Hi $Value$,
Schoolwork (thou art damned) got in the way so I started looking at TLRD today.
The large debt load is manageable. I fully supported the dividend cut as it would allow the company to focus on allocating that capital to debt reduction. Also, the company generated approx. $630 Million in FCF from 2016-2018 and I expect them to generate at least $500 Million in FCF from 2019-2022 which would allow them to pay off the 2022 senior notes AND leave some cash for share buybacks and further debt reduction
I like the way you're thinking! I was thinking of checking the debt documents of debentures TLRD has outstanding in order to estimate how much FCF has to be generated in order to pay it off completely (interest and everything), hence how long it will take to do that, assuming some substantial decrease of FCF (right now I don't know what the rate of decrease should be). I want to check how bad FCF has to drop so as to make repayment of the debentures impossible (assuming they don't have some revolving credit facility going). After this period, whatever FCF is still being generated is pure profit for the shareholder. So, using your calculation, this should be already after 2022. As almost all value of a business depends of discounted cash flows after the first few years the great majority of value is still there for grasps, i.e., if there is still some decent FCF after 2022! This value is of course greatly amplified in case substantial buybacks are completed with spare FCF while the shares are undervalued, i.e. if they are undervalue in the first place, which is the thing I want to check.
I will keep you updated!
Nya |
