RE: Yellow Media comeback? ZeroIt would seem that several of you would like to take the latest "analysis" from the G&M, frame it, and hang it on your wall.
Let's take a look at the latest to come out of what is turning into the National Enquirer of the business world and call out a few glaring issues.
"The lenders aren’t fooled either, and they are starting to take control by cutting the company’s credit lines in half and demanding repayment of $100-million a year on the drawn credit. The dividend cut will save the company $75-million a year. Which implies less money to invest in the digital business."
Two comments:
1. Not 75 million, but 325 million of after tax revenue a year will be saved because of this year's dividend cut (both of them obviously need to be counted unless you are a moron and your memory doesn't span more than 2 months as would seem to be the case with this reporter).
2. At least 30 million a year less will be spent on financing costs (interest) due to the debt that has been paid down this quarter. I am not factoring in interest savings on commercial paper because I'm not sure what rate it was at. However, commercial paper outstanding went from 295 M to 108 M in the first half. Probably at least another 5 Million in annual savings.
"After all, the company has more than $1-billion of annual revenues."
Let's be precise and say how much more than 1 billion (particularly since the difference is large enough to pay the annual salaries of all the writers at the G&M for about the next twenty years...)
Revenue, 2009 -- 1,392,000,000
Revenue, 2010 -- 1,365,300,000
1st half of 2011 -- 692,110,000
Annualized -- 1,384,220,000
"Meanwhile, the print business is evaporating at an accelerating rate."
No, it's not accelerating. Plain and simple -- no numbers back this notion.
Moreover, refer to revenues above. While something may well be drying up, something else, apparently is not. It has been asked on the board why YLO call themselves Canada's #1 Internet Company. Do you know why? It's simple. They have the highest online marketing revenue.
"The company’s stated book value was$5-billion before the write down. The market value was one-tenth of that,so it’s clear that the board was just catching up with the stock market. Even now the book value will be substantially higher than the market capitalization. Investors are saying the books still over state the company’s real-world value by a long shot."
Let's be precise since this is not some free rag but supposedly one of the nation's leading business newspapers. The market value was actually about 1/17th of book value. It is now, at a 30 cent share price, about 1/13 of book value.
"I don’t see it as any more of a buy at 28 cents than it was at $15."
Interesting. Let's see how long it takes to prove that statement is a crock. Annual dividend savings are double the current stock price. How is that not a buy?
"The lenders aren’t fooled either"
Let's just make the assumption that if the globe and mail is not fooled, then NOBODY is fooled and certainly not the lenders.
I also love the depth of his research. None of his friends use their services?
If an article is so inaccurate that I can pick out this many flaws in the span of 5 minutes, I do wonder how it ever got past the editor's desk at one of Canada's largest newspapers.
Mark