Author Topic: ALJJ - ALJ Regional Holdings, Inc.  (Read 24957 times)

slkiel

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #20 on: October 22, 2013, 12:46:40 PM »
Good point re: the overhead and adjusted number. That would definitely ding it. Looks like we may have to be patient to get some concrete info. I have a call into Rob Christ at ALJJ to see how much of the Harland Clarke numbers we may be able to rely upon. and am hoping to hear back (though I may be too optimistic). I also had an entertaining conversation with someone at Faneuil, but wasn't able to gather any more info.


Saidal

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #21 on: October 22, 2013, 05:35:03 PM »
Steven,

I'd love to hear how your call goes. I'm pretty sure Harland must of shopped the deal, hence a CIM should be out there, along with  a quality of earnings report. Even if you ding the biz for overhead and certain adjustments, a purchase at 4x-5x is ultra attractive given the NOLs.

I've spent a limited amount of time on the acquisition, however my diligence items so far include:

(1) Covenants, terms and pricing of the seller note.
(2) CapEx and OCF conversion (EBITDA - Capex/EBITDA). I've seen similar competitors in the space mint EBITDA, but the majority goes towards CapEx every year.
(3) Given the "cheap" price, customer concentration and contracts/renewals could be a major concern. Hopefully the Management team could provide some color.
(4) Reasoning why Perelman, a smart investor would sell the biz, then have it churn hands a couple more times. However at $70MM, this could of been a drop in the bucket for Perelman




Packer16

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #22 on: October 22, 2013, 06:48:03 PM »
In looking at the website it looks like they are doing some Obamacare work.  I wonder if this is a large portion of their revenue orif this may go away at some point. 

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slkiel

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #23 on: October 22, 2013, 08:34:09 PM »
(4) Reasoning why Perelman, a smart investor would sell the biz, then have it churn hands a couple more times. However at $70MM, this could of been a drop in the bucket for Perelman

I originally thought that M&F acquired it in 2011, but I later found something saying they acquired it in 2006. It looks like it was just moved around a few times under the M&F umbrella. I tend to think Faneuil is just small potatoes to Perelman. M&F gets this revenue stream from the seller note and some upside from the ALJJ shares. M&F/Harland gets a revenue stream while focusing their operations. Plus, who knows, maybe Van Buren (Faneuil CEO) was pushing them somehow.

There may be a concern about the customer concentration. The customers they reference on their website seem like they would be pretty sticky, though. For example, it would probably be a bit tough for SunPass to switch, and you wouldn't think the Washington health care exchange would be quick to switch call centers. The CEO was a lobbyist, which is probably where a lot of these contracts came from. A lot of these government contractors just kind of continue to exist. The contractors may not offer the best service, but the government often lacks motivation to switch. They may not get great margins, but the government won't price them to bankruptcy either (unless it's Medicare doing the pricing).

Another element to consider is that the CEO (Van Buren) is now fully responsible for Faneuil and may be able to have the freedom to be more entrepreneurial. At Harland Clarke and M&F, it looks like there may have been some bureaucracy. It might have some spin-off quality characteristics in that regard. She is certainly incentivized with her $2m purchase, though it seems odd she bought Faneuil and not ALJJ shares. I don't know how it would work, but wouldn't she be missing out on the value of the NOLs for her share of the company?

morningstar

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #24 on: October 23, 2013, 08:11:33 AM »
I have been following this company for a couple years (as part of Harland Clarke) and I would point out two things...

(1) In 2012, Harland reorganized its reporting segments to include some call center operations from its other business units under the "Faneiul" segment, so I don't know if what is being sold to ALJJ includes everything they were reporting as part of that segment. ALJJ might not be getting the full $29-30m in annual segment EBITDA. However, I think additional corporate overhead would be pretty low as the corporate segment at HC is basically just the office of the CEO.

(2) I wouldn't use the $70m price for the MFW-HC transfer as meaning much of anything. It is most likely inflated. The transaction allowed Perelman to remove cash from HC (a levered entity, whose refinancing hopes looked grim at the time with bonds trading at 20%+ yields). Certainly the perception of HC investors at the time was that MFW was stuffing a bad asset into HC. The fact that it's being sold 20 months later at about a $20m loss pretty much confirms that view. I suspect there is actually less to Faneiul than meets the eye.

slkiel

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #25 on: October 27, 2013, 03:03:56 PM »
ALJ released an 8K on Friday night. It can be found here: http://www.otcmarkets.com/financialReportViewer?symbol=ALJJ&id=112211

Their acquisition did not include Harland Technology (HTS), but did include MDT and everything else. The financials for the part of Fanueil that transfers are below:

2013 run rate (extrapolated through the end of Q3, likely to improve in Q4 because of new contracts signed in Sept. and Oct.)
Revenue: $106.2m
Operating income: $8.6m
EBITDA: $11m

2012
Revenue: $93.6m
Operating income: $3.4m
EBITDA:$5.8m

If we use the 2013 figures, shares are currently trading at 3.8x EBITDA after taking into account dilution and Van Buren's stake. I'm sure Ravich will have some cost-cutting and other ideas going forward, but it's still pretty cheap at today's price using both the 2013 and the 2012 numbers. A company like this should trade more like 8x-10x.

matjone

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #26 on: November 15, 2013, 10:10:16 PM »
So we expect something like 9 million in EBIT.  They have the note at 25 m and the market cap is around 50 m.  That doesn't seem that cheap - am I missing something?
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writser

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #27 on: April 09, 2014, 05:59:28 AM »
ALJ agreed to buy Las Vegas based Carpets 'n More according to a press release. Unfortunately I cannot find any financial information (operating results) regarding the take-over apart from what is discussed in the press release. Has anyone else had more luck?

Quote
The aggregate consideration for the acquisition of all of Carpets was $5.47 million, including expenses of the transaction, payable by ALJ in cash to the seller.  Concurrently with the closing, Carpets will be recapitalized in a transaction resulting in ALJ owning 87.94% (basic) or 82.63% (fully diluted) and Mr. Chesin, the Chief Executive Officer of Carpets, owning 12.06% (basic) or 17.37% (fully diluted) of Carpets.

ALJ is funding the acquisition through existing cash, the sale of 1.4 million shares of its common stock in two separate private placements at a price of $1.60 per share, and the incurrence of $2.0 million in debt from Libra Securities Holdings, LLC, a related party.  The Promissory Note, which was approved by the disinterested directors on the Board of Directors of ALJ, carries a 5-year maturity with a balloon payment due April 2019 and a 10% annual interest rate.  The note may be pre-paid at any time without penalty.  Interest is payable quarterly but may be capitalized by ALJ at its election.
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writser

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #28 on: May 15, 2014, 06:17:24 AM »
Latest quarterly: link

Let me be very frank: I barely know anything about this company :). I just kept a small position after the tender offer; Ravich seemed like a good guy to side with. That said, the numbers look really good again. 3.5m net income and 4m CFFO for the quarter, and they still have a $60m tax shelter. I Would love to get some more information about their subsidiaries: I have no clue about what Faneuil is doing, how sustainable these earnings are, growth perspectives, influence of Obamacare etc. I don't know much about carpet selling either but that's a smaller part of the puzzle (and it's not incorporated in the financials yet). Has anybody had luck contacting IR? Is anybody still following this?
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

writser

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Re: ALJJ - ALJ Regional Holdings, Inc.
« Reply #29 on: July 17, 2014, 11:54:00 AM »
Any news out today? Couldn't find anything despite the large move.

I sold my position a few weeks ago unfortunately. Happy about the decision though - the stock price just kept moving up and up and I have no knowledge at all about their competitive edge and / or future prospects. It didn't seem prudential to me to justify the current stock price based on two quarterlies only. Nevertheless Ravich seems like a good guy to partner up with so I will keep an eye on this.

next day: I see now, a pump on SeekingAlpha.
« Last Edit: July 18, 2014, 11:54:48 AM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.