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Dean Foods Company Message Board

walk57 15 posts  |  Last Activity: Jul 18, 2016 8:14 AM Member since: May 29, 2000
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  • Reply to

    2Q

    by walk57 Jun 26, 2016 1:34 PM
    walk57 walk57 Jul 18, 2016 8:14 AM Flag

    All Otelco's competitors are looking at much cheaper money as well. Refinancing old more expensive debt was one of the suggestions in Maglan's letter to FairPoint.

    I'm surprised FairPoint hasn't made an offer for Otelco already. Otelco introduced new competition to them in Maine with the 10 gig northern loop lease with Maine Fiber and I know they would love to have Otelco's hosted PBX biz.

  • Reply to

    2Q

    by walk57 Jun 26, 2016 1:34 PM
    walk57 walk57 Jul 17, 2016 9:17 AM Flag

    FRED was at 9.70% on the day (2/17) the new agreement was funded and effective. So we have dropped over 3% in a very short period of time. And the cost to do this current agreement was very very expensive, over $5 million.

    The $15 million subordinated loan rate in this current environment is totally unacceptable. I plan on participating on this Q's CC.

  • Reply to

    2Q

    by walk57 Jun 26, 2016 1:34 PM
    walk57 walk57 Jul 12, 2016 10:04 AM Flag

    B at now at 6.82. Otelco managed to find the short duration spike in interest rates when doing the refi.

    Check that. It was Oak Hill Capital that is buying up the NE fiber companies. Rapid consolidation.

    Nice piece by Otelco's CEO, Rob Souza, in yesterday's Bangor Daily News regarding broadband in neglected areas. It's on the OTT Communications website.

  • Reply to

    2Q

    by walk57 Jun 26, 2016 1:34 PM
    walk57 walk57 Jul 11, 2016 1:28 PM Flag

    Noticed that. As Maglan said in their letter to FairPoint, the high-yield market was effectively closed when Otelco was refinancing. Fairpoint has some 8.87% debt...wouldn't be surprised to see them refinance some even though their leverage is currently higher than Otelco's.

    In its PR last week, Otelco's ALE's are currently around 96K. I expect a 2Q EBITDA around $7.2 million, which would be $0.1 million higher than the $7.1 million they're rolling off. Revenue will turn positive one of these quarters IMO.

    Since Otelco now makes its principal debt payments on the first of April & July, debt has decreased at least two million since the current figure

    Quick consolidation going on in NE fiber. Oaktree Capital bought Oxford Networks last week and will combine them with First Light who they bought in March.

  • Reply to

    2Q

    by walk57 Jun 26, 2016 1:34 PM
    walk57 walk57 Jul 7, 2016 2:36 PM Flag

    Banks done? Sub $4 shares aren't easy to find.

  • walk57 by walk57 Jun 26, 2016 1:34 PM Flag

    The 2Q ends on Thursday. Results come in early August.

    My only question for this quarter is how many direct purchases will be made by officers when the insider window opens a couple days after the earnings release in August. Five of seven Board members made direct purchases two months ago at prices roughly $1.00/share higher than they are now. My guess is the current sellers at these levels will find more willing takers for their shares at that time.

  • Reply to

    Where in the World is Maglan?

    by otter04256 May 2, 2016 11:18 AM
    walk57 walk57 Jun 14, 2016 9:45 PM Flag

    Apparently taking their concerns directly to the Board in their latest letter. Seems Maglan feels that FairPoint is undervalued relative to peers as its recent Enterprise Value is around 5x projected 2016 EBITDA. While that is low compared to some of its dividend-paying peers, there are some wireline telcos, albeit smaller, that are far far cheaper than FairPoint.

    Consider Otelco, one of FairPoint's smaller competitors in northern New England. If Maglan is perplexed about Fairpoint at 5x EV, they would be amazed at where Otelco is at. Today Otelco is priced at less than 3.6x trailing twelve month EBITDA. And Otelco's EBITDA actually rose slightly last year from 2014. This is a huge discrepancy, even if you give some consideration to FairPoint's larger size. If you attach a 5x TTM EBITDA multiple to Otelco that Maglan Capital is upset about with FairPoint, you would end up with $146 million minus $92.4 million net debt which equals $53.6 million equity value. Otelco's equity is currently around $13 million. This means that Otelco's current stock price would have to more than quadruple to equal FairPoint's 5x multiple that Maglan is complaining about. Further, Otelco's leverage is lower than FairPoint's...it's net debt is less than 3.2x TTM EBITDA.

    Otelco just added 10 gig capability in northern & eastern Maine which introduces new competition to FairPoint in that area. If i were FairPoint I would consider an immediately accretive acquisition of Otelco at a dirt cheap price before contemplating a sale of itself.

  • Reply to

    Incredibly disappointing

    by kingedxxxxx May 31, 2016 5:08 PM
    walk57 walk57 Jun 9, 2016 9:46 PM Flag

    King,

    While I agree a post reorganization stub like Otelco with its illiquid nature and no coverage by Wall Street may have a temporary effect on the stock price, including the current situation where there is (was) a 232k share "overhang" from the banks who are probably liquidating, I couldn't disagree more with your "dead money" thesis. Time will tell.

    Valuation still matters. I have asked this board if anyone could find a wireline telco that trades remotely close to Otelco's undervaluation. Silence. Because there are none.

    I encourage all to examine the letter one of FairPoint's largest shareholders sent to its Board a couple days ago. Maglan Capital is extremely upset FairPoint's current Enterprise Value is so low in their view, just 5x projected 2016 EBITDA. Meanwhile, one of its competitors (Otelco) is trading at less than 3.6x trailing twelve month EBITDA. This is a huge discrepancy. Like I said in an earlier post, if Otelco were awarded the current valuation FairPoint's shareholder is whining about, its share price would be almost four times higher than it is today. Maglan Capital also noted in its letter that the high yield market was "closed" in late 2015 and early 2016. Not "difficult" or "challenging" but "closed." On January 25th Otelco closed on its new deal. Because the high yield market was closed they had to go to Plan B. Expensive, but it got done. Meanwhile, B rated high yield has gone from around 10% when they signed the deal down to around 7% now.

    You and other posters have spoke of a buyout. At this valuation versus its peers I believe its competitors would be ignorant not to inquire about Otelco. Especially someone that shares geographical areas such as FairPoint. With the state of "cheaper" money right now as compared to the start of the year and the fact the acquirers stock would be much more expensive than Otelco's, to me this is a slam dunk to somebody who is paying attention.

  • Reply to

    Maglan Capital

    by walk57 Jun 6, 2016 4:39 PM
    walk57 walk57 Jun 6, 2016 9:34 PM Flag

    You're certainly entitled to your opinion. Still trying to get one of many Otelco "non-holders" on this board to dispute the facts presented in response to King's post. I thought since you declined, I thought someone else that doesn't hold the stock with a negative view would pick up the slack.

    Otelco's EBITDA trend reversed in 2015. That's a fact. EBITDA went up slightly as compared to 2014.

    Now we have seen five consecutive quarters of smaller revenue losses. Last quarter it was 0.9%, the smallest revenue drop since I've held shares. If the trend holds you might have to take that "revenue falling" line out of your argument. The company has continued to add services (fastest connections in northern Maine for example) that you completely ignore.

    I wouldn't ignore the recent direct purchases of Board members either.

    Good luck on your apparent mission (not sure what your purpose here is exactly) to discourage people from investing in a very undervalued security.

  • Fairpoint (FRP) Communications is a wireline competitor of Otelco's in New England. Like Otelco, it does not pay a dividend. Today, one of Fairpoint's largest shareholders, Maglan Capital sent a letter to Fairpoint's Board. It suggested various value-creating initiatives, such as a sale, dividend, debt restructuring, etc. The full letter can be found on FRP's site. An excerpt:

    "FairPoint's current enterprise-value is 5x projected 2016 EBITDA, among the lowest in its peer group, while comparable companies are valued in a range of 6x to 9x+ EBITDA. Therefore, the stock represents a tremendous value play. At a 6x valuation, FairPoint's share-price would be $23, or over 75% higher than the current price."

    This shareholder is upset that Fairpoint's EV is currently 5x projected 2016 EBITDA, which it considers to be extremely undervalued relative to its peers

    I have news for Maglan Capital. Your competitor in New England currently trades at 3.6x trailing twelve month EBITDA. We do not have a projected 2016 EBITDA for Otelco because guidance is never given. However, we do know that Otelco's EBITDA went up slightly from 2014 to 2015, and adjusted for the first quarter "CoBank effect" 1Q/16 EBITDA was $0.1 million higher than last year.

    OTEL's trailing twelve month EBITDA is $29.2 million.

    If OTEL were trading at the 5x EBITDA valuation Maglan Capital is complaining about in regards to Fairpoint, Otelco's Market Cap would be $53.6 million. ($29.2 EBITDA x 5 = $146 million - $92.4 million net debt) Otelco's Market Cap stands at approximately $13.8 million now. Otelco's stock price would have to almost quadruple to get to the valuation Maglan Capital is upset about currently with Fairpoint.

  • Reply to

    Incredibly disappointing

    by kingedxxxxx May 31, 2016 5:08 PM
    walk57 walk57 Jun 5, 2016 11:59 AM Flag

    "I'm not going to refute anything."

    Not surprised. Facts are hard to refute. Perhaps King or other non-holders of Otelco stock on this board can refute the facts I presented in response to his post.

  • Reply to

    Incredibly disappointing

    by kingedxxxxx May 31, 2016 5:08 PM
    walk57 walk57 Jun 5, 2016 10:40 AM Flag

    Thanks for the response....but once again it didn't address any of the facts I presented to the poster who started this thread. Can any of you non-holders of Otelco stock refute what I said in response to King's post? I'm still waiting.

    I'm sure that you were aware what was going on...because that's what non-holders of this stock do...when Otelco was in the process of refinancing the credit line.

    *You knew the lead lender of the last credit line, GE, was in the process of selling its entire financial subsidiary? Kind of hard to get the biggest investor interested in your refinancing when the whole unit of the lead lender is on the block.

    *You said: "The fact that they didn't want to renew their credit lines should be a flashing red alarm for potential buyers."

    So, again as a non-investor, you know for a fact that none of the six banks involved in the last credit facility were interested in dealing with Otelco on a new credit agreement? Don't you think that assumption may be incorrect? Could it have been some of the banks were willing to play but with the largest lender out of the picture the rest weren't willing to pick up the slack?

    *Because of the current regulatory climate, banks are extremely focused on lowering the overall leverage of their portfolio. This didn't help.

    *At the time Otelco's refinancing process was going on, high-yield, because the energy companies were blowing up, was very unattractive. It's getting better now partly because some of the very ill in the oil sector have filed for bankruptcy already. Otelco ran into some bad timing when doing this refi.

    *As for the company being "milked by management" I would encourage you to compare the officers compensation with other wireline peers of comparable size. You may be surprised.

  • Reply to

    Incredibly disappointing

    by kingedxxxxx May 31, 2016 5:08 PM
    walk57 walk57 Jun 3, 2016 12:12 AM Flag

    The new credit agreement only requires $1 million per quarter. The last one required a principal payment of approximately $1.6 million per quarter. The terms of the new agreement are not as tight. That seems to be lost among some here as well.

    Let's assume Otelco just paid the $1 million minimum at its scheduled payment on the April 1st due date. If cash stays the same its net debt right now is $92.4 million ($99.3 million minus $6.9 million cash) or put another way, Otelco's debt is less than 3.2x trailing twelve month EBITDA which is $29.2 million. This is an insanely low number for how the Market is currently valuing it.

    Otelco paid a very steep price to get this new five year credit line, but think about this. It cost north of $5 million but cash did not decrease from the previous quarter...it stayed the same at $6.9 million. Otelco WILL NOT have this drag when it reports 2Q in August.

    The CFO made a reference to this fact on the 1Q conference call. "Cash at the end of the first quarter was $6.9 million, essentially the same as at the end of 2015. Given the level of loan costs paid in first quarter, some might consider that a positive accomplishment."

    Judging from the current stock price, I must have been the only one who noticed that line.

    I am convinced the six banks selling recently converted shares are primarily responsible for the recent decline in the share price. The large holders have been steady in recent years even when Otelco was valued higher with an inferior financial position. None of them IMO would be selling at these levels especially given the points I made in my previous post above.

  • Reply to

    Incredibly disappointing

    by kingedxxxxx May 31, 2016 5:08 PM
    walk57 walk57 Jun 1, 2016 5:52 PM Flag

    Funny how most of the posters on this board don't own Otelco and have a negative view of the stock. I've tried presenting a long case with facts but they go ignored. They're met with general responses (value trap, dying company, etc.) that don't address the facts. Maybe you can at least acknowledge these facts:

    *Five of seven Board members have made direct purchases of Otelco in the past couple weeks. Further, these Board members will not get any "freebies" (as one poster inaccurately refers to them) in the future as the Stock Incentive Plan was rejected by shareholders at the latest Annual Meeting. If they want any more, they pay the Market price.

    *Revenue loss in percentage terms has slowed. The past five quarters: -6.1%, -3.2%, -3.1%, -2.5%, and the latest quarter -0.9%. If the trend continues Otelco goes positive soon. Business (stable) revenue is now up to approximately 55% of the mix.

    *All this talk about "growth" is crazy. At this valuation Otelco simply has to amortize its debt faster than their EBITDA declines. Of course, Otelco's EBITDA did, in fact, rise in 2015. And backing out the "CoBank effect" in 1Q/16 resulted in EBITDA $0.1 million higher than 1Q/15.

    *It doesn't seem to matter to the bears here, but debt keeps decreasing. The Market has not rewarded Otelco for this yet, but it will at some point. You can only hold the balloon under water for so long.

    *Bears say comparing Otelco to its wireline peers on a value basis is "irrelevant." Do you agree? Nobody is cheaper but don't believe me...check out page 24 of LICT's investor presentation on its website.

    *Otelco just won a small Connect ME grant for broadband, and now have the fastest internet connection (10 gigs) in northern & eastern Maine. They are not standing still.

    *This is not a fact, but speculation. One or more of the banks is selling their recently converted shares. Indiscriminately. This has nothing to with the company. But it results in some great prices here, IMO.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 27, 2016 9:25 PM Flag

    The "Market" for OTEL at the current time may just be a bank or two extremely eager to sell their recently converted Class A shares at just about any price they can get. Banks do really weird things. That's why we have to bail them out sometimes. Especially strange because 5 of 7 Board members just made direct purchases in the current quarterly window.

    If Otelco is at such a massive disadvantage how come their margins are near, or at the top versus all wireline peers every quarter? Could go piece-by-piece through your latest rehash but its no use. I've been through how Otelco revenue mix is over 55% stable or growing business at this point, but you just ignore that. Revenue loss was 0.9% last quarter, its lowest drop since I've been around here. You ignore that. I say Otelco stabilizes or actually reverses its revenue deline this year. You ignore that. Insiders buy. You ignore that. Oteloco is far far cheaper on an EV/EBITDA than any of its wireline peers. You ignore that.

    For a person who is currently 0 for 1 in the speculation department regarding Otelco, (insiders ARE NOT buying-PJN 5/14/16) you sure seem confidant. All I can say is follow the free cash flow.....dude.

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