RE: Risks I just signed up today so please do not knock my post for that reason, and I am certain I will have countless spelling errors, so again please be kind!! I have been reading stockhouse boards for years and ONR/PSN for about a year ,but decided to join and post tonight due to the post marked, " risks " which I thought was one of the best posts i have seen on this forum. I dont agree with all the points but its very well done and brings a very good point to the table- this is a speculative stock . Compare this post to those who believe there is some great conspiracy out there that drives stocks down- shakes the tree- so the big boys can buy at a low price-lol the big boys bought long ago- or the traders who use hind sight trading- posting how they sold this or other stocks at a high three days ago, and then buy back in at the low and always have a profit-- they never post in advance- always after the fact!! And last, the blind, who have married this stock and see no evil, and will never will.
I Attended a Haywood event almost exactly a year ago where Open Range put on a presentation. I bought a lot of ONR in March 2010 as result of that presentation, and more in early September, when they announced they would split in two, and form PSN- I have stuck it in my own rrsp, wife's rrsp, tax free account, my own account, daughters education account- everywhere!!!- but I l still have over 75,000 shares of PSN which is too much given the rest of my portfolio. . I am now selling some shares- stopped last week due to the dip- and will keep selling, until March 23, when the amount I own will be about the same as other stocks in my portfolio- I think its prudent to take some off the table- .
On the post that inspired me to join stockhouse;
1/2- competition
No barriers to entry, and competition as a result, are by far, the biggest risks to this stock. However, the cost of the rentals really is peanuts vs the profits being make by those drilling for oil, and I bet most operators want 100% certainty that the tanks will be there on time- and not leak- and not really price sensitive. Thus, even if a new competitor starts selling or renting tanks- there might not be a significant downward push on margins, competition might be on service- However, if a viable competitor shows up- PSN stock price will drop - like a rock ,as the uncertainty on number of tanks going forward and keeping the margin at 80% will drive the stock price down very quickly.
3 growth
the projections of number of tanks is all over the map-- PSN say 400 by June 30- Haywood have 540 at end of this year and RBC have both 440 and 400 tanks at end of year in the same report..( they also mix up eps and cash flow per share numbers in their last report) In the past management has always underestimated their numbers. PSN has EBIDA projection of 205 mm for 2012 based on their projected tank rentals. The RBC growth numbers are less than PSN s own projections - and yet they come up with a 20 dollar price per share target- I am not certain that not reaching 400 tanks by June will tank the market - to use a word- I agree over time margins will decrease- but a projected EBITDA of say 300 million plus in 2013 will surely drive the stock into the plus 20 dollar range in 2013.
4 insider trading
This spooked me as well- a sale of 400,000 shares is significant- I dont care how many shares you own, i dont like the explanation for tax and estate purposes- I think their chair is simply being prudent and taking some off the table at a very good price- and soon, he would be under the black out period, so had to be done now or after results are announced- I think this sale will hang over the market until March 23- I agree with your comments
5- Dividend
I see little risk to the dividend- with EBIDA of 210 million - 85 million dividend is not at risk- yes because of the significant growth this squarter, a lot of money is now tied up in accounts receivables and inventory of tanks ( thats why I am sure they had to go the market for another 75 million ) I disagree that capital expenditures should reduce EBITDA-available for a dividend. In fact, one could easily justify an increase late in 2012.
6 valuation
I really dont think there is a peer to PSN ,but agree its selling at a premium to other oil service stocks. I also agree that one miss will result in a blood bath, with perhaps a drop of 25% overnight.
Overall, I agree with your advise to take some off the table- I shudder when I hear about someone who has 100% of their investments in one stock like PSN. - and a speculative stock at that.
I would set a total percentage of your portfolio that is in PSN- and if it say its 10% ,and you are now at 13% of your total portfolio, due to the nice increase in stock price, then simply sell 3% and ride 10% into the future.
good luck to all- realize my post was a mixed bag of for and against PSN ( and way too long )- I plan on holding PSN at least til the end of the year- but will be triming as the year goes on if the stock goes higher