF isn't plausible? And if not, does it support the level of dividends they've paid?
    2) in what currency are they taking in cash receipts? Chinese Renminbi? If so, can they pay out dividends to US investors in RMB?
    3) As a follow up to #2, is it possible that they're merely pledging RMB to acquire USD (to return cash flows to shareholders)? (effectively a currency exchange)
    Apr 30, 2013. 03:29 PM | Likes Like |Link to Comment
  • SouFun Dividend Yield Is Likely Deceiving [View article]
    moron, SFUN does not pay a regular dividend. The last 2 years they've paid out nearly all their cash flows in a special dividend close to the end of the year. you lose credibility when it's obvious you've done little to no research
    Apr 24, 2013. 02:34 PM | 1 Like Like |Link to Comment
  • Frothy Finance Makes Conn's Inc. An Attractive Short [View article]
    So what do you think it's worth?
    Jan 15, 2013. 01:27 AM | Likes Like |Link to Comment
  • Is The SEC Action Against Auditors Of Chinese Companies One Of Gunboat Diplomacy? [View article]
    My friend, this is a direct quote from your article:
    "Companies that are at risk for being deregistered by the SEC include Qihoo 360 Technology Co. Ltd (QIHU), SouFun Holdings (SFUN), Baidu, Sina and Ctrip."
    Dec 10, 2012. 03:00 PM | 1 Like Like |Link to Comment
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52 Comments
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