Hi you can search my posts on this board. I was hoping for late last year, maybe February. A couple things impacted my initial outlook - closing of ACEIII, SFRL melt-down in Q4, EU Forex, fee income from new ACAM agreements at a much lower rate than MTGE/AGNC % of assets, adjusting staffing and costs/delays of spin-offs. I saw no reason for debt assets in a tax free levered BDC to be selling at a 25% discount (option dilution was offset by my expected increase in EPS and NAV).
Hi All, It has been a long time since I have posted. Interesting stuff since Q4 and this 10Q.Overall, as always progress is being made slower and not as well (or frequently) communicated as I would have liked. BUT, I am still long a fair amount of shares and optimistic about achieving $18-$20 plus dividends but 6-12 months later than I had hoped. The downside risk has been protected in this investment, which during this volatile period for the market is good.. I prefer 1 tax free transaction and probably lower re-structuring codes/expenses. I think for ACAM, EAUM and management fees have hit rock bottom and addl. appreciation will occur in the next 2 quarters and hopefully market will assign a similar PE + book value.. I believe the price action after the results and call were extremely bullish for the stock from here on out. good luck to all, LI like the buybacks!
I know it is low volume but good price action - I think the blackout period is from end of qtr till the cc and the company can not buyback shares - can anyone confirm? Wonder if it has anything to do with the Mirion sale - ACAM does have an incentive fee 20% of earnings above a certain threshold - equity I would imagine sliding but anywhere form 1012% for the 20% level to kick in, it is hard to see what gain was attributed to ACEIII (at least off the top of my head I think 58% of $750M less the Sales price at 3/31/14 deal announced (not ures if it was adjusted before the 9/30 sale)
Ditto! B&W - Remember the leverage in the loan facility required them to have equity invested in SFRL's - which they could only get by liquidating equity in Portfolio companies. They could not leverage as much or at the same favorable rates without this (they probably could get some leverage based on their investments in Portfolio Companies but not as much nor at the same rates). Which takes time, I anticipated 2-3 quarters but really felt they would be good to go in Q1-15 (based on Q2 Commitments for Q3. Where they are now as far as SFRL investments on their books vs. Q1 of 2014 is a much different place as far as where they are in the process and how much more they have to go -and extrapolate their progress to the end of Q1 and Q2 seems a logical earliest point in time to start the buybacks/dividends based on cash flows. So I really think it is more logical, prudent time. that being said I certainly wish they had taken advantage of the decline since Q3 announcement at some minimal level, but am happy with this announcement. Although I wonder how much impact the hedge fund that purchased 2.2% of the shares had to force management into action. Unfortunately, my 5k shares and postings on this board were not enough! (LOL!!!)
No, I do not think so, just allocating some unknown amount if there is a discount to book. Note the release noted if a premium to book then it would consider a dividend. this is good news for all.
Hi apparently I was wrong i.e. maybe I need to get my eyes checked but they announced the dividends on the 18th last quarter. Will see if the Fed signals a rate hike in 2015 and if ACSF pops afterwards.
Seems Odd last quarter it was on the 13th of December. With today's action I am presuming news has leaked out and there will be no dividend increase this quarter. Let's see if the hunch is true.
actually you are right might not be so bad, due to spin-off vs. new organization
NMB, what about addl. Corp expenses which will likely be between 2.0% (low side to 3.5 (high but might be for initial 1st year).. I would expect 2.0-2.5%, however, they might go for a better mix and less leverage?
Hi, I actually think with the current strategy, ACAS earnings will be much more transparent. E.g. with ECAS now being consolidated, 1 less thing that management can do to "create" income. I think part of the dividends, was a collection of ROE or ROC and because it was not reinvested, the value in ECAS kept going down. Anyway, the more hard assets ACAS has that are not held in separate wholly owned entities, the more the market will value ACAS at closer to NAV, and then when the spin-off happens and those assets pay a dividend to SH. I would expect the spin-off BDC's to trade at 7-15% discount range - will probably tart oput between 12-15%. ACAM if it grows top and bottom-line EBITDA during 2015 will start to impact the market perception. I can see how currently it might trade at some discount as EBITDA has not increased since Q1 (maybe Q2 can not recall). I think a diversified ACAM Is quite valuable and will trade close to book, I do not know when thought and waiting to see 2014 financials in the 10K
Hi Shorts, excellent post. I think the discussion should start focusing on some of these points. Regarding the ROE of 8% very much agree that it was not very good - compared to historically with just ACAS or peers for 2014. I think ACAS was somewhat late tot he game for SFRLs - i.e. behind the curve by a 3 months to 1 year. It takes time to build a portfolio without overpaying, additionally, the company had some headwinds in 2014 - EU exposure, ACAM's proportional weight in leverage mortgage market (AGNC and MTGE) which has suffered since 2013 and creates a lot of pressure on ACAM's values - i.e. Q4 decline in ACAM valuation and no appreciation in H2 of 2014, even tho AUM grew by 19% in 2014 (if I am remembering the Slide # correctly). So I am fairly optimistic that the probabilities are skewed more favorably for ACAM (and ACAS) in 2015. Plus the growth opportunities and savings that management noted. We'll see. I am also glad that the WF person asked his questions. Management really needs to communicate better, this conference call did have more details than prior quarter but left a lot to be desired and honestly, leaves me scratching my head, while their strategy and actions I agree with, the poor communication - both in quantity (Nothing since last call) and refusal to provide even simple high level points on the timing and not noting that they intended to buy an additional $2B of assets before the spin-off (which would have been higher based on Q3 ending balance) really confusing/dis-appointing to me as a shareholder. Or they are shooting from the hip and do not have a good strategy. Anyway very good to have these posts.
I actually have begun to think of ACAS in non-spin-off/ buy back terms and am focusing on NOI and NAV increase for 2015. Based on the current trajectory of NOI and ACAM in-flight funds, less EU exposure and cost saving initiatives. I am expecting NAV to be between $22.-$22.75, I actually see another .50 to .75 from portfolio appreciation vs. depreciation in 2015 but I have left this out of the equation for fear of people thinking I am a lunatic. I think this will obviously give a corresponding rise to the share price but also a reduction in the discount. So 75% of $1.50 = $1.10 from a base share price of $14 $15. - $15 to $16, But then I see the positives of NOI/ earnings acceleration and pre-split excitement and I think $17-$18 by year end is reasonable. so 15-20% from these levels
Hi NMB, Yes, this was a good list of future plans, I am glad they have a lot in the pipe. I hope the fees are closer to 1.0 and 1.75 than ACSF,.. I know there are 2.0% and 20% incentive, but somehow I dislike paying 2% flat. I think ACAM's issue in H2 2015 is that the new entities had lower asset management fees than AGNC and MTGE., thus did not offset enough of their NAV reductions.
Yes either way, I think it is good for shareholders - they invest more now (or in Jan and Feb) at better prices than last year (plus leverage from loan) and we should see some good cash flows next year and if the debt market recovers from the doldrums, hopefully we will get the depreciation reversal as well. Anyway seems like the odds are with us. I love the price action this week!!
I had hoped ACAM would have some appreciation in the 2nd half with all the deals they did, but the new fees were lower % wise of the AUM than MTGE and AGNC -which lost a lot in the 2nd half of 2013. We'll see if they improve in Q1 - hopefully so. I think that was the only bad piece of the earnings release no increase in the fair value of ACAM
What I did like the most was NOI and the overall NAV value at the end of the quarter. I am thinking that Q4 had the highest risk to NAV (at least vs. going forward). I think things will settle down in the debt market, the company will start receiving the benefits of the cost savings initiatives, more earned interest, more EAUM for ACAM and EBITDA, etc. So it is off, I give them a solid B+ on operating execution and results thus far, but poor communication and PR of their focus/strategy. Good luck to all.
Hi NMB, glad to have you posting. I agree with you and not characterize the call as confrontational. However, it was clear the analyst were frustrated with the answer provided - i.e. repeated asking of questions in a different way, asking for some basic information. Also, to be honest, the company has done a poor job of communicating several things: 1st - if truly they did not know how long this would take - I,e. the magnitude of the effort, they should have set the expectation lower on the last call. Everyone, including yourself expected some action (not the actual spin-off) to occur earlier some sort of pre-filing, etc. Also, on the slides they mention addl. SFRLs they need to buy before the spin-offs as well as needing to have a balanced portfolio to pay a market yield, i.e. either buy more CLO's other assets. Based on the amount they want to buy and end of quarter commitments, these seems like it will take 2 quarters - note, they can probably still do a lot of legwork and activities in the interim. I also think they can emphasize/promote that growing ACAM is the new foundation of the company. People are still viewing them as a BDC where NAV discount and dividend yield and growth are the key metrics - they have switched strategies and not really promoted this - seems like just 1 piece of the business, vs. the company. On the issue of the buybacks vs. investing for growth - they had the same opportunity for 2009- to present. and they thought it was a good value back then - when Assets could have been had for pennies on the dollars and now that there are no pervasive deals, they cancel the buybacks to invest in debt at all time low rates of return. I am not criticizing there choice so much but to point out that the inconsistency of their buyback rationale as well as the flaw in their change in approach at this particular time. However, at this point in the business cycle not a bad place to be - high quality SFRLs.
I think you are mistaken - from the release just before the financial statements -" Due to changes in the composition of American Capital's investment portfolio and market conditions, strategic reviews of its business were conducted in the fourth quarter of 2014, which resulted in the closing of one office and a workforce reduction of approximately 13% of its employees. As a result, a charge of approximately $19 million was recorded for the fourth quarter of 2014 related to accrued severance payments and stock based compensation charges associated with the workforce reduction." This seems clear it is a lay-off unless you have a different definition of reduction in force and severance, etc..
I am hoping for a little more of the details, are they tax related, BDC related, is it more of a formality, I would think it is just a matter of time but I am not a lawyer and no SEC experience. Also would like to see if they can provide a time frame after SEC approvals, for this to be implemented, could be they can prepare most fo the other stuff ahead of time and then fill in any gaps while waiting. I would just be more comfortable knowing what the issues are (in general) and some comfort, not really asking for too much more speciifcs just an overall understanding. I think with all the subsidiaries it is a tough job accounting wise and legally due to nu ber of entities - based on some of the past ifilings.