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Otelco, Inc. Message Board

  • invest680432 invest680432 Feb 2, 2013 8:24 AM Flag

    How much is this company worth?

    Current IDS holders will own 85% of the company when it re-emerges. Currently, the market is putting a value of 23M for 85% of the company which translates to 27M for the whole company. Is this what this company is worth? Seems like an incredibly low valuation to me. From a quick look at the financials and forecasts, looks like this should be worth at the very least 50M and even then that's really cheap.

    What am I missing?

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    • I am very interested to hear the company explain what their net earning or cash flow would be under the new structure. We are being asked to have only an equity position....won't that value ultimately be based on earnings? We know there will no longer be any pps support from a dividend or interest payment so it falls back to earnings right? Otelco will be busy paying off the senior loan with any cash generation.

      • 2 Replies to hdecker88
      • This is a repeat and modification of a post I made yesterday.

        Not too long ago the IDS units traded for in excess of $16. That gave a $8.50 value for the equity portion of the IDS. That was for a company with $270m in debt. That would now be reduced to $135m. The EBITDA will be reduced from $45m per year to $32m per year according to the presentation that accompanied the conference call yesterday (it is available on the web site). At $8.50 per share for the equity that gave the company a $110m equity value. I would say you should reduced that by the percent reduction in EBITDA to $78m and then increase it by some amount for the reduction in debt, maybe to $85m. If that happened the new equity should trade for about $6.50.

        I think this stock could trade up sharply once it sinks in to the market that the IDS will not be wiped out and will get almost all of the company. Right now, too many posters dont seem to understand what this proposal is. The concept of bankruptcy seems to lead most to the conclusion that all equity will be wiped out and that just isnt the case. BK here is simply a management tool to get this restructuring done.

      • If you look at the presentation in the filing, they're forecasting 30M EBITDA for the next 4-5 years including this year. The question remains what the NET earnings will be, but even if there's only 5M per year of net earnings, at 10x PE, the value of the company should be 50M.