Packer16 Posted December 12, 2014 Share Posted December 12, 2014 As to LatAm cable cos, I think they are nice businesses like they are in the rest of the world. Thanks for the heads up on the Liberty spin-co that will includes LatAm cable. I have owned NET, a Brazilian cable co in the past when it was selling for less than 5x EBITDA. NET has been in essence been purchased by TelMex so I no longer follow it that closely. As to Shun Ho Resources, I like to hold the same shares as the operator and in this case it is Shun Ho Resources versus Shun Ho Technology and the discount to NAV and EBITDA multiples are about the same. Packer Link to comment Share on other sites More sharing options...
Liberty Posted December 12, 2014 Share Posted December 12, 2014 Thank you Packer! Link to comment Share on other sites More sharing options...
cameronfen Posted December 13, 2014 Share Posted December 13, 2014 Thanks for your help! Link to comment Share on other sites More sharing options...
west Posted December 14, 2014 Share Posted December 14, 2014 I think you've mentioned, either in this thread or one of your idea ones, that you sometimes have to do credit analysis on a company. Are there any books you recommend on this topic? TIA! Link to comment Share on other sites More sharing options...
Packer16 Posted December 14, 2014 Share Posted December 14, 2014 Yes, one good book is How to Make Money with Junk Bonds by Robert Levine. It also provides guidelines for option adjusted spreads for various junk bond ratings. PAcker Link to comment Share on other sites More sharing options...
Guest JoelS Posted December 14, 2014 Share Posted December 14, 2014 Packer, how do you compare first world markets v second tier? i.e. If you have a 70c dollar in the US v a 30c dollar in Greece, which do you choose? How do you assess the country risk? It seems time is often not on your side with these second tier market investments because the country may default implicitly or explicitly. TIA. Link to comment Share on other sites More sharing options...
Packer16 Posted December 15, 2014 Share Posted December 15, 2014 I think it depends upon the situation. There are many corporate credits in Greece that are higher quality than the sovereign. This is not a typically situation. Some examples are Intralot and Coca Cola Hellas. These bonds trade at a tighter yield than the sovereign and in some cases have large portions of their revenue not in Greece. If Greece goes to the drachma, some companies would be hurt less or even helped including firm who have sales abroad and cost in Greece. Intralot and Lukoil (as oil and refined product prices are set by world markets not just Russian markets) are examples of these types of companies. Ones where there would be issues are banks as they are directly exposed to devaluation issues. I try to stay away from the basket cases like Venezuala and Argentina but still think the Greeks will pull this one out. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted January 1, 2015 Share Posted January 1, 2015 Hi, Packer, Happy new year! A general question on maintenance CAPEX. For companies with high debt (usually that means these companies/industries need significant CAPEX), how do you decide the maintenance CAPEX level. Companies tend to understate their maintenance CAPEX and attribute their high CAPEX to growth, which doesn't materialize eventually and turned out whatever supposed to be growth was indeed maintenance CAPEX. Sometimes, so called growth CAPEX is actually mandatary to replace the old business which is declining, so all these CAPEX should be treated as maintenance CAPEX at the best. I think it depends upon the situation. There are many corporate credits in Greece that are higher quality than the sovereign. This is not a typically situation. Some examples are Intralot and Coca Cola Hellas. These bonds trade at a tighter yield than the sovereign and in some cases have large portions of their revenue not in Greece. If Greece goes to the drachma, some companies would be hurt less or even helped including firm who have sales abroad and cost in Greece. Intralot and Lukoil (as oil and refined product prices are set by world markets not just Russian markets) are examples of these types of companies. Ones where there would be issues are banks as they are directly exposed to devaluation issues. I try to stay away from the basket cases like Venezuala and Argentina but still think the Greeks will pull this one out. Packer Link to comment Share on other sites More sharing options...
Packer16 Posted January 1, 2015 Share Posted January 1, 2015 One way is to look at history, has cap-ex created growth or just a slower decline of cash flows. GNCMA is a good example of a company in a declining industry that has been able to increase revenues and cash flows while others have been in slow the decline mode. In that case you can look at the slow the decline cap-ex/sales versus the grower and select some number between these two. Packer Link to comment Share on other sites More sharing options...
Guest JoelS Posted January 21, 2015 Share Posted January 21, 2015 Packer, one of your key criteria seems to be private market value/takeout value.. Would that be fair to say? If so, is this something that you have worked out over time through experience, or something that you have recently begun to look for based on theory? How do you incorporate it into your analysis?.. Toby Carlisle's book 'Deep value' indicates that a key driver of performance is to purchase stocks at or below an acquirer's multiple. Link to comment Share on other sites More sharing options...
Packer16 Posted January 22, 2015 Share Posted January 22, 2015 Comp takeover multiples in certain industries can provide nice benchmarks if a takeover is a viable exit strategy. In the TV/radio business this is true along with the telco/cable companies. These are typically used in with comp companies to estimate a fair multiple for company under study. Packer Link to comment Share on other sites More sharing options...
muscleman Posted January 24, 2015 Share Posted January 24, 2015 Packer, I see you track a lot of teleco/cable companies. Some of the stocks did well last year, like GNCMA. Some didn't, like ALSK and PT. In hindsight, would you be bullish at the beginning of 2014 for these companies? What went wrong with ALSK and PT? Link to comment Share on other sites More sharing options...
Packer16 Posted January 24, 2015 Share Posted January 24, 2015 PT/Oi was invovled in fraud so much the CEO of the combined firm resigned. This was a highly levered equity that was cheap without fraud. With fraud who knows. ALSK is an interesting one in that its leverage with be reduced with the AWN sale and is amongst the cheapest telcos. It is at disadvantage to GNCMA. It should trade in line with other RLECs like LICT and New Ulm who trade for 3.5x and 4.5x, respectively. Packer Link to comment Share on other sites More sharing options...
JAllen Posted January 24, 2015 Share Posted January 24, 2015 Packer: Do you think LICT should trade at a 2X-3X EV/EBITDA discount to RLECs like Frontier, that have declining revenue and higher debt? Link to comment Share on other sites More sharing options...
Packer16 Posted January 25, 2015 Share Posted January 25, 2015 The RLEC story is dependent upon revenues and EBITDA increasing over time. LICT and some of the RLEC have steady to slightly up revenues at this point. If this is an industry wide trend (which I think it is) you will see FTR and others follow. In some of my day job work, we have seen some evidence that industry insiders think the decline is over and they are buying based upon that premise. Packer Link to comment Share on other sites More sharing options...
muscleman Posted January 26, 2015 Share Posted January 26, 2015 PT/Oi was invovled in fraud so much the CEO of the combined firm resigned. This was a highly levered equity that was cheap without fraud. With fraud who knows. ALSK is an interesting one in that its leverage with be reduced with the AWN sale and is amongst the cheapest telcos. It is at disadvantage to GNCMA. It should trade in line with other RLECs like LICT and New Ulm who trade for 3.5x and 4.5x, respectively. Packer I see. So you think ALSK's investment thesis is still intact and should play out over 1-2 years? What's your best ideas for 2015? I am running out of ideas right now. Link to comment Share on other sites More sharing options...
muscleman Posted January 26, 2015 Share Posted January 26, 2015 Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA? Link to comment Share on other sites More sharing options...
Liberty Posted January 27, 2015 Share Posted January 27, 2015 Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA? He gave an answer on Global downstream of this: http://www.cornerofberkshireandfairfax.ca/forum/strategies/ask-packer-no-seriously-ask-him-anything-(aha)!/msg163359/#msg163359 Link to comment Share on other sites More sharing options...
muscleman Posted January 27, 2015 Share Posted January 27, 2015 Packer, have you studied Liberty Global and other Malone companies? Any thoughts there? How would you compare Liberty Global with ALSK and GNCMA? He gave an answer on Global downstream of this: http://www.cornerofberkshireandfairfax.ca/forum/strategies/ask-packer-no-seriously-ask-him-anything-(aha)!/msg163359/#msg163359 Thank you! :) Link to comment Share on other sites More sharing options...
kab60 Posted February 24, 2015 Share Posted February 24, 2015 Did you check out Hawaiian Telcom? Seems to be around ev/ebitda of 5. Net debt/ebitda 2.2 and insider buying. Link to comment Share on other sites More sharing options...
krazeenyc Posted February 25, 2015 Share Posted February 25, 2015 Did you check out Hawaiian Telcom? Seems to be around ev/ebitda of 5. Net debt/ebitda 2.2 and insider buying. I've been looking at HCOM too. I'd love to hear Packer's thoughts on this name as well. I'm not sure how to think about it. They're in the midst of a major capex spending spree to lay fiber and they have a long runway for growth in both broadband internet and cable tv (they're only breakeven on tv right now). But, the large majority of the ebitda is being generated by voice landlines that are in terminal decline. Are they automatically not an acquisition target b/c of their large voice business? Is their cable tv business far too small to be an acquisition target at this point? What multiple should they trade at? Link to comment Share on other sites More sharing options...
Packer16 Posted February 25, 2015 Share Posted February 25, 2015 I get a multiple closer to 4.4x EBITDA for HCOM. I like them and think with the cable connection they should be able to offset decline of voice lines quicker than other telcos. In addition, in HI there is only one other cable provider and HCOM to provide video and broadband connectivity. Packer Link to comment Share on other sites More sharing options...
Munger_Disciple Posted February 25, 2015 Share Posted February 25, 2015 Packer, It looks like HCOM competes with Time Warner Cable in Hawaii. Given the scale of TWC/Comcast, their programming costs will be significantly cheaper than HCOM's. Isn't this a problem for HCOM's cable video business? Link to comment Share on other sites More sharing options...
Packer16 Posted February 25, 2015 Share Posted February 25, 2015 HCOM provides the cable over the same cable as internet and phone and gets some nice incremental margins for the video. It will add to profitability as long as they do not sell for a loss which I do not think they are doing. Packer Link to comment Share on other sites More sharing options...
kab60 Posted February 25, 2015 Share Posted February 25, 2015 Thanks for the feedback, Packer. There's a nice interview (although a bit old) with the CEO of HCOM and the general market situation (dec '13) here: http://www.hawaiibusiness.com/is-hawaiian-telcoms-iptv-rollout-a-game-changer/ - according to the interview, Hawaiian Telcom has a 15-year franchise for IPTV services on Oahu. Does that mean that TWC are not allowed to build out their own fiber network (and have to stick with coax?). That would seem strange. Anyway, seems like they expect most of the fiber growth capex to be done by the midlde of 2016 (around $40m/year), where the company expects to have built out 240,000 to 250,000 households (160k today). They're getting around 2.500 new vid subscribers/quarter and from the look of their website and offers it doesn't seem like they dump prices as Packer also mentioned. Latest investor presentation, jan 15, here: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY5NDg2fENoaWxkSUQ9MjcwMzczfFR5cGU9MQ==&t=1 Also, not sure how you get a multiple of 4,2 - care to share? According to latest presentation it's at 4,8. I don't suppose you're invested here seeing the current opportunity in Ntelos? Edit: According to the interview fiber buildout should be done mid 2016. Growth capex is is around 40 pct of all capex, 93m ltm, and they also build out mobile cell sites, so 40m might be a bit overstated. Link to comment Share on other sites More sharing options...
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