Post by
CrAyZe on Aug 31, 2017 11:44am
Outlook - Drop Comments
Morning gang....Sorry I have been absent as of late. I have been sort of in and out of the name (for the monthly dividend) but have recently been hurt to the tune of 3 - 4K trying to pick an entry spot I am comfortable with.
I can confirm that there is a short report on the stock (and this is not the first time) which is really why we are seeing the weakness. I am going to be touching base with management today and report back to the board. The short report indicates that they will have to cut the dividend as the payout ratio can not be sustained with current revenues and underperforming investments. This is actually true. We do need to see some capital invested ASAP. However, nothing will replace the 15% revenue drop provided by SEQ.
The company has 0 debt and claims to continue to have some investment opportunities on the go. I think the market needs to see this. We have a lot of work to make up a 15% drop in revenue while the underperformers continue to underperform. The timeline is what is hurting us. We needed 100 mil invested in the first half of this year. The company is diligent and have been great stewards of capital in the past. I would imagine this will continue but the private equity market is not hot right now (as we have been told).
The shorts will go on the run if we are able to close some big deals in before year end. The question to us is... is $20 still a good entry. It seems like it has been in this trading range but I am very nervous this thing floats well below $20. We are in the dog house now and it is going to take some big moves to recover. I know we were all hoping for this earlier. Again, the timing is so critical. This short report would mean nothing if we have a new partner or two added by now (as mentioned by management in the q2 report).
I think the yield is in question for 2018 if they don't do something quick. We can forget a dividend hike at this point. That is out the window. We have a payout ratio that needs to be fixed. The company can pay it no problem the question is can they do it without debt.
None of us want our capital going away this quickly even for an 8% coupon. It could be a 10% coupon at this rate.
What to do?
If you own the stock now and are a long holder I think you can probably re-load at lower levels. If you want to buy this thing try to wait until under $20. If they do make a positive announcement I think we will reclaim the low 20's in short order.
This is a great company going through some pretty tough times. The long story is positive. The company is probably worth a billion + with 0 debt and re-occurring positive net income. If you have the courage to hang on for 5 years this is where the money is made. Personally, I want in under $20 and then will hold for the long term!
Comment by
gairvine on Aug 31, 2017 12:27pm
Well reasoned post...would welcome any further thoughts. I've been long this stock for some time and agree with your assessment. I do think it's wise for management to be prudent rather than chasing inflated deals. Looking to add under 20 if we get there. Regards