Naz News, Gappers and FLE's

[George the Greek]

LQDT: Still confused about the auction(s) fallout,
and I consider myself fairly unwell informed
(or well uninformed ),
but the company fundamentals look okay,
action has been represented
as a bear raid (30% of the float short;
potential for a squeeze?).

This was interesting
from Y!MB investor.gator handle:

Revised Valuation

Given recent insider buying and early February FY'14 guidance, we can assume events of this week were a surprise to management and caused by unusual bidding by competing parties for the DLA contracts (more on that later)
Assuming a 25% to 30% reduction in EBITDA for FY'15 and assuming FY'14 comes in at the mid point of management's previous guidance (the latter based on the the fact that management says there will be no impact to FY'14):
At $18.50 per share, LQDT has an enterprise value of ~$515M against revised FY'15 EBITDA of $75M (about 25% to 27% less than FY'14 midpoint of guidance) for EV/EBITDA of 6.9x.
This valuation is 'fair' given the negative trends in the business offset by strong balance sheet, good moat around the business, founder run business, etc...)
As for the bidding in the auction, there are some clues that bidding was highly unusual. It will be interesting to see who the winning bidder is for both rolling and non-rolling stock
* LQDT says bid amount for rolling stock was so high it jeopardized ability to provide high service levels. It is unlikely that any other company can dispose of stock more efficiently than LQDT and so this is LQDT warning the GOV'T that the low-bidder will screw up the liquidation of rolling stock. Government is known for accepting low bids that later have horrendous execution. This contract will come back to LQDT after a termination withing the two year initial award is my prediction
* As for non-rolling stock increase from 2.x% to 4.35%, this is a shocking increase. We assume the company felt they could provide service under this contract and at least break even. Either way, this is a massive hit to the business model. In buisesses not otherwise hit by technological or regulatory chages, econmics just do not change this much overnight. Cleary an irrational bidder (perhaps the same one that won the rolling stock bid) bid this contract up. Whoever this company is, they will screw up and disappear.

Addendum: downgrade, ugh.

April 3 (Reuters) - Liquidity Services Inc :
* Baird cuts to neutral from outperform; target to $19 from $30