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MDR
My guess is that your a bull on oil at current levels. My question would be then why MDR?
I understand they do mainly offshore EPC works but my view isnt too positive atm. If oil manages to stay low, it isnt clear if they would be able to sustain their improved performance. Their order backlog is only 1.3 years revenue. From a capital structure point of view, it looks ok. Not sure what im missing..
Exciting times, anyones working on anything?
184 has pulled back a little :)
@OTEL
Good call. Why is the share price different from the one quoted on their website? I checked google finance, last traded date was 28 May?
Would you have further understanding of their business? Like how do they compete with the satellite guys in rural areas?
ELRNF
I think its misleading to quote the numbers off.
The numbers provided were as of 31 Dec 2013 since its traded OTC:BB.
Their last balance sheet cash figure was about US$120m+ and since they announced dividends (record date is Aug 2014), current buyers have no right to that US$110m cash distribution.
So their current balance sheet cash is about US$10-30m thereabout only, assuming they did not take on debt this year.
So in essence current price is what you value their pipeline + the cash as well as assuming Moshe Ben will continue the good work. Given Imaging was one of their crown jewel in their portfolio, havent checked the rest yet. Ive heard good things about him and IDB (owner of Elron)so that aspect is fine.
ELRNF
I think its misleading to quote the numbers off.
The numbers provided were as of 31 Dec 2013 since its traded OTC:BB.
Their last balance sheet cash figure was about US$120m+ and since they announced dividends (record date is Aug 2014), current buyers have no right to that US$110m cash distribution.
So their current balance sheet cash is about US$10-30m thereabout only, assuming they did not take on debt this year.
So in essence current price is what you value their pipeline + the cash as well as assuming Moshe Ben will continue the good work. Given Imaging was one of their crown jewel in their portfolio, havent checked the rest yet. Ive heard good things about him and IDB (owner of Elron)so that aspect is fine.
212hk
Thought I will just update.
The firm recently announced a partial tender of up to a quarter of outstanding float at HK33/ share. Its at HK37/sh now.
To me seems like management is trying a gradual take-under.
If anyone has been communicating with the management, please let me know or share your notes. Will be happy to chat!
CSI
Hi king888,
I have looked at it. Its run by a ex investment banker hence the the firm is quite good at using financial instruments.
Dividends seem a tough way to value the firm though I would agree the properties are undervalued given they have been selling well. Must have been the recent cooling measures that hit the residential segment hard as well as PRC money markets and property contraction . To note, the firm if I rem has about a quarter in residential only, rest in commercial.
Ill take a closer look and update you. Happy to discuss more if keen.
Unfortunately not, have been in IB and not a pleasant experience. Now I understand how David Einhorn felt when he wrote the intro to his life in his book as a DLJ banker. Doesn't help that I don't appreciate a bureaucratic system.
If you guys are running something let me know :)
Oh, wasnt aware. I love Canada man, beautiful place. And you can view their hotels!
Yeah Im still in the same red dot. :)
Today prices were cooling off so I added some.
On the other hand, Nanyang is trading down.
HSI is down for a couple of days, news said its bcos of the Russian/Ukraine standoff so something probably is cooking in KS.
Im clueless too, no news ...
trades like a mio shares and over when normal is like 200l + per day
buying more ryan?
BTW Ryan, r u based in US now?
0422 HK
Been rather quiet here lately. Anyone looking at this name?
Its kind of oddball company that does exim for motorbikes to Vietnam but worth a look since its looking real awful now.
But I did see some red flags, just wanted to clarify and confirm it with someone else.
haha me too, looks like the heavens really hate me
Re: Y.WT
Is it me or the warrants right now are expensive versus the stock?
At $7 people are assuming the stock will head to $35/sh ITM while its OTM atm...
The implicit leverage on returns seems to be lost for the warrants.
might consider adding some stock now..
Happy holidays everyone :)
Thats the part that Im puzzled as well.
Clearly its investment properties and theres revaluation changes impact to P&L but they are still fairly undervalued.. On the other hand, the residential ones are on a as sold basis, doesnt even seem remotely like percentage of completion? Either the appraiser made a big bloop or something else ...
Anw take care, heard of the H7N9 going on at your end.
Merry xmas season everyone :)
KS184
Hey Wil and alll, I was looking at this and has went up a buck already. You reckon still good to build up more?
Im concerned about their Vietnam liability but again its not big to cripple, just taking off hk400m off their billions of cash haah.
macau wise sales is slow but i understand from them they are sitting on it, pending the bridge in 2015/6.
Also, a new name.
Lai Sun Garment (191)/ Developments (488)/ Lai Fung/ E-Sun. Have u looked at this before and/or spoke to their folks before?
They have a history of poor execution but recently did see some interesting changes. Not to mention some interesting shareholders as well.
MNI
Was also looking at this fella
Their statement on provision for pension seems like it doesnt tell alot. Anyone has any take on the impact of their unfunded pension liabilities?
Thanks King!
Yeah expensive to short here
On Shorting
Does anyone know if shorting still gives you interest in both US and in Asia?
Also what are the rates like for shorting (i,e for the ones with least to most stock short interest).
CFDs are getting very expensive as it keeps rolling.
and options are non existent here in Asia :(
Allied Nevada Bonds
I think beyond the numbers which does look interesting, there are several key points to the decline, many of which is operational.
1) firm expected net cash costs to rise from $709/oz (1H 2013) to $800-825/oz (FY 2013)due to operational issues at Hycroft mine
2) Cash is $250m yes, but capex alone in 1H 2013 is already $200m. This is on top of a negative OCF.
3) firm also postponed their 130,000 tpd mill facility. The mill is a key component to firm's original target of 225k oz gold and 25.5m oz silver from 2015 to 2024.
4) Most importantly, the firm is a one mine, 2 product wonder. Risks are fairly concentrated.
And I havent gone into the covenants yet ..it seems though that they are nearing their covenant levels.
I personally wont buy it at 70cts for sure.
All stocks
Hi all, hows everyone?
Sorry Ive been away for quite a while, been busy at work and theres heavy restrictions on trading accounts.
On one hand, good call on Batista and OGX in the past, wasnt hard to spot a phony. Amazing at how much it has transformed into now.
On the other, wanted to find out whos at HK now? Possible to help me check whats the progress of residential and commercial /office market like in Kowloon HK region? Theres only so much Google and Google Earth can do...
Last but not least, if you have noticed, rates (at least in SE Asia) rose ave over 100 bps over the last 2 weeks or so for the 3 year monies. So if your holding something thats financing reliant, pls be careful.
Hi Bradford,
Just wondering what are your thoughts and relation to your posted reply? My numbers are too pessimistic?
With reference to my previous post, my $400m p.a free cash flow statement may not seem to hold its weight now as mentioned, especially if the decline worsens. Thats why I think its flawed.
The funny thing is that Morgan Stanley projects a 18% p.a decline and yet has higher FCF at the tail end, i.e 2015-2016. I suspect that on top of adding the synergies of %175m p.a, they also put cost increases at a very steep decline, hence overall fcf and ebitda numbers are actually stable when they should be declining. The cost assumptions are very sensitive, a 1% change may result in losses at the tail years.
Also the reason why my later year fcf and ebitda is low is because there will no longer be any assets to depreciate and amortisation of intangibles is on a income approach, which means as the years go by, amortisation gets lesser. Im not sure how MS plugs in the numbers for this but one things certain, there will likely be no residual PPE at 2014/15 thereabout. And my assumptions for capex are very low, so increasing it will lower cash flows again.
The dex one note posted below is not relevant as going forward the new amortisation and cash sweeps will be in effect which effectively about under 2/3 on average of free cashflow will be used for amortisation/ paydown of debt, 1/3 for interest payment and the rest discretionary.
Also the numbers you posted is not FCF, thats the LFCF reported, i.e post paying of interest.
My LFCF numbers are:
2012 2013 2014 2015 2016
- 522 417 307 195
In fact I rarely look at ebitda cos ultimately capex is a real cost especially for a firm with fully depreciated assets and intangibles. A firm with depreciation but no capex is like a self liquidating entity. I mean some business may survive with minimal capex but im sure they will need more than just the $47M spent in 2011? I am not close to the company to know if theres value for those spent assets and intangibles so please let me know if you do?
The bare minimum you need is $300M of leverage free cash flows per year for the next 5 years after 2016 to retire the combined $1.5B of debt, assuming they do successfully paydown $1.5B from now till 2016. This means about $450M p.a of free cash flows and $500M p.a. for the latter years will be needed post 2016. So anything below that will mean equity wipeout. How likely do you think it will hit that number?
I personally do not take comfort into whether Kyle Bass, Prem, Shultz or John Paulson bought into it. By the way, Paulson holds a stake bcos of debt to equity conversion in the previous round of restructuring, likely the same for Shultz.
I crunched the numbers on pen and paper so cant send it over, but if you need to compare numbers just give me a buzz? Need someone to enlighten me and if ive done something wrong somewhere.
http://www.businessweek.com/articles/2012-03-22/the-golden-allure-of-the-yellow-pages
DEXO/SPMD
On the other hand, finally done with looking at DEXO/SPMD.
I wasnt able to justify an equity value per se for both of them.
What I worked on paper came up to this:
Calculations for the combined entity (Figures in USD m)
2012 2013 2014 2015 2016
FCF 588 775 632 495 363
ebitda 1169 1005 857 715 579
Debt ending 3200+ 3000 2587 2282 2090
cash interest paid 253 216 188 169 = total 825
amortisation paid 150 140 120 115 = total 525
amount swept 386 291 203 96 = total 976
Total cash paid to debt 789 647 510 380 = total 2326
Principal paid down 536 431 323 211 = total 1501
So the issue is everyone writes about long term and all, but i fail to see how the combined entity will last more than 5 years beyond 2016.
That means using EBITDA multiple of 4x of say 400-700M is not very feasible since even if Im assuming just 15% annual decline in topline and same decline in costs per year as per FY2011/3Q2012 leads to the numbers above.
Also many of the valuation is purely EV/EBITDA or EBITDA multiple and leads to equity value is erroneous. For example equity value of EBITDA (assuming 800M each year) * 4 years = $3.2B is not right. Firstly one has to deduct the debt of $3B to reach a $0.2B equity value. Secondly, 800M ebitda p.a is pretty high i would say, decline has been steep. Also the cash is about 200m+ which doesnt make much difference to the above number.
The above shows the firm paying down $1.5B in 4 years without retaining any residual cash flow.
In conclusion, I am starting to see that my previous assumptions were flawed and so was my previous valuations. A FCF of $400-500M p.a. is only possible when cost declines are very steep, like 20% p.a. levels while topline remains flat. Reality is that topline is likely to decline at least 10% p.a.
So any comments/ views?
On Shorting Asia
Beware of being too early.
It seems that I do see some volumes moving into equities now with initial acceleration. Many of them institutional.
Also read news that many are shifting portfolio allocations so that means more time to ride for the longs :) Hang in there.
Hi Owl88,
Did you manage to get my email address?
Anyway on HK board independence, there was a recent article in Singapore which focuses on statements made by reknown investor and activist, David Webb in shareholder oppression.
Ill post it here since the article has since been removed.
Let’s not pretend any more that independent directors (IDs) are independent, says Hong Kong shareholder activist David Webb.
He suggests abolishing the requirement for IDs and letting them be called independent only after being elected by minority shareholders.
IDs need to make up at least one-third of boards in Singapore and Hong Kong to provide an objective voice to ensure management acts in shareholders’ interests.
But Mr Webb, repeating a common criticism, says IDs are often picked because of their close relationship with controlling shareholders or board chairmen.
Shareholders are given “a sense of false comfort” as a result, says Mr Webb, 47, a retired investment banker who made his name in the past 14 years giving scathing, sharp and sometimes prescient commentary on the Hong Kong stock market through his website, “webb-site.com“.
“Good companies will still put good people on boards, bad companies will always find three people who are willing to endorse anything,” he says.
Mr Webb spoke to BT early this month when he was in town for this year’s Corporate Governance Week organised by investor lobby group Sias, or the Securities Investors Association (Singapore).
Having IDs only electable by minority shareholders could improve corporate governance in both Singapore and Hong Kong, he says.
“The reality is that if candidates are voted upon by controlling shareholders, the candidates will only be those who are acceptable to the controlling shareholder. Then the whole system breaks down…
“It’ll be more honest to say he’s the old school friend of the chairman, family doctor, whatever, he’s only there because the chairman likes him.”
Under Mr Webb’s system, controlling shareholders are not precluded from putting forward candidates they deem suitable, he notes – just that they have to abstain during voting.
This gives IDs a mandate to ask difficult questions without “being quietly asked to stand down”, he says.
Another policy Singapore and Hong Kong can look at is to have a legal framework for class-action suits, Mr Webb says.
“This can unify a fragmented set of plaintiffs for civil claims. If you have a shareholder with $2,000 of shares, another with $200,000, it might not be worth suing for. But if collectively, there’s a $200 million investment involved, and the wrong-doing amounts to millions, that’s very well worth it,” says Mr Webb.
In the US, various so-called frivolous or vexatious suits are brought to court which would not succeed but would otherwise harass or embarrass the defendants.
Australia avoided that by having a “loser pays” system. This results in only strong cases coming to court, says Mr Webb.
Such a system could work in Singapore and Hong Kong, he says. To help minorities cope with the costs of seeking legal redress, litigation finance companies can step in where a team of lawyers assess the merits of a case to decide whether to finance it.
In return for a share of potential damages paid out, these companies will pay the cost of bringing the case to court as well as bear the risks of paying defendants’ costs should the case fail.
This allows the private sector to take on the role of enforcing corporate governance, in addition to having regulators and the state do so, Mr Webb says.
“Any system like that has a deterrent effect on bad behaviour,” he says.
In Hong Kong, Mr Webb spends his time researching smaller companies and advocating for good corporate governance.
In 2003, he launched “Project Poll” to push for poll voting at shareholder meetings instead of voting by a show of hands. This was because companies packed meetings with employee shareholders such that the voting process became a charade, he says.
To advocate for poll voting, Mr Webb bought 10 shares in each of the 33 companies on the Hang Seng Index, and divided them into five lots of two shares, held by himself, his wife and three companies he established.
Under Hong Kong law, five shareholders at a meeting can demand a poll to be held – which Mr Webb duly did. It took six years for the law to catch up. In 2009, the “one share, one vote” regime he espoused became compulsory in all meetings of listed company shareholders.
“And this is important because even if the company has a majority shareholder, which they do, they can still count the other votes, subtract their votes from the totals, and then say okay, how did the public vote,” he says.
Mr Webb is also known to have moved share prices with his commentaries.
In July 2007, he raised doubts about a watch and jewellery maker called EganaGoldpfeil Holdings. A massive sell-off the next day caused its stock to plunge by up to 64 per cent.
The company denied Mr Webb’s allegations, before collapsing a few weeks later. It filed for bankruptcy in 2008 and was delisted this year.
Source: Business Times 22 October 2012
Hi Glen,
Sorry to hear about the painful lesson but I guess its a path to learning which I myself am no exception.
The most important lesson I have learnt in investing regardless of which field you believe in is that there's no such thing as passive investing. Buffett doesn't check prices daily, but he didn't mention he did check operations every day. You have to know whats your investment thesis and if things turn out different, its time to exit. Ignore the fear of missing the run up. Unfortunately most choose to see red and then risk aversion sets in, holds for a few years and finally sell it at a big loss.
Thanks for highlighting that having majority ownership means little. Most times such companies can be spotted by management actions and how they raise funding. This brings me back to AM.TO, why is the owner constantly selling?
However I beg to differ to start viewing all firms as fraudulent first. That is like a tainted view. One of the more important key to investing is not to have bias. Clearly the repercussions to that might be bad, for example selling the good ones and keeping the bad ones.
For example, BYD which I recommended a short while I was in a investment firm. I wouldn't say its a fraud since operations are ok and data doesn't support that statement. However I noticed thin margins, no moat, claiming to be the next leader in hydro and electric cars when its best expertise was not in cars but in AA or AAA batteries. One of the largest tech companies in Asia claimed that BYD stole their technology also made me worry a bit. Im still wondering though why he bought it.
Further, the signs of fraudulent companies are fairly similar and gets easier to spot with some practice.
The one thing Buffett was right (I dont always agree with what he says) is that we tend to invest through our rear view mirrors cos its always clearer than the windshields. Its same as the RTOs. One shouldnt just jump in purely cos PEs are low, cash is more than market cap etc. Look forward and ask questions is the best way forward.
Sorry for the long message. Oh btw, why is BIDU a fraud?
Pursuant to my last post on the oddity on the value I calculated, wanted to compare it with a different view on the cash flows.
Notably, the firm did around $336+m of OCF in 2011 with about $141m in interest expense paid. That numbers were $570m and $138m in 2010.
Capex was about $60m for both years, barring the acquisition costs of $110m in 2010.
So in the coming years, interest expense will be about $78m p.s.
So actual tangible cash profits will be about 336 + 141 = 477. say its 450m and less 78m gives approx $370m CFO p.a. less capex.. thats about $300m p.a.
Comparing with a new post recap debt load of $850m with about $200m cash means net cash is $650m. Debt will be paid off in less than 3 years.
So assuming 7 more years of $300m p.a, ok sorry maybe more conservative of $200m p.a, we get residual value of $1.4B for the equity of the firm. Taken over 28m new common shares, that works out to be close to $50 per share? This seems more reasonable versus the $2 i got previously and is well over the warrant strike of $29.25. But of cos I didnt account for time value.
Now my worry is the management tries to pull some acquisition stunt and continues his shareholder annihilation plans.
I happen to spot some other views on this counter. The last statement is funny with a perma bear on board.
http://www.hotstockmarket.com/t/121180/ylo-yellow-media-toronto-stock-exchange/920
Still working on the numbers, will share once I have it. Their conversion data is slightly confusing so Im taking a while.
This CEO is simply pillaging this firm, damn this level of stupidity.
Off hand, the firm
- added $250m in cash
- took out $2,757m in debt, CB and preferred
- added $850 in new debt (senior + sub exchangeable)
Assets added $250m to $5,298m
Liabilities declined to $1,057m
Net assets being $4,241m with $4,313m in deficit
so net equity is worth approx $72m
new common shares out is 27.955m
value per common works to be $2.58 per share?
Funny am I missing out something here?
YLO, DEXO/SPMD
After reading on the latter, now Im reading on the former and am trying to work out some calculations on them. Just had some clearance to buy securities. Yay!
On the YLO, are the old preferreds (series 1,2,3,5 and 7) /convertibles still trading?
Also are the new debt + new exchangeable debt tradable yet?
ok after I did my reading on DEx/SPMD merger documents.
Some thoughts I have.
- FCF wise it is oddly cheap, like what Will mentioned. With a assumed combined market cap of 150m, FCF averages 400m p.a. but looking at the Morgan Stanley's forecast, they seem to be fairly optimistic with print volumes declining only 10-15% p.a. Judging at how rapid the while online landscape is moving, 3-5 years for the death of this combined entity is not unreasonable if they continue to not innovate. FCF imho will find it hard to hit 500m or even 400m p.a if growth rates do hit -20% p.a. and even if the write off of assets stop (which is the primary cause of losses in 2010/11).
- As a combined entity, I noticed that debt decreases sharply due to assumptions of payment and amortisation. So on top of the interest expenses, there is another significant expense that is for principal repayment. Havent dug into the debt docs to check on the covenants but stoppage/delay of interest/principal will definitely trigger default.
- The risk of liquidation ((equity value 0) is remote versus that of restructuring (equity has value)as the combined entity still has cashflow generative components despite the headwinds 9which isnt crippling atm).
- I noticed that SPMD is cheaper than Dex in terms of the exchange for the merger. But its minimal though.
My only question will be why did Kyle Bass only enter into equity only now and not earlier? I suspect he holds the debt as well which makes it even more odd to buy only now.
@ Will, theres warrants for which parts? Dex or SPMD? I cant view the instruments via Google finance or my trade platform. Are they long dated? Whats the terms of those like?
Hey guys, please ignore my last post. Somehow my old drafted message got posted.
I read about the DEXO/SPMD merger previously. Price seems to be taking a breather now. Overall still pretty cheap given the FCF of the combined entity. Ill take a quick look at it.
I was wondering more for YLO, or now Y. Recap approved and I checked Google finance but the complete listing of instruments available to trade were not given. Anyone able to advise on this?
And I really dislike institutional restrictions!
All the ideas but I cannot execute! Dayum.
Yellow Media / Dex One + Supermedia
Hey guys,
Saw a ran up in these counters for equity. Havent been keeping track. Congrats by the way.
Understand for yellow media, recap was approved and not sure if the Dex/SPMD merger was approved.
But in any way, whats the best means to extract the value currently or has it gone up way too much?
Oh btw, also congrats for the call on Krun Thai and GL, a pity I have no access to TB markets :(
Nanyang Holdings
Hi all, I am intending to collate some questions and send it to the management. If you have any queries, please send it to me. Before sending out, I will distribute the list.
Also I will be heading to Guilin China so if anyone of you are there, drop me a note.
Cheers,
MNT
Owl88
Cant do a private message or reply. They need me to subscribe.
Anyway, my email is mervynthh at gmail.
OSX/ OGX
Somehow I am not very impressed with Batista.
From various sources, it does seem this man often stretches himself very thin to get to places. Further it is of my observation that people who boasts about wealth and their monetary goals often crash and burn. There were also talks about him securing shipping contracts with undesirable means and within his own companies which themselves have not been producing the resources after some years.
It appears that this man is purely a mega beneficiary of opaque resources auctioning in Brazil and has been historically a poor asset allocator despite him always quoting to wish to buy undervalued assets.
Among the articles read, some attached here are some of the notable quotes.
_____________________________________________________________
Quotes
“It won’t be ready in 2026,” said Joao Carlos Cavalcanti, who partnered with Batista on an iron-ore business that was later subsumed into MMX. “Eike told them it had 750 million tons of ore, but it doesn’t have 150 million. They fell for Eike’s blue eyes. He’s very beguiling.”
In six years, Batista’s six publicly traded companies have made just one dividend payment -- and that because of a one-time financial gain. Still, the dearth of cash hasn’t stopped Batista from diversifying into a slew of new closely held ventures, from technology to Rio de Janeiro real estate to sports and music events-management.
Batista said he exemplified a new “Brazilian dream” of entrepreneurial success. He repeated his goal of overtaking Carlos Slim as the world’s richest man by 2015, a feat that would require him to double his wealth at the time.
He bought [ex-President] Lula’s suit in a charity auction for R$1 million and the very next day the BNDES [Brazil's state development bank] loaned him R$150 million so he could rebuild Hotel Gloria. He gets what he wants, period.
Links:
http://www.bloomberg.com/news/2012-07-12/batista-loses-15-billion-as-brazil-awakes-from-dream.html
http://www.bloomberg.com/news/2012-10-25/batista-may-buy-1-billion-of-new-ogx-shares-through-put-option.html
http://www.economist.com/node/21555907
http://brazilianbubble.com/eikes-ex-partner-shows-no-surprise-with-ogxs-meltdown-saying-eike-never-delivered-what-he-promised-and-brazilian-analysts-know-nothing-about-oil/
http://www.bloomberg.com/apps/news?pid=newsarchive&refer=latin_america&sid=a2exSoF.ys4o
http://www.bloomberg.com/news/2012-10-26/batista-spurs-ogx-rally-with-2-billion-pledge-corporate-brazil.html
http://www.economist.com/node/21560588
http://www.bloomberg.com/news/2012-07-11/batista-may-win-petrobras-deal-on-ship-delays-corporate-brazil.html
Yup was referring to the family as a whole, in terms of owning assets around the region.
Also yeap, the pccw deal was blocked after they tried to circumvent the rules. But of course one can imagine what will happened if the case of tipping agents were not made public...
BMBM
Hey Will, quick question.
How does a non US guy buy Pink sheets?
I checked with Google Finance, doesnt show the payouts either?
Hows the costs like compared to buying the normal equities or bonds etc?
WU...
A case of a good company being exploited the wrong way.
Excessive dividends imo and valuations have been too optimistic given the gloomy industry outlook.
One of Buffett's two lieutenant used to own this name while he was still running his hedge fund.
Nanyang dividends
Did a quick check, HK doesnt levy witholding tax on dividends.
http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2012/dttl_tax_guide_2012_HongKong.pdf
Check roman 4.1