BTH - Blyth Inc.

[scorpioncapital]

What do you guys think of this company? It's simple - selling candles and weight loss products.

It's in the MLM business. I think it's a hated industry now but I have no problem with this model and of the mind that whatever sells products, sells products. Although I do look at distributor commissions and only invest in companies with the highest % of sales, usually in the 40% range.

It is owned 45% by the founding family.

It has purchased 3.5% of the float recently.

It is heavily shorted - highest on the NYSE.

It trades at $220 million market cap and earns free cash flow after capex of at least 30-40 million, but even if you don't believe that, cash taxes at assuming 35% were 2.2 million in q1 2013 so I assume they earn 6.5 million per quarter.

It has net current assets of about $325 million (assume 50% for already very depreicated pp&e) and current liabilities of $175 million so it seems relatively solvent on a debt basis.

 

[constructive]

The short thesis was that they owed $270M to the minority shareholders of ViSalus. The cash crunch was resolved by pushing the acquisition date back to 2017.

 

Now the short thesis is that growth has stalled and will go into reverse, because ViSalus looks fairly Ponzi/pyramidal. I'd keep in mind that MLMs deserve low multiples, so in order to have a margin of safety you should demand a really really low multiple.

[Philip Morris IV]

I had an old roommate who sold ViSalus.  Their products are overpriced by a factor of 2-4x.  If memory serves me right, their protein powder was $65/2lbs, whereas I typically pay $48/5lbs.  The product was fine but nothing special.

 

I'm not smart enough to be able to tell an MLM from an all-out pyramid but nothing about his experience inspired any confidence.  Seems to me unless your product has a notable prestige to its ownership, or your name is Lamborghini, you can't sell it for 2-4x the competition for long.

[scorpioncapital]

I'm not sure I understand the visalus preferred stock on the balance sheet. From what I gather, in 2017, the 145 million will be converted to common equity thus raising the equity to around $200m or so...but wouldn't there be a corresponding increase in share outstanding?

[wawallace]

First Post- Glad to be here!

 

This caught my eye on the Losers list today (Down 22% as I type). But upon inspection things look very bad.

 

Shareholder's equity has dropped from $117,362 (June 2012) to $46,478 (June 2013). Also, Blyth's operating profit for the second quarter was $1.2 million this year versus $17.8 million last year, largely driven by the decline in sales.

 

Looks like Visalus is having a hard time keeping minions on board:

 

"ViSalus had over 57,000 qualified independent promoters in North America at the end of the second quarter compared to over 70,000 promoters at the end of the first quarter.  The Company also has nearly 4,000 qualified promoters internationally. Prior year second quarter ending promoter count was over 114,000." The worst part is that as ViSalus implodes I don't think it has even been paid for yet.

 

Just a cursory look, but enough for me to move on to the next one.