the whole transaction is a essentially a black box - we know nothing about Q-Cells financials and their debt load. They bought Q-Cells out of bankruptcy and the company has continued to generate massive losses (except for Q1FY14) so far. There's been NO similar deal in the space to compare the valuation.
as the article explains in detail the negative implications of the deal - I already pointed to those issues on Friday
HSOL shareholders are left with just 6% of the new company after the transaction is closed. There were NO financial informations or projections about Q-Cells recent and future financial performance
Sure - but investors expected much better guidance given the recent upside pre-announcement. And valuation still looks very expensive given the outlook for the company and the industry as a whole. With almost no chances for sales or meaningful earnings growth the shares appear heavily overvalued as FY16 estimates clearly will have to come down given yesterday's conference call announcements. At more than 20x FY14 earnings there is almost 50% downside here for the shares.
The discount to book value was based on the assumption that the company won't be able to cope with the huge debt load over time. With the debt load and interest payments reduced substantially going forward its up to the company to show that the remaining assets will be able to earn substantial returns. The problem is that these assets have been underinvested for many years so capex needs to go up substantially going forward. Would expect most or even all of their interest savings to go into capex going forward.
there were no relevant short positions prior to the announcement - I shorted a big chunk today adding to the smaller initial (wrong) after hours short. Averaged up to $1.95.
But if momentum propels the stock higher above previous day highs I will take the loss and cover.
The all important revenue number was weaker than expected and Q4 outlook also weaker than expected despite containing two slipped deals from Q3. Cash flow also poor. Full year guidance reduced. No FY15 outlook.
At 3x FY14 revenues the shares don't look expensive but the ongoing huge cash burn makes investors doubt the company will reach break even before cash is running low. Hold.
Actually they are getting only $250 mln out of the sale after subtracting $50 mln of related costs and the whole amount will go into debt reduction - which makes sense given the high interest burden the company is carrying.
But in exchange they are giving away close to $200 mln in preferred dividend payments from the AWN joint venture, their remaining 1/3 ownership in AWN and the subscriber base. Assets which might have been worth far more four years from now.
So actually the REAL purchase price for the assets is around $60 mln which looks pretty low to me. And admittedly I have some problems to get to the $12 mln in EBITDA synergies the company claims to have identified.
With the wireline and broadband assets remaining I suspect the company will have to increase their investment substantially to improve growth rates - especially the broadband business has remained heavily underinvested after some legal setbacks almost 10 years ago.
So cash flows might come under even more pressure and I don't think that the company will be able to reinstitute the dividend anytime soon.
Overall the deal might be a very slight positive but still ALSK needs to execute on its new strategy. Given the problems with broadband in the past there's plenty of execution risk here.
That said the shares should give back most of today's gains over time.
In exchange for the sale of their ownership in AWN and their wireless subscriber base they will end up with $250 million to reduce debt.
But they would have earned $190 million in preferred dividends from the AWN joint venture over the next four years anyway and STILL would have owned the assets they are now selling for a little more.
There's nothing wrong with focussing on their core business but they will have to focus on their underinvested broadband business and up capex meaningfully going forward. Not sure what that means for cash flow going forward. Would short the shares here.
he ANNOUNCED the deal on the conference call - it isn't new, it is already in reported backlog and it isn't material at all - they just put out a press release to stop the shares from their freefall. And they already threatened to recycle the deal several times more given the wording of the press release.
actually he lost even more by recycling another old news which was already discussed on the conference call four weeks ago. Not that he had any credibility before anyway
The deal was already announced on the last conference call, they are just recycling old news. It is included in the latest backlog number and it is tiny with an annual revenue volume of just $4 mln. The shares shouldn't be up at all.
it has been included in the latest backlog number and it isn't even material with just $4 mln in annual revenues. People are so dumb.
read again - the deal was signed already at that date - old news that will be recycled a few times more given the wording of today's press release. This deal is already in backlog, it isn't new and it isn't material with just $4 mln in annual backlog. Shame on Marsh for acting like he does.