Earnings season updates (AWDR.OL, PVCS.L, CNRD, ASFI)

It’s earnings season again, and that’s always an interesting time for an investor since it’s the moment of truth: is your thesis playing out as expected, or is reality throwing a wrench in the wheels?

Awilco Drilling

Awilco reported results for the second quarter earlier today, and they are excellent. Revenue was 59.5 million thanks to slightly higher contract rates and a revenue efficiency of 97.3%. The company also announced a second quarterly dividend of 1 USD, giving the company a dividend yield of more than 20%. Other good news came earlier this week when the company announced that it signed a 3 year contract for the lease of WilPhoenix, increasing the value of the backlog with 424 million to 860 million. If the stock price stays at the current levels I’m probably going to increase my position slightly.

PV Crystalox Solar

Crystalox Solar also reported today, and the results for the first six months of 2013 seems to be alright. The business is in trouble, but the company does have a lot of cash and it anticipated that it should be roughly cashflow break-even in 2013 after restructuring. Cash from operations before changes in working capital is slightly positive while reported earnings are slightly negative. So that look good to me. The return of cash to shareholders is taking more time than I expected, but according to the company that should happen sometime later this year.

Conrad Industries

Conrad Industries reported yesterday and the results were simply excellent, and it appears that the company is on track to earn a record amount in 2013. The backlog is up 218% compared to previous year and the new construction site that was build on the land adjoining the Conrad Deepwater facility was taken in use this June. A slight negative is that it seems that the BP claim is being delayed, although that’s not a surprise given the fraud BP has to battle.

Asta Funding

ASFI reported results a week ago, and the most interesting development is the settlement with the Bank of Montreal on the non-recourse debt that backs the Seneca portfolio. Asta Funding has prepaid $15 million on the loan, and the next $15 million in of collections will also go to the bank. After this Asta Funding can recover the $15 million prepayment, and further collections will be split 70/30 between ASFI and the bank while the interest rate on the loan has also been lowered. Seems like there is a bit of value after all in the Seneca portfolio for Asta Funding, although it’s not going to be a lot.


Author is long AWDR.OL, PVCS.L, CNRD and ASFI

18 thoughts on “Earnings season updates (AWDR.OL, PVCS.L, CNRD, ASFI)

  1. pietje

    Also, I am thinking about buying more CNRD. Still seems very cheap. On the other hand, this might be a cyclical high. What’s your take on this?

    1. Alpha Vulture Post author

      I don’t know exactly where we are in the cycle, but business is really good and I don’t expect that it’s going to be this good every year. But it looks good for the foreseeable future, and you are not paying a high multiple today for the earnings especially if you take in account the big cash position. But Conrad is certainly not as cheap as it was a year ago.

  2. Floris

    One should obviously avoid using peak multiples to value cyclical businesses, but it looks like there is a structural demand shift for Conrad that will help push revenues (much) higher. The lack of a large pipeline to accomodate the oil shale boom is driving demand for barges. This could imply tailwinds in terms of revenue for 2-3 years. Given the strong operational execution of management, the CAPEX for ’13 is likely to be largely growth CAPEX.

    I agree that it’s difficult to forecast, but there could be a strong growth runway at high returns on capital for Conrad. It’s not that cheap anymore but, if Conrad can capitalize on its growth runway there still a lot of value. Its usually difficult to predict the length of the growth runway, but in this case I feel its a high probability scenario. Unless it rockets up to $40 in no time, im holding on to my full position.



    1. Alpha Vulture Post author

      Yeah around $40 dollar today I would probably also start thinking about selling. Probably not going to happen, and sticking around for the ride the next couple of years while they are hopefully going to increase intrinsic value significantly isn’t a bad plan imo.

  3. Arvosijoittaja

    The Bank of Montreal settlement looks like an amazing magic trick, which raised the value of the Great Seneca portfolio from zero to considerably more. My bet is that Asta will be able to collect much more than the 15 MUSD that they’ve now invested. After all, there is nobody, who has a better understanding of the real value of Great Seneca than Asta. Furthermore, Asta did not have any pressure to make any kind of deal and certainly no reason to accept anything that isn’t profitable.

    1. Alpha Vulture Post author

      I don’t think it will be very material to the value of the company. They collect a bit more than $3 million per quarter from the Seneca portfolio and there is logically a downward trajectory on those collections. So it will take roughly a year to pay the bank 12 million, then more than a year to recover their own 15 million. So doubt that the funds they have invested today will generate a very high return.

      1. Arvosijoittaja

        Assuming that Asta is able to collect the remaining 28 MUSD in 6 years would give an IRR of 24%, if the cash flows look like this (-15 0 12 6 6 4). They are only earning 8% with Pegasus and from the cash probably less than 1.5%.

        Nobody asked in the earning call do they get zero based revenue from Great Seneca:)

  4. Josh

    The ASFI deal did not make sense to me. I am still holding the stock but I thought it was slightly bearish in that they get cash flows much later. I might not be understanding it correctly as I have not followed the company as probably most people. With the lowered interest rate, maybe it is neutral. I did think that the purchase of the new 53MM portfolio for 3.3MM was bullish and offset any negative.

    On CNRD, the stock still looks very cheap but will echo the other comments that it is tough to figure out what is economic cycle earnings and what is peak earnings. With all the CapEx being spent, I think it is possible that new economic cycle earnings are $4 where in the past that was probably peak. I am using $3 as economic cycle and along with the cash that gets its over $40. I have started to trim my position, (not on valuation) but from a portfolio management/risk perspective as the position has gotten too big.

    1. Alpha Vulture Post author

      I think ASFI is getting the cashflow earlier instead later with the new deal. With the previous deal they either had to pay back the complete loan to the bank first (which maybe would never happen) or they would have to default on loan and give the collateral to the bank creating a zero. The bank probably didn’t want to own the collateral and collect on the underlying receivables themselves, so we got a new deal that also gives ASFI a piece of the pie.

    1. Alpha Vulture Post author

      Shouldn’t it be a possible positive? If the lawsuit has merit and ASFI officers and directors breached their fiduciary duty it should be good if something is done, right? But I doubt that the suit has merit.

  5. Josh

    Under Note 16, in their 10-Q from 8/9/2013. I had only read the press release.

    “On August 7, 2013, Palisades XVI, a 100% owned bankruptcy remote subsidiary, entered into a Settlement Agreement and Omnibus Amendment (“Settlement Agreement”) with BMO as an amendment to the Receivables Financing Agreement. In consideration for a $15 million prepayment funded by the Company, BMO has agreed to significantly reduce minimum monthly collection requirements and the interest rate. If and when BMO receives the next $15 million of collections from the Portfolio Purchase, less certain credits for payments made prior to the consummation of the Settlement Agreement, the Company is entitled to recover from future net collections the $15 million prepayment that it funded. Thereafter, BMO will have the right to receive 30% of future net collections. Palisades XVI was in technical violation of the borrowing base covenant at June 30, 2013. The covenant was eliminated entirely from the Settlement Agreement. ”

    So once they collect 30 million of the non-recourse debt, BMO will receive 30% which will be used to pay the remaining balance. If that is the case, then ASFI does start receiving cash earlier vs waiting until the entire amount is paid off. Of course, BMO will receive 30% forever vs until the debt was paid off. Am I reading this correctly?


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