Author Topic: ALJJ - ALJ Regional Holdings, Inc.  (Read 25100 times)

Hielko

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #10 on: February 12, 2013, 02:18:06 PM »
looks cheap again
Wouldn't surprise me if it will get even cheaper. 33M shares were tendered while 30M shares were accepted in the offer. Think there are a now a bunch of people that have a tiny position remaining and who want to sell.


ragnarisapirate

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #11 on: February 12, 2013, 03:20:12 PM »
A cash box, NOLS, and a manager who can make a debt laden mini-mill in an impoverished region make money...

I have to say, there is a price where this thing gets really interesting really fast.
« Last Edit: February 12, 2013, 03:27:20 PM by ragnarisapirate »

matts

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #12 on: February 13, 2013, 10:44:38 AM »
Does anyone have a good handle on the amount of NOLs left at ALJJ? I have not been able to piece together how much, if any, would have been used up on the KES sale. Would appreciate any guidance.

Hielko

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #13 on: February 13, 2013, 01:06:10 PM »
Does anyone have a good handle on the amount of NOLs left at ALJJ? I have not been able to piece together how much, if any, would have been used up on the KES sale. Would appreciate any guidance.
I think the company needs to recognize a gain on the KES sale. Book value was negative $13 million at the latest annual report, and guess it was positive +$51 million after the merger but before the tender offer. So guess that was 64 million of taxable income. The company had $258 million in NOL carryforwards so that would leave them with $194 million in NOL's, but there are some restrictions on 36$ million of this amount, so probably better to assume they have now ~$158 million effective in NOL carryforwards. Could be used to shield the company from $55 million in income taxes assuming 35% tax rate.

They also have a significant accumulated deficit ($300 million pre sale). I would guess that has some value as well since I would think this would allow the company to pay dividends tax free in the future as a return of capital as long as this remains negative.

matts

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #14 on: February 13, 2013, 03:33:29 PM »
Exactly what I was looking for, a very logical estimate. Thanks Hielko!

Chris DeMuth Jr

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #15 on: August 31, 2013, 10:43:54 AM »
This was an attractive opportunity earlier this year (http://seekingalpha.com/article/1098481-turn-steel-into-gold-with-alj-regional-holdings).  Worth taking another look?  Management was competent and shareholder-oriented.  It would be interesting to see if they could pull off another success. 
Chris DeMuth, Jr.
 
Rangeley Capital

slkiel

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #16 on: October 21, 2013, 08:05:58 AM »
An update on ALJJ:

On Oct. 18 they announced the acquisition of Faneuil, a call center sub of Harland Clarke (which is a sub of Perelman's M&F). Press release is here: http://www.otcmarkets.com/otciq/ajax/showNewsReleaseDocumentById.pdf?id=1788101770

ALJJ paid $25m in cash, Harland Clark offered $25m in seller financing (rate unknown), and ALJJ gave Harland Clark 3m ALJJ shares. Total purchase price was $53m. Faneuil's CEO, Anna Van Buren, also bought about $2m worth of Faneuil (not sure why she bought Faneuil directly and not ALJJ shares).

It appears they got a deal. The first six months of 2013 showed Faneuil with $6.9m in operating income on $80m in revenue. This is a nice increase over full year 2012's numbers: $8.8m in operating income on $155m in revenue. This is all of the granularity I could find in the filings. References are here:

2012 10K: http://www.sec.gov/Archives/edgar/data/1354752/000135475213000005/hchc201210k.htm#s30B24F3A88268FC5364BD6662C6224F6

First six months 2013 10Q: http://www.sec.gov/Archives/edgar/data/1354752/000135475213000039/hchc-10q2013630.htm

Remember, ALJJ has $176m in NOLs at the end of Q2 2013. At the end of June, they also had $1.04 in net cash and short term investments. They typically make their quarterly announcements 45 days after the end of the quarter, so we should know on Nov. 15 if that number increased.

The question is how to value this with the limited information currently available. These may not be the best, but it is currently trading at the following:

2012 operating income: 3x
2013 operating income (full year run rate): 2x
2013 revenue: 0.18x

What multiple should it trade at? I don't know, and would like to hear the opinion of those on the board. I don't know that I've found enough information to figure out EBITDA or free cash flow. Maybe others have found better info.

One other point. Clearly we would want to know why someone like Perelman would sell? It looks like Faneuil just doesn't fit into the rest of Harland Clarke's business. There were also some comments floating around about Harland Clarke wanting to focus their operations. Here, incentives are still aligned as they get to participate in the upside in the stock with the 3m shares, and will collect a healthy interest rate from the seller financing. There is a figure that Harland Clarke acquired Faneuil for $70m in early 2012, but that was simply moving it from M&F to Harland Clarke. Apparently M&F acquired it in Dec. 2011, but I don't know the price. I'm not worried about that $70m figure. It seems to be more for accounting than an indication of the value at the time.

The business is a call center with some government contracts (SunPass in FL, etc.), utilities, health care. There may be some more potential in the health care space. Their website with more info is here: http://www.faneuil.com

Even after the 30% run over the last few days, this still looks like a double at a minimum from here, and possibly much more. Love to hear your thoughts.


slkiel

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #17 on: October 22, 2013, 09:19:00 AM »
Good article today from Whopper: http://seekingalpha.com/article/1757152-alj-regional-holdings-new-acquisition-unlocks-value. If you look at the links in it to the slides for 2012 and 1H 2013 you'll find the EBITDA numbers I was looking for. Looks like EBITDA is $25m run rate for 2013 and $29m for full year 2012.

Current EV/EBITDA multiple is 2x if we use the 2013 run rate.

I'm not sure what EV/EBITDA multiple to use, but a 5 multiple, which would seem to be very cheap, would give equity of $3.33/share. Shares are currently at $1.22, Plus, for good measure, no tax for a long time with the $170m in NOLs. If you looked at it from a free cash flow perspective, you may get $15m-$20m/yr after the sale to ALJJ and interest on the seller note. FCF yield of 28% minimum.

Hielko

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #18 on: October 22, 2013, 09:51:23 AM »
Don't forget that those segment EBITDA numbers don't include corporate overhead, ALJ doesn't own 100% of the business and it's unlikely that a sophisticated seller is going to sell a division for 53 million if it's worth a lot more. They might have gotten a good deal, but it's imo very optimistic to think the business (excl. the value of the NOLs) is worth a multiple of that number today. Also note that the EBITDA numbers are adjusted EBITDA numbers, so it's excluding some negative events that may or may not be one-time events.

writser

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #19 on: October 22, 2013, 10:28:56 AM »
Agreed, the Whopper article seems a bit optimistic (don't forget that he is paid if he writes an 'alpha-rich' article). The 29 mio EBITDA the article is talking about is adjusted (GAAP EBITDA is 19 mio for 2012 and even that is excluding corporate overhead). We only have limited knowledge about the transaction so far and limited information about the history of Faneuil. A sophisticated seller is willing to sell the division for ~50 mio, looks like a bit of a stretch to me to assume that based on 10 powerpoint slides we can deduce that Faneuil suddenly is worth twice as much or more.

It looks like a great transaction but I'd rather be a bit more conservative beforehand.
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