Back to $.50/share?
How do you figure that? Even if gold were to go down $100 to $200 oz, these guys would still be making money.
If gold stays the same or even goes up a little, they are going to be making quite a bit of money.
This is doubly true if their production picks up anything close to what they are projecting.
My biggest worry at this point is that the stock goes up too fast for my small sized position. I'm sitting on a HUGE gain here...
Sentiment: Strong Buy
I hope you are correct. It would be good if SVU can spin off all or most of their retail locations, and then use the proceeds to largely pay off debt and expand Save-A-Lot.
It would be great if a year from now SVU is almost entirely wholesale, with retail being sold off and Save-A-Lot spun off.
Assuming they get a good price for retail, and the Save-A-Lot spinoff goes OK, SVU is going to be a lot higher than what it is now.
Sentiment: Strong Buy
I read the transcript to. I don't know that I would come to conclusion that they are doing fine. After all, sales are down close to 10%. Additionally, they lost $.57/share. A lot of their locations are also in areas that have been negatively affected by dollar strength (Peso weakness) & lower oil prices.
With that being said, I think management is above average compared to their competition. I also think the company is better capitalized than most of their competitors.
They are going to have lower cap-ex, as they are holding back on putting in more cosmetic counters in lower sales locations. I also think that they are going to cut back on inventory levels as a regular course of business. They will also be carrying less inventory in the approximately 30 stores that are closing. In fact, they might be able to get some cash flow from the liquidation of inventory. On the other hand, they might not, as they have to pay severance AND perhaps lease payments & such.
If SSI can maintain sales & cash flow at current levels, they MIGHT be able to maintain the dividend. It is going to be close though.
Looks like I was partially right, partially wrong.
The dividend has been declared for the next quarter...So I was obviously right on that call.
As to earnings...wow, they are weaker than I thought was possible. I was also surprised at how much forward guidance has been lowered. I will have to listen to the conference call and look at the numbers. I am initially skeptical that they will keep the dividend at the current rate beyond this quarter and maybe next.
I still suspect that going into the holiday season, they will need cash to build inventory. If a dividend cut is going to come, that is likely when they will do it.
The stock is now trading at about 30% of book value. Dividend yield is over 12%.
It will be interesting to see if the insiders continue their purchases OR if they back off.
What will also be interesting is to see what happens with the short position. Going into the conference call, I think 25% of free float was short. I wonder if the shorts will close out their positions in an orderly fashion? At well under $5/share, I think all the easy money on the short side has been made.
We will see!
I think there is a good chance that SSI will have a bad earnings report tomorrow. However, I believe this has been largely priced in. Of course, it depends on just how bad it is.
Same thing for the dividend. I think it will probably be paid. HOWEVER, it depends on how bad the earnings report is.
What I can see happening is that the dividend is paid for another couple few quarters, THEN it is drastically reduced or cut. If they are going to cut the dividend, it will probably be going into the holiday season, when they need cash to build inventory.
As to money being spent on buybacks. It was not at the precise low....BUT it was at a SUBSTANTIAL discount to book value. They also are retiring the dividend associated with those shares...so if they borrowed money to buy back the shares at 5% and cancelled shares with a 7% dividend yield, that is a good move in my book. Was it perfect? NO, but I would hardly call it squandering money....
Finally, management is eating their own cooking. They are heavily buying shares at $7 & under. A very bullish indicator in my book.
These guys seem to be making GENERALLY the right moves. Are they perfect? No! They are certainly better than most of their competitors though....
I've been poking around the department store industry. I think might be a good bargain. I believe SSI to be one of the better values in it also.
I've been checking out SHLD & BONT. Both of these companies are weak & a mess. I would not be surprised to hear of more SHLD closures along with BONT.
SSI has a pretty good valuation and capital structure compared to BONT & SHLD. I just don't see how BONT & SHLD get out things with the amount of debt they carry. This is DOUBLY true if the economy gets ANY worse than it already is. So many things have to go right for SHLD & BONT to "make it".
Compare that to SSI. For SSI to "make it", things just don't have to get significantly worse...
It would be interesting to see how many of these closed locations have a SSI store nearby. I wonder how much SSI could pick up from their competitor's weakness?
Probably not a lot, but it should be something.
Anybody got any thoughts on this?
I'm poking around the department stores. They seem to be put on sale.
I was looking at BONT, and am shocked at some of their figures!
They are trading for only 1.5% of sales! Wow, that is crazy! If they have a good year, stock could be a 1 P/E!
That is great....
Unfortunately, they simply have too much debt.
I also don't see too much in the way of unencumbered assets, as the stock is trading for about book value.
For the trailing 12 months of sales, they've got about $112 MM in EBIDTA. Compare that to debt of $1 BB. Debt is about 8x EBIDTA.
They have to spend some of that EBIDTA on keeping up the stores & such. So let us say that the stores are put on a severe diet....maybe only $25MM for capital expenditures. You've got about $80MM towards interest & debt reduction.
But wait! Management has said they are going to manage inventory better and take out $100MM of that. That is going to be a 1 time event....Put all of that towards debt reduction.
Let us also assume that earnings/sales increase in the upcoming year, bringing EBIDTA from $112 to $150MM! This probably is NOT going to happen....but just for arguments sake let us assume it does.
Outstanding debt goes down to about $800MM after this uptick & tremendous effort.
The year after that, there is no more inventory to liquidate. Also, stores need more capital spending, as most EBIDTA went towards debt reduction. So up capital expenditures from the bare bones $25MM to $50MM. Even at $50MM, that might be light....
So you got $100MM of $150MM going towards debt reduction.
At the end of the year debt is $700MM....
Ah, but it is unreasonable to think that BONT should be run without any debt in the capital structure. I am very, very conservative in my views on capita....BUT I'll give it to you that BONT should carry some debt. What is the optimal amount? Hard to say, but most certainly it is under $700MM. Maybe 2x EBIDTA?
So that leaves $400MM excess debt!. I just don't see it.
I'm poking around looking at buying SSI here. I used to own it years ago....but sold out way too early!
Might get back in.
Anybody have any opinions as to the strength of the dividend?
The cash flows and balance sheet indicate that it might be safe in the near term. Additionally, insiders have been heavily buying below $7/share.
On the OTHER HAND, department stores are facing declining SSS, witness Macy's and Nordstrom and Kohl's.
A decent percentage of SSI stores are near the Mexican border, which is facing problems. Also, a lot of stores are in the oil patch, also facing problems. Then you've also got the Amazon problem....
So it is a hard call here. If the economy improves/stabilizes, then they might be able to hold the dividend. If not, they can't. However, if they cut it 50%, still a good yield.
Just worried they cut it 100%.
Thank you for the compliment! It is rare to get one on the Yahoo! boards, and I appreciate it.
Fixed income investing is a different beast than equity investments...
I have dabbled with preferreds from time to time, but in this low interest environment, have not found many good opportunities.
Years ago, back in the panic, my family & business partners made some incredible investments buying prefs of REIT's. At the height of the panic, some of those were paying close to 30%. They never missed a payment. Of course, through the years they recovered to near par. They made a LOT of money and got some tremendous income.
Today, there are definitely some intriguing pref's in the energy & shipping areas. Also in the BDC space.
I wish I had more knowledge of this, as there is $ to be made.
"The Corner" is the "Corner of Berkshire & Fairfax". It is a community of investors & analysts. Imagine a much more serious version of the Yahoo! finance message boards with 90% less idiocy. Google is your friend for finding it...
Sentiment: Strong Buy
I am sorry, I do not have any specific knowledge of these bonds OR their refinancing. HOWEVER, I do not anticipate any problems with this. If there was a problem with this, I imagine we would hear about it rather quickly.
One thing that I would mention is that on the latest quarterly conference call, management detailed that they have paid down debt somewhat. One of their stated goals (per conference call) is to FURTHER reduce their leverage ratio.
They also stated & detailed the amount of debt that they anticipate Save-A-Lot will get in the anticipated spinoff.
IF MANAGEMENT CAN CONTINUE TO DELEVERAGE and spin off Save-A-Lot, I do not think that debt will be any problem in 12-18 months.
I think this will especially be the case if some more "retail" assets are sold off to PE.
I have been working on an extensive analysis of the SVU situation and will be posting it at "the corner".
All will be welcome to read it and comment on it.
Sentiment: Strong Buy
actually, it's reverse split was quite a while ago.
I've followed/owned this stock for about 2 years now, and any reverse splits were done before I became aware of it.
If gold continues it's path and goes to $1400 oz, AND they execute their business plan, CALVF is going to make a LOT of money.
Sentiment: Strong Buy
Unless business gets SUBSTANTIALLY worse, and/or management makes some moronic moves, I would put the chance of default at less than 5%.
The company is solidly profitable, using cash flow to improve the stores & pay down debt.
Things are going in the RIGHT direction. They may not be getting there as fast as liked...or going at 100% of potential...but they are making progress.
ONE RISK is that the credit markets freeze up & they can't refinance. HOWEVER, that is a long time away...
Sentiment: Strong Buy
Earnings for the latest quarter were down.
To add insult to injury....the number of shares outstanding has increased substantially. Shares out have gone from 22.6MM to 26MM. Was this in connection with retirement of some debt?
Stock is still pretty cheap. TTM earnings appear to be $.073/share, with a P/E of 5.2.
I hate to say it, but I was let down by this last earnings report. Earnings were way down.
Price of the stock is way down, along with liquidity & trading.
Perhaps WORST OF ALL....why would they need to convert to MLP? The marketing agreement is sucking up most of the cash flow....
There is definite value here....but much truth in what you have said also.
I bought this years ago at 4's and sold out at 6's. Was happy to get what I got, as I was concerned by insiders owning real estate the company leased and other such deals.
I think management is VERY short sighted in having these arrangements. If these guys REALLY wanted to make money....they would:
A). phase out MOST of the insider deals.
B). Get a much more transparent compensation scheme going. They SHOULD get paid well, but at a reasonable rate.
C). Expand the company prudently over the next few years...
D). Pay a special $1/share one time dividend
E). Start a quarterly $.05/share dividend. Raise it to $.06/share after a year, $.07/share after two years and so on.
The end result is HAPPY, long term shareholders. Perhaps even more importantly, the company will be noticed by the investment community. Couple that with good results, good dividends, and you get a stock at TWICE the valuation accorded to it now.
Get rid of the insider discount, grow the company, reap the rewards....
Anybody have any insight on when the next earnings report is coming out?
I am very interested to see it.
It will also be interesting to see how sales & profitability are affected by all the expansion & improvement to the refinery.
I think good things are coming up....
Sentiment: Strong Buy