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TravelCenters of America LLC Message Board

  • granicus007 granicus007 Nov 8, 2012 5:10 PM Flag

    trading at 3x forward earnings

    There is a lot of "mis-information" that is consistently posted on this board (unfortunately).
    * Leases between TA & HPT are LONNGGGG-TERM in nature (and cannot, I repeat, cannot be arbitrarily changed).
    * TA now owns outright approximately 30+ travel centers (which of course there are $0 rents paid).
    * TA owns an additional 8 large commercial parcels of land already zoned for travel centers which are located on major thoroughfares. No mortgages, no liens-zip.
    * TA owns the TA corporate headquarters building in its entirety.
    * TA owns a significant amount of the insurance holding company (along with sister companies)
    * TA owns all their inventory + fuel in-the-ground
    * TA "owned" travel centers were all purchased at what has been termed fire-sale bargain prices. In a normalized real estate environment, the value of these sites could literally be double (100%) more than TA purchased them for.
    * TA's cash on the balance sheet is approximately the value of the entire market capitalization of the entire company.
    * At present levels TA is selling for about 3x forward earnings
    * TA, FLying/J and Love's are the biggest players in this space. And location is everything. Most of the best interstate locations that have proper zoning and utilities are GONE. They are literally irreplaceable. These locations should only get more valuable as environmentalists rule-no idle zones, anti-noise zones, restrictive truck traffic zones.
    * HPT, RMR, TA relationships - this is an impediment to many investors and I certainly understand. But many companies such as Fox with the Murdocks, Google with the founders having special voting shares, Facebook with special voting shares for Zuckerberg, etc. The list goes on and on. The point is that there are corporate LAWS that control who can do what and when. But fact of the matter is, TA is moving more and more autonomously by purchasing these 30+/- travel centers directly. By the way, should TA ever sell any of their centers HPT has right of first refusal. But any transactions would have to be at fair-market-value.
    * I have stated this more than once- TA is in fact a real estate play. The executives at TA are real estate experts with many years of experience. Take the time to study their biographies. They know what they are doing and their skills combined with TA's cash and the opportunities of buying financially distressed sites with smaller mom-and-pop centers cannot be underestimated.
    * Travel centers are a numbers game. Revenue, Revenue, Revenue + economies of scale mean very little to NO additional back-office support. Think of it this way....while TA keeps purchasing additional travel centers they would probably be adding NO ONE to their corporate office staff. ECONOMIES OF SCALE.

    These are just some of the reasons I remain a long term share holder in TA. Not many people see what TA is going to be, nor where TA is headed - yet. But they will....the only question is when?

    Vaya con Dios amigos!

    Sentiment: Strong Buy

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    • Counterpoints:

      *Leases are long-term and they can't be changed, but that doesn't mean rent isn't going up. For the first 9 months of this year, rent pmts to HPT went up $8.5 million.

      From the 10-Q, TA sold $48.3 million of leasehold improvements back to HPT, which caused an increase in rent of $4.1 million. That's an interest rate of 8.5%.

      From the same 10-Q, TA has approximately $125 million available on its credit line. Said credit line bears interest at 4.5%.

      Riddle me this....why did TA sell the leasehold improvements back to HPT rather than borrow on its credit line??

      * I'll take your word that TA owns 30 travel centers. Fire sale prices? I doubt it. TA can't figure out the best way to finance capex, why do you think they are experts on buying travel centers? They bought Petro 5 years ago...how'd that transaction work out for them? They've spent $70 million buying sites the last 2 years. When are we going to see a bump in earnings?

      * Cash on the balance sheet means nothing. TA has to have that much cash or else its suppliers won't extend it credit. It's not like TA could pay a dividend equal to the current market cap. You might as well say, "TA has PP&E on the balance sheet equal to X times its market cap. You also conveniently forgot about the loan payable to HPT that dwarfs the cash on the balance sheet.

      *TA is selling for 3x forward earnings. Although it's so levered that PE is basically irrelevant. What effect would a mere 5% drop in gross margin have on TA's earnings?

      *The scarcity of the locations has no impact on TA. HPT owns the land, so HPT benefits from rising real estate values. If you truly believe that the TA locations are going to greatly increase in value, then you own the wrong company. Buy HPT, not TA.

      *There may be laws regarding related party transactions, but there are also ways around those laws. See my point above about selling leasehold improvements back to HPT. Against the law? No. In the best interests of TA shareholders? No.

      *TA is NOT a real estate play. That's the dumbest comment I've heard. HPT is a real estate play. TA is an operating company that HPT had to spin-off in order to keep its REIT status.

    • Stock price is a forward indicator and as such the entire market is getting ready for the show down on fiscal cliff. We are pricing the worst for Q4 given the seasonal loss that is predicted already. During this season our stock is also weather sensitive. Given the Sandy mess in NE and predicted hard winter this year, IMO we are not going to be doing anything special for next 4 months. The only positive is that this DEF construction will be out of the way and the lanes will be open for full utilization next Q.

      Sentiment: Strong Buy

      • 1 Reply to sirius_yomama_2
      • Cap ex is out of control and has been for 2 years and based on the conference call they expect the same cap ex next year. any drop in cap ex would add huge to the bottom line.
        We as shareholders realize no value for the land or centers we own outright. there is no way to monetize them. (no dividend, no buyback, and will never sell the centers)
        last but not least look at earnings this quarter, lower then same quarter last year and that is with at least 8 new centers in operation. explain that.

 
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