Author Topic: USNU - US NeuroSurgical  (Read 5759 times)

Cameron

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USNU - US NeuroSurgical
« on: October 04, 2017, 08:07:48 PM »
This is a small 3.23 million dollar company. They lease out a gamma knife to NYU where they receive a royalty payment for every use of the machine for cancer treatment. They get about 90% of their rev. from NYU. The P/E ratio at about 6x, but when you back out the 3.6 million in cash you are getting the business for free which is ridiculous because it spits off so much free cash flow but for the sake of being conservative they have a $1 million a year capital lease on the gamma knife which you could consider their capex. leaving $2.6 million in cash and when that is backed out we get a p/e of a little more than 1x as well as price to fcf of 2x. Price to Sales is 1x and it trades at book value.

In addition they have made some investments in companies that give them distributions for example in 2016 they received $500,000 from these investments which off set half of the capital lease and in 2015 they received $312,000 that helped off set the $803,000 paid for the capital lease.

The gamma knife got damaged during Hurricane Sandy and they were without sales for a year and a half so this is something to keep in mind in regards to another event happening that could cause the knife to not be usable for a period of time but considering the business and investments are valued at a grand total of zero dollars I'll take the chance.


writser

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Re: USNU - US NeuroSurgical
« Reply #1 on: October 05, 2017, 02:40:27 AM »
It looks cheapish but I'm not sure I understand your calculations. As far as I can see cash on hand is about enough to cover future lease- and asset retirement obligations. So you pay ~3.2m for the operating assets. What's your estimate for FCF?
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Cameron

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Re: USNU - US NeuroSurgical
« Reply #2 on: October 05, 2017, 05:54:55 AM »
It looks cheapish but I'm not sure I understand your calculations. As far as I can see cash on hand is about enough to cover future lease- and asset retirement obligations. So you pay ~3.2m for the operating assets. What's your estimate for FCF?

I backed out cash because half the capital lease is paid by NYU as a standard payment and then rest has been covered by operating cash flow. If you were to by the company outright as if you were a company like Berkshire they would be able to send you at least $2.3 million of it on day one returning 70% of your investment. FCF is about $300,000. Return on equity was 19% in 16 and 17% in 15.
« Last Edit: October 05, 2017, 12:55:50 PM by Cameron »

DTEJD1997

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Re: USNU - US NeuroSurgical
« Reply #3 on: October 06, 2017, 06:04:58 PM »
Hmmm:

Looks interesting.  Low enough valuation even for me to invest!  maybe...

Company might be very vulnerable when the lease expires in NY.

Will have to go through their other joint ventures and map it out.  It was hard to keep everything straight just reading it.

What is so very interesting is that the stock has traded as low as $.07/share in the last year.

A lot of these nano-caps will sometimes trade for silly valuations (low OR high). If you have a position, and are watching closely, you can make some great profits or build a great position at a super low price.  I've done this a few times...

I'll put this on the list of things to research further....

Definitely a good candidate...

Cameron

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Re: USNU - US NeuroSurgical
« Reply #4 on: October 06, 2017, 09:44:02 PM »
Hmmm:

Looks interesting.  Low enough valuation even for me to invest!  maybe...

Company might be very vulnerable when the lease expires in NY.

Will have to go through their other joint ventures and map it out.  It was hard to keep everything straight just reading it.

What is so very interesting is that the stock has traded as low as $.07/share in the last year.

A lot of these nano-caps will sometimes trade for silly valuations (low OR high). If you have a position, and are watching closely, you can make some great profits or build a great position at a super low price.  I've done this a few times...

I'll put this on the list of things to research further....

Definitely a good candidate...

.07 is insane I bought a majority of my position at .35

What really interests me is the cash, since they are now at the point where some investments are paying off they are building it up where they could possibly hand it shareholders They had a history of failing to sign other clients to lease a gamma knife to mind you that the industry isn't big there is something like 170 in operating today. 

In terms of the NYU lease risk of renew they have a long history and just from my memory they have renewed the contract before without problems.

DTEJD1997

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Re: USNU - US NeuroSurgical
« Reply #5 on: October 06, 2017, 09:58:32 PM »
Hmmm:

Looks interesting.  Low enough valuation even for me to invest!  maybe...

Company might be very vulnerable when the lease expires in NY.

Will have to go through their other joint ventures and map it out.  It was hard to keep everything straight just reading it.

What is so very interesting is that the stock has traded as low as $.07/share in the last year.

A lot of these nano-caps will sometimes trade for silly valuations (low OR high). If you have a position, and are watching closely, you can make some great profits or build a great position at a super low price.  I've done this a few times...

I'll put this on the list of things to research further....

Definitely a good candidate...

.07 is insane I bought a majority of my position at .35

What really interests me is the cash, since they are now at the point where some investments are paying off they are building it up where they could possibly hand it shareholders They had a history of failing to sign other clients to lease a gamma knife to mind you that the industry isn't big there is something like 170 in operating today. 

In terms of the NYU lease risk of renew they have a long history and just from my memory they have renewed the contract before without problems.

Have you ever met or had discussions with management?  What do you think the likelihood is that they would do a dividend?  Some nano-caps state that they will pay a dividend once they have more than X amount of $$$ in the bank, or some other financial metric.

Others come out and state that they will NEVER pay a dividend in the foreseeable future.

I always like my companies to pay dividends.  It takes some amount of risk out the equation, forces some amount of discipline on management, and can tremendously reward shareholders over long periods of time!

Foreign Tuffett

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Re: USNU - US NeuroSurgical
« Reply #6 on: October 07, 2017, 04:52:41 AM »
Any concern at all that this might be a value trap? I think it has many of the signs.....

President and Chairman Alan Gold has been in place since 1996 and is married to Susan Greenwald, who is the only other named employee. I think Gold and Greenwald have both been involved in similar capacities with predecessors to the company since 1983. Gold gets $300K a year + a car allowance, decent pay for what likely amounts to a part time job. Gold and Greenwald are both over 70.

There are only three full time employees (you just met two of them) and the two outside directors have been in place since 1999. The board only meets once per year.

I don't think the company has ever paid a dividend or bought back stock and, if the 2016 10K is any guide, "does not anticipate declaring dividends in the foreseeable future."

For someone building a large basket of things that are "stupid cheap" on a quantitative basis, this might be worth buying. Ditto for someone who wants to be a nano cap activist.

As for me, I'll be over here on the sidelines, sitting this one out. 
Former Teldar Paper Vice President

Cameron

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Re: USNU - US NeuroSurgical
« Reply #7 on: October 07, 2017, 07:02:40 AM »
Any concern at all that this might be a value trap? I think it has many of the signs.....

President and Chairman Alan Gold has been in place since 1996 and is married to Susan Greenwald, who is the only other named employee. I think Gold and Greenwald have both been involved in similar capacities with predecessors to the company since 1983. Gold gets $300K a year + a car allowance, decent pay for what likely amounts to a part time job. Gold and Greenwald are both over 70.

There are only three full time employees (you just met two of them) and the two outside directors have been in place since 1999. The board only meets once per year.

I don't think the company has ever paid a dividend or bought back stock and, if the 2016 10K is any guide, "does not anticipate declaring dividends in the foreseeable future."

For someone building a large basket of things that are "stupid cheap" on a quantitative basis, this might be worth buying. Ditto for someone who wants to be a nano cap activist.

As for me, I'll be over here on the sidelines, sitting this one out.

For me I don't feel its a value trap and everyone of these cheap companies comes with some type of dirt on it, I view RELL as more of a value trap. The other employee is William Schneider and he is located at the NYU medical center as an advisor. Management owns 17% and 30% is owned by an investment banker senior partner at Allen and Co Stanley S. Shuman. While it was a long time ago they did authorize a share buyback in 2000 that lasted to about 2004-2005 with 500,000 allotment 204,000 were retired.

No two ways about it its a crap company until 2009, now its an ok company. its fixed cost and they have started to make enough revenue for them to make money.

Gold ran GHS the only thing I could find on that was a lawsuit that the company filed against the city of Chicago over some receivables which they lost because USNU really owned the receivables and GHS didn't. They sued again but this time as USNU and got $400,000 in 2009, as well as he wrote part of a chapter called Computerization in a book called The Physician as Manager. The company basically computerized documents for medical service companies and they owned USNU as a subsidiary which they retained when the sold GHS for $2,146,000 in 1997.

I should have prefaced the dividend comment as pure speculation on a special dividend since they never have had as much cash as they do.

The important metric to look at is the patients per year 2016: 513   2015: 474  2014:  326 thats as far back as it goes.
« Last Edit: October 07, 2017, 10:02:32 AM by Cameron »

Ruka

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Re: USNU - US NeuroSurgical
« Reply #8 on: October 07, 2017, 08:39:58 AM »
Any concern at all that this might be a value trap? I think it has many of the signs.....

President and Chairman Alan Gold has been in place since 1996 and is married to Susan Greenwald, who is the only other named employee. I think Gold and Greenwald have both been involved in similar capacities with predecessors to the company since 1983. Gold gets $300K a year + a car allowance, decent pay for what likely amounts to a part time job. Gold and Greenwald are both over 70.
If they over 70 then the premiums on his $500k life insurance won't be cheap either. Wife's listed as beneficiary.
For me I don't feel its a value trap and everyone of these cheap companies comes with some type of dirt on it, I view RELL as more of a value trap. The other employee is William Schneider and he is located at the NYU medical center as an advisor. Management owns 68.2% so they have some incentive for the stock price. While it was a long time ago they did authorize a share buyback in 2000 that lasted to about 2004-2005 with 500,000 allotment 204,000 were retired.
Where do you get the 68.2% from? The 2016 annual report lists 17.6% belonging to management. There's another investor listed with a 30% interest.
Quote
No two ways about it its a crap company until 2009, now its an ok company. its fixed cost and they have started to make enough revenue for them to make money.
Would that statement not require a thorough analysis of the subsidiaries. Quite some investments, loans and guarantees went there with some of it coming back as loan repayments it seems. Same as for the parent the question is if actual cash is extracted now or in the future.

Cameron

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Re: USNU - US NeuroSurgical
« Reply #9 on: October 07, 2017, 09:59:28 AM »
Any concern at all that this might be a value trap? I think it has many of the signs.....

President and Chairman Alan Gold has been in place since 1996 and is married to Susan Greenwald, who is the only other named employee. I think Gold and Greenwald have both been involved in similar capacities with predecessors to the company since 1983. Gold gets $300K a year + a car allowance, decent pay for what likely amounts to a part time job. Gold and Greenwald are both over 70.
If they over 70 then the premiums on his $500k life insurance won't be cheap either. Wife's listed as beneficiary.
For me I don't feel its a value trap and everyone of these cheap companies comes with some type of dirt on it, I view RELL as more of a value trap. The other employee is William Schneider and he is located at the NYU medical center as an advisor. Management owns 68.2% so they have some incentive for the stock price. While it was a long time ago they did authorize a share buyback in 2000 that lasted to about 2004-2005 with 500,000 allotment 204,000 were retired.
Where do you get the 68.2% from? The 2016 annual report lists 17.6% belonging to management. There's another investor listed with a 30% interest.
Quote
No two ways about it its a crap company until 2009, now its an ok company. its fixed cost and they have started to make enough revenue for them to make money.
Would that statement not require a thorough analysis of the subsidiaries. Quite some investments, loans and guarantees went there with some of it coming back as loan repayments it seems. Same as for the parent the question is if actual cash is extracted now or in the future.

68.2% was wrong I was going off scratch notes i'll change that 

They only recognize the NYU revenue on their income statement, net income of just the NYU contract was around 300k in 2016 280-270k in 2015 in their income statement and they report the investments with the equity method for income and on the balance sheet. the Corona Gamma Knife, LLC and NeuroPartners, LLC investments aren't recorded on the balance sheet because they own a variable interest. The outstanding subsidiaries guarantees amounts to $708,750 if they were all to default yearly average payments amount to $114k a year. CGK and Neuro are far enough along to not need huge capital expenditures. FOP and FOPRE rent their equipment and actually makes more money than USNU. BOPRE and MOP are the only 2 that may require capital.

Basically for 3.2 million you get 3.6m in cash, 3.2m in sales that cover expenses and then some, 300k a year in fcf if sales don't grow and thats without throwing in 4 investments in various companies at later and earlier stages of development
« Last Edit: October 07, 2017, 11:42:40 AM by Cameron »