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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (8138)9/2/1999 1:41:00 PM
From: Ron Bower  Read Replies (1) of 78843
 
Armin,

Thanks for the response;

As near as I can determine:
Carematrix doesn't pay rent, they work off of a base management fee plus a share of the profits. (They do invest in the development costs as part of getting the contract for management.) Chancellor existing units are financed, but they may have trouble generating new money to continue growth. Part of CMDC income is from a 'development fee' on new facilities. They've indicated a possible decline the development fee income in the next two Qs if Chancellor cannot find the funds, but I think that's already in the price decline.

They were hit by a Medicaid change this past year. The management contract requires facility owners to bear most all of the costs from a change on government regulations and it has minimal effect on CMDC's income. Most of their units are for middle/upper income and not Medicaid. I believe they contract clients for a monthly fee as long as they have money, then they're transferred to Medicaid facilities when the assets are gone.

I've not fully researched, but it appeared the price was about to move so I jumped. The funds are selling, but there's plenty of buyers at this level - I have to believe it's other funds buying in. The price has been steadily falling and it's getting near fund report time. Some had a lot of exposure and I think they've been averaging dwon from the 30 level before they put their reports together. They don't want to report a company that's gone from 30-8.

They may not meet analysts projections, but there's not much downside at this price.

JMHO,
Ron
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