GNCMA - General Communications

[plato1976]

Had a very good run recently

Anyone had any idea what's the catalyst for this run?

 

 

So I've sold down my GNCMA (average price $14.50) from 6% to 1%, even though I think there is still a lot to like.

 

I partly mainly shrunk my position due to Bookie's warning of what could happen (experience of what happened) if oil prices were to remain depressed for a long time. I think people would do everything they can to keep their broadband internet and wireless service, but if they're not in the state they can't be a customer. I still think this is a long shot, but I guess it's a possibility and something to be aware of even if it's just a 1-2% possibility. I'm also a bit worried about the national price wars in wireless and whether or not they'll spill over into Alaska. 

 

GNCMA will have ebitda of $370MM ($320MM+$50MM), Debt of $1.37B, Market Cap of $618MM.  So we're looking at an EV/Ebitda of  5.37 -- if you have a target upside of 6.3x you have 55% upside not bad! I think the AWN deal is a good one both in terms of price as well as for their business -- good for the competitive dynamics of the wireless business in Alaska (it was also bad for them to have a disinterested partner in Alaska). Additionally, I think Searchlight is very smart money -- and I think the possibility of them teaming up with Liberty or someone to buy out GNCMA is always a possibility -- perhaps this also explains why the stock has rallied.

 

I've done the same thing with the same worries, but I sold at $14.00/share. Watching it rally has been tough, and I keep thinking, "why did you make a macro call, dumb*ss?". C'est la vie

 

I've been looking at the recent telco Packer posted, NTLS. That one looks quite interesting.

[krazeenyc]

Had a very good run recently

Anyone had any idea what's the catalyst for this run?

 

 

So I've sold down my GNCMA (average price $14.50) from 6% to 1%, even though I think there is still a lot to like.

 

I partly mainly shrunk my position due to Bookie's warning of what could happen (experience of what happened) if oil prices were to remain depressed for a long time. I think people would do everything they can to keep their broadband internet and wireless service, but if they're not in the state they can't be a customer. I still think this is a long shot, but I guess it's a possibility and something to be aware of even if it's just a 1-2% possibility. I'm also a bit worried about the national price wars in wireless and whether or not they'll spill over into Alaska. 

 

GNCMA will have ebitda of $370MM ($320MM+$50MM), Debt of $1.37B, Market Cap of $618MM.  So we're looking at an EV/Ebitda of  5.37 -- if you have a target upside of 6.3x you have 55% upside not bad! I think the AWN deal is a good one both in terms of price as well as for their business -- good for the competitive dynamics of the wireless business in Alaska (it was also bad for them to have a disinterested partner in Alaska). Additionally, I think Searchlight is very smart money -- and I think the possibility of them teaming up with Liberty or someone to buy out GNCMA is always a possibility -- perhaps this also explains why the stock has rallied.

 

I've done the same thing with the same worries, but I sold at $14.00/share. Watching it rally has been tough, and I keep thinking, "why did you make a macro call, dumb*ss?". C'est la vie

 

I've been looking at the recent telco Packer posted, NTLS. That one looks quite interesting.

 

I think it's the AWN acquisition and Searchlight deal.

[plato1976]

the funny thing is that both the awn and searchlight events happened around Dec 5

The stock began to appreciate from mid Dec, and had another surge recently

Talking about efficient market pls...

 

Had a very good run recently

Anyone had any idea what's the catalyst for this run?

 

 

So I've sold down my GNCMA (average price $14.50) from 6% to 1%, even though I think there is still a lot to like.

 

I partly mainly shrunk my position due to Bookie's warning of what could happen (experience of what happened) if oil prices were to remain depressed for a long time. I think people would do everything they can to keep their broadband internet and wireless service, but if they're not in the state they can't be a customer. I still think this is a long shot, but I guess it's a possibility and something to be aware of even if it's just a 1-2% possibility. I'm also a bit worried about the national price wars in wireless and whether or not they'll spill over into Alaska. 

 

GNCMA will have ebitda of $370MM ($320MM+$50MM), Debt of $1.37B, Market Cap of $618MM.  So we're looking at an EV/Ebitda of  5.37 -- if you have a target upside of 6.3x you have 55% upside not bad! I think the AWN deal is a good one both in terms of price as well as for their business -- good for the competitive dynamics of the wireless business in Alaska (it was also bad for them to have a disinterested partner in Alaska). Additionally, I think Searchlight is very smart money -- and I think the possibility of them teaming up with Liberty or someone to buy out GNCMA is always a possibility -- perhaps this also explains why the stock has rallied.

 

I've done the same thing with the same worries, but I sold at $14.00/share. Watching it rally has been tough, and I keep thinking, "why did you make a macro call, dumb*ss?". C'est la vie

 

I've been looking at the recent telco Packer posted, NTLS. That one looks quite interesting.

 

I think it's the AWN acquisition and Searchlight deal.

[Packer16]

If you compare this to a telco, you are right to sell but this actually a cable/telco/wireless and TV broadcast company.  The non-telco comps sell at multiples of 8x and higher and now this is the largest and most integrated provider in Alaska.  It also is one of the few growth companies in this space and has an investor who has co-invested with Liberty Global in Puerto Rico.  I would not be surprised to see Liberty Global buy this at some point.

 

Packer 

[Phaceliacapital]

Mind to share your fair value estimate? And if you do share, how do you treat the impact of the oil price?

 

I averaged at 9ish for my position, and sold part of my investment earlier this week. I had close to a 100% gain and sold shares worth my initial investment +20% return, the remainder remains invested (around 70%). I also had the currency effect playing for me as a EUR investor so I had quite the nice return in +/- 1 year.. (I am a LT investor though). I rolled over my sold stake into DNOW, I probably sold too soon and bought too soon, but I am not a market timing kind of guy.

 

BTW, thanks to everyone for the contributions.

[krazeenyc]

I was definitely very conflicted when deciding to pare down the position.

 

Pros for keeping the position:

 

1) Valuation still quite reasonable -- still decent upside.  (Maybe I should've used ~7x a midpoint between telcos and cable companies)

2) I was very bullish on the AWN transaction (reasonable price, good market dynamics, and Alaska was a poor partner with no incentives to maintain a good wireless retail business) and thought the Searchlight deal was bullish (you could infer they thought GNCMA is worth significantly > $13)

3) GNCMA seems to be well run and growing -- with a dominant position in Alaska.

4) My cash position was already too high.

 

Worries/Risks

 

1) Oil prices and population dynamics.  Even though I didn't and don't think this is a likely risk, Bookie (and researching the past a bit more) makes me a bit worried that there is some tail risk here. Even if people love their high speed and wireless internet -- a large population decline  in Alaska would be very bad for a leveraged business like GNCMA.

2) Insiders keep selling -- but they are probably excited that their stock has finally shot up after years and years of stagnation.

3) Leverage.  Even though I love Packer's ideas and approach to investing -- specifically as it pertains to achieving outstanding returns via investing in these highly leveraged but operationally stable businesses -- I'm still quite wary of the leverage and what could go wrong. 

[peterareed]

All fair points.

 

One thing worth considering regarding the debt. With the exception of the debt issued to Searchlight, General Communication Inc., which is the issuer of the equity, is not the obligor, issuer, or guarantor of any of the bank debt (revolver and term loan), or the unsecured high yield bonds.

 

Despite not being the obligor, issuer, or guarantor of any of the bank debt, there is significant "Restricted Payment" capacity to dividend cash from the subsidiaries to the parent.

 

This is a very significant difference, in my opinion.

[gurpaul88]

http://www.marketwatch.com/story/gci-reports-fourth-quarter-2014-financial-results-2015-03-04?reflink=MW_news_stmp

[Gamecock-YT]

Getting pounded today.

[krazeenyc]

Getting pounded today.

 

I assume it's the ebitda guidance. I was expecting ~$370MM (incorrectly) and they guided to $310-$335. Curious to hear the call.

 

Looks like they were consolidating the AWN ebitda in 2014. So it's essentially $273 ($323-$50 ALSK payment) in 2014 vs $310-335 in 2015. So $1.4B Debt + $500MM = 5.89x

 

[peterareed]

I thought that the guidance was pretty solid. With the NOLs, this is an awful lot of free cash flow relative to the market capitalization.

 

VZ's entry to date has not been ambitious - and given the very short window to dig (frozen ground most of the year), it will be until summer before VZ can meaningfully expand its network, if it even plans to do so.

 

Does anyone else view the results, guidance, and go forward picture differently?

[peterareed]

This refinancing saves the Company over $5 million in interest per year. Given the NOL carryforwards, all of this drops to free cash flow. This is roughly a $.12 per share increase in FCF per year. Is anyone else still following this?

[peterareed]

Another strong quarter with $82 million of Adjusted EBITDA. Anyone still paying attention to this?

[Gamecock-YT]

Quietly.  ;)

[gym97]

I am following it.

 

http://www.alaskacommunications.com/~/media/Files/pdf/releases/2015/ALSK_News_2015_5_7_General.ashx

 

Anybody have any idea if this is a real threat to GCI's position in data? GCI's data revenue from business customers alone exceeds ACS's total data revenue at the moment.

 

 

[argonaut]

Hi Packer,

 

Assuming debt and cash stay about the same as they are now, an 8 multiple for EV/ebitda would imply a stock price close to $30 for a buy out? Is that close?

[Gamecock-YT]

At 8x I have it around $34. So roughly 100% upside from today's price.

[argonaut]

Thanks. That's substantial.

[Packer16]

By my calcs, the value is about $30 @ 8x EBITDA still alot of upside.

 

Packer

[argonaut]

Thank you. They seem to be growing nicely with the balance of AWN.

[Gamecock-YT]

Consolidated Revenue of $248 million

 

Adjusted EBITDA of $88 million

 

Strong wireless and data performance drove consolidated revenues for the second quarter of 2015 to $248 million, an increase of $23 million or ten percent when compared with the second quarter of 2014. Compared with the first quarter of 2015, consolidated revenues are up $16 million or seven percent.

 

Adjusted EBITDA for the quarter was $88 million, after the deduction of $6 million in transition costs associated with the Alaska Wireless Network ("AWN") transaction.  Adjusted EBITDA grew $4 million or four percent compared with the second quarter of 2014 and grew $13 million or 17 percent compared to the first quarter of 2015.

 

During the quarter, GCI repurchased 1.2 million shares of its Class A common stock, at a cost of $19.7 million. This brings the total shares repurchased in 2015 to 2.3 million.

 

2015 Guidance

 

Revenues are unchanged and in the range of $920 - 970 million.

 

Adjusted EBITDA of $310 - $335 million. Previously this had been with the caveat that it would be less approximately $30 million in one-time transition costs.  However, one-time transition expenses have totaled only $13 million thus far and are expected to be approximately $20 million for the year. Additionally, we are having good success with equipment installment plans which improved EBITDA by approximately $11 million on a year-to-date basis.

[zippy1]

Q3 out

http://finance.yahoo.com/news/gci-reports-third-quarter-2015-210500754.html

ANCHORAGE, Alaska, Nov. 4, 2015 /PRNewswire/ -- General Communication, Inc. ("GCI") (GNCMA) today reported its third quarter 2015 results.

 

Growth in broadband data subscribers and ARPU coupled with strong wireless roaming drove consolidated revenues for the third quarter of 2015 to $259 million, an increase of $18 million or seven percent when compared with the third quarter of 2014.

 

Adjusted EBITDA for the quarter was $97 million, growing $3 million or four percent compared with the third quarter of 2014. EBITDA for the quarter was negatively affected by $4 million in AWN-related transition costs and the absence of political advertising, which was particularly strong in the third quarter of 2014. On a comparative basis, quarterly EBITDA benefited from $8 million in equipment installment plan revenue versus $7 million in the second quarter of 2015 and none in 2014.  As more customers take our equipment installment plans, we are seeing a reduction in ARPU which dampens the EBITDA benefit of equipment installment revenue.

 

"We are pleased with our strong quarter led by roaming and backhaul revenues of $45 million", said Ron Duncan, GCI's president and Chief Executive Officer.  "We anticipate that this quarter will represent the high water mark of those revenues for the foreseeable future.  We have been working with our largest carrier customers to offer them a competitive alternative that will reduce their rates, eliminate the seasonality in our revenues, and retain significant traffic on our network. If we're successful, we will have the majority of our roaming traffic on long-term contracts but cash receipts from roaming and backhaul could decrease by approximately 20 percent for 2016 as compared to 2015."

 

Full text and tables can be found at www.gci.com.

[mbrock77]

GCI isn't kidding when they say they are willing to sacrifice video subs in the face of higher programming costs:

 

http://www.broadcastingcable.com/news/currency/gci-says-it-will-drop-amc-univision/146608

 

Ballsy! I know CABO dropped Viacom and only lost around 2% or so of subs. Any other cable companies dropping big networks?

[Gamecock-YT]

Interesting guidance for next year. Hopefully will pay off in the long term.....

[gym97]

It would be nice if they cooled down on the capex for a while to demonstrate strong free cash flow. EBITDA guidance seems fine, even if it is a moderate decline, esp as we have a lot more visibility over roaming revenues now (i.e. less risk of this going away due to verizon is how i interpret that).