Junto Posted August 4, 2014 Share Posted August 4, 2014 I bought a position in TAXI today. I think it is undervalued here. Here is a nice write-up at SeekingAlpha: http://seekingalpha.com/article/2352885-survey-shows-the-uber-story-is-overblown-taxi-remains-dominant Earnings are out today: Medallion Financial Corp (NASDAQ: TAXI) reported Q2 EPS of $0.28, $0.01 better than the analyst estimate of $0.27. The Company also announced a distribution of $0.24 per share for the 2014 second quarter, up from $0.22 per share in the 2013 second quarter. The Company further announced that its Board of Directors authorized an increase in the Company’s stock repurchase authorization to $20 million, an increase from the $6 million still remaining under its previously authorized program. http://www.businesswire.com/news/home/20140804005613/en/Medallion-Financial-Corp.-Reports-2014-Quarter-Results#.U9_qpPldVd8 Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 5, 2014 Share Posted August 5, 2014 I am glad somebody started a thread on this. I remember looking at this years ago at $5/share and thinking it was an interesting, niche company. My big concern today is how will the value of taxi medallions be affected by Uber & Lyft? Link to comment Share on other sites More sharing options...
LC Posted August 5, 2014 Share Posted August 5, 2014 Ooh cool company I've never heard of...wish I knew about it sooner. I personally think Uber built a better mousetrap, but I don't know this industry. Link to comment Share on other sites More sharing options...
peter1234 Posted August 5, 2014 Share Posted August 5, 2014 My big concern today is how will the value of taxi medallions be affected by Uber & Lyft? +1 Article has nice background info but could not find info on valuation... ??? Link to comment Share on other sites More sharing options...
timidbid Posted August 5, 2014 Share Posted August 5, 2014 The NYC Taxi and Limousine Commission has pricing and transfer data here: http://www.nyc.gov/html/tlc/html/about/average_medallion_price.shtml Link to comment Share on other sites More sharing options...
Junto Posted August 5, 2014 Author Share Posted August 5, 2014 My big concern today is how will the value of taxi medallions be affected by Uber & Lyft? +1 Article has nice background info but could not find info on valuation... ??? Agreed expansion on valuation could be done. I am not as concerned with Uber. Disruptor, definitely. Market killer, not likely. Remember TAXI doesn't invest directly in medallions, they lend against them. This allows for them to underwrite risk and adjust accordingly. The valuation would have to fall 30% overnight for it to start to impact the portfolio materially. Meanwhile, The NYC Taxi and Limousine Commission has pricing and transfer data here: http://www.nyc.gov/html/tlc/html/about/average_medallion_price.shtml Valuations have been stable. Add on top of this earnings are currently being diversified into recreational consumer loans and home finance loans into a strengthening economy (at much better yields), I feel positive about the direction of the company and management's awareness of their position in the marketplace and actions needed to further grow and strengthen the business. Book value is $11.01 per release, earnings should be $1.10+ for 2014, buyback authorized for 7% of float ($20MM) and current yield is 8%+. I don't need much more for me to see this is undervalued in my viewpoint comparative to other businesses in the marketplace today. Link to comment Share on other sites More sharing options...
kevin4u2 Posted August 5, 2014 Share Posted August 5, 2014 I read somewhere that Chicago delayed the results of the latest medallion sale, possible because they didn't receive any bids. I haven't confirmed this to be true. Regardless, what is any business worth facing a huge onslaught of competition that is hugely disruptive, offering a much better product? Most of the debates I have listened to recently were discussing whether or not the government should compensate medallion owners because they were sold a form of property right. Remember change is the enemy of any business. Link to comment Share on other sites More sharing options...
Junto Posted October 17, 2014 Author Share Posted October 17, 2014 Not sure if anyone else has been adding aggressively down here but I have. The one risk that I am watching is the diversification in lending into new product types and away from TAXI medallions. Although good for diversification, it will be important to see how the loss history shakes out long-term. Otherwise, I really like how they are managing the business right now. Link to comment Share on other sites More sharing options...
oddballstocks Posted October 17, 2014 Share Posted October 17, 2014 This is a really interesting idea for uniqueness alone. I like that they aren't in the taxi business, but are lending to the taxi business. If this is looked at as a typical business I'm not that impressed, but realizing that they're a lender the story's different. If this were a traditional bank this would be extremely undervalued given their earnings. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted October 17, 2014 Share Posted October 17, 2014 I like that they aren't in the taxi business, but are lending to the taxi business. To me... they are in the taxi business. A loan simply slices up the underlying business into equity and debt. Combined, the equityholders and the debtholders own the business. If the loan defaults, then the bank should seize collateral and find somebody to run the business. In practice, most banks don't like to seize their collateral because they don't know how to run the business. Which means that they do a lot of silly things to avoid seizing collateral. Link to comment Share on other sites More sharing options...
Junto Posted October 17, 2014 Author Share Posted October 17, 2014 I like that they aren't in the taxi business, but are lending to the taxi business. To me... they are in the taxi business. A loan simply slices up the underlying business into equity and debt. Combined, the equityholders and the debtholders own the business. If the loan defaults, then the bank should seize collateral and find somebody to run the business. In practice, most banks don't like to seize their collateral because they don't know how to run the business. Which means that they do a lot of silly things to avoid seizing collateral. Banks are not built to be in the business of running other businesses. They liquidate and/or depending on size, appoint receivers to manage and liquidate/restructure. The TAXI medallion lending is niche, small business lending program that is ultimately collateral dependent and a liquid market. A foreclosed medallion in September 2014 sold for $900,000. Most sell between $900,000 and $1,200,000 depending on individual vs corporate ownership. http://www.nyc.gov/html/tlc/html/about/average_medallion_price.shtml Ultimately, the stock is very undervalued where it has been this past week. Up nicely today, but I still expect it to run as shares are repurchased and earnings continue to flow through. Business is not being disrupted materially to reflect the current low valuation placed on the stock. Link to comment Share on other sites More sharing options...
Avyalake Posted November 27, 2014 Share Posted November 27, 2014 Under Pressure From Uber, Taxi Medallion Prices are Plummeting "There was only one medallion sale in September, followed by nine in October. Ominously, five of the 10 sales in those two months were foreclosure sales" " The trouble in New York’s market was also partly obscured by a flaw in the average price reports that were published monthly by the city’s taxi commission until September. Those reports erroneously said average prices for individual medallions had stayed largely the same since setting a record of $1.05 million in June 2013. In fact, individual medallions have traded below $1 million for most of the last year. But the commission excludes from its statistics any transaction at a price more than $10,000 below the previous month’s reported average." http://mobile.nytimes.com/2014/11/28/upshot/under-pressure-from-uber-taxi-medallion-prices-are-plummeting.html?referrer= Link to comment Share on other sites More sharing options...
matts Posted November 28, 2014 Share Posted November 28, 2014 Under Pressure From Uber, Taxi Medallion Prices are Plummeting "There was only one medallion sale in September, followed by nine in October. Ominously, five of the 10 sales in those two months were foreclosure sales" " The trouble in New York’s market was also partly obscured by a flaw in the average price reports that were published monthly by the city’s taxi commission until September. Those reports erroneously said average prices for individual medallions had stayed largely the same since setting a record of $1.05 million in June 2013. In fact, individual medallions have traded below $1 million for most of the last year. But the commission excludes from its statistics any transaction at a price more than $10,000 below the previous month’s reported average." http://mobile.nytimes.com/2014/11/28/upshot/under-pressure-from-uber-taxi-medallion-prices-are-plummeting.html?referrer= Wow, that's pretty shocking to me. I assumed a distortion of reported prices like that would have been widely reported before now. Thanks for posting. Link to comment Share on other sites More sharing options...
Junto Posted December 2, 2014 Author Share Posted December 2, 2014 I have continued to average lower into TAXI as of late. Now one of my largest holdings. I stand by my thesis and don't see the movement in medallion prices significantly impacting the lending position of TAXI and certainly don't think the discount to Net Asset Value is warranted. Wish I would have picked up a couple thousand more shares in the low $9.00 range yesterday but I guess work takes priority. TAXI did start on the buyback program and through 11/28 bought 122,077 shares @ $10.40 avg. Hope more has followed into yesterday and throughout the month as it trades at a material discount and plenty of capacity is available under the buy back program. As of November 28, 2014, $18,730,948 remains available for future stock repurchases vs a market capitalization of $251MM at 12/1 close per google finance. Sec filing: http://1.usa.gov/1rTlMkO Link to comment Share on other sites More sharing options...
Avyalake Posted December 3, 2014 Share Posted December 3, 2014 New York Taxi Medallion Prices Fall Again Individual taxi medallions are one of two main classes of yellow taxi licenses issued by the city. The other class, corporate or “mini-fleet” medallions, has also declined in value, though there were no reported sales of corporate medallions in November. In October, six of that type were sold at an average price of $987,500, down 25 percent from a peak price of $1.32 million in May 2013. There are some interesting notes on the loans in the comments section of the article. Link to comment Share on other sites More sharing options...
Junto Posted December 3, 2014 Author Share Posted December 3, 2014 You have to get away from the concern of volatile prices. There is cushion in the price and the loan portfolio as loans were not all made in last two or three years... I am comfortable investing at these levels although I do feel the against the tide investment thesis pressure like I did when I invested in SPMD...now DXM which worked out well...FTR...which worked out well...and the banks during the depth of the crisis. The counter thesis is always that new technologies are destroying the existing business and that the business fundamentals are changing more rapidly than the business's management can respond. In the end, my thesis that it isn't changing as rapidly as the media is describing and that the business can reorganize and grow through good management while buying the business at a discount to comparative businesses (reversion to the mean) has proven correct. It is going to be rocky here while the media is riding the train but as it quiets down and performance is proven, I expect to collect my substantial dividends, see further buyback continued (more bought on Dec 1 at 9.40/share avg,) and see the market move this back to where it should be trading which right now I estimate to be around $13-14/share. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted December 3, 2014 Share Posted December 3, 2014 You have to get away from the concern of volatile prices. There is cushion in the price and the loan portfolio as loans were not all made in last two or three years... I am comfortable investing at these levels although I do feel the against the tide investment thesis pressure like I did when I invested in SPMD...now DXM which worked out well...FTR...which worked out well...and the banks during the depth of the crisis. The counter thesis is always that new technologies are destroying the existing business and that the business fundamentals are changing more rapidly than the business's management can respond. In the end, my thesis that it isn't changing as rapidly as the media is describing and that the business can reorganize and grow through good management while buying the business at a discount to comparative businesses (reversion to the mean) has proven correct. It is going to be rocky here while the media is riding the train but as it quiets down and performance is proven, I expect to collect my substantial dividends, see further buyback continued (more bought on Dec 1 at 9.40/share avg,) and see the market move this back to where it should be trading which right now I estimate to be around $13-14/share. Admittedly, I know very little about the business but loaning on assets that are declining is a very dangerous business. The point of a down-payment on a loan is to have the borrower have incentive to pay back the loan. If prices continue to drop then there will likely be little incentive to avoid bankruptcy and start a new company that does the same thing. This is a very real phenomena for development loans at banks (company goes bankrupt, bank auctions land underlying loan, new corp re-buys that very same land; I kid you not). What are your expected returns and over what time period do you expect your thesis to play out? Do prices have to stabilize at these levels for TAXI to stay profitable? What is the break-even point? Luckily there are enough people employed through the industry that they could be artificially protected but this is not a necessary service such as FTR. TAXI is competing in the ultimate commodity business, loaning money, and this is a small enough business to let fail and sell off assets. Link to comment Share on other sites More sharing options...
Junto Posted December 3, 2014 Author Share Posted December 3, 2014 Schwab good points. loaning on assets that are declining is a very dangerous business. Completely agree. It is very dangerous and I think that is where management is demonstrating its mindset by actively diversifying into new asset classes. There is risk in this change in direction as well which I have mentioned and am tracking closely. They may still be lending into the marketplace for medallions; however, I would expect they are taking larger down payments and doing more thorough global cash flow analysis (considering all income sources and repayment options) on their customers. Smaller institutions are generally still evolving in this area and it is a regulatory hot button and has been for a while now. See this article from CU Today(http://bit.ly/1vnrKiW) Spreads are surely also rising on the loans, although I have not done research to confirm this. I am completely comfortable with the lending business as I live it every day. My target is two to four years. Meanwhile I expect my dividend to continue at 9%+. Note from the 10-K Investment Characteristics section: Medallion Loans. Our medallion loan portfolio consists of mostly fixed-rate loans, collateralized by first security interests in taxicab medallions and related assets (vehicles, meters, and the like). The portfolio was originated at an approximate loan-to-value ratio range of 50-75%. We estimate that the average loan-to-value ratio of all of the medallion loans was 36% as of December 31, 2013. In addition, we have recourse against a vast majority of the owners of the taxicab medallions and related assets through personal guarantees. Its a good risk/reward return in my view given my current review of the company's financials and actual changes in the marketplace. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted December 3, 2014 Share Posted December 3, 2014 Approximately how many medallions are there in a large city? How much of the market do these sales actually represent? I haven't been able to find a simple answer. This is interesting though. Thanks for the article Junto. I am starting to see the hysteria thesis and this is a cool website. Link to comment Share on other sites More sharing options...
Wilson-TPC Posted December 3, 2014 Share Posted December 3, 2014 Approximately how many medallions are there in a large city? How much of the market do these sales actually represent? I haven't been able to find a simple answer. This is interesting though. Thanks for the article Junto. I am starting to see the hysteria thesis and this is a cool website. It's written in the article quoted on the first post. "As a large majority of TAXI's portfolio is concentrated in the NYC market, it is important to understand how this specific market operates. There are currently 13,605 New York taxicab medallion licenses in existence, 6,000 green boro taxi licenses (servicing northern Manhattan and the outer boroughs), and about 40,000 for-hire cars (FHVs), including Uber cars, registered with the NYC Taxi & Limousine Commission (NYC TLC Taxicab 2014 Factbook). There are two types of medallions: individual and corporate. Individual medallions have historically sold at a discount to their counterpart primarily because owners of individual medallions must drive their own taxi for a specific number of hours per year. In October 2011, medallion sales completed their long trek to $1 million, much to no surprise." Link to comment Share on other sites More sharing options...
Wilson-TPC Posted December 3, 2014 Share Posted December 3, 2014 Thanks Junto! I never even knew there was a company out there that gave loans to Taxi Medallions. I understand that Taxi Medallions comprise ~50% of the loan portfolio, and it also owns ~20-25% of the medallions in NYC. Don't you think that the medallions are overpriced and wouldn't that depress both the medallions it owns and the collateral values of the loans? Thanks. Link to comment Share on other sites More sharing options...
Junto Posted December 4, 2014 Author Share Posted December 4, 2014 it also owns ~20-25% of the medallions in NYC. Not sure where you are getting this information...it certainly isn't correct based on my review. FYI, their 10-K puts the market for New York City Taxi Medallions at: we estimate that the total value of all of New York City taxicab medallions and related assets such as the vehicle, taximeter, and roof lights exceeded $16.6 billion as of December 31, 2013. The foreclosed properties on their balance sheet are related to Chicago Taxi medallions where they own 159 medallions, 5 of which are handicap accessible. The 159 medallions are carried at a fair value of $48,739,000 on the consolidated balance sheet at September 30, 2014, compared to $50,403,000 and $49,928,000 at December 31, 2013 and September 30, 2013, and are considered non-qualifying assets under the 1940 Act. Pursuant to a municipal ordinance, the number of outstanding medallions is capped at 6,995 as of December 31, 2013 in Chicago. Going to see another drop down on these but not overly concerned here. Risk here on a reduction of unrealized gains, core earnings expectations continue. Here is also an article from today of interest on TAXI at NY Times "How Our Taxi Article Happened to Undercut the Efficient Market Hypothesis" http://nyti.ms/1rYHpju Link to comment Share on other sites More sharing options...
kab60 Posted December 14, 2014 Share Posted December 14, 2014 I'm really starting to like this, apart from the investments in a lacrosse team apparently, but why'd the share count rise so much? 18mil in 2011 according to morningstar, 25mil today. Seems like the company sold a bunch of shares at 16$ and around 11$, and even though that's not too bad with buybacks around 10-11$ today, why dilute shareholders? Link to comment Share on other sites More sharing options...
finetrader Posted December 14, 2014 Share Posted December 14, 2014 Would this company profit from the decline in gasoline price? Link to comment Share on other sites More sharing options...
Junto Posted December 17, 2014 Author Share Posted December 17, 2014 TAXI continues to be a regular buyer of its stock below its net asset value. Several buys over past several days. See 8-k Filings: http://www.sec.gov/cgi-bin/browse-edgar?CIK=taxi&Find=Search&owner=exclude&action=getcompany Link to comment Share on other sites More sharing options...
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