Here is why the ENH merger is poor
1) They are using ENH stock. ENH stock isn't pure gold. In fact I have researched ENH several times and determined their returns to be poor. The deal should be all cash.
2) ENH will have a bigger say in the merger than Aspen. If anything the merger should take place on Aspen's terms. Aspen is the larger company.
3) ENH CEO keeps bragging he is investing $25M in the deal. Who cares?
4) ENH's reserving is poor compared to Aspen with all their earnings coming from reserve releases while Aspen had positive earnings this year ex reserve releases. ENH's quality of earnings is fairly poor.
6) ENH's ROE has substantially lagged Aspen the last 3 years.
7) ENH is not diversified and wants another company to help them diversify
8) ENH has not proven what synergies the 2 companies have
9) ENH says the merger makes their capital base stronger even though there will be $700M in goodwill in the transaction making their capital base weaker
10) $47.5 is a pretty terrible premium given the risks of the new company, combining and costs. The deal should be all in cash as Aspen shareholders wouldn't want to own any of ENH
11) The premium isn't really enough even if it was cash. If the deal was at $52.5 to $55 that would represent the correct value.
12) I just really don't see what makes Aspen better or more valuable together.
ya but Aspen basically told everyone why ENH is a #$%$ company. They brought up some good points about ENH's reserving practices.
I think what makes it a good business actually is the fact their payer mix is so poor. It is what gives them a competitive advantage.
They say their majority of their customers I think were non-banked!
CONNS prays on the poor and charges them twice the price but poor people can't afford it anywhere else because CONNS ties them in with credit options.
Yes you do want to watch how the allowance / receivables captures their bad debts.
For instance PNC has an allowance of 2% of their loans for their bad debts despite provisions being 0.4% of loans per year.
Cons has an allowance of 5% of their loans despite bad debts being 10%.
So I would impair their receivable portfolio a little bit and figure out their real tangible book value. Either way I was ready to research the hell out of it being its spike to $40. Now I am looking at other stuff.
I have it on my watch in case it drops again but at $40 I think I can find things better.
Not to say I don't think it is still cheap just kind of mad my research takes forever to complete and I don't just walk into a stock unless I know everything.
Why would people pay 40 PE for a company which has literally 0 chance to rescue itself out of bankruptcy?
It's debt load would take basically 12-14 years of profits alone to pay down and after that shareholders can share in the profits.
Instead they are paying back shareholders now when they need to have the money to pay back debt.
How can a company with 300M of assets have 1.5 B of liabilities?
How can a company with $100M of net income have $1.5 B of debt?
How can this same company being buying back stock when it is so overvalued?
How can this company pay dividend when it should be preparing to pay back its debtholders to rescue it from an eventual bankruptcy?
It seems the management of this company is not protecting its stockholders from any sort of debt call or leverage concerns.
WHy would shareholders value such a company at a 30-40 PE when it has limited growth and large bankruptcy risk
thats from CGA. Have you called Shaanxi? And what is the criteria for getting an A?
China has a lot of things to deal with. It would seem hard to believe an A rating means you were a great tax paper.
Perhaps all it means is you filed on time and is equivalent to being in goodstanding here.
Ask CGA or Shaanxi. In my opinion a tax bureau would not rate someone for tax purposes.
ya you can't really go wrong with a business with such great long term fundamentals in the ag industry with such great past metrics.
It's grown operating profit on average 22% a year since 2003 and ALSO 22% a year from 1993 and
Since 2006 it's grown 3.4%, 21%, 26% down 54% then 131% 32% 14% and 15%. It's payout ratio is like 70%
Yet it trades under 10 times and an inconsistent company like TEX gets a 20 or so with no real payout.
It's no brainer!
my fresh ideas have been lacking. My current general stock portfolio has been performing pretty well. But at some point I can't count on old ideas forever.
lol, I would sell TEX and put it all into DE. I can't really see how it's optimal to hold TEX at the current price.
I was looking at Conns since someone here suggested it. However I decided to research PRE first and I spent a week doing that and now Conns is up 25%. So, fudge that investment idea. And PRE was a waste of time in the end. The Catastrophe stock I own currently is still better.
DE is probably the best investment I have now or PNC. Though I am looking to repopulate my portfolio with some fresh ideas which have been greatly lacking.
ya you've asked me about them before. They are not my kind of stocks lol. A key to my success is only swinging at the pitches I can hit. I definitely don't have skills predicting the 43 PE of a company that does this "The Company focuses on display IC products for display device and offers LCD technical consulting to customers to provide them with value-added technical support and integrated solutions."
And even worse I can't predict earnings of a company with negative earnings that does this "GT Advanced Technologies Inc. is diversified technology company with crystal growth equipment and solutions for the global solar, light emitting diode (LED) and electronics industries. "
I'd much rather value Tesco, Insurance stocks and container stocks. I know t hey are boring but at least I can guess the numbers!
I have no skill in predicting the future of the LCD market so why even try!
ya I like Deere a lot especially more than TEX. I will be reading up on some casualty insurance stocks tonight and also Tesco, and TAL, TGH. The container stocks have gotten crushed this year especially TAL. The stock now has a 7% yield. These container companies aren't particularly hard to value either. However I have difficulty finding quotes on container rates and understanding the container industry. So it is kind of like a mining stock where your company produces a commodity like good and has no control over price.