GVC.TO - Glacier Media

[Mephistopheles]

I think someone mentioned that McElvaine is selling to diversify more. It does bother me that Chou is selling though.

 

This should not bother an investor at all, unless the person selling was in a control position and that could reflect something regarding the business.  Managers buy and sell positions all of the time...could be to create liquidity to meet redemptions, or to narrow their ideas and concentrate them, or possibly take tax losses to offset gains from other investments, etc. 

 

Always rely on your own analysis and valuation, not what any manager (including me) tells you or does.  There have been many great managers who have been wrong on valuation of an idea.  In fact, it is certain that every great manager at one time or another has been.  Cheers!

 

You're right. I trust my analysis and am planning to invest on Monday, but you are right in saying that Chou's selling shouldn't bother me.

[Guest hellsten]

I think someone mentioned that McElvaine is selling to diversify more. It does bother me that Chou is selling though.

 

This should not bother an investor at all, unless the person selling was in a control position and that could reflect something regarding the business.  Managers buy and sell positions all of the time...could be to create liquidity to meet redemptions, or to narrow their ideas and concentrate them, or possibly take tax losses to offset gains from other investments, etc. 

 

Always rely on your own analysis and valuation, not what any manager (including me) tells you or does.  There have been many great managers who have been wrong on valuation of an idea.  In fact, it is certain that every great manager at one time or another has been.  Cheers!

 

Yes, there are a lot of reasons to sell a stock. Regarding coattailing, I can't remember if Charlie Munger and Warren Buffett made any mistakes recently. Chou and Klarman have definitely made at least a few mistakes. Investing in cigar-butts vs high-quality is perhaps reason.

 

I wonder if this is something Buffett and Munger would be interested in. I need to look at why they bought LEE and at what price.

 

“Our future depends on remaining the primary source of information in certain subjects of great importance to our readers,” Buffett wrote in a letter to publishers and editors of Berkshire’s daily papers last month. “Technological change has caused us to lose primacy in various key areas, including national news, national sports, stock quotations and employment opportunities. So be it. Our job is to reign supreme in matters of local importance.”

http://www.businessweek.com/news/2012-06-05/buffett-s-berkshire-discloses-stake-in-lee-enterprises

 

I had a very brief look at Lee Enterprises and it seems cheaper than GVC on a FCF basis even after rising more than 100%. FCF has been $50-100 million according to Morningstar.

[Packer16]

As to Lee, the FCF is closer to $50 million which will take close to 20 yrs to pay off versus 3 to 4 for Glacier.  Glacier also has some better business (business info) than Lee.  Finally, if Lee's EBITDA multiple (6.3x) is applied to Glacier, Glacier is a 50 cent dollar.  So Lee has more debt and is more expensive on an enterprise basis but the real issue with Lee's FCF is that it will go to the debt holders (including Buffet) and what is left for the equity holders.  I see Lee as more of a LEAP versus Glacier as  an equity.

 

Packer

[Packer16]

JRN has a large TV segment which adds almost puts JRN in a different category of business (TV broadcasters) and has correspondingly higher multiples (7x EBITDA vs. 4.2x for Glacier).  If Glacier was valued the same as NYT (5.6x EBITDA) then value would be 70% higher.  One aspect of Glacier that is better than the other newspaper companies is its trade paper segment.  As to CFO trends,  they appear to have peaked before the recession and recovered since then.  They have paid down a net amount of $13 million since 2007 including paying for the acquisitions since then.

 

 

Packer

[krazeenyc]

JRN has a large TV segment which adds almost puts JRN in a different category of business (TV broadcasters) and has correspondingly higher multiples (7x EBITDA vs. 4.2x for Glacier).  If Glacier was valued the same as NYT (5.6x EBITDA) then value would be 70% higher.  One aspect of Glacier that is better than the other newspaper companies is its trade paper segment.  As to CFO trends,  they appear to have peaked before the recession and recovered since then.  They have paid down a net amount of $13 million since 2007 including paying for the acquisitions since then.

 

 

Packer

 

The New York Times is a trophy asset similar to owning a sports team. I expect that if there were an auction for the NYT it would sell for far more than the economics dictate.  I don't think comparing Glacier to the NYT is a good comparison.

[Packer16]

At least with a sports team you get bragging rights and can generate revenue from related real estate.  I am not sure how much a trophy newspaper is worth these days, look at the sale of the Washington Post ($250 million) and Boston Globe ($70 million). 

 

Packer

 

 

[hardincap]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

[tengen]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

[hardincap]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

[Parsad]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

 

http://ca.finance.yahoo.com/news/madison-venture-announces-reorganization-shareholdings-213322648.html

 

Don't automatically assume guys that people are selling when something changes.  Dig deeper and do the research!  Cheers!

 

[hardincap]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

 

http://ca.finance.yahoo.com/news/madison-venture-announces-reorganization-shareholdings-213322648.html

 

Don't automatically assume guys that people are selling when something changes.  Dig deeper and do the research!  Cheers!

 

Yes, this is exactly the kind of info i was fishing for. Thank you.

 

"The majority of the Glacier common shares distributed by the special purpose investment entity were received by shareholders of Madison and their associates and have not been sold."

 

If the 6M shares were distributed to the shareholders, why is Aunger, Grippo and Kennedy reporting just 1M direct ownership in the stock?

[Parsad]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

 

http://ca.finance.yahoo.com/news/madison-venture-announces-reorganization-shareholdings-213322648.html

 

Don't automatically assume guys that people are selling when something changes.  Dig deeper and do the research!  Cheers!

 

Yes, this is exactly the kind of info i was fishing for. Thank you.

 

"The majority of the Glacier common shares distributed by the special purpose investment entity were received by shareholders of Madison and their associates and have not been sold."

 

If the 6M shares were distributed to the shareholders, why is Aunger, Grippo and Kennedy reporting just 1M direct ownership in the stock?

 

Because they are theoretically "beneficial" owners through MV.  It's so that they show what their "direct" ownership is.  You are trying to read into something, when nothing is really there.  Cheers!

[watsa_is_a_randian_hero]

can someone explain if I'm missing something here...I've spent a few hours looking at this, keep coming back because of the speculation this is "the stock" Parsad is loading up on.  But I dont get what all the hubbub is about. 

 

My large take-aways:

-They have local newspapers which make them them better off then their peers...but nonetheless in a risky business.

-Management seems to be highly regarded, and the company has been shareholder-friendly.

-Debt will need to be re'fied at higher rates.

-They've made some recent acquistions that haven't paid off (see goodwill writedowns).

-On the face, the stock does not seem cheap.  It is in a tough industry and sells at 7x EBITDA. 

 

I think I'd want that over 4-5x EBITDA seems like too much given the risk...am I missing something?  Do people expect margins to rebound?  Am I misinterpreting the JV accounting?

 

[Packer16]

The EBITDA multiple is closer to 4.2x or $54 million (annualized $13.4 million from Q2).  The JV accounting has changed from proportional accounting last year.  The business also includes business information/publishing which is more valuable the community newspapers.  In terms of debt refinancing, Glacier has a coverage ratio of over 8 times implying an A or higher credit rating so the 5% interest is not to bad.  The free cash flow is about $30 million including growth cap ex, so you have a FCF yield of about 27%.  Pretty cheap on both an equity and enterprise basis.

 

Packer

[Mephistopheles]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

 

http://ca.finance.yahoo.com/news/madison-venture-announces-reorganization-shareholdings-213322648.html

 

Don't automatically assume guys that people are selling when something changes.  Dig deeper and do the research!  Cheers!

 

Yes, this is exactly the kind of info i was fishing for. Thank you.

 

"The majority of the Glacier common shares distributed by the special purpose investment entity were received by shareholders of Madison and their associates and have not been sold."

 

If the 6M shares were distributed to the shareholders, why is Aunger, Grippo and Kennedy reporting just 1M direct ownership in the stock?

 

Because they are theoretically "beneficial" owners through MV.  It's so that they show what their "direct" ownership is.  You are trying to read into something, when nothing is really there.  Cheers!

 

I'm sorry, just a little confused or am not understanding you properly. Wouldn't the 6M shares now be considered direct ownership since they were distributed? Either way, they are not reported now under either beneficial or direct, so what is the reason for that?

[Parsad]

Cardboard and Parsad saying management owns 33%.. where are you getting that info?

 

Their latest information circular says MVC owns 27%, down from 34% last year. Add 1M shares owned directly by Grippo and Aunger, thats still 28% of the company, not 33%. And it seems management have sold significantly from last year. Am I wrong?

 

I just did a quick check on SEDI.ca and it doesn't show any selling by management or directors. Brian Hayward (director) acquired a few thousand shares in 2012 and Orest Smysnuik (CFO) acquired 16,200 shares in 2012 and another 17,650 in May of this year.  I'm not sure what to make of the transactions for Madison, which are listed as "conversion or exchange" and not "acquisition or disposition".

 

just going by information circular they sold down nearly 18% of their holdings in the past year. not exactly a bullish signal?

 

http://ca.finance.yahoo.com/news/madison-venture-announces-reorganization-shareholdings-213322648.html

 

Don't automatically assume guys that people are selling when something changes.  Dig deeper and do the research!  Cheers!

 

Yes, this is exactly the kind of info i was fishing for. Thank you.

 

"The majority of the Glacier common shares distributed by the special purpose investment entity were received by shareholders of Madison and their associates and have not been sold."

 

If the 6M shares were distributed to the shareholders, why is Aunger, Grippo and Kennedy reporting just 1M direct ownership in the stock?

 

Because they are theoretically "beneficial" owners through MV.  It's so that they show what their "direct" ownership is.  You are trying to read into something, when nothing is really there.  Cheers!

 

I'm sorry, just a little confused or am not understanding you properly. Wouldn't the 6M shares now be considered direct ownership since they were distributed? Either way, they are not reported now under either beneficial or direct, so what is the reason for that?

 

Those other shares were distributed to other partners in the Madison Ventures entity, thus they don't belong to the three board members or entities they control.  Cheers! 

[hardincap]

how do you figure 33% ownership of the co by management?

[Parsad]

how do you figure 33% ownership of the co by management?

 

It was never 33% ownership by management, but by the entity they controlled...Madison Avenue Ventures.  So yes, they controlled 33% of the stock, but 6M was distributed to "shareholders and associates" of MAV, who have not sold their stock, and the remaining 27% held in MAV plus distributions from the dissolved MAV entity, remain in control of management.  But what does this have to do with anything?!  Cheers!

[hardincap]

it matters because it tells us how much "skin in the game" management has. you and cardbooard cited 33% ownership by mgmt, but now it appears this isnt correct. mgmt are principals of MVC, which itself owns 27%. this doesnt necessarily mean management have that level of skin in the game, because we don't know how much of MVC mgmt owns directly. correct?

[watsa_is_a_randian_hero]

The EBITDA multiple is closer to 4.2x or $54 million (annualized $13.4 million from Q2).  The JV accounting has changed from proportional accounting last year.  The business also includes business information/publishing which is more valuable the community newspapers.  In terms of debt refinancing, Glacier has a coverage ratio of over 8 times implying an A or higher credit rating so the 5% interest is not to bad.  The free cash flow is about $30 million including growth cap ex, so you have a FCF yield of about 27%.  Pretty cheap on both an equity and enterprise basis.

 

Packer

 

Thanks packer, I figured it might be something with the JV accounting. 

 

I haven't dug very deep on this...but is there any debt at the JV level?  IE in looking at a true EBITDA multiple, we're adjusting EBITDA higher for proportional ownership, but does the numerator need to be adjusted higher for any proportional debt?

[Parsad]

it matters because it tells us how much "skin in the game" management has. you and cardbooard cited 33% ownership by mgmt, but now it appears this isnt correct. mgmt are principals of MVC, which itself owns 27%. this doesnt necessarily mean management have that level of skin in the game, because we don't know how much of MVC mgmt owns directly. correct?

 

This is semantics.  Prem doesn't own all of Sixty-Two Corporation, so should we be concerned that he doesn't have enough at risk?  I don't own all of Corner Market Capital, so should that negate how committed I am to making sure CMC doesn't lose money?  I think this is somewhat irrelevant.  Cheers!

[Mephistopheles]

As a follow-up and to consolidate previous information posted elsewhere, I propose a clarification to the 'land' value on the balance sheet. 

 

As of 12/31/12, land was valued at historical cost of $17.7 million.  Of that total, roughly $7m was due to acquisitions in the last few years leaving $10m.  Of the $10m, most of that land was purchased in the '06-'10 timeframe.  I therefore suggest that land values are not as extremely undervalued as previously mentioned as the stated value does not represent land that has been on the books for 20+ years.

 

Cheers

JEast

 

It's also worth noting that a bulk or all of the land was reappraised to fair value due to the switch to IFRS in 2010. It went from being worth $6.5 M on 12/31/09 to $11.5 M on 1/1/10. So yes, it's probably booked at market value, more or less.

 

From 2010 AR:

 

"The Company applied the deemed cost election allowed under IFRS 1 by which the Company adjusted certain of its land and building assets to their fair value at transition to IFRS. This resulted in an overall increase to the carrying value of these assets by $10.9 million at January 1, 2010, the date of transition to IFRS."

[hardincap]

it matters because it tells us how much "skin in the game" management has. you and cardbooard cited 33% ownership by mgmt, but now it appears this isnt correct. mgmt are principals of MVC, which itself owns 27%. this doesnt necessarily mean management have that level of skin in the game, because we don't know how much of MVC mgmt owns directly. correct?

 

This is semantics.  Prem doesn't own all of Sixty-Two Corporation, so should we be concerned that he doesn't have enough at risk?  I don't own all of Corner Market Capital, so should that negate how committed I am to making sure CMC doesn't lose money?  I think this is somewhat irrelevant.  Cheers!

 

Look, you said management owns a third of the company, and I'm merely pointing out that this isnt true. Did I say anything else, like this company is a bad investment, or management doesnt have enough skin in the game? No. I'm perplexed as to why you are interpreting it that way. I'm merely trying to get the facts straight.

[Parsad]

it matters because it tells us how much "skin in the game" management has. you and cardbooard cited 33% ownership by mgmt, but now it appears this isnt correct. mgmt are principals of MVC, which itself owns 27%. this doesnt necessarily mean management have that level of skin in the game, because we don't know how much of MVC mgmt owns directly. correct?

 

This is semantics.  Prem doesn't own all of Sixty-Two Corporation, so should we be concerned that he doesn't have enough at risk?  I don't own all of Corner Market Capital, so should that negate how committed I am to making sure CMC doesn't lose money?  I think this is somewhat irrelevant.  Cheers!

 

Look, you said management owns a third of the company, and I'm merely pointing out that this isnt true. Did I say anything else, like this company is a bad investment, or management doesnt have enough skin in the game? No. I'm perplexed as to why you are interpreting it that way. I'm merely trying to get the facts straight.

 

My point was that they controlled 33% (at one point) and still own about 28% after the distributions to other investors...who are probably family, friends and children trusts.  It's not like it's Sardar and he owns 1.5% of BH and controls 18%.  It's just something that really isn't relevant to the actual thesis of the investment, and there was no intent to mislead anyone.  Cheers!

[hardincap]

it matters because it tells us how much "skin in the game" management has. you and cardbooard cited 33% ownership by mgmt, but now it appears this isnt correct. mgmt are principals of MVC, which itself owns 27%. this doesnt necessarily mean management have that level of skin in the game, because we don't know how much of MVC mgmt owns directly. correct?

 

This is semantics.  Prem doesn't own all of Sixty-Two Corporation, so should we be concerned that he doesn't have enough at risk?  I don't own all of Corner Market Capital, so should that negate how committed I am to making sure CMC doesn't lose money?  I think this is somewhat irrelevant.  Cheers!

 

Look, you said management owns a third of the company, and I'm merely pointing out that this isnt true. Did I say anything else, like this company is a bad investment, or management doesnt have enough skin in the game? No. I'm perplexed as to why you are interpreting it that way. I'm merely trying to get the facts straight.

 

My point was that they controlled 33% (at one point) and still own about 28% after the distributions to other investors...who are probably family, friends and children trusts.  It's not like it's Sardar and he owns 1.5% of BH and controls 18%.  It's just something that really isn't relevant to the actual thesis of the investment, and there was no intent to mislead anyone.  Cheers!

 

I beg to differ. Wouldn't you say having 33% direct ownership and, say, 15% direct ownership makes a big difference, especially when we're talking about a micro cap?

 

edit: apologies for taking the discussion off a tangent.