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Dean Foods Company Message Board

walk57 71 posts  |  Last Activity: May 27, 2016 9:25 PM Member since: May 29, 2000
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  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 27, 2016 9:25 PM Flag

    The "Market" for OTEL at the current time may just be a bank or two extremely eager to sell their recently converted Class A shares at just about any price they can get. Banks do really weird things. That's why we have to bail them out sometimes. Especially strange because 5 of 7 Board members just made direct purchases in the current quarterly window.

    If Otelco is at such a massive disadvantage how come their margins are near, or at the top versus all wireline peers every quarter? Could go piece-by-piece through your latest rehash but its no use. I've been through how Otelco revenue mix is over 55% stable or growing business at this point, but you just ignore that. Revenue loss was 0.9% last quarter, its lowest drop since I've been around here. You ignore that. I say Otelco stabilizes or actually reverses its revenue deline this year. You ignore that. Insiders buy. You ignore that. Oteloco is far far cheaper on an EV/EBITDA than any of its wireline peers. You ignore that.

    For a person who is currently 0 for 1 in the speculation department regarding Otelco, (insiders ARE NOT buying-PJN 5/14/16) you sure seem confidant. All I can say is follow the free cash flow.....dude.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 26, 2016 7:16 PM Flag

    Bought a little today at $0.65/share less than some of the Directors paid last week. Would be more aggressive, but whomever is taking this down will probably give me better prices in the future.

  • Reply to

    Who Bought Today?

    by walk57 May 23, 2016 12:28 PM
    walk57 walk57 May 24, 2016 8:24 PM Flag

    You would think, but despite the fact five of the seven Board members have made direct purchases (very disappointed its not seven of seven at these prices) of stock in the past week, somebody apparently is in a hurry to liquidate their position. There are some unhappy shareholders out there as evidenced by the defeat of the Stock Incentive Plan at the Annual Meeting. Can't say I don't blame them for voting the way they did.

    It is time for the Board to explore its options here and exercise its fiduciary duty to its shareholders. Otelco currently trades at 3.6x trailing twelve month EBITDA. Otelco's EBITDA actually rose slightly in 2015, rare for wirelines in this environment. This multiple when compared against its peers is dead last. By a long shot to most. Quite frankly, at this multiple I'm surprised every insider at the company hasn't taken advantage of this quarters window.

    Because Otelco has a new five-year credit line in place, they can afford to be patient. But its time to check the current landscape out. A company (particularly one with NOL's) could take advantage of this bargain-basement valuation and absorb the debt on much better terms than Otelco has now. Of course, there are other value enhancing synergies as well like duplicated staff that can be eliminated and listing costs. And if stock were used as part of the currency in a deal, it would be overvalued in relation to this one guaranteed.

    Time to act, IMO.

  • Looks like the Chairman did...

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 21, 2016 12:24 AM Flag

    Started buying in the $1's in late-2012. The sub debt at that time (because it was very possible the company could be liquidated via Chapter 7 leaving the IDS holders with nothing) had MUCH more risk than the common does now, IMO. There was no guarantee the pre-pack would be successful.

    I recall you mentioned you rode OTT into BK and did well as the price was rising prior to the obvious filing. Good for you. What I don't understand is your aversion to the stock now considering the risk, even though the common is a notch down in the capital structure, is much less. When Otelco reports 2Q it will have debt under $100 million. Big change from the $271 million pre-BK. Leverage is much lower. And although the terms of the new 5-year credit agreement are not good, they got it done. They are not in a position where they are in a "forced selling" mode that they would have been if the pre-pack hit a snag. That would have been a complete wipe-out of the sub debt holders and a massive haircut of the senior lenders.

    Here are some basic things to consider:

    Otelco is trading at a lower TTM EBITDA multiple than any other peer in the wireline biz. Some by a very large number.

    They are running much more efficiently than ever, as reflected in their margins.

    As mentioned before, Otelco does not have to turn into a "growth" machine. It's not. It simply has to pay down debt quicker than the EBITDA declines. EBITDA, as we know, actually increased slightly in 2015 compared to 2014. Meanwhile debt declined $12 million last year. Value is being created regardless of stock price.

    They are not staying still. Yes, landline revenue will continue to decline but steady or growing areas in business now comprise over 55% of the mix.

    The new FCC reforms could be beneficial with "broadband only" lines eligible for funding. The answer to that is coming soon.

    In the meantime, Otelco is ripe for a takeout given its cheap valuation relative to its peers.

    Four insider buys. Its a start.

  • Reply to

    Have you felt the rumblings?

    by rural1962 Apr 21, 2016 7:31 AM
    walk57 walk57 May 20, 2016 11:14 PM Flag

    Meaningless? LICT included it as a peer on page 24. Are you blind? OTEL debt has dropped over $33 million since restructuring 3 years ago.

    When was the last time Sugarman made a direct purchase of LICT? How many direct purchases by Board members has LICT had lately?

    You are living in fantasyland if you think LICT is getting 8-10x. And I'm an LICT shareholder as well.

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 20, 2016 8:24 AM Flag

    It's only the bottom of the 1st inning so you still have a shot at one of your theories panning out. A look at the scoreboard right now says you're 0 for 1 with a strikeout.

    "We can't know what they know,but we can know what they do,and the insiders at this company are NOT buying." -PJN 5/14/16

  • Reply to

    Have you felt the rumblings?

    by rural1962 Apr 21, 2016 7:31 AM
    walk57 walk57 May 20, 2016 7:37 AM Flag

    I like LICT here too, it is cheap, but I would check out page 24 once again before saying its discounted to all of them.

    Otelco in reality trades today at less than 3.7x trailing twelve month EBITDA, not the 4.1x indicated. It is not as close as the presentation portrays. EV is $107.8 million. TTM EBITDA is actually $29.2 million.

    Mr. Sugarman who sits on the LICT Board also is a Director at OTEL. He made a small direct purchase last week. Three other Board member made direct purchases as well.

    To speculate LICT gets taken out at 8x-10x EBITDA while another ILEC/CLEC is trading under 4x is pushing it, IMO.

  • You could have received 45 cents more per share on Friday by selling to an Otelco Board member than what you're getting today.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 17, 2016 9:03 AM Flag

    "We can't know what they know,but we can know what they do,and the insiders at this company are NOT buying." -PJN 5/14/16

    Since you're on a hot streak it only makes sense you would try to spin Goldman Sachs purchasing over 76K shares as a negative. They obviously see what I do here. Quite simply, the equity is extremely cheap. You can stick with your dark conspiracy "takeunder" theory though. Let's see if it works out as good as your last call here.

    Financial picture getting weaker? Otelco leverage has gone from around 4.25 to under 3.40 in the last three years. Quite the opposite. Revenue loss has slowed markedly. You choose to ignore this. In fact you choose to ignore anything this company has accomplished since reorganization like over $33 million debt reduction in the last three years.

    Another Board member bought 5K Otelco with his own money on Friday. Otelco closed around $0.25/share lower yesterday than his purchase price of $4.75/share Friday. Maybe if there is more insider activity today Otelco can crack $4.55/share. Some of the current shareholders seem eager to sell to them.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 16, 2016 7:45 PM Flag

    Another Otelco Board member just took your advice.

    He made a direct purchase of 5k shares on Friday, one day after receiving 1,633 "freebies" as you refer to them on Thursday. The SEC form 4 was filed tonight.

    That makes four Board members in the past week who have used their own money to purchase Otelco shares.

    Also, Goldman Sachs appears to be soaking up a portion of the 232K shares that were dropped on the Market by the banks when the new credit agreement was signed in the first quarter. It's doubtful Goldman could have built a 76k position at these prices in such a short time without the banks help.

    In spite of Otelco trading at multiple far lower than any of its wireline peers (nobody is in the same zip code) and this evidence presented above, Otelco actually traded slightly down today.

    I will give you this. I am amazed by the ignorance of some of my fellow stockholders.

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 16, 2016 11:42 AM Flag

    Brew,

    Call or email IR. They are always helpful.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 16, 2016 10:41 AM Flag

    Check that.

    Another Board member made a direct purchase on Friday. It was just reported today. That's three now.

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 16, 2016 7:52 AM Flag

    Unfortunately yahoo prohibits links on these boards.

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 15, 2016 7:11 PM Flag

    It quite possibly was GS purchasing shares from one of the banks that had its Class B convert to A when the new credit agreement was signed. I recall that after hours trade was only 70k. So they still would have had to pick some more up somewhere else.

  • Reply to

    Goldman

    by walk57 May 14, 2016 12:27 PM
    walk57 walk57 May 15, 2016 3:21 AM Flag

    Brew,

    It's available either at the SEC or Nasdaq website.

    It's not common to see one of the "big guys" such as Goldman Sachs or Buffett invest in nano-cap stocks even if they believe its very undervalued. Even if their investment in a nano-cap is successful it doesn't "move the needle" much for them because of their huge size. You always hear Buffett talking about the next "whale" he wants to invest in, not the next "minnow."

    Nice to see the interest from Goldman Sachs though. Maybe Wall Street is waking up.

  • Reply to

    Insiders

    by pamjeffnelson May 14, 2016 9:01 PM
    walk57 walk57 May 15, 2016 2:55 AM Flag

    I see its time for a reality check here.

    1. Two members of the Otelco Board have made direct purchases of Otelco stock in the past week. With their own money. Check out the Form 4 SEC filings.

    2. As for the "free" shares you speak of, Otelco shareholders at the Annual Meeting have voted to discontinue the Stock Incentive Plan. You will not see any more "free" (bad word to describe the plan BTW) shares issued to Otelco officers after the plan expires this year. See SEC form 8-K filed on Friday.

    3. Add Goldman Sachs to the list of those who disagree with your "value trap" thesis. Goldman Sachs filed its 13F with the SEC on Friday. They disclosed they had opened a 76,271 share position in Otelco in the first quarter.

    Your credibility, already very suspect, drops two more notches after that post.

  • walk57 by walk57 May 14, 2016 12:27 PM Flag

    The 1Q/16 institutional ownership numbers are starting to come out. Don't ever recall Goldman Sachs being an Otelco shareholder in the past.

    Goldman Sachs revealed it opened a new position of 76,271 shares in the first quarter. Quite impressive that they were able to establish a position like this in just one quarter given Otelco's small float. My guess is they are a top-10 Otelco holder already. Probably were able to build a position this fast due to some of the disgruntled shareholders not happy with the new credit agreement.

  • Reply to

    Not liking the refinancing

    by letsmakeadealmonte May 11, 2016 6:37 AM
    walk57 walk57 May 14, 2016 12:18 AM Flag

    I've outlined where I expect revenue is going to stop declining or reverse (which I explained in another post) so its all out there. I may be right...or I may be wrong. That's investing.

    I am looking forward. When Otelco got its extension three years ago its debt was $133.3 million. It's now around $100 million. It will continue to decrease. In fact it went down another $1 million (at least) one day after the cut-off of the 1Q/16 earnings. Your "escalating interest payments" line should be tempered by the fact the principal amount of the debt continues to go down.

    Let me ask you a question, Letsmakeadealmonte. If debt keeps decreasing, and EBITDA is rising or staying the same (which was the case in 2015) does shareholder value increase regardless of what Mr. Market says? I could care less what the stock price is in any given day. I take advantage of the weak. I thank the six banks that were involved in the last facility for contributing to the current stock price. Eventually they will run out of their recently-converted Class B shares to sell.

    I can see whatever I may say will not change your mind. But that's OK. To say that any wireline peer at a comparable valuation isn't relevant isn't the point. There is no wireline peer anywhere near this low valuation. There is no comparable valuation. The Market has more than adjusted for bad news here.

    You have a great weekend as well.

  • Reply to

    Not liking the refinancing

    by letsmakeadealmonte May 11, 2016 6:37 AM
    walk57 walk57 May 13, 2016 6:45 PM Flag

    You and some of the Board members seem to be in disagreement as to the course of action to take at these prices.

    The term "value trap" is getting kicked around here by a few. At less than 3.7x trailing twelve month EBITDA Otelco is one heck of a value trap. Please find me another peer in this wireline space that trades at this extremely depressed valuation. If you can, and it passes DD, I'll invest in it.

DF
18.52+0.260(+1.42%)May 27 4:01 PMEDT