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TransMontaigne, Inc. (TMG) Message Board

  • bigrhinoceros bigrhinoceros Feb 9, 2006 9:11 PM Flag

    Earnings Release

    The earnings release contained a statement from Don Anderson that I find to be very significant and promising.

    "Our primary focus remains on increasing our terminaling and marketing margins over the long haul. THERE IS BUT ONLY ONE TIME WHEN THE VALUE OF OUR BASE INVENTORY IS TRULY MEANINGFUL TO OUR SHAREHOLDERS, AND THAT IS UPON ITS FINAL LIQUIDATION."

    As I see it, the company just reported their second best total margins less SG&A quarter in the company's history. Despite the continued volatility in GAAP EPS, the company appears to be stronger than ever and in great shape. The volatility in EPS continues to be casued by irrelvant inventory gains/losses (see statement above) and volatility caused by pricing due to external factors (Katrina/RIta) out of their control.

    I guess the current reported GAAP loss and volatility in earnings will scare a lot of people and give us another buying opportunity. I just wish that the "final liquidation" would take place sooner than later, and I can assure you that it will be well north of $10 per share.

    Comments?

    Here are the historical margin numbers if you are curious (taken from the release).

    total margins less SG&A quarter by quarter
    year ending June 30, 2004 (in millions)
    Q1 9.3
    Q2 16.6
    Q3 20.1
    Q4 18.1

    total margins less SG&A quarter by quarter
    year ending June 30, 2005 (in millions)
    Q1 11.7
    Q2 22.0
    Q3 17.9
    Q4 9.3

    total margins less SG&A quarter by quarter
    year ending June 30, 2006 (in millions)
    Q1 -3.9 (loss due to Katrina & Rita pricing problems)
    Q2 21.6

    Quarter 3 and 4 to come later this year

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    • I concur with buyandwin, we have a difference of opinions, but not an acrimonious feud. I think he is a bit optimistic, while he probably views me as a bit pessimistic over MWP management ability etc. I agree that MWP remains as the one of the most promising GP's on the market, IF, they can get their act together. So long as the marketing division loses money, it essentially negates any positive ground that MWE contributes. I have been a huge advocate for buying their way out of this mess, even if it means overpaying. Kill the problem (i.e. turn marketing into a profitable to break even business and set it up so that it has virtually no chance of losing money by eliminating the keep whole contracts) and the market would reward them for being essentially a pure play on the IDRs like MGG, EPE, ETE, NRGP and soon to be AHGP and most likely the yet to be spun off GP of APL. With the resolution of the above mentioned issues/problems, MWP would be my main mule (largest holding). Right now, my wagon is being lead by Crosstex (XTXI), which I view as having perhaps one of the savviest management teams short of Richard Kinder or Dan Duncan. They have a lot of organic growth projects lined up in a time when organic growth is the venue of choice due to escalating multiples on acquisitions.

      Now, back to TMG. Good news hearing about the POCC/RVEP deals. I hope TMG has better luck that the corrupt management team lead by Richter and Shore. I predicted the demise of RVEP about a year before they IPO'd. They didn't stand a chance competing with Valero LP's Dos Laredos pipeline. Valero LP got in with Pemex and RVEP got the shaft. They might have been able to make it work if: Richter and Shore hadn't been to busy shoveling money into their own pockets and if they had been able to make any accretive acquisitions. the real problem they had was that they were too small to do anything. To small to do an equity offering, to small to borrow money at a reasonable rate or through normal channels (Citi, RBC) or tap the debt market. The only chance they really had was to convince the seller to accept units of RVEP in payment. That was clearly a high risk proposition and as we can see, it never happened. Had they been able to make a modest acquisition, say a 20 million dollar deal at a 10x multiple (cash flow of around 2 million) they could have survived. Instead they blindly clung to tying to compete with a company that spent more building Dos Laredos than the combined market caps of POCC and RVEP combined.

      POCC still foolishly pursues its fuel rack sales. I doubt they make enough money to cover the overhead. It remains to be seen what happens to POCC/RVEP after the divestiture is complete. RVEP clearly is the better value of the two right now, but I wonder what kind of expenses they will have. If you net debt from the proceeds and divide by the number of units outstanding and you can see the hidden value. The ? is what they intend to do with the cash, and the shell company. Redeploying the cash into a midstream asset would be nice, although they still need to bulk up to get a critical mass.

    • dhedges

      I'm still lurking around. Don't have a current position in TMG, although it looks very tempting.
      I wouldn't consider my relationship with RRB as "tense" either now or before. I would consider it as if we looked at the same coin with RRB seeing one side and me seeing the other. I am very much interested in the value of the underlying assets and not that concerned with the petty self dealings that caused MWE-MWP file gate problem. Both are still paying me huge distributions and they are still growing and I'm looking for bigger payouts in trhe future.
      I believe MWPis one of the least expensive GP's around

      good luck to all
      b&w

    • Well, if I had the cash, I would look at something like, buying a controlling stake in Penn Octane (the GP of Rio Vista), then approach some of these closed end MLP funds, offer them a chance to get in on the ground floor in exchange for equity financing. Essentially, buy the GP, then use the equity raised from the MLP funds to make a large (comparatively speaking) acquisition. Its a perfect scenario for any private midstream group that is looking for a pre-packaged GP/MLP.

    • There seems to be plenty of cashflow being generated.

      I wish TMG would sell all of its assets to TLP and then we wouldn't have to deal with all of these GAAP NI swings that really prevent TMG from being fully valued.

      • 1 Reply to equityboy46
      • You are right about the cash flows. They have a pretty good track record of generating about $15-20 million in EBITDA per quarter and free cash flows averaged over the last 3 years are around $30 million per year (this is a rough estimate on my part).

        As for selling all the MLP eligible assets to TLP, they would if they could but the debt keeps them from doing it all at the same time. Unfortunately, it is the non-MLP eligible assets that TMG will continue to hold that cause all the net income volatility...but don't worry, the 2% GP interest (with dividend split rights) and the 50% TMG ownership in TLP will more than make up for the volatility in the long run (I think). rrb? hedges? you guys have any thoughts?

        It is probably worth mentioning some of the key points from the fool.com write up about TMG, which I thought was pretty much on the mark. Here, in brief, are a few of the points.

        Book value of around $7 will support the stock
        10 cents in earnings for every $12million EBITDA
        $80 million EBITDA in normal year with no growth
        $10 share price target / 15 multiple-doesn't factor in future growth
        Earning less volatile due to new hedging practices
        Book value might be understated due to accumulated depreciation
        Stable management
        debt didn't move much after Katrina/Rita, indicating situation less dire than what stock was showing
        Emphasis on how boring the company is
        How management does not promote the company