Author Topic: SYTE - Enterprise Diversified  (Read 239181 times)

CorpRaider

  • Hero Member
  • *****
  • Posts: 2203
    • The Corpraider
Re: SYTE - Sitestar
« Reply #420 on: April 11, 2018, 05:04:10 AM »
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.


InelegantInvestor

  • Full Member
  • ***
  • Posts: 160
Re: SYTE - Sitestar
« Reply #421 on: April 11, 2018, 05:31:26 AM »
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.
HVAC contractors are asset-lite(maybe they own a truck). Only proprietary value is customer list and relationships. It's generally a relationship business. How long does that value last once old owner moves on?

So you're not buying reproducible revenues and profits, necessarily.


valuedontlie

  • Full Member
  • ***
  • Posts: 139
Re: SYTE - Sitestar
« Reply #422 on: April 11, 2018, 05:40:47 AM »
There are no public residential HVAC operators... And the public HVAC companies on the commercial side are mostly in design/build as opposed to maintenance/repair...

Similar attributes would be the plumbing industry and I would look at Chemed (CHE) which owns Roto Rooter. It is mostly plumbing and drain cleaning. Consistent revenue growth, 20% EBITDA margins, hardly any capex, and buying up smaller operators at 4-5x EBITDA.

Presentations site:
http://ir.chemed.com/events-and-presentations/upcoming-events

gfp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1824
Re: SYTE - Sitestar
« Reply #423 on: April 11, 2018, 06:18:07 AM »
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 

InelegantInvestor

  • Full Member
  • ***
  • Posts: 160
Re: SYTE - Sitestar
« Reply #424 on: April 11, 2018, 07:57:39 AM »
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years. 

It turns out these assets are cheap for a reason.

CorpRaider

  • Hero Member
  • *****
  • Posts: 2203
    • The Corpraider
Re: SYTE - Sitestar
« Reply #425 on: April 11, 2018, 08:02:07 AM »
Interesting stuff.  Thanks.

Jurgis

  • Hero Member
  • *****
  • Posts: 4625
    • Porfolio
Re: SYTE - Sitestar
« Reply #426 on: April 11, 2018, 08:35:10 AM »
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.

So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?

Not saying this happened to SYTE. Just clarifying.
"Before you can be rich, you must be poor." - Nef Anyo
--------------------------------------------------------------------
"American History X", "Milk", "The Insider", "Dirty Money", "LBJ"

oddballstocks

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2250
    • Oddball Stocks Blog
Re: SYTE - Sitestar
« Reply #427 on: April 11, 2018, 08:58:18 AM »
Last time I was shooting the shit with our HVAC man (an owner operator) he spent an hour talking about all the non-compete agreements his friends and colleagues have subverted over the years.

So basically owner could sell his business and then start a new one and pretty much go to his former clients while the buyer is left with not much?

Not saying this happened to SYTE. Just clarifying.

When I was in high school my dad considered buying an HVAC dealer.  He worked in sales at a distributor and knew one of his best clients was considering selling.  He went fairly far with the transaction, audited the books, made some offers, hired an accountant to advise on M&A.  The thing stopped dead in its tracks for a single reason.  The seller had accumulated $50k of old inventory that they wanted sticker price for, while my dad recognized it was worthless.  They were $50k off on the price and they couldn't make a deal.  The seller wanted $300k, my dad would pay $250k.

I mention this because it's common.  You have someone who isn't a business person running a business.  They over spend on inventory, or trucks, or tools, or whatever and they want to "get their money out."  It isn't a bad thing, it's the nature of the business, and it's common.

I've talked to my dad about this extensively.  He was going to buy in not because it was a good deal, but because he was familiar with the industry.  He said this company had about a 5% net margin, and he felt he could double it by changing how they approached their selling, how they managed inventory, and how they scheduled repairs.  There are a lot of costs for HVAC repair.  This is off the top of my head, but I believe to get a person to your house costs about $150.  That's the truck, the tools, the labor, the benefits, and the time to drive.  If they can't make $150 right away they're losing money on the visit.  That's why a lot of places have a $70 service charge, they're trying to recoup half of that cost before they arrive.

My dad went into training HVAC techs.  He was a teacher before sales and recognized he loved to teach.  The biggest issue is there are not enough HVAC techs, or people who want to do this.  He said companies are struggling to hire, and they're willing to pay for classroom training to bring them up to speed.  Some of these classes are $15-20k.  But a good tech can make upwards of $40/hr.

The problem with HVAC is two fold.  The first is EVERYTHING is depreciating, the equipment, the tools, even the skills as new models are replaced.  The second is as your labor becomes more skilled there is incentive for them to go off on their own.

My dad said the most common situation was a guy is making $35/hr and sees that his company bills him at $150/hr.  He thinks "geez, I have a truck, I have these tools, why don't I go off on my own?"  And they do, and they charge $125/hr for labor, their wife does the books and the phone and they do ok.  Sometimes they recognize that it's better to be an employee, but some make it.  But it's REALLY hard to scale that thing. 
The ultimate edge for bank investors: http://www.completebankdata.com

Spekulatius

  • Hero Member
  • *****
  • Posts: 3434
Re: SYTE - Sitestar
« Reply #428 on: April 11, 2018, 10:01:49 AM »
What's the problem with the HVAC bidness?  Employees take the lion's share/are hard to retain?  Seems like lots of guys start up their own shop, with like one helper, in that industry.
HVAC contractors are asset-lite(maybe they own a truck). Only proprietary value is customer list and relationships. It's generally a relationship business. How long does that value last once old owner moves on?

So you're not buying reproducible revenues and profits, necessarily.

Itís price competitive, since the service is fairly standardized . Most of the work falls within just a few month, so they work long hours in peak time. Price and lead time are the primary factors. The long hours favor owner operators over those that just have employees, imo.
Life is too short for cheap beer and wine.

LowIQinvestor

  • Hero Member
  • *****
  • Posts: 598
Re: SYTE - Sitestar
« Reply #429 on: April 11, 2018, 10:05:37 AM »
Can anyone explain Kiel's job at Santa Monica Partners? thx!

"Includes 85,413,593 shares owned by Arquitos Capital Partners, LP. Arquitos Capital Management LLC acts as the General Partner to Arquitos Capital Partners, LP. Steven L. Kiel is the Managing Member of Arquitos Capital Management LLC and is deemed to have beneficial ownership over the Common Stock owned. Also includes 41,666,667 shares owned by Santa Monica Partners, L.P. SMP Asset Management, LLC is the general partner of Santa Monica Partners, L.P. and Steven L. Kiel is an advisor of SMP Asset Management, LLC and is deemed to have beneficial ownership over the Issuer's Common Stock owned by Santa Monica Partners, L.P. "