RE:Got ask yourself, Why now?rehsifylf; As I have previously posted I was an STB Shareholder from June 2009 – Jan. 2015. I bought my shares at a low price due to the 4 alarm fire sale that was on at the time. I sold my shares in Jan 2015 because in my opinion STB was dead money with a yield. It turned out that due to GOOD LUCK my timing was very good.
In that time frame Student Transportation did not generate any Shareholder Value. In fact the opposite was true.
I heard everything said and saw what actually happened. You probably remember that when they rolled out the “Management Services” part of the business we were told that it would provide “Growth Without Dilution”; Didn’t Happen!
Now they have rolled out the “Safe Stop App.” At this point it is a bit of a “Pig In A Poke”. It could prove to be a Low Margin “Value Added Service” which is not a bad thing or actually Profitable. Only time will tell.
I believe that Dennis has also said the 2016 is the year when “Management Services” are going to begin producing positive results.
I am not suggesting that the “Intention” is not there but to date the results have been underwhelming.
Why is 2015 important now? To attempt to “predict” future results, you need to start with verifiable facts. Due to the seasonal nature of the business it’s best to attempt to analyze STB on an annual basis.
Although there are some very useful numbers in the 2016 Q1 report the results as usual are horrendous. For example, I don’t know how to calculate a Payout Ratio when the top line number is seriously negative. It’s just the nature of the business.
The Q2 results should shed some light on how the year is shaping up.
The Business Model; You are correct. They have been using the same model for 11 years and unfortunately intend to continue that.
That is the PROBLEM! Student Transportation is essentially a “Cash Flow” business. They have very little in the way of “Tangible Assets”. In fact, the “Tangible Book Value” is negligible.
When a “Cash Flow” business persistently spends more for Overhead, Maintenance, Growth, and Dividends than their Revenue (11 years to date) the difference has to be made up with Debt and Dilutive Equity. It’s virtually impossible to create Shareholder Value with that model!
The Dividend; I agree that a Company with 90% of expenses and revenue in USD should set their Dividend in USD.
The collapse in the CAD provided STB with an opportunity to reset the Dividend in USD terms at a lower than historical value (a reduction). It was Necessary and actually a Good move. In reality it demonstrates that the former Dividend Policy was NOT sustainable.
You are correct that due to the current exchange rate the Canadian Shareholders are doing better than before and oddly at todays exchange rate the US Shareholders are also doing a bit better than they would have under the old policy.
It remains to be seen if the current Dividend is sustainable or not. The market seems to think not.
Why Do I Care? I keep an eye on STB because as a former Shareholder I am very familiar with the Company. I like the Concept, they are very good School Buss operators, do a very good job for their customers and there is lots of opportunity for them to increase their market share. It’s the “Business Model” that SUCKS.
I would like to see them take advantage of the current situation and Revise the “Business Model”.
If the current DRIP participation is actually 5% discontinue it.
It their POR target (the way they calculate it) is 60% adjust (lower) the Dividend to the target. Over time if they execute well they can adjust (raise) the Dividend to the target.
The result would be a Company with a well covered / safe Dividend c/w a useful amount of “Actual Cash Flow” (abt. 15% the way I calculate it) to create some Shareholder Value with by;
- Investing in the Companies Growth
- Reducing Debt
- Buying back shares
- Some combination of the above
In my opinion the result would be a much better “Total Return” than STB has historically achieved.
Everybody is entitled to their own opinion. That’s mine. I don’t expect everybody to agree with it but it is the opinion that caries the most weight with me.
As Always; Do Your Own Due Diligence; It’s Your Money !! PS; Whenever I compose a post longer than a few words I do it in MS Word and then copy and paste it into the Stock House text editor.