Sunday, July 15, 2012

Ideas to think over for this Sunday 15-Jul-2012

Those looking into some catalyst might want to ponder over this name for the week. After looking into the name which I originally got from Barron's this def. is worth the post:

Phillip 66 (PSX) : The firm is a recent spinoff from COP. Trades at 5x earnings and basically has 3 business, Chemicals, oil refining and midstream. The firm seem to have good prospects. Recently talked about by two smart investors -

What might be the catalysts:  SOTP by industry experts suggest a 30% upside.
Chemical: The firm has a JV with chevron. PSX apparently also has a proprietary process producing higher quality ethylene and polyethylene from ethane and naphtha at lower cost. In addition PSX licenses technology to competitors. 80% capaicty is within US where it uses low price ethane and sell into high price markets, earning good spread.  Valued at approx. $13 a share at 10x P/E

Midstream assets at 17x FCF are worth aporox. $20 a share. Two non-refining segments are worth $31 a share

Refining has 3 segments - specialty marketing, pipeline. With no capacity to move crude out of kushing and crude trading at a discount to brent, for few yrs refinary's will enjoy low cost advantage. Some estimates suggest that  refining alone worth is worth approx. $10 a share with pipeline assets within refining in addition to marketing business can be possibly valued at $20. The basic refining is worth approxc $10 a share. Refining is basically free and can earn potential EPS of approx. $4.00 share.

Taking $9 per share debt out of the price, the stock is still worth approx $50 s share.    

Sunday, July 8, 2012

Two Ideas to think over for this Sunday

Those looking into some catalyst might want to ponder over these names for the week:

Rentech Nitrogen Partners - Manufactures nitrogern fertilizer and industrial products including ammonia, urea and stuff. Used natural gas as its primary feedstock. debt, 10M; Cash:72M; 6Q EPS is more than 15%; last Q EPS is more than 46%; last Q sales increase is 60%.

Cardtronics:: Potential Short: Over leveraged; they have contract with BoA which provides them with 56% of their cash needs. The contract is set to expire in October,2012.

Sunday, July 1, 2012

Ideas I posted in early June, in case you missed

These names are obviously not analyzed but i have come across them with some decent catalysts. Might be worthwhile for readers to look into --

ARE - Potential Long - Investors worried about investment pipeline and efforts to delever balance sheet. Now they are investment grade. Its pipeline is very large, USD 1.1bn, 17% of gross asset value. Most of pipeline is in premier life science hubs, SF, Boston, ect. The development projects open late this year

MANH - Potential Long - Develop supply chain software for manufacturers, distributors, retailers & transportation. I just love the business they are in. Haven't looked at fundamentals.

QCOR - Potential Short - Stock had a 100% run in last 2 yrs, acthar - drug on which QCOR depends came off patent; dependency on single manufacturer, expansion of rebates under medicaid will adversly affect these guys - therefore the upholding of healthcare law is not good? Regulation about how insurers reimburse for Acthar will negatively impact QCOR (pg 16 10K), Negative impact from macro- moving payer mix more under medicaid and govt. programs will (-)vly affect the firm; anti takeover provisions in place

GIL - Potential Long - Went from 10% to 65% of Wholesale screenprint market which will grow to 70%. shareprice fell as cotton prices increased - the company seems to have absorbed some of it. Recently increased the capacity by 40% EPS expected to increase. They " might enter" and sell to Nike and Disney. mgt. owns $250m stock

RLD may provide substantial upside with lateral growth, good fundamentals and growing emerging markets

This article is a summary of what I read online on Barron's and my own research. I thought this was interesting to point to readers looking at small cap beaten down stocks..
  • RealD – Current price at $14.96
  • Potential Upside by Industry Estimates: $8 per share
  • Market Capitalization: $818M
  • Cash: $24.89M; Total debt: $25M
  • Shares Outstanding: 55M
  • Operating Margins: 22%; ROE:22%
  • Sector: Technology; Industry: Movie Production, Theaters

 What does RLD do?
RealD, a technology outfit that specializes in 3D movies, could finally be ready to give up its feast-or-famine existence as an occasional Hollywood novelty for a meatier long-term role. The Los Angeles company, which supplies theatres with systems that enable their projectors to play 3D movies, and sells the special glasses required, has enjoyed a good lead-in to the arrival of summer blockbusters.

Led since 2003 by co-founder Michael Lewis, RLD went public at $16 in 2010 after the enormous success of the movie Avatar, then rose to a high of $35 in May 2011. But then the stock slid all the way to $8 late last year, amid fears that 3D was a fad. A failed deal to use RealD's technology in TV sets heightened the worry. However, early reviews from Europe for The Amazing Spider -Man in 3D have been positive, and new licensing deals with a Chinese theater operator should help the company's expansion overseas. That comes on top of the spectacular success of another 3D pic, The Avengers, in early May. The recent news has helped push RealD shares to $13.52 and according to some industry estimates the stock has the potential to top $20 in the next year. Summer blockbuster candidates like Spider-Man and Madagascar 3 could add to 3D's momentum from big-budget movies such as Prometheus.

Potential Catalysts:

Lateral Growth:
The popularity of the recent 3D movies and the technology's new expansion beyond the action-adventure genre to drama are positive signs of maturity. As production costs fall, more directors are likely to embrace 3D. RLD's systems have been installed on about 20,600 screens, 12,000 in the U.S., and 8,600 overseas. The company invests $10,000 to put in each unit. In turn, the theater pays the company a fee of 50 cents for each 3D movie ticket it sells. It's a nice swap: Theaters charge as much as $5 more for a 3D ticket. To recoup its investment, RealD needs a theater to sell roughly 20,000 tickets per screen. According to some analyst conservative estimates, a theatre will sell an average of 17,000 tickets per screen in the first year, with a modest decline per screen each year as more 3D screens go into service. That suggests the system pays for itself in about 16 months. According to industry estimates each theater screen might bring RLD $37,000 over eight years. Yet he says the stock trades as if the take might be only $21,000, offering a significant discount for investors.

Emerging Markets:
Biggest opportunity, however, lies abroad where big-budget action pictures require little translation. Already, the 3D splits—the proportion of a movie's box office sales generated in 3D—is about 49% domestic and 51% international. For the five years ending 2015, RealD's international growth rate might average 19.7%, versus 8.8% for domestic. RLD's international expansion has "a lot of legroom, a lot of runway" for growth. RLD has less than 10% of the Chinese market In the past 18 months, it's signed up 2,000 screens in China, including a big deal this month, and has installed 650 of them. China is adding 3,000 screens per year and had 10,500 screens at the end of 2011. By contrast, the U.S. has 40,000 screens. But RealD is also taking share from rivals, including Dolby Laboratories (DBL); other competitors include IMAX (IMAX) and MasterImage.

RLD might enjoy a bright spot is the consumer-electronics business. In 2011, Samsung decided not to make flat-screen panels using 3D technology. Yet 3D is surely coming back. RealD has 300 patents, which it could license to companies making 3D TVs.

Earnings might fall in 2012 to $26.1m, or 47cents a share, from $36.9m, or 65cents a share, as RealD invests abroad, puts more money into R&D and fixes bumps at its 3D eyewear unit. Cash flow from theatrical licensing could rise to $141mn in 2015, nearly double what it was in 2010, as capital spending on U.S. theaters wanes and licensing fees roll in. RealD trades at about 12x cash flow, compared to 25 times for IMAX . RealD could fetch $21 a share from any acquirer—about 50% above current levels.