Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Hiring due to "growth"... Haven't seen much of that lately from AYSI but hopefully this a harbinger of better times ahead...
https://www.seek.com.au/job/32721676
DRYS - Bought some at $4 today, sold most at $5, still holding a few.
MCEM - Another cheap concrete company. Trades at a P/E of roughly 10x, with no net debt. The company reports financials on its website in good detail in a timely manner. Currently trades at 4.2x EBITDA, well below other cement companies (USCR, SUM, VMC, MLM, etc.) that trade above 10x EBITDA. This one doesn't have the hairy legal issues of CUO, has a larger concrete segment, and actually trades at a valuation that's lower than CUO. Only offset is that it does trade on the pink sheets.
CYBE - Decided to jump in here with a short at $34, just too tempting...
CYBE - I'm holding off on shorting at the moment, seems to be rallying on increased volume today so it may have a few more days to go. If it breaks above $31 it may go a bit further. If it stalls at $31, then I may short as it will look like a double top. I agree that Q4 may have a large bump in EPS due to a one-time tax gain and that Q1 and Q2 will be challenging in terms of comps. I'll let you know if I decide to start shorting again.
Good luck
Never mind, I see they just posted...
Press release says 2016 financials are available, but I can't seem to find them on the OTC site...
Anyone else having any luck?
LMIA - Picking up some more LMIA here after the recent drop from the $9.00 range. There has been no company specific news to cause the recent drop and I continue to think this represents a nice opportunity to buy an undervalued company in advance of some strong expected growth and profitability improvement in 2017 and 2018.
HZNP - I bought some at open, then again at close. Agree with R59, will take some time but should eventually trade higher based on earnings. I'll be writing out-of-money calls to reduce to my avg.
AYSI - Their business should be picking up with renewed strength in iron ore and other commodities, such as coal, where wear is an issue. If you look at the stock price performance of the iron ore producers, coal companies and other commodities companies, you'll see very strong performance on expectations of higher demand in the US with everything Trump is looking to do on the infrastructure side. It will probably take a year or so before we start seeing it in the financials, which have been somewhat soft the past few quarters.
I still haven't heard anything from the company regarding the transaction. Anyone else have any luck?
CYBE - Agreed, but I had thought it was overvalued at $25 too, where I had added most to my position. I wanted to short more over $30, but it had already become such a large short position for me, that I couldn't justify it rationally...
I may decide to fully cover my short here. Semi stocks are down today, which I think is the impetus for this drop.
I'm glad to see the market down today as things were getting a bit overheated for a while there. I'm taking this opportunity to look for some attractive entries, the problem is I can't seem to find any companies I like for prices I like. I had bought some FMSA yesterday morning after the OPEC news. I think they'll perform well in the next few years as they de-lever and strong frac sand demand from renewed shale drilling continues to drive sand pricing up from the current bottoms. Though, admittedly, a good amount of that recovery seems to be priced in already...
I continue to like LMIA for a recovery in 2017. I've also bought a few shares of TPIC recently, though its a small position. I also nibbled on some TGI in the low $27's.
CYBE - I have not been able to find anything, though I'm taking this opportunity to cover some of my position at a loss as it was getting uncomfortably large. I'll continue to hold a smaller short position, but need to book the loss for tax purposes. I'll look to re-enter the short more aggressively if it stays at this lofty level in early 2017, especially before Q4 earnings.
LMIA - I continue to buy more LMIA shares. I think there is a great opportunity here below $8.00 to get in before the turnaround takes hold and expected improvements get priced into the shares. I think current fair value is closer to $11-$12 per share and that LMIA could be valued at over $20-$25 in the next two years and the turnaround is realized. The stock price appears to be consolidating nicely here in the $7.90 range since earnings before what I expect to be the next leg up.
I mentioned that I ran a model based on the company's publicly stated financial goals related to both top-line growth and profitability improvements. The table below summarizes that analysis. As you can see, based on their 9% 2015-2018 revenue CAGR, it implies significant growth in 2017 and 2018 based on their increased content in new and large commercial aircraft (737 MAX, 777, 787, new Gulfstream aircraft, etc.) They are also targeting a 300 bps improvement in EBITDA, which is modeled as well. The results are shown below in terms of EPS expectations and lower debt levels. Management is targeting a leverage ratio of 3.0x in 2018, and this model shows them being able to get there.
Spirit Aerosystems is a large customer and has been vocal about its desires to acquire Tier 2 and 3 suppliers and I think LMIA would eventually be a great fit for them. I don't see LMIA selling until they've been able to substantially realize their planned turnaround.
CUO - Ha, seems to be strong here as I'm also lightening my position. I agree with your views on Q3 results, strong, but not a blowout quarter and a bit lower than Q2. I just don't like that they're continuing to fight this Valco case and that there is this large hangover related to this litigation. After reading the 10-Q again, I noticed that Valco is pursuing an additional $5 million claim against CUO outside of their existing case. I'm not sure what its related to, but I think with the legal cloud continuing to hang over CUO, I'd rather move my money into investments with a bit more potential / less risk.
I'm honestly a bit dismayed at the strength we've been seeing with the R2k up 12 days straight now. I'm hoping for a pull-back here to pick up some shares of companies I like (LMIA, RUBI, KS) and cover some short positions (CYBE).
I attempted to contact Sam at AYSI with a quick email confirming the nature of Matrix Metals with no reply as of yet. I would suggest that everyone do the same so that we can get a an answer. If this was indeed an acquisition that included the royalty payment, then it makes more sense relative to what was paid.
Another point I'd like to make relates to information disclosure. This is a large transaction for AYSI ($5.8 million vs. $19 million market cap). Not only is it a large transaction for AYSI, it is a large related party transaction. That should mean extra scrutiny from us minority shareholders and a greater need for information disclosure from the company.
I think it is a good step by the board to be proactive and hire an independent firm to provide a "fair value assessment". But is that enough disclosure? A "fair value assessment" is different than a fairness opinion on the transaction. Given that the company is a Delaware corporation, why was an Australian firm selected to run the analysis? Why not get a fairness opinion from a US firm? I feel any time that you're dealing with a large related party, its better to be overly cautious. I think they tried to be mindful here, but did they do enough? It's hard to say without additional information disclosed.
I feel the company should have provided additional disclosure on the nature of the acquired business and some financial information of the acquired business so that minority holders could assess the impact of this large related party transaction.
As with everything with AYSI, I wish there was more detail... What does "various materials and production inputs" mean exactly? Does this include the royalty? What are the financials? Without these details, its hard to opine. I sent a note to the company to see what it means. We'll see if they respond...
In general, I view the desire to bring everything in house and the removal of these related party transactions to be favorable. It shifts the company to being more attractive to outside investors/acquirers.
I continue to hold and buy opportunistically on dips, but the investment horizon here has stretched much further than I anticipated.
You seem convinced that Matrix Metals included the royalty, any reason?
CYBE - Continues to surge higher in the face of a weak Q4 sales forecast and falling backlog. Currently trades at 24x EBITDA (EBITDA that is likely to drop in with lower Q1 and Q2 results y/y). Not sure why anyone is chasing this one higher, but in this hot market, apparently no one cares... I had covered some after earnings, but am starting to layer more short shares here around $28. Anyone else still short here?
CUO - Excluding the legal expense related to the case and the write-down of the pre-paid royalty, CUO earned $0.92 per share in the quarter. Looks like they will not be taking a charge related to the Valco judgement and will continue to fight with an expected appeal. The $0.92 quarter compares with a similarly adjusted $0.51 last year. Another very strong quarter operationally.
"The Company and its legal counsel believe there are grounds to appeal the Partial Summary Judgment regarding this and the other claims of the suit as the court improperly resolved factual issues that should have been decided by a jury. The Company and its legal counsel believe there is a likelihood that some, or all, of the issues resolved by the Partial Summary Judgment may be reversed on appeal and remanded for trial by jury although there can be no assurance that an appeal will result in reversal."
In terms of the rationale for not taking a charge:
"the Company does not believe that there is a reasonable basis for estimating the financial impact, if any, of the final outcome of these proceedings and accordingly no accrual or reserve has been recorded in compliance with accounting principles generally accepted in the United States of America."
LMIA - I have been heavily buying shares of LMIA the past few days after their quarterly earnings announcement. While the quarter was nothing to wildly celebrate, I think it highlights the progress the company is making to turn around its business. At the end of 2012, they made a large acquisition of Valent Aerostructures, which was financed with debt. The company's performance has struggle since then, which combined with the increased debt load has pressured shares significantly since the acquisition. Due to the poor performance, new management was brought in 2014-2015 to help guide the turnaround of the business.
Since new management joined the company, they have aggressively moved to cut cost, close excess facility and refocus the business on profitable growth. I think this is where the opportunity lies with LMIA. They have garnered a growing share of components on high growth, next generation commercial platforms (737 and 737MAX, 787, 777x, HondaJet, next-gen Gulfstreams). In each of these platforms they have been able to increase the amount of content and revenue per shipset. The growth on these programs will begin in 2017 and accelerate into 2018 as production volumes of these aircraft ramp up. As a result, the company is guiding for revenue growth in 2017, the first year of growth since 2012. Mid-point guidance points to growth of about 8% in 2017. However, the large growth will really occur in 2018. They have stated a target growth of 9% CAGR from 2015 to 2018. That implies a growth rate of 20%+ in 2018. Analysts pointed this out on the last conference call and management confirmed. They are also guiding towards increased margins through 2018, with EBITDA margins up 300 bps from 2015 levels.
I've run various models based on these projections for 2017 and 2018. The company has a large NOL that they can use to offset taxes in 2017 and most taxes in 2018. The NOL's were valued at $13 million or so at year end 2015. I think they have had losses through YTD 2016, so they've build up additional NOL's since then. Based on these management guided results, I think we could see EPS in the neighborhood of $1.10 in 2017 and over $1.60 - $1.80 in 2018. I have strong confidence in these forecasts given that their revenue per shipset is set by contract and the shipment schedules from the jet manufacturers are pretty set at this point, given the large backlogs. These contracts are also long-term in nature, with terms well over 5 years. They also have additional opportunities that they are working on to increase content further on new programs.
I think the market hasn’t yet priced in this growth opportunity. I think fair value today is closer to $11 - $12 per share. If the company can execute its plan and grow at the levels it is guiding, then by 2018, I think we can see a share price that is approaching $20 - $25 per share, based on increased earnings and lower leverage. Potential upsides include additional content wins in the interim, a return of growth in their engineering services business, and a refinancing of their debt to something at a lower interest rate. Risks include operational risks of achieving these projected results, though I believe management has been taking the right steps to ensure they product to plan. They also have significant experience in the space running much larger division in the aerospace industry (also have 17.6% equity ownership). Overall, I think this is a very attractive long-term opportunity that will take 2 years to play out, but could be quite rewarding, especially at the current price. I would appreciate anyone’s thoughts.
Here is a link to their recent investor presentation highlighting some of the above points I mention.
http://files.shareholder.com/downloads/LMIA/3195949586x0x916217/212D0740-0099-49BC-B350-3348A37A80E5/LMI_PathwayToEquityGrowth_Nov2016.pdf
AYSI - Trump win should benefit AYSI through increased demand for steel, and the associated iron ore. Materials companies are up across the market. Now we just need Chinese demand to start rebounding and we might actually approach fair value...
CUO - It's also interesting to note that materials companies are up big today (VMC, USCR, EXP) yet small CUO is actually still down at the moment. Market efficiency at its best... Thank you very much, I will buy some more.
CUO - It's entirely possible that they have a charge for the lawsuit. I think its a liability in the neighborhood of $5 million, present value and after-tax. They may decide to bite the bullet and put it on the balance sheet and record a charge. If that is the case, it'll be a one-time charge though and will mean the removal of $300k+ quarterly litigation expense, which I think is worth more than the $5 million liability on a go-forward basis. I'm not at a full position as there may be an opportunity to take advantage of some panic selling if they do announce a one-time charge. I feel it's worth the risk at this price though.
I've been buying back CUO this morning after selling half post-litigation announcement a few weeks back. I thought the litigation should have a roughly $3 per share impact on price. Buying back here roughly $2.50 lower than my sales. Should benefit over the next several years with higher aggregates and construction demand.
Agreed, holding short here and may add to the position if there is strength. Declining backlog, low q4 guidance, no large orders, $0.16 pre-tax and only $0.10 tax adjusted for a $24+ stock? SCKT just earned $0.10 or so pretax and it's priced at $3...
SPAR - Last year, it followed the same seasonality as STS, with Q3 performance below Q2. I assumed that it would be the same this year. They anticipate $570-$590 million revenue full year, which implies $274-$294 in the 2nd half, versus $296 million in the 1st half. Full year EPS is guided at $0.20 - $0.25 per share. They reported $0.14 through the first 6 months. 2nd half implies $0.06 to $0.11 for a $9.30 stock. So even at high end of guidance, they're trading at 37x P/E, with a lower 2nd half versus 1st half.
LNTH - I decided to open up a short here as well late this morning. Any reason in particular to be up 10% today?
SPAR - I went short some shares of SPAR as well today near the open. They manufacture and sell heavy-duty vehicles. The stock price has run up from $2.60 in January to over $9 currently. They are marginally profitable and trade at an extreme P/E multiple and 50x EBITDA. I would expect they are facing headwinds similar to STS and other commercial vehicle manufacturers/suppliers. Earnings will be out on November 3.
Great call on STS. I covered most of my position in the 15's and have moved that into increasing my short position at CYBE. Should be easy money heading into earnings. The stock hit $15.50 last earnings, and revenues were $18.5 million. They were breakeven at $11.4 million of revenue, my guess is that they're somewhere near $0.05 to $0.10 at $13-$15 million of revenue... That will be down from the $0.29 headline number last quarter. I don't know how this keeps going up in the face of those upcoming results.
STS - technically, with tomorrow's expected drop, the stock will break the 50-day moving average that has provided support during this long run from $6... should get the momo's out and accelerate a decline. Looking good on the short side
CYBE - I've actually added to my short this afternoon. I am also short STS and CMT at the moment. STS reports tonight, so hopefully we see a drop tomorrow.
CMT - I was able to short some shares today in the $19.50 range at Ameritrade. This adds to my other short positions in CYBE and STS. I'm looking for others as well. On my list are SKY and potentially SPAR.
Nice, I picked up a chunk as well, though I wanted more at that price...
That is also a good find. Assuming that grows at an inflationary rate of roughly 2% per year for 39 years, I ran a quick discounted cash flow at a 5% discount rate to get a roughly $8 million - $10 million potential liability. Of course this is all preliminary until the company does its own analysis, but it seems to be at least a $5 million valuation impact, potentially more, potentially less if they can settle this favorably.
As I said before, I would love to see them settle this. This may be an overhand on the shares until its resolved...
CUO - I sold about half of my position at $24 on average. I think the reason they sued was so that they could rescind the lease and avoid having to pay the royalty on the remaining tonnage. The agreement is buried in an 8-k filing from 1996. The agreement has a minimum royalty in place that call for a payment on roughly 810 thousand tons per year. The royalty rate per ton was initially set a $0.37 per ton. That rate is subject to change based on the linkage to a cost index. With 32.3 million tons remaining on the contract, that means there is 39 years remaining of royalty payments (32.3 million / .8 million per year).
Doing some quick math using the initial royalty rate, that means up to $12 million potentially in future payments... Theoretically, this would be spread out over the next 39 years and any payments would be tax deductible. So the present value of the payments after-tax may be much less. The other big question is, what has happened to the cost index since the time of the deal?
I think the comment at the end of the press release regarding taking additional reserves relates to this potential liability. It would be best if they could just settle the future payments with Valco with a cash payment today that reflects the present value of the potential liability. I'd rather see this go away, even with a one-time cash payment today, than continue to see $1 million + go out every year for legal costs to fight it.
CYBE - I joined you on the short side on this one. I have averaged in around $23 and will look to add to the position as it continues to move up.
LCI - Congrats to LCI holders on the strong earnings report. EPS of $0.73 vs the $0.59 estimate and guides FY 17 revenue 5% above street estimate $690-$700 vs $666 estimate.
Some heavy buying volume coming in this afternoon...
Well, when you're trading below the value of cash and hard assets, how much lower can you go? This quarter was abnormal in its gross profit margin. I know their BHP contract requires them to give a rebate once certain sales levels are hit. It's possible that hit this quarter. I'll check with Sam to see if there was anything unusual.
This was the first loss the company has posted in a quarter in the past 6 years. I am a bit surprised by the loss. Gross margins were at the lowest point this quarter than in the past 6 years. Gross profit margin of 25% was the lowest since the third quarter of 2009 (when it was 20%). Not sure why the big drop as they have averaged 47% over the past 10 years.
I would not expect that to continue. Even at these lower sales levels and a normal 45% margin, they should be able to post $0.02 per share per quarter. The balance sheet is a fortress with $0.81 per share in cash and an additional $0.23 in real estate. If they can sell the property, we're looking at over $1.04 in cash. They also have other assets. Tangible book value is now at $1.50 per share.
They need to to dividend some cash to shareholders or take this private...