Over next 12-18 months this company could undergo a pretty major transformation
assuming that some of the premises implicit in the Roumell May 2012 13D filing and
the January 2013 13Dfiling materialize. ----
Currently there are a little more than 18 million shares outstanding, although
probably somewhat more if options not in the money are included---
Company has approximately $50 million cash and $60 million in debt on the
As per Roumell 13D's:
Assuming deals could be structured for sale of the India land and also the
Brazilian operation sold--this could in aggregate generate $120+ million cash??
Perhaps some royalty arrangement on the Brazil operation on future sales???
The $120 million received added to the $50 million on hand = $170,000,000---
Retire $60,0000,000 debt and perhaps buy back 4,000,000 shares--(approximately
$30,000,000) would still leave approximately $80,000,000 cash on balance
sheet----with shares outstanding reduced to approximately 15-16 million.
Further rationalization of operations along the lines suggested in the
Roumell 13D's could result in a solidly profitable company with operating earnings
(tax sheltered by NOLS) of $1.50 + per share in 2014?.
This is of course hypothetical---everyone should do their own due diligence--
The initial investor reaction to the recent announcement appears to be positive.
Tecua was #1 percentage gainer on NASDQ today.
I believe it would be helpful for the stock if management were to interest one
or two brokerage firms to initiate research coverage---one or two institutional
presentations this year would be helpful in getting the Tecumseh story
Just some fine tuning re: Jan 22nd post.
Assume $120,000,000 realized from sale of Brazil and India assets---
This added to $55,000,000 cash on hand = $175,000,000
Pay off debt of $60,000,000 leaves $115,000,000.
Assume as a guess $40,000,000 ??? restructuring, severance and
special charges related to asset sales--leaves approximately
$75,000,000 cash on balance sheet going into 2014.
Assume No stock buyback program this year, however late in
2013, assume company announces $60,000,000 stock buyback program to be
carried out over next 4-5 years.
Also assume company announces $.60 per share annual dividend
commencing in 2014.---this would be approximate
$12,000,000 annual cash outflow.
Assuming restructured revitalized company generating
revenues of $600,000,000 in 2014 with operating margins
of 6%---largely untaxed due to NOLS---generates $36,000,000 of
operating earnings (approximately $1.80 per share) resulting in
free cash flow--$24,000,000 (after $12,000,000 dividend payments).
Assume depreciation more than covers capital spending
in 2014 $30,000,000) and beyond.
All of this could lead to very strong 2015 and should support a
significantly higher stock price 12-18 months from now
operating earnings could well exceed $2.00 per share in 2015.
Risks are ever present (see SEC filings) and the above is merely speculation
on what could theoretically (hopefully in actuality) happen---
After reading their annual report, find it difficult to believe that TECUA would give up both India & Brazil. India, can understand. But Brazil where a majority of their manufacturing is done; that would be tantamount to gutting the company of their manufacturing base. In addition, giving up a majority of their presence overseas especially in the BRIC countries? The countries setting up their own IMF-style lending bank to address their infastructure needs. Something does not ring right there. If TECUA does signal that they are going to sell both their Indian & Brazil holdings, I am a seller.
On another note, having a share buyback is one of the worst ideas that TECUA could do. Studies have shown that company managements are notorious for buying back shares at the height instead of the depths (like now) of a stock price. Better to give a special dividend to shareholders instead of letting mgmt squander it on a buyback.
just reread (for approx 10th time) the original may 2012 13D filed by roumell.----
roumell talks about a special dividend (which would be quite ok --i.e. would cash
the check) however IMHO if Roumell's suggested initiatives were implemented,
I would prefer the approach suggested in my 1-22-2013 post---(stock buyback
and paydown of debt).This would set the stage for a cash rich company
potentially earning $1.50 in 2014 and growing eps perhaps at 15%+ rate
from there (all this "pretax" due to NOLS--
Importantly IMHO, this scenario could support a regular dividend of $.60 annually
(at least) representing nearly 7% yield on current stock price.
There is still a lot to be done--Even though my focus remains on 2014, it
would be good to see near term progress on "THE PLAN"----
One other point---Roumell doesn't want to see any acquisitions--However,
I would support a well conceived smaller acquisition or two if immediately accretive to
earnings --especially if paid for with all cash (I like the idea of a debt free
balance sheet at this time)
The nearly $400 million Nol's would have significant value to a potential acquirer of
this company--there are some fairly complicated IRS regulations pertaining to this
---anyone interested in this can use their favorite search engine and be brought
up to speed-- That said, the Nol's have more value if used by Tecumseh over
the next several years with Tecumseh remaining as a stand alone company--