yadayada Posted January 29, 2014 Share Posted January 29, 2014 There seems to be alot of hidden value in this idea. That is masked by their crappy nook business. They have negative earnings, but looking at the underlying college and retail business, they seem to generate alot of fcf. Their business is also declining very slowly, only a few % a year. So they probably deserve a sub 10 multiple, but the current multiple of around 4x the FCF of these 2 businesses seems to indicate decent upside. If you look at their latest year, operating profit of college and retail was about 290 million$. If you would substract about 35 million in interest payments, and then a 35% tax rate, that is 166 million$. But what is interesting is that depreciation and amort. is higher then their actual capital exp. This seems standard with retail? Anyway, it was about 66 million $ lower in 2013, and even lower then that % whise the 2 previous years. That is counting in their NOOK mess too. So 166 + 66 = 232 million$ in free cash flow in 2013. For a market cap of about 900 million $ I think. Or a multiple of 3.8. Best buy a year ago anyone? This was actually more then the 200 million in 2012. Malone has a nice stake in this one. And there are other large shareholders who also are very motivated to unlock the full value of this stock. This is ofcourse assuming they pay 35% tax, and it looks like they accumulated some NOL's. If a spin off would happen, I would say their college and retail would deserve more like an 8 or 9x multiple. Just doesn't look like amazon will take them out of business any time soon. Part of the 4-5 % decline is also due to no popular titles coming out like 50 shades of gray. That might provide a little upside, if a new title like that is released. Allthough one thing i dont understand are allt he messy things on the cash flow statement. oh what i forgot to mention, microsoft bought a large stake in the NOOK business a while back, and there have been rumors of them taking it over completly. http://www.fool.com/investing/general/2013/09/09/microsofts-buy-of-barnes-nobles-nook-looks-more-li.aspx Link to comment Share on other sites More sharing options...
CorpRaider Posted January 29, 2014 Share Posted January 29, 2014 I was/am watching it but when they promoted the nook division head to ceo i pretty much figured thats a signal they are committed to the albatross business obscuring all that cash. Link to comment Share on other sites More sharing options...
yadayada Posted January 29, 2014 Author Share Posted January 29, 2014 I supose your right. ANy chance they can break even on their nooks? ALso just noted that leonard riggio sold a bunch of stock too. Link to comment Share on other sites More sharing options...
DCG Posted January 29, 2014 Share Posted January 29, 2014 I supose your right. ANy chance they can break even on their nooks? It's not really the hardware that matters with the Nooks. The problem is that Nooks restrict people to buying digital books from B&N, which has a much smaller selection and higher prices than Amazon. Most people who'd consider a nook for digital book reading get a Kindle, iPad or Android tablet. I like B&N stores, and hope they remain, but I totally just showroom in B&N and purchase books from Amazon (regardless of whether I buy the digital book or physical book). Link to comment Share on other sites More sharing options...
Mikenhe Posted January 29, 2014 Share Posted January 29, 2014 my wife has worked in a couple of their stores int he last few years. From what I've seen with my own eyes and the stories she comes back with - well lets just say that the only investemnt in their stock is through my wifes 401k. theres no other money going into this from me. its all about the bottom line and the current week/month at store level. no long term incentives for staff, no training, no benefits. heads of the stores can do what they like and any departure from company policy will be ignored by district managers as long as they are meeting the goals. New policy and ideas are often ignored – or put in place only when senior management come to visit. I doubt if a senior person at B&N has ever spent any time at a store without the store knowing they were arriving in advance. Suggestions from staff are treated the same way as the staff are – ignored. The whole place needs a kick up the arse and I can’t see it happening with the current directors in place. It’s a no from me. oh – and example for you – in order the rein in heating costs the temperature control for a store in new Hampshire was controlled from head office in new York. New Hampshire could only get it changed after several customers complained in the same day. Which meant someone wasting their time tracking down whoever was controlling the temps in new York. At the last time the leaky roof was constantly patched because of leaks – merchandise being damaged and or moved at every leak plus staff costs associated with that – instead of replacing a faulty roof. Its all very short term thinking. Link to comment Share on other sites More sharing options...
CorpRaider Posted January 29, 2014 Share Posted January 29, 2014 I supose your right. ANy chance they can break even on their nooks? ALso just noted that leonard riggio sold a bunch of stock too. Yeah, they are supposedly going to outsource more/all of the hardware, so to hear them tell it the business won't be as crappy. Link to comment Share on other sites More sharing options...
yadayada Posted January 29, 2014 Author Share Posted January 29, 2014 The CEO also doesn't seem to own any stock currently, that is not a good sign. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 30, 2014 Share Posted January 30, 2014 I feel like anytime someone asks about competition from Amazon, they're really asking "will Amazon shareholders tolerate a company that loses money long enough for (insert name here- JCP BBY SHLD BKS) to go bankrupt?" I think BKS is cheap. Jeff Gundlach also doesn't get it... Link to comment Share on other sites More sharing options...
krazeenyc Posted January 30, 2014 Share Posted January 30, 2014 BKS is cheap. I've followed it for quite some time, and even bought it once, but sold it after MSFT rumors made the stock run up fast. There is some optionality with the NOOK unit with a possible MSFT buyout but I think the chance of that happening is quite slim. While they can get out of Nook hardware, they can't realistically dump the Nook unit -- if they're trying to exist over the long term. They can't be the largest B&M bookstore and not have e-books available. Finally, Riggio scares me -- he is shady imo. (Look at the original college deal details and the Burkle lawsuit). Link to comment Share on other sites More sharing options...
CorpRaider Posted January 30, 2014 Share Posted January 30, 2014 BKS is cheap. I've followed it for quite some time, and even bought it once, but sold it after MSFT rumors made the stock run up fast. There is some optionality with the NOOK unit with a possible MSFT buyout but I think the chance of that happening is quite slim. While they can get out of Nook hardware, they can't realistically dump the Nook unit -- if they're trying to exist over the long term. They can't be the largest B&M bookstore and not have e-books available. Finally, Riggio scares me -- he is shady imo. (Look at the original college deal details and the Burkle lawsuit). That pretty much sums it up for me. Hard to tell if malone is driving this train now. Link to comment Share on other sites More sharing options...
yadayada Posted January 30, 2014 Author Share Posted January 30, 2014 I read that he had plans with riggio to take it over and make something out of the NOOK business. But now that riggio has basicly given up, im not sure what malone wants to do. Thx for the comments anyway, has been helpfull. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted January 30, 2014 Share Posted January 30, 2014 Doesn't Riggio own a lot of shares? I think Riggio wants to operate the bricks and mortar business and he's really interested in the college textbooks business. *I own LMCA. Seems like a better idea than BKS. Link to comment Share on other sites More sharing options...
krazeenyc Posted January 30, 2014 Share Posted January 30, 2014 Doesn't Riggio own a lot of shares? I think Riggio wants to operate the bricks and mortar business and he's really interested in the college textbooks business. *I own LMCA. Seems like a better idea than BKS. Unlikely since Riggio used to own the college bookstore business and sold it to BKS at inflated prices (additionally, he did other little things to benefit his inner circle at the college bookstores at the expense of BKS shareholders. Link to comment Share on other sites More sharing options...
CorpRaider Posted January 30, 2014 Share Posted January 30, 2014 I dunno but I really think the B&M could be a nice business cash cow. The decline in print has tailed off recently and yuppies and intelligentsia in suburban america have to have somewhere to hang and buy lates and board games and the like. I could see them going to a membership model like a specialized costco or something. Personally, were I a master of the universe I would be looking to make a run at them. Link to comment Share on other sites More sharing options...
krazeenyc Posted February 21, 2014 Share Posted February 21, 2014 http://www.marketwatch.com/story/remember-marianos-frozen-margaritas-on-national-margarita-day-february-22-2013-2013-02-21?reflink=MW_news_stmp Link to comment Share on other sites More sharing options...
yadayada Posted February 21, 2014 Author Share Posted February 21, 2014 opportunity was there at 13-14$, but now at more then 17$ it is gone. Didn't act on it. No margin o safety now. Link to comment Share on other sites More sharing options...
Yours Truly Posted February 21, 2014 Share Posted February 21, 2014 opportunity was there at 13-14$, but now at more then 17$ it is gone. Didn't act on it. No margin o safety now. Is the market not believing this will go through? still $5 on the table for the arbs Link to comment Share on other sites More sharing options...
rykelsap Posted February 21, 2014 Share Posted February 21, 2014 G Asset Management is not a credible buyer. The firm does not have a lot of capital under management and has previously issued press releases on BKS calling for a corporate split in 2012 while holding a position primarily made up of short duration, out of the money call options. See the below link: http://www.sec.gov/Archives/edgar/data/890491/000114420412009774/v303094_ex99-4.htm Link to comment Share on other sites More sharing options...
yadayada Posted March 2, 2014 Author Share Posted March 2, 2014 what the hell at the latest quarter? 65 million of net income. But it wasn't breaken down how much they made from college and their bookstores. Gross margin improved from 24 to 30%. Pretty much shot up to 19$ :( . Wish i would have taken a gamble. Link to comment Share on other sites More sharing options...
DCG Posted March 2, 2014 Share Posted March 2, 2014 How much real estate does BKS own? Link to comment Share on other sites More sharing options...
DCG Posted March 3, 2014 Share Posted March 3, 2014 I've been watching BKS for a while, and have been warming to the idea - mainly because I think it's likely worth more 1.2 Billion, but struggle with predicting what this company will look like several years out. I'm kindof surprise it's still doing the amount of sales that it is, so some people are apparently still buying books from them instead of Amazon for whatever reason. I read their 2013 annual report and am still having a hard time finding out whether they own any of their retail locations or just lease. Link to comment Share on other sites More sharing options...
DCG Posted April 3, 2014 Share Posted April 3, 2014 hmm..down over 14% on news that Liberty Media sold most of their shares. Link to comment Share on other sites More sharing options...
CorpRaider Posted June 25, 2014 Share Posted June 25, 2014 G$$%^%&@ >:( Did anyone actually pull the trigger? If so, well done. Link to comment Share on other sites More sharing options...
yadayada Posted June 25, 2014 Author Share Posted June 25, 2014 G$$%^%&@ >:( Did anyone actually pull the trigger? If so, well done. results oriented imo. Price could have stayed 14$ for another 3 years easily. Or maybe it slowly climbed to 18$. That would have been a bad return. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted June 26, 2014 Share Posted June 26, 2014 I think that this optimism is misplaced. The reason for keeping the two companies together is because you can use the physical stores to push adoption of the Nook. Splitting up the companies will make this tricky. I suspect that there will not be an agreement that forces Barnes to push the Nook in its physical stores. John Malone wants out and he's no slouch when it comes to investing. I think that Liberty will exit at a good price. Link to comment Share on other sites More sharing options...
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