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Tecumseh Products Company Message Board

  • longtimefollower longtimefollower May 13, 2013 10:50 AM Flag

    8-10% EBITDAR margins by 2015.

    8-K filing today says this is the goal. Based on 2012's numbers, the midpoint of that would be a figure of about $80 million in EBITDAR. In 2012, the company ran $36 million in depreciation and amortization, so that gets you down to $44 million in EBIT. I'm assuming, because of monetization of assets, the company will be debt free in 2015, and pay no interest expense. Assuming that for a good long while we pay NO taxes to speak of (a big assumption), $44 M in EBIT converts to roughly $2.50 a share in EPS. (And this factors in NOTHING for expected growth between 2012 and 2015!) Applying a full tax rate, and that gets you down to maybe $1.50 in EPS. But assuming the company monetizes both Brazilian foundry and India excess land, those 2 actions alone could generate upwards of $8 in cash. Assume the company actually earns $2 in EPS in 2015, slap a 12x multiple on that, and add in the $8 in cash generated from sales, and you get a $32 stock price by 2015....a multiple of 4x the current price. Personally I think a price target of $25-40 for the stock, by 2015, is eminently reasonable. I also think that, assuming we monetize Brazil and India within the next year, that the stock should be trading at $12-15, and possibly as high as $15-20, by that point in time.

    There's a ton of asset value here, and a ton of value in the core underlying commercial compressor business. Best of all, they have made significant improvements that are likely to increase market share, and margins, in the compressor business, over the coming years. This is a "best of all worlds" situation, imho!

    Sentiment: Strong Buy

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    • Well it seems to me that your central thesis is still correct--
      My guess:

      Decent chance for Tecumseh TECUA to be generating
      EPS (untaxed due to $400+/- million NOLS) of $2.00 +/- in 2015---
      With NOLS sheltering earnings for several years---company should be generating
      serious free cash flow at that time. Add to this possible monetization of some assets
      in India, Brazil etc. company could be debt free by end of 2015---
      Stock probably got ahead of itself a couple of months ago---should theoretically
      be forming a base for a possible move into the low teens in early 2014---then
      over the ensuing months into 2015--a gradualy but choppy run into the high
      teens, low twenties by mid 2015.

    • longtime

      I agree with your analysis
      Persoanlly, I am thinking EPS $2.00 in 2015--
      Am Ok with 12 PE
      To be conservative am thinking price target range objective
      $18 - $24 in 2015
      IMHO Best not to add the $8.00 at least for now---
      Debt elimination shoring up pension plan build up cash for
      working capital, acquisitions, possible initiation of a
      quarterly dividend (which I would really like to see happen)--

      Jim, on recent conference calls suggested that they are
      going to play the hand out at least for now on retaining
      Household R&F operations, also land in India--nothing imminent
      re: sale, but property is listed with broker.

      One element not discussed previously which I think is important
      is the company's use of phantom stock options--
      recipient receives the benefit of stock appreciation--but
      the benefit iis paid in cash---does not result in additional
      stock being issued --no dilution.

      Thanks for your posts


    • I should clarify that the sale of assets I note above would also include a sale of the household R&F business. Also, the generation of $8 in cash would depend on the company paying little or no taxes on any gain on sale, which I am not positive on (but suspect is true).

      • 2 Replies to longtimefollower
      • Whats the deal on R&F?.....Does Tecua sell to large manuf's like GE, Whirlpool, Sears etc etc or do these companies build what they need themselves? and if Tecua does sell to them is it because of low margins that they want to sell this business?...Even if the only make very little NOW from R & F, I think they should hang on to it and not sell it just because they want the $$$$$ and try to grow it, innovate and get costs down where others will buy from Tecua instead of producing products in-house.

      • Excellent work. How did you go about working up a potential value on Brazil and India. India is the far more difficult asset to value. Do you believe the sale of the household R&F is likely and what impact would maintaing it have on your numbers.

        Sentiment: Strong Buy