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UVE - Nicely done! Congrats on the solid trade. I left some money on the table here as well as it appears buying shares for a quick flip was the way to go.
UVE - I wimped out and covered a few when they were solidly lower in the $0.15 range. Held the rest for full profit. Congrats on the solid trade! I also made a few bucks selling CMG $525 puts expiring today soon after the news came out. Was able to get premiums as high as $1.50!
KINS - I've slowly been selling my shares here in the $9.50 range. I thought it would take until March 2016 before it was back at these levels after the disappointing Q3 results. I'm happy to sell at these prices.
UVE - My average is approximately $1. Apparently I'm not as nimble as R59...
UVE - I couldn't resist and sold some $17.50 puts expiring today. Small amount, but I think it's gotten a bit overblown.
Agree it was overvalued at $35+, maybe not so much at half price, either way, it's a short term move and won't hold past the end of the year if I get shares.
UVE - The huge El Nino that protected the Atlantic Coast this year may turn into a large La Nina next year. I just wanted to make sure you were aware that this coming summer may be a bit more active than the past several years.
http://www.zerohedge.com/news/2015-11-17/its-official-biggest-nino-ever-killer-la-nina-follow
Good Luck
UVE - Probably the easiest several million dollars he's ever made...
Well... it took an hour to hit the high end of his target! Wow, quite the move. I've decided to just delete UVE from my streamer and ignore the temptation to buy. I'll wait til the dust settles a bit more here.
I hope none of our other long plays aren't the next targets...
UVE - Not playing this one yet, but maybe its worth a flier on the buyside. Are you buying any more at this point?
UVE - My streamer is telling me that traders are attributing downside in UVE to negative comments made by Anthony Boozza of Lakewood Capital at the Robin Hood Conference. Don't have any other details.
FONR - Glad to see the negative reaction to what was a better quarter than what I expected. I covered my short at $16 for a quick profit. Are you staying short expecting a further drop?
Trimmed my HRTG position today following the surge from the earnings release. I continue to hold a core position as I think its the best of the bunch in terms of future growth opportunities outside of FL and management.
KINS remains my favorite insurer by far though. Earnings next week should be solid with EPS in the $0.36 to $0.40. I think analysts typically include some estimate of cat losses in their estimates, so the $0.28 analyst estimate is quite low. Last Q3 in 2014, analysts were forecasting $0.21 and they came in with $0.26, or a 25% beat. I think we'll see something similar this upcoming quarter.
Good luck to all...
FONR - I'm looking at FONR for a potential short entry as well. I think it may run a bit more in the near-term, maybe up to $19-$20. But before earnings day, I do plan to enter into a short position. BSQR may be another decent short candidate depending on how far it runs up prior to earnings.
Good luck to all...
ZFGN - With an enterprise value under $200 million, does anyone think ZFGN is worth a gamble at these levels? It sure seems as though something is brewing under the surface, but at this level does anyone think its worth a flier?
KINS shareholders may have dodged a bullet here as it looks like Joaquin will stay out at sea and miss the east coast.
http://www.nhc.noaa.gov/graphics_at1.shtml?5-daynl#contents
IBB - Biotechs are melting down here this afternoon in what was a strong market. Is this just the beginning of the downturn or will this turn out to be a great buy point? Any thoughts out there?
KINS - I got 2,000 at $8.54 as well as 1,000 in the $8.60's. I had an order above the closing price that didn't get executed. Strange close. Q3 is just about in the books and it should show a sequential earnings increase to something in the $0.35 - $0.40 range for EPS. So long as there is no repeat Hurricane Sandy, I see this trading at $10 near year end.
KINS - Bought some more KINS here in the $8.60's on the quick drop.
I'd like them to as I think we need to pull the band-aid off, but I don't think they will. My vote is no.
I have updated the iBox to reflect the most recent financials for AYSI. As I mentioned earlier today, there were some one-time costs in the figures last quarter, so results were actually better than reported excluding those one-time items.
Over the years, I’ve put together a valuation model for AYSI that I’ve used to estimate the fair value of the company. I’ve had this model going for several years now and update it every quarter based on their financial results as well as my expectations on their projected results going forward. I also use the model as a sanity check on the current share price and what it implies relative to projected performance.
The model utilizes a WACC-based discounted cash flow analysis. I have worked for a major investment bank / corporate finance advisory firm for approximately 10 years now and the vast majority of our work is valuation based. We use both a DCF analysis and comparable companies analysis to gauge the value of companies that engage us for a variety of purposes. This is also the valuation methodology that is taught at top business school programs everywhere.
I’ve created both a base case projection as well as a downside case projection that estimates AYSI’s value in each scenario.
In the base case, I assume that fiscal year (FY) 2015 and 2016 will be challenging years based on current results to date and expectations of performance in the commodities industry in which AYSI sells its product into. In 2017, I expect AYSI to return to growth and reach 2012 revenue levels again in 2018. After 2018, I expect growth to slow to a long-term inflationary rate by 2022. In terms of EBITDA margins, I expect AYSI’s margin to dip in 2016 as sales decline, followed by a return to 30% EBITDA margins that the company has posted through FY 2015. Based on this projected level of financial performance, I estimate the enterprise value of AYSI to be in the range of $27.9 million to $37.5 million, based on a discount rate range of 17.5% to 22.5%, which I believe to be conservative but reasonable given the company’s all equity capital structure, exposure to a volatile commodity industry, and its small size. A summary of the analysis can be seen in the table below:
To that enterprise value, I then add the company’s cash balance, subtract debt, and add any other assets the company owns that are not included within the DCF analysis (in this case an estimate of the value of their Indonesian land). The result is the equity value of AYSI, which is divided by the # of shares outstanding to provide the fair value per share. Based on this analysis, AYSI’s share price should be fairly valued in the $2.40 to $3.13 per share range, with the implied valuation multiples shown below.
If you were to observe today’s current price of $1.32, it’s at a sharp discount to the range I’m showing above, which is why I have continued to add at these levels.
I also looked at a downside case where the projected results are well below what I have forecast above and well below what I would anticipate the company could do to get a sense of what performance the market is currently expecting based on a $1.32 share price. In the downside case, I have sales falling down to $22 million in FY 2016 and FY 2017 and growing only 3% thereafter. I also have EBITDA margins falling to 22% in FY 2016 before recovering to 25% long-term (they have performed above 25% for the past 3 years). The results are shown in the tables below:
As you can see, even in this pessimistic scenario, the share price is well above current trading levels. In order to get a share price that approaches the current price at the low end of the range, sales have to fall to $17.5 million in 2017, then grow 3% per year with EBITDA margins at 15% long-term (half current levels). Needless to say, I expect performance to come in well above those levels and am prepared to wait for the eventual share appreciation. As I wait, I get to see the cash balance continue to grow and provide a growing floor to the share price (in my base case, cash per share reaches $1.10 in September 30, 2016 versus $1.00 in my downside case).
This analysis also ignores the potential upside of AYSI and the resulting values from the model only improve with higher growth that is entirely possible given the strength of AYSI’s product and a return to more normal industry conditions.
Picked up 10k more shares in AYSI @ $1.30. I'll be posting updates to the ibox later this evening. As I was putting together the information I noticed that Q3 included $290k of fixed asset impairment expense, which I view as one-time in nature. That adds another $0.011 per share in EPS for the quarter, so approximately $0.056 excluding one-time items.
With cash per share of $0.80, at $1.30, you're buying the operations for $0.50 and they generate anywhere from $0.20 to $0.37 per share per year in earnings over the past 5 years. That's a P/E of 1.35x to 2.5x. Mining operations in Australia continue to increase production which will only continue to support their business. Even with iron ore down 70% from its highs, these large operations are generating strong cash flows, partially helped by the decline in costs from a lower AUD and efficiency improvements (such as those provided by AYSI's products).
I'm expecting another quarter with lower sales in the range of $5.0 million as the AUD continues to weaken, with earnings in the $0.04 - $0.06 range.
I'll also post some tables on a valuation model I've created. One is a base case model that assumes growth recovers in FY 2017 and the other is a downside case, which assumes sales in the low $20 million range growing at 3% into perpetuity (severe downside case). You'll see that both scenarios point to valuations above where AYSI is currently trading.
KINS - Picked up some more shares here in the $8.75 range. Great entry point after the recent run-up as a drop to close the gap was not surprising. The dividend should hit accounts early next week so it wouldn't surprise me to see it back at $9+ next week as some dividend reinvestment occurs. Q3 will be very strong with the new reinsurance program in place with lower ceding %'s and no adverse weather to date. I'm expecting EPS to approach $0.40 for the quarter.
Good luck to all...
AYSI - Bought a few of those share offered at $1.35. Surprised that the stock has given back all its gains. The report was a positive one and I was expecting somewhere in the range of $5 - $6 million of revenue for the quarter and EPS in the $0.04 to $.06 range, so it was at the low end of both ranges. Given what is happening with the AUD, its making a large impact on the reported results. So while in AUD, the results look quite good y/y, because the AUD has fallen so much relative to the dollar, it looks like a big revenue decline y/y... I continue to hold and buy on weakness expecting either 1) an eventual buyout or 2) improvement in market conditions in China, strengthening AUD, and a return to growth. My price target given the current level of earnings is still north of $2.00 and further growth will only raise that target...
AYSI post EPS of $0.045 for their third quarter. Cash up to $13.8 million or $0.80 per share. Sales were down this quarter, likely shipped more in Q2 ahead of Q3. Still a solid result and I'd expect better in Q4. There was no large exchange rate benefit this Q as the Australian dollar was flat with the USD over the quarter. With $0.28 EPS through 9 months and $0.80 cash per share, still extremely undervalued...
KINS - Earnings would have been another $0.014 higher if not for some lingering effects from the severe winter weather. Did anyone get a chance to listen to the conference call this morning? Any highlights?
Nelson, congrats on KINS as well! It is also one of my largest holdings and will likely stay a long-term holding. I'd like to see them raise the dividend sometime later this year as well.
KINS - Great quarter. Results should only continue to improve as they cede less to reinsurers beginning Q3 (so long as there isn't a large hurricane that hits NYC). Q3 earnings may even get closer to $0.40 per share. Stock is very cheap based on Q2 results and I expect double digits at some point later this year.
I added on HRTG as well this morning, unfortunately a bit early and I'm averaged in around $21.50...
Nelson - HRTG
I missed the conference call and its not available for transcript yet. What were the major disappointing comments? EPS came in ahead of analyst estimates...
Picked up some more shares in the $1.40 range. This is likely a knee-jerk reaction to the decline in overall markets and some of the turmoil occurring in the Chinese markets. Iron-ore production is continuing at record levels and this is what will drive AYSI's performance going forward. Lower iron ore prices will help drive miners toward cost-saving products, such as AYSI's. They've also introduced new products (ceramics) that will help stimulate new growth. I have no issues buying 2.2x P/E ex cash and 1.6x EV/EBITDA multiple, especially when its closest competitor Bisalloy trades at a 7.9x EV/EBITDA multiple with weaker recent financial performance.
I still think the company will eventually buyout non-family shareholders. With roughly $12 million of cash that's already on the balance sheet, they could pay $1.70 per share for the remaining shares. Though I think they could easily borrow $5 million to finance a portion of the purchase and pay something closer to fair value over $2.00 per share.
HRTG - The Navellier recommendation has certainly brought in some buy volume. It appears as though we've broken through the $22.50 resistance and are moving towards new record highs. I continue to think that HRTG will move up to the upper $20's to trade more in line with the other FL insurers. A calm hurricane season could see HRTG trading over $30 early next year.
HRTG - I am no P&C insurance expert I'll defer to those that have more knowledge on the topic. I do know that the management team is solid and has a lot of experience in the Florida market, so I'm confident in their competency. I do like HRTG and am continuing to hold. The stock appears to be held up here at $22.50. I think a break of $22.50 will send this up to $24-$25 so long as the hurricane season remains quiet...
KINS - We should be hearing from the company by the end of next week on their 2015-16 reinsurance plan and exactly how much that ceding % will decline to. I have been a buyer here over the last few days in the mid $7.50's and will continue to buy on weakness.
AMBA - Sold some short term calls in AMBA this morning. I think this high-flier is due for a correction. Citron also wrote an article later this morning highlighting the ridiculous valuation.
Well, I did say that I haven't spent anytime doing any research... For some reason I thought RICK's clubs were all RICK's brand... Sorry about that, next time I'll spend a moment doing a bit of research before posting.
SCRH - My other worry with SCRH is how much they would benefit (or even take part) if a buyout by RICK would occur. SCRH licenses the Scores name to the clubs. If there were to be an acquisition of the Scores clubs by RICK, I would guess that they would rebrand everything under the RICK brand. What value then is there in the Scores name and SCRH? I don't know the situation very well at all, so I haven't spent any time doing research on the licensing agreements to see if there are provisions in place in the case of an acquisition...
Yes, I am still long HRTG and have not sold any shares. It is definitely a larger position as I have more confidence in their management and their relative undervalued position. The stock appears to have stabilized, built a base, and with today's close at $21, is near breaking a trendline that should move it up to near its previous highs. My thoughts around hedging around Hurricane season with shorting UVE and FNHC apply to HRTG as well.
UIHC - Picked up some more UIHC today via selling Jun $15 puts. Was fortunate as a director filed a form 4 showing a large 25,000 share purchase at $14.66. This one hasn't panned out as expected, but its not a large position. Not sure if I'll be holding on through hurricane season, but I have considered holding and shorting UVE or FNHC as a hedge given their higher valuation multiples (betting on a normalization of multiples between the two companies).
AYSI on the verge of breaking into the $1.70's. Seems as though interest is increasing. I found this blog write-up on AYSI this morning. Mentions all the salient points we've discussed here and has a price target in the $2.40 - $3.44 range, similar to what I've been throwing around as a fair price.
https://occamsrazorinvesting.wordpress.com/2015/05/20/alloy-steel-international-inc-otc-aysi/
52 week high is $1.83 and I wouldn't be surprised if we reach those levels in the next few weeks.
SHAK - Quite the incentive to be long SHAK shares if you're a customer at IB... Even if the stock drops you're making money via borrowing shares