Replies to post #59766 on Value Microcaps Motherboard

[Berliet]

Re: southacresdave / ALY


Thanks for sharing your thoughts. I agree O&G acquisition is not cheap, it comes to about 10 times Net Income if you consider 10% increased utilization and 35% tax rate that ALY will be paying going forward. Of course, its benefits far outweigh the price, IMHO, more balanced offering from more than one view point.

ALY management has long maintained their desire to keep Debt/EBITDA under 3, and with O&G acquisition, the ratio will slightly exceed 3 in Q1 '07, and under 3 by the end of Q2 '07:

EBITDA
Q3 Actual = 25160
Q4 Estimate = 28330 (Q3+1912)*1.05 (1912 represents Petro Rentals EBITDA and 5% to accomodate for increased pricing in Q3 as well as to account for eqipment delivery from Q3 to Q4)

Q1 '07 Estimate:
Rental Tools = 22000 (They stated $100M for the year)
Rest of the Business = 18535 (ALY did 16850 in Q3, I estimate 10% increase in 2 quarters)
Total EBITDA Q1 '07 = 40535, run rate of 162410

Debt as on 9/30/06 = 262466
Additional Debt = 250000
Total Debt as on 3/31/07 = 512466
Debt/EBITDA ratio = 3.155

They also mentioned in the CC about their desire to keep Debt/Capital employed ratio to 1 OR Debt/EBITDA under 3. By Capital Employed criteria they should not need to issue additional shares (Capital employed as on 9/30 was 470538, this number does not include Petro Rentals or O&G.) I hope they dont do secondary, but it is not out of question. I think we could see $25 in the next 4-5 months.

PS I loaded on FTK in the 14s couple of months ago. It is my largest position, and I plan to keep it for some time.