Y.TO - Yellow Media

[siddharth18]

A lot of folks have been burned in the past by this name and vowed not to touch it for the rest of their lives.

 

For the remaining folks that are able to discount past issues and view this in terms of an objective - risk/reward type bet, here are the numbers:

 

http://i.imgur.com/5cUMkMa.png

 

Here is the Canaccord research report https://research.canaccordgenuity.com/_layouts/researchnoteviewer.aspx?pubid=98678

 

 

http://i.imgur.com/8VqQUHZ.png

It is noteworthy that during 2013 thus far (first nine months), Yellow Media has generated $7.19 per share in FCF.

 

The FCF decline resulting from decline in print revenues will be somewhat offset by digital revenues and lower interest costs going forward as the company mandatorily and voluntarily retires its debt.

 

Of the few people in the world who have had the actual prior experience to re-route the business from print to digital, Yellow has chosen one of them.

[Capitalist World]

Just revisiting this old standby. Sold the stock recently for 300% return and now I see some fund managers holding this  (Dynamic and Fidelity) so it was time to say goodbye. I left some money on teh table but rotated to gold stocks a few weeks ago for a short term spec.  working nicely now 

[yadayada]

For people curious about the online segment, check this out:

 

https://www.google.com/finance?q=STO%3AENRO&sq=eniro%20ab&sp=1&ei=Hg9LU-DQLsL3wAPwtAE

 

It is a swedish version of this company I think. It was trading for a 6 PE earlier last year. I didnt really know as much about investing as I do now tho. I do think this was undervalued now. It looks like they do have some kind of moat with that business search engine. If you can construct roughly what the margins are, that part of the business deserves a higher multiple I think.

 

From reading the eniro annual report, that search engine is 53% of revenue. And only 6% or so is SEO stuff.

 

Does anybody use anything other then google to search for local businesses? I have never heard of that. It looks like that search engine business has a moat and would be a high margin business.  Plus there is growth.

 

19% of Eniro's business is print, 19% is voice. But they broke out print and online, and there they have 24% ebitda margins, and they are increasing with online growing and print shrinking. Not sure what the similarities are, but it looks like they actually provide some value apparantly?

 

 

 

Ok if you assume 25% ebitda margins for online, then ebit would be roughly 50-75 million for online. For eniro actual intangible cash charges is much lower the amortization, like less then halve. Not sure if that is right. with 400m$ in online revenue, that would be 100$m ebitda - 50-85m$ roughly. And if it grows a bit then this thing generates 50-90m$ in FCF. If you think they have a moat with that business (there seems to be value in their database? basicly print translating to online) then this would deserve a pretty high multiple.

 

There are large NOLS right? And you can discount interest payments, because they will be mostly paid down by print business. So  depending on how sure you are about their search local business search engine, which should be worth the most by far, then you get a debt free company with a online search business for 700m$ that can generate 50-90m$ in FCF with a very high return on capital.

 

Interesting that the swedish market seems to think it deserves a high multiple.

 

Take all this with a grain of salt tho, I spent very little time on this so far. But it looks worth checking out.

 

And would love to hear about people using these services, why the hell doesnt google do this? Is their directory so valuable that google cannot move in on this?

 

Also SEO stuff is a tiny part of eniro's online business, so it seems that is probably the same for the canadian version right?

[yadayada]

to split these posts up in two, I think currently ebitda margins are in the 40's because the % of their print segment is still very high. If you look at eniro , print % is only 14% now i think last year, and ebitda margins have been stable over the years.

 

Also Eniro seems to be in a place where Yellow media will be in a few years, as their online transformation has been completed already.

 

They did decline a little bit this year for Eniro, but i think that is because print segment is so small now that margins there are dragging down the online segment. It looks like they have a moat with their proprietary database?

 

If you take FCF multiple of eniro, that is 700m ebitda - 160m interest- 100m taxes and -150 in investing that is 290m in FCF. Voice would be another 70m. But with a market cap of 5.2 bn and 2 bn in net debt that is a multiple of 24x.

 

and Yellow has 400m in net debt, but their print section is still larger. You can discount the print section and all the debt and say 700/70m = a 14x multiple. Or a 8-9x multiple if you think actual cash charges will be the same % of the amortization charges as with Eniro.

 

If you look at Eniro in 2011, they had 800m in amortization and only 114 million in actual cash charges. Which makes sense I think because once everything is working it takes little money to maintain it. It is basicly a online yellow pages.

 

So if you think actual cash charges will be only a fraction of the currently expanding amortization charges then this could be 100m$ in FCF a few years from now. Given that there is a little bit of growth, high return on capital and a moat (?) and by that time almost no debt, it would deserve more like a 15x-20x multiple at the very least.

 

Also I am discounting the print business 100% here.

 

Plus i dont think you can completly discount their print business.

 

K done rambling now, please shoot this down, as it now looks very interesting :) .

[yadayada]

this is interesting:

http://searchengineland.com/confessions-of-a-yellow-pages-user-76937

 

 

[tengen]

I thought Yellow Media could continue to have a decent niche business (albeit at greatly reduced margins from the old printed directory business). My reasoning was that YLO would have better information since businesses paid to be listed, so you'd never get search results that were out of date. However, on the few occasions I tried using their search engine to find a local business, it gave me information that was no longer valid (phone numbers had changed or the business had ceased to exist). This put me completely off YLO.

[yadayada]

i thought about their moat, and it seems their online business is just destined to fail. for small businesses you can use google or yelp just as well, probably better then YP. And for restaurants tripreport.com is just so much better. The whole layout, the number of reviews, and the accuracy of reviews. YP feels clunky if you compared it to tripreport. Especially in thinly populated areas.

 

I only found out about tripreport last year, and im pretty savvy about these things. So I think in 6-7 years, people will figure out beter ways to find things, and that wont be YP. They dont really offer any added value, and with more and more small businesses listing on google, their database doesn't hold much value. When people become more rational about these things become aware of the better alternatives, then they will go bankrupt.

 

You could argue tho that that might take a long time, as alot of people still have the habbit of reaching for yellow pages for these things.

[Philbert77]

So I think in 6-7 years, people will figure out beter ways to find things, and that wont be YP. They dont really offer any added value, and with more and more small businesses listing on google, their database doesn't hold much value. When people become more rational about these things become aware of the better alternatives, then they will go bankrupt.

 

Well... i guess not. Most recent earnings press release:

 

 Encouraging revenue outlook. “The trends in our bookings, although suggesting a very modest additional hit to our revenue curve for another couple of quarters, are nearing pre-COVID levels. And our analysis suggests that the bulk of our COVID-related revenue declines are due to lower spending levels by individual customers, which we believe can be regained, rather than business closures or increased losses of accounts.”

 Net Debt extinguished. “As of today, our cash on hand, approximately $110 million, exceeds our debt, so our net debt excluding lease obligations is better than zero. And we recommit to fully paying off our Exchangeable Debentures, at par, on or around May 31, 2021.”

 Major new revenue initiatives. “Over the next 120 days, we are phasing three exciting new products into our offering. Also, by year-end, we expect to have doubled our telesales capacity, to significantly ramp up our acquisition of new accounts. These moves, long in the making and testing, are carefully designed to further bend our revenue curve toward stability.”

 Quarterly dividend declared. “Our Board has declared a dividend of $0.11 per common share, to be paid on September 15, 2020 to shareholders of record as of August 28, 2020.”

 Doubling of contribution to pension plan. “As we announced we would, we have begun doubling the currently required contributions to our Defined Benefit Pension Plan, for the benefit of our retirees.”

 Launching purchases of stock. “Today we are also announcing an NCIB to repurchase shares of our common stock.”

 

https://corporate.yp.ca/media/filer_public/9e/ab/9eabf51a-f48e-4f4e-b389-9b6b61084b7c/press_release.pdf

[valuedontlie]

man it's been a while since i've looked at this...

 

still looks like a melting ice cube... no end in sight to revenue declines?

[Philbert77]

Revenue is still declining but they have aggressively paid off debt, have crazy cash flow and have reinstated the dividend. If COVID hadn’t hit I suspect they would have been much closer to stopping the decline or even had some revenue growth.