Post by Possibleidiot01on Sep 04, 2024 9:20pm
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Post# 36209128
Greystone Capital Q2, 2024
Greystone Capital Q2, 2024Top 5 holding.
Medical Facilities Corp. (MFCSF)
With shares up +40% year-to-date, Medical Facilities Corp. has moved firmly within our top five
positions and shall remain there as long as they continue to execute the very simple strategy
of running hospitals profitably and returning excess cash flow to shareholders via dividends
and buybacks. Management has earned our trust by executing very well and doing what they
say they will do, with the most recent quarterly results showing increases in revenues,
decreases in costs, and strong cash flow conversion numbers.
When I first came across MFC, it fit the mold of a turnaround by virtue of some very poor
decision making by prior management. After getting familiar with the assets and earnings
power, and with new management in place prior to our investment, I realized it was less of a
turnaround but rather more a return to common sense. Management quickly simplified the
entire cost structure, stopped doing value destroying M&A, and began returning all capital to
its rightful owners, us. Given that MFC owns durable streams of cash flows in the form of
hospitals that collect service revenue on the back of medical procedures, these capital returns
should continue.
I estimate MFC could generate greater than $30mm in distributable cash flow during FY24,
against an enterprise value of around $270mm. These cash flows can be reinvested by MFC at
mid-teens rates of return simply by repurchasing stock, which they’ve done by reducing the _____________________________________________________________________________________
share count by nearly 25% during the past two years, letting shareholders know that long term
value per share is the guidepost by which management is operating.
Our position in Medical Facilities Corp. is a good reminder that we don’t have to chase trends
in A.I. or predict the future to generate strong returns. Investing in durable businesses with
strong cash flows, smart capital allocation policies and cheap valuations works just fine.
Significant potential upside also exists should the company decide to monetize its portfolio of
hospitals via asset sales.