Bluegreen: OK, I've researched it more for ya...
OK, they have $1.4 Billion in their coffers. They're probably seeing 20% growth going into the next few years, which I see as optimistic. They're predicting EBITDA positive by year end. Problem is they have a lot of debt... $2.5 Billion still in "senior notes". Not sure what else beyond that, but they accrued $139 Million in interest expense last qtr, so it's certainly substantial. They have almost $300 Million revenue/qtr. Take that out at 20% for 5 years and you're looking at about $750 Million revenue QUARTERLY for 2006. I would estimate core operating expense growth about 1/2 rev growth going by past #'s... that leads us to $530 Million. This is $220 Million EBITDA Quarterly. Now here's the problem: depreciation looks to be very substantial... probably $200 Million+. Then we have interest... if they continue retiring debt, then all will be well. Indeed, if they have $3 Billion debt, and continue buying at 43% of face value, then they could have it all retired by then. So, we're basically looking at about $80 Million in annual earnings for 2006, making very difficult assumptions. I originally didn't think they had cash (Yahoo!'s #'s are wrong), but indeed they do.... so they have hope at least. However, depreciation is very meaningful... and viewing their balance sheet would be even more meaningful in relation. In the end, it's all about the general market: where will WCG's technology and competition be 5 years from now?? THAT is my big problem w/ communication companies. At least computer companies can simply stop producing a Pentium 2, and ramp up to Pentium 4's. Communication companies, on the other hand, are taking on billions of debt and hope that their technology will last enough years to make it worthwhile... and they are basically stuck with that technology all they way through. Chances are that it will not last. But, I'll give them this: the competition is down substantially... very few companies are still making these massive networks. 2 years from now though?? Yeah... I wouldn't hold my breath for any communications company. I just think it is one of the worst business models one could have in this day and age. They're simply stepping stones for future technology... all the while screwing shareholders and themselves. I was amazed to see Weitz VALUE Fund investing heavily in this sector though... very bizarre. I think the guy is absolutely nuts, but he does have a very good record. His main point is that this is the time for consolidation in the sector, and on that point he may be right. I can't see any other hope for the sector than for buyouts to happen, expenses getting consolidated, and prices going up. Then again, who's willing to pay more for their cellphone than they already are?? I know I very much want to pay LESS... especially when my email is virtually free.
- Zen |
