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Silicom Ltd. Message Board

bobby2loaves 57 posts  |  Last Activity: Apr 28, 2016 7:34 AM Member since: Apr 19, 2008
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  • Reply to

    Quotes from April 2016 call

    by jsqfunk Apr 27, 2016 8:09 PM
    bobby2loaves bobby2loaves Apr 28, 2016 7:34 AM Flag

    Hey jsq - welcome to the board.

    It does indeed look like WRB is going to continue to delve into other areas, diversifying their reach, and further coiling the spring if/when we ever see a hard market in insurance again.

    That said, management seemed pretty downbeat on rates going forward, with Rob saying "rates are plateaued or trying to decrease".

    And their comments on the growing tension between insurers and brokers also sounds like major industry turmoil as well. Rob made it sound like their high net worth business startup is going to strictly use an on-line platform. If that turns out to be true, I wouldn't be surprised to see WRB move more of its products to being sold directly online. It is the way of the world in many businesses today.

    Bottom line: while this may be a good place for WRB to increase its business lines, it's going to be detrimental in the short-term, as there are startup costs that being down profitability before increasing it. And with rates taking a turn for the worse, I am not expecting WRB to be shooting out the lights on earnings for the next couple years. Throw in the fact that WRB is trading for nearly 1.5x book, about as high as it's been in 10 years, and I am expecting the stock to see $50 before it sees $60 again.

    Mind you, this is coming from a 6-year WRB bull who still holds an insane percentage of WRB in my portfolio. But I have sold some shares here in the upper $50s, and expect I'll be able to buy them back lower.

    Bill may never have sold any of his personal shares, but for many years, he has been waiting to buy back shares for the company closer to 1.15x-1.25x book. And I am going to follow his lead on that.

    WRB plays the long game. If you're going to own part of the franchise, prepare yourself. And buy more shares as we near $50 again. We could easily see $40 in book next quarter. And 1.25x book is a great time to be buying this stock.

  • bobby2loaves by bobby2loaves Apr 21, 2016 7:57 AM Flag

    I've been reading about Gensource lately. They propose running a solution mine using brackish water from the get-go, which somehow would avoid the evaporation process (using only crystallization). Their model would greatly reduce Cap Ex costs, while keeping cost/ton low from the streamlined mining process.

    It's being run by Mike Ferguson, the early developer of the Legacy mine (sold to K+S).

    The project has been sitting around for several years, although they are drilling some test wells this year, and it looks like this month Yancoal Canada Resources Co gave them a couple million to help them purchases leases.

    Anyone have thoughts about his project?

  • Reply to

    volume last two days. impressive.

    by timeforacrash Apr 20, 2016 3:11 PM
    bobby2loaves bobby2loaves Apr 20, 2016 3:53 PM Flag

    There's no institutional conspiracy here. Corn/wheat/soy have gone vertical the past few weeks, and are all making new highs for 2016. Shouldn't be any surprise POT is $3 off its ten-year low........

  • bobby2loaves by bobby2loaves Apr 19, 2016 10:24 AM Flag

    Barclays lowers POT price target to $14: opinion.

    Corn up 10% in 3 weeks, and near 6-month highs: fact.

    Market seems to prefer the fact.

  • Reply to

    Picked Up Some More POT Here at $15.60

    by bobby2loaves Apr 12, 2016 10:55 AM
    bobby2loaves bobby2loaves Apr 13, 2016 5:59 PM Flag

    Nicely done, onewaytomars4. Way to dig into the 10-k and find that 12 cents EPS per $20 change in potash/ton.

    I stand corrected.

    That said, Tilk said $1.00 in 2016 EPS should translate to $1.50 in 2017 EPS with the reduced cap ex. So, another $250/ton would translate into another $1.50 in EPS, bringing us to $3.00 in EPS. Even with another 1-2mm tons in potash production and better prices on N and P, that probably only gets POT to $3.50 or so in annual EPS.

    But hey, like I said at the beginning of all this, I'm just looking for $2.00 a share in EPS, and all we need is $330 potash/ton for that. Hard to imagine that not happening at some point in the next 2-4 years. And voila, we've got a $30 stock.

  • Reply to

    Picked Up Some More POT Here at $15.60

    by bobby2loaves Apr 12, 2016 10:55 AM
    bobby2loaves bobby2loaves Apr 12, 2016 5:05 PM Flag

    This isn't 2008. Things have changed. Cap Ex is almost done. Costs are down. 10,000,000 tons x an extra $250 a ton = $2.5B more profit. Take out taxes, and you're still looking at adding $1.75B annually, which is about an extra $2 a share inEPS. And if potash doubles in price/ton, you have to figure N and P are going to increase margins as well. #DoTheMath

  • Reply to

    Picked Up Some More POT Here at $15.60

    by bobby2loaves Apr 12, 2016 10:55 AM
    bobby2loaves bobby2loaves Apr 12, 2016 4:16 PM Flag

    If potash goes to $500/ton, production goes to 10mm+ tons a year, earnings go to $4+ a share, and stock goes to $60+. #DoTheMath

  • S&P Takes Negative Rtg Actions On Four Global Fertilizer Firms
    BY Dow Jones & Company, Inc.
    — 11:29 AM ET 04/12/2016

    The following is a press release from Standard & Poor's:

    -- The fertilizer market environment has weakened materially, and we
    expect prices to remain well below 2015 levels.
    -- Weaker prices will lead to a drop in earnings and higher leverage in
    2016-2018.
    -- We are therefore lowering our ratings on global fertilizer producers
    EuroChem, K+S AG (KPLUF), and Potash Corp. of Saskatchewan (POT) by one notch and the
    outlooks on the ratings are stable.
    -- We affirming the ratings on Uralkali, but revising the outlook to
    negative.

    Potash Corp.

    The downgrade reflects our view that Potash Corp.'s credit measures have
    deteriorated below the level we deem appropriate for an 'A-' rating, owing to
    weakened fertilizer prices. We now expect the company to generate cash flows
    below our previous expectations over the next three years, resulting in the
    five-year weighted average adjusted FFO-to-debt ratio deteriorating below 45%,
    which is in line with our downside rating trigger for the 'A' rating.
    Nevertheless, our base-case scenario also incorporates an expected improvement
    in the company's operational efficiency as it shifts production from its New
    Brunswick mines to the lower cost Rocanville mine, which the company expects
    to have cash costs of US$45 per mt when operating at full capacity in 2017.
    These operating efficiency improvements, reduced dividend levels, and
    curtailed capital spending are not, however, sufficient to fully offset the
    material deterioration in prices. As a result, we have revised our financial
    risk assessment to intermediate from modest to reflect the deterioration in
    our estimates of the company's five-year weighted-average FFO-to-debt ratio,
    and overall financial risk profile.

    etc, etc

  • POT looking pretty oversold here. Down 25% in 3 weeks on nothing much. Seemed like a good time to lower my cost basis.

    Long term thesis for me here. I'm happy to rake in 6% a year, while waiting for POT to make $2.00+ a year in EPS, at which time the stock will double. My guess is that double comes within 2 years.

  • Reply to

    is The Dividend Safe

    by financekid299 Apr 4, 2016 2:15 PM
    bobby2loaves bobby2loaves Apr 4, 2016 4:09 PM Flag

    Yes. The dividend is safe. At today's miserably low fertilizer prices, they will still have enough in net income ($1.10 or so) to pay it this year. And once their 7-year Cap Ex spree winds down at the end of this year, they will have $1.50 in net income in 2017.

    Of course, fertilizer prices can still go up or down from here. But the dividend looks pretty well covered at this point, even as several potash mines around the globe are being shuttered at today's prices.

  • Reply to

    Analysts Piling On With More Negativity

    by abbaman7 Mar 22, 2016 11:44 AM
    bobby2loaves bobby2loaves Mar 22, 2016 12:38 PM Flag

    I googled him to see the commentary on today's downgrade. Funnily enough, the first article that came up was a Dec 2014 interview saying how great potash was an investing thesis, right before POT's share price got slaughtered, losing 60% of its value in 12 months. And now he thinks potash is a poor investing thesis. Sigh........

  • Thoughts on this?

    Karnalyte Resources plans to begin construction of new potash mine this fall

    A financing agreement worth about US$700 million means construction of the first phase of a proposed potash mine near Wynyard could begin as early as this fall, according to Calgary-based mining company Karnalyte Resources Inc.

    “By Sept. 30 we’ll have the financing in place, and I’ll have dirt flying the next day. That’s how fast we’re ready to go,” Karnalyte founder and president Robin Phinney said Monday, noting that all permits and engineering work for the proposed mine site are in place, and that construction and commissioning are expected to take 30 months.

    Karnalyte plans to build its solution mine, the Wynyard Carnallite Project, in phases. The first phase is expected to produce 625,000 tonnes per year, and the completed mine’s capacity is expected to reach 2.125 million tonnes per year. Work on the first phase will be entirely underwritten by Gujarat State Fertilizers and Chemicals Ltd. (GSFC), a fertilizer company based in India, in exchange for a temporary 51 per cent voting share in the company.

    On Monday, the companies announced an agreement in principle that involves the Indian firm covering phase one development costs and agreeing to buy 56 per cent of phase one production at market price for 20 years. Phinney said GSFC “fell in love” with the project because of the ore body’s high grade and its attractive capital costs.

    More to follow on next post....

  • bobby2loaves bobby2loaves Mar 11, 2016 10:45 AM Flag

    Normally, I would say they were trying to protect their own jobs. But based on this release from yesterday, I'd say you're right......they would have done better to sell out.......than to get kicked out:

    K+S CEO to retire after contract runs out next year
    FRANKFURT, March 10

    The embattled chief executive of German fertiliser mining group K+S expects to retire in May 2017 when his contract runs out, he said on Thursday.

    "I assume that I will move into retirement," CEO Norbert Steiner told a press conference after the release of full-year results, when asked about the end of his current contract next year.

    K+S has seen its share price drop almost 40 percent to 20.5 euros over the last six months and 8 percent over the last three months, hurt by lower global potash prices.

    Last year, CEO Steiner fended off a 41-euro-per share takeover approach from larger Canadian rival Potash Corp , which withdrew its proposal in October.

    German prosecutors are pressing charges against CEO Steiner and 13 other K+S employees over suspected illegal waste water disposal but the court has yet to decide whether the case will go to trial.

    "We will announce a successor in due course. The supervisory board has not looked into the matter yet as far as I'm aware," Steiner said. (Reporting by Patricia Weiss; Writing by Ludwig Burger; Editing by Arno Schuetze)

  • Reply to

    What is the after tax yield?

    by tete92660 Mar 10, 2016 12:55 PM
    bobby2loaves bobby2loaves Mar 10, 2016 3:06 PM Flag

    None.

    There is no dividend tax if you own it in an IRA.

    And if you own it in a taxable account, you can just reverse it out on Line 48 of your 1040 as a Foreign Tax Credit.

  • bobby2loaves by bobby2loaves Mar 10, 2016 7:28 AM Flag

    They did fine for 2015, with profits above 2014, but 2016 guidance is pretty scary, with EBITDA expected to be "significantly below" 2015's $1.05B. Considering they only had $273mm in net profit in 2015, you've got to figure that means 2016 is going to operate at a loss. Why they are raising their divi, I have no idea. Most interesting to me was the part about the Werra plant being affected by environmental reasons......which has about 250,000 tons Potash coming out of it.

    I said it before - - and I'll say it again - - Abbaman was right about the K+S acquisition being suspect.

    Here's the guidance from the release:

    Outlook for 2016: Significantly lower result expected

    A downturn in the potash market, which first became apparent in the second half of 2015, may continue this year. Along with intense competition, an ongoing difficult economic situation in the emerging market countries is expected, continued low agricultural prices, and less availability of credit for farmers, particularly in Latin America. Moreover, given the restrictions placed on the permit to inject saline wastewater at the Hattorf site, temporary production cuts at the Werra plant cannot be ruled out. Consequently, a significant drop in average prices in the Potash and Magnesium Products business unit, as well as sales volumes slightly below those of the previous year is anticipated. The Salt business unit experienced a mild winter so far, and although moderately higher sales volumes for industrial salt, salt for chemical use and food grade salt are planned, this cannot offset the lower sales volumes for de‑icing salt.

    Overall, K+S Group revenues in the 2016 financial year should therefore decrease moderately year over year, while operating earnings EBITDA and EBIT I are expected to be significantly lower than in the same period in the previous year. Adjusted Group earnings after taxes should follow developments in operating earnings and thus also be significantly below last year’s numbers.

  • China Food Inflation Explodes To 4 Year Highs As Producer Prices Slump For 47th Straight Month
    03/09/2016 20:41

    For the 47th month in a row, China's Producer Prices have fallen year-over-year - a record deflationary streak. CPI rose 2.3% YoY - the fastest pace since May 2014 (against expectations of a 1.8% rise in consumer prices, and at the upper end of the +1.5% to +2.4% range). PPI printed as expected with a 4.9% YoY plunge in producer prices (-4.5% to #$%$ range). However, what is most disturbing - from both a social unrest and economic-stimulus-hope basis, is that Food prices exploded 7.3% YoY - the most in 4 years.

    "The uptick in consumer prices is certainly striking," Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. "But with virtually the entirety of the increase coming from food prices, it?s not an increase that?s likely to be sustained for long. Food prices are subject to supply shocks and seasonal blips."

    But, it looks like Food-flation is here to stay... China Pork prices were up 18.8% YoY in January.

  • Reply to

    Significant New Development Regarding SQM

    by abbaman7 Mar 7, 2016 1:16 PM
    bobby2loaves bobby2loaves Mar 8, 2016 11:23 AM Flag

    One other thought. Tilk has been saying if they can't have larger ownership with their equity stakes, they would prefer less. I suppose it is possible they could offer up their SQM shares to another entity acquiring Ponce's shares, raking in $2B or so. Of course, the question is then what do you use the $2B for? Share buybacks seem a little boring, only reducing the float by 10% or so. And paying down debt only saves you about $100mm a year in interest. Both of these options would only goose earnings by about 10 cents a year in EPS. Hardly a sweet return for $2B. Better to take over a company with the potential to make $500mm+ a year in net income, and add $7.5b to your market cap, becoming the world's largest producer of both Potash and Lithium, at about 20% of global share each. (FYI - Lithium, although an exciting market, is only about 15% of SQM's revenues).

  • Reply to

    Significant New Development Regarding SQM

    by abbaman7 Mar 7, 2016 1:16 PM
    bobby2loaves bobby2loaves Mar 7, 2016 2:14 PM Flag

    Now here's an acquisition even you seem to like. Me? I love it. For the low, low price of about $1B, POT can gain controlling share of a company that traded for $15B just a few years ago. I don't know the first thing about Lithium mining, but hey, I can learn.......

  • bobby2loaves bobby2loaves Mar 3, 2016 11:35 AM Flag

    He also mentioned that since Fert prices had dropped so much more than grain prices, farmers' ratios for fertilizers/yields were as good as they have been for a long time.

    So maybe grains don't need to recover for the Potash market to rationalize a bit here.......

  • At the BAML conference yesterday, Wayne Brownlee (CFO) presented. When asked about whether the Uralkali and Belaruskali breakup had impacted things, he said it certainly did, and continues to. But with that said, he related this little tidbit:

    "We actually are seeing a price turn in Brazil right now. Pricing last week is up $20/ton. We’re seeing the price that’s codified in the United States. All it took was for some in-season demand to kick in to help turn this market around. So we think we’re coming out of this thing that we’ve had for the last 3-4 months.

    He also said he was optimistic that 1Q16 cuts by PotashCorp, Canpotex and Belaruskali are allowing for a more constructive tone in the markets now.

    When's the last time you heard about potash/ton being up $20? As has been said on this message board numerous times, that is the single most important number for POT.

    FWIW he also mentioned that credit rating agencies prefer M&A over share buybacks, should POT want to take on anything here. And that phosphate M&A would have to be very cash accretive, as the potash business commands a greater multiple, likely meaning they would only look at potash M&A.

SILC
27.61+0.01(+0.04%)Apr 29 4:00 PMEDT