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Five Star Quality Care Inc. Message Board

  • pjhatbpi pjhatbpi Oct 14, 2006 9:46 AM Flag

    Aggravating stock, but there is a silver lining

    While anyone who was very long this stock, would not like the pull back which has occurred on the news of the senior convertible bonds, the positive aspects for the future are pretty good. As was surmised, the additional funds could be used to buy out the remaining Sunrise leases and this would be good news in the longer run, yes? In the end, it is all about earnings and the management team seems to be moving in the right direction. Sure we would appreciate it if the stock price would put in a good consistent move above 11 and beyond, since it has been bouncing between 9 and 11 for the last half of a year. As it is, it is still holding the 50 dma. As I noted yesterday, someone was buying hugh blocks of shares (equivalent to 1/6 the float) the last two days, so for whomever was selling, there was someone buying it up.

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    • Furthermore, I think the management team has had this whole series of events planned for the last couple of months or more. They are working their plan and attempting to not risk alienating the investment world. It may appear that they are, but if their latest moves prove to add to the bottomline within the next 3-6 months, in addition to their growing the top line ... that will move the stock and it can only get better

    • Just finished listening to the last conference call again, from 8/4 and heard the CEO state that the 7 remaining SRZ managed facilities are the most challenged and have cost .02 on the bottomline. He indicated a strong interest in taking these 7 back from SRZ and therein give FVE the control they want and eliminate the mgt fee. They are confident in their ability to improve results. This takeover will defnitely be able to happen with extra funds they are raising from the bond sale. They will also be able to acquire addditional properties (these could be announced before the end of the year), which will help to grow the top and bottomline, because there will be little increase in G&A expenses. IMHO, I think this bond sale could be the last hit to the balance statement for some time to come. Things are setting up for good growth in the quarters ahead. Lastly, inspite of us not liking to see the stock go down (that is obvious, but if you look at this company over the last 2-3 years, the results have been improving steadily, but the stock is volatile), I must say the management is professional and is doing the right things. Note that institutions own 76% of the float and there have been 5 million shares more added by institutions versus sold. This supports the reason for the large block purchases of the stock the last 2 days ... there are people who believe in the long term story and are not just looking to make a few $ in a month or two trade. Think long term!

      • 1 Reply to pjhatbpi
      • My last post on RM in response to another post ... some of this is a repeat, but it is a good final summary

        PeterinMaine said...
        10/14/2006 11:18 PM
        76% institutional ownership so not sure just reading a chart is crucial? As I posted back a few pages ago, once FVE takes direct control of the remaining SRZ properties, they can do the "right" thing to deal with them. These 7 are costing FVE .02 on the bottomline (that would be a nice % increase to eps, with that .02). If they can not turn them around they will shut them down or sell them. SRZ did not do anything different with them, since they were happy just getting their mgt fees. In addition, another potential benefit which will be recognized by stock holders is the cost to FVE when they cancel the contracts. There are clauses in the SRZ-FVE contract which would allow FVE to get out of them at a much lower cost than the last contracts they bought out of earlier this year. All of this could and should be annouced very soon, following the closing of the convertible offering. I open to hearing contrary views on this company ...

    • Looked back on dialog about why/when FVE would buy out remaining SRZ contracts ... saw this in September 05 ... it makes sense what they are doing now and fits with a master plan of making the business more profitable going forward.

      Re: FVE thoughts/question (Not rated) 14-Sep-05 12:44 pm Not sure on that one. I do have a couple of thoughts though.

      1. The 18 they did not cancel are preforming at a level acceptable enough to FVE.
      OR They are not performing at a level acceptable enough but just well enough to not justify the buyout by the time the contract is up.

      2. They decided to do 12 now and see if the new company could improve the performance of the locations to justify future buyouts.

      3. They simply did not have the additional funds to buy out the remaining contracts. Remember... they did increase from 8 to 12 at the last minute.

      All of this is just speculation on my part, but it does make sense if you understand the innerworkings of both businesses.
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