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MasterCard Incorporated Message Board

minireef05 10 posts  |  Last Activity: Jul 1, 2015 11:45 AM Member since: Aug 16, 2006
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  • Reply to

    Is McCormick in play?

    by rar_biltong Jun 24, 2015 9:48 AM
    minireef05 minireef05 Jul 1, 2015 11:45 AM Flag

    I think a lot of people believe that it is in play and would make a nice acquisition for Berkshire or the likes of CAG or someone else. The real premise here, however, is that it is a pure play on flavor with a very solid track-record of performance. It is in the sweet spot of market capitalization where it has proven it's staying power but is not too large to cut into it's own future growth abilities. I think also it is a household/pantry name that people see, eat, and love-- and want to get in on the action.

  • Reply to

    vlo outlook

    by emmachatman May 21, 2015 10:00 AM
    minireef05 minireef05 May 22, 2015 11:48 AM Flag

    Never said I liked them better, but there is a stark difference in energy investment when it comes to commodity price differentials and pure volumes. I don't characterize them as mutually exclusive, but they certainly look and behavior differently when it comes to business economics. Low volumes on great differentials will not make you as much money as high volumes on great differentials, but eventually the high volumes saturate the market and undermine the great differentials as other players up and downstream look to get their cut and try to adjust accordingly. Look at the farmers for the best example. You need some significant change to get the dynamic in motion, like a drought that cuts output in half. The shortage of crop leads to a rise in price. The farmers want to cover the costs they took in the bad season and make more of a return the next season. What do they do? They plant more acres to take advantage of the high prices. The next season, consequently, is a bumper crop that is priced lower than the drought-stricken previous year. The great differential brought a desire to maximize volumes that ultimately undermines the differential. They should have planted the same amount and took full advantage of the higher price without flooding the market.

    Oil market is seeing the same thing playing out--- flood the market because the price is high. The price is high because the market isn't flooded. It would have been better to set an agreed upon threshold where the E&P's are pumping enough to back out most imports, but not enough to glut out global supply and foment the price crash. Keep the supply/demand in balance and everyone gets rich.

  • Reply to

    vlo outlook

    by emmachatman May 21, 2015 10:00 AM
    minireef05 minireef05 May 22, 2015 10:16 AM Flag

    With the relatively large volume of exports for VLO, does the US driving season really factor for them? Even if driving season was slower they would still be able to sell their product into the export markets at well over 500,000 b/d. I could see landlocked refineries needing strong US gasoline consumption to keep from pumping product into long-term storage, but VLO seems to be better positioned for product sales into a number of outlets.

    For plays on volume movements with driving season, the pipeline and barging companies would be the better play than refineries since the extra volume means higher utilization rates and either higher tolls collected or lower per unit operating costs with near full capacity utilization.

  • Reply to

    I have been following CPST since 2008

    by ovloh May 20, 2015 11:37 AM
    minireef05 minireef05 May 20, 2015 12:52 PM Flag

    Is their capacity based on the current percentage of total possible throughout their current facilities could support or are they currently only utilizing 35% of their employed workforce output potential? See, there is a stark difference there. If they could potentially increase through output to 100% given their current facilities that is more of a factor of space-- do they have large enough facilities to manufacture 2x more product and make room for the added inventory, workforce, assembly areas, storage of finished and not yet shipped product, to put that many more units through testing and "seal of approval".

    Or do they have 10 workers employed but on a given day they are using only 35% of their potential? If that is the case, they have too many employees for their current needs and it would explain why they are losing money-- they are using the proceeds of 3.5 workers to subsidize the pay of the other 6.5 on average.

    On the flip side, you should also ask, given the environment where they are decreasing their order revenue per MW and only making use of 35% of their capacity, why do they need to have such large facilities? Why not rent out a facility half the size, pay less in rent/insurance, property taxes, utilities, etc. and still be at a comfortable 70% of capacity with room to grow. See, in the later case they are running like a small business, making the most efficient and effective use of their cash and improving margins as much as possible. In the former, they are blowing cash on property taxes and building infrastructure where only 35% of their facilities is generating any revenue or profit. Again, 35% of the assets are subsidizing the costs of the extra 65% going unused.

    And given their price per MW trajectory, even if they added that extra 65% to production in 2014, it would generate 7.5% less than it would have in 2013.

  • Reply to

    I have been following CPST since 2008

    by ovloh May 20, 2015 11:37 AM
    minireef05 minireef05 May 20, 2015 11:59 AM Flag

    It is a great idea with lousy economics.. All the information you need is right in their 10K.

    Fiscal 2014 orders-- $131.5 million, 675 units, 135.3 MW.
    Fiscal 2013 orders-- $112.6 million, 765 units, 107.2 MW.

    Looks great on the surface right, more money with less units? They are giving away MWs of capacity which is the biggest factor in demand. No utility service bases their supply/demand on the number of units but in the load factor of MWs. 2013 avg MW order price-- $1,050,373. 2014 avg MW order price-- $971,914!

    Lets extrapolate this and say you're selling to the same customer two years in a row. The customer requires 1.4 MW of capacity. Given the information above, in 2013 that customer would buy 1.4 MW at $1,471,890. In 2014 that same customer would buy the very same 1.4MW for only $1,363,698! They have lowered their prices $108,192 for that order. How is that supposed to get this company into the green? In an effort to book more sales, they are in fact discounting their MW's by selling larger capacity units at lower per MW valuations. If that customer has only 1.4MW of capacity to add to maintain their operations or for a one time switch from municipal electricity to in-house generation (bi- or tri-), this is a one time sale/opportunity to close that order and they are doing so from one year to the next at a 7.35% declining revenue per MW! The only people benefiting is the customers that get to spend their CAPEX at a discount. Every MW sold at this 7.35% discount is a unit that will not need replacement for several years if not much longer.

    They are keeping their EPS just below the black through attrition of their own corporation! Sell fewer units at larger capacity to keep from having to spend as much on manufacturing. Sell these MW-discounted units to lock in the sales to keep the cash flowing, and to keep the number of units low to keep from having to pour money they don't have into their manufacturing base.

    Sentiment: Strong Sell

  • Reply to

    $130 a share by July 1st, 2015

    by febooker3 Feb 6, 2015 8:46 AM
    minireef05 minireef05 May 14, 2015 9:21 AM Flag

    Just about $101 range.....

  • Reply to

    GE Panic Selling has begun

    by jj_mclure Apr 21, 2015 4:24 PM
    minireef05 minireef05 Apr 21, 2015 5:16 PM Flag

    Depends on which chart your using. On the 1 month/1 year charts all that has broken is the 10 day moving averages. I would suspect $25.77 short-term and possible back to $25 to retest the deeper averages on the 1 year chart which is what GE was doing prior to the Capital news.

    Capital news is wonderful for its impact on cash deployed into repurchase program. BUT, they are going to be running ever closer to the $1.10-$1.20 in industrial earnings as their sole EPS source prior to any additional tax/restructuring costs with Capital.

    I don't see a major move higher until the speed of the Capital liquidation is seen, Alstom acquisition is finalized, and a few large/key industrial acquisitions take place on the scale of Avio or Alstom to get these underlying earnings headed higher. The organic growth is not significant enough to warrant a P/E higher than 20 on those earnings. They are not growing at the speed of a Honeywell and so do not deserve that type of multiple, especially since Honeywell and other industrials are growing their dividends much faster as well (GE will remain flat for another 1.5-2 years further undermining the CAGR for dividend accounts).

    Good hunting.

  • minireef05 minireef05 Apr 21, 2015 12:40 PM Flag

    First, the gap needs to be closed.

    Second, people are realizing that they are going to jettison that 90% of Capital much faster than their own schedule (likely be end of 2015 if not very early 2016).

    Third, because of this removal, they will very quickly come to be dependent on their industrial earnings, which without any boost from the announced share buyback/SYF spinoff reduction will come to what, $1.10-1.20 for 2015? At 26.50 that puts them with a P/E of 22-24. Factor in the buyback and you can boost the EPS but I don't think it will be enough to drop that P/E to a range that is justified by their current growth rate.

    Remember, they are going to take more tax hits and restructuring costs with the Capital sales that will impact ACTUAL earnings. They can report whatever "adjusted" EPS they want but the true numbers that are actually affecting the real cash entering and leaving the coffers are being impacted over the next 1-2 years, coupled with an increased tax rate that will add another drag.

  • Reply to

    What will GE Do with all the cash ?

    by topline1 Apr 20, 2015 3:17 PM
    minireef05 minireef05 Apr 21, 2015 12:33 PM Flag

    Ummm..... if the repurchase price avg. is $26.50 that $50 billion will take down just shy of 1.9 billion shares... 10 billion outstanding currently. That is 19% of the float... not quite 1/3 but sure let's just toss around numbers.

  • Reply to

    $130 a share by July 1st, 2015

    by febooker3 Feb 6, 2015 8:46 AM
    minireef05 minireef05 Apr 7, 2015 12:33 PM Flag

    We could be headed for $101 if UNP continues the downward slide to retest long-standing moving averages on the 10yr chart. Just a stones throw away really, especially if we get a few of those spring time 300+ point moves on the DOW and comparable on the other indices.

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