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Out with the Old, Up 600% in 6 months

|Includes: Regent Communications Inc. (RGCI)

Regent Communications, Inc. (RGCI) acts as a radio holding company for 62 stations (50 FM and 12 AM) in 13 markets across the US. Unsatisfied with the stock’s performance, in July 2007 Riley Investment Partners pulled the necessary 20% shareholder support to call a special meeting for the resignation of the company’s chairman, Mr. Sutter—Northwestern University Professor and principal at a VC/PE in Hopewell Ventures. On March 2009 Regent filed an 8-K displaying the new management team. Since then the stock has risen 600%, beating the Q2 0.02 EPS analyst estimate by 300% at 0.06 EPS.

 

Financial Accounting Standard 142 (FAS 142) requires non cash impairment charges for fluctuations in radio station valuations, ususally reflected in year end statements. The CFO reassures in a Q2 2007 conference call:

 

“Given the lack of recent transactions in the industry by which to base market multiple values, the impairment charge is driven by a bias to reconcile the asset value of our station group to the approximate market capitalization of the company at year end. This non cash charge to earnings will not impact our liquidity, cash flows from operating activities or debt covenants, nor will it have any impact on our operations.”

 

Regent announced in October 2008 that it had partnered with Radiolicious to stream all of their radio stations to iPhone users via their app.  Using the 2009 Q2 numbers as a forward model the stock is an effective 2 P/E, finally breaking free from a monsoon of losses. 



Disclosure: No position