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Mac-Gray Corp. Message Board

  • Howie58 Howie58 Apr 28, 2005 10:53 PM Flag

    Annual Report and Q1 CC: An Assessment

    "Dave","Slo", and Colleagues:

    Here is my interpretation of the above-referenced presentations. My overall view is mixed. I'll split this into pluses and minuses:

    Pluses: This gang is very confident about their business plan and their ability to execute it. Their track record over the past year or so confirms this. They have successfully intgrated the new operations (a task made easier by virtue of the taken over firms' senior management stepping aside). Revenue is growing and will continue to do so.

    Minuses: Today's questions the analysts calling in (regional firms I'd never heard of), might raise a big picture question--yes, they are executing a business plan, but what is the profit growth in a mature industry?

    By senior management's own admission, this is a no-growth industry hurt (ironically), by declining apartment occupancy rates. TUC has some organic growth via switch to cards and renegotiated contracts but their major growth will come from being the consolidator in this arena.

    Therein lies the rub, and I think we saw the beginning of that this quarter. Revnue may grow, but it appears that debt will as well. Indeed, senior managers made it clear that will be the case. Granted, they are servicing their debt, but for at least the next few years, I wonder if debt service and interest will negate profit growth?

    Along these lines, I was slightly disturbed by the use of EBIDTA accounting discussion in both the annual report and the CC. I thought that the debacle of the 2000 crash made that passe. Revenue growth doesn't mean much if it can't generate high margins.

    I am no CFA or MBA. So my view is far from expert. But my assessment overall is something like this: TUC is not a sell but it probably isn't a screaming buy either. I suspect it will find its way into microcap/small cap indices. It isn't a big risk to invest here; but it is no Genentech or early Microsoft.

    Best to all, and hope to get a response.


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    • Sir Howie-Thanks for the info. As a poor working stiff, I can't always keep up with the latest news. My meager 100 shares purchased @ 3.20 are still up 167% after today's downward slide, Think I should keep holding? Slo

      • 1 Reply to slocaladave
      • Sir Slo:

        Nice to hear from you; share size is irrelevant; you want to make money and not see your profit slip.

        OK, I am not a technician, but it appears the stock has been holding its 50 day moving average since September of last year. It hit that today; next resistance mark is 100 day at 7.75--perhaps you should set a mental stop at that.

        Per my earlier comment--these folks want to become the kingpin in a flatlining industry. To do that, they will need to incur more debt to buy other operators. I guess the question is whether profits will grow with revenue. I have held on to stock with revenue growth and EPS stagnation and found that quite frustrating.

        We were down on relatively low volume today, but this was a big time up day for the market. If it holds here; today was a shakeout of weak hands. One way or the other, the stock just can't seem to break above the 8.90 range.

        I will observe and post. All the best in all endeavors.


    • good post geez.....