Archive for September, 2010

KVHI: Huge contract

September 30, 2010 Leave a comment

KVH Industries today announced a 10-year contract with the US Coast Guard. The contract is the biggest in the company’s future, valued at $42M.

The winner of a full and open competitive procurement process, KVH’s TracPhone(R) V7 satellite communication system and the mini-VSAT Broadbandsm service becomes the U.S. Coast Guard’s Small Cutter Connectivity (SCC) Ku Band System and Air Time Support Services solution. The U.S. Coast Guard Telecommunications and Information Systems Command (TISCOM) will deploy it over a 3- to 5-year period aboard as many as 216 small cutters representing 16 different cutter classes. The contract, encompassing the shipboard hardware, airtime services, and support, is a 10-year Indefinite Delivery/Indefinite Quantity (IDIQ) Contract valued at approximately $42 million.

The contract is for installing as many as 216 TracPhone v7 systems. This is huge for the company in terms of recurring cash flow, signing up other companies, and future deployment of additional systems with the US Coast Guard.

This is just a beginning of what I expect to be just the beginning of major sales cycle for the company. With the company close to covering the entire globe, major upgrade in the connection speed, and the stamp of the US Coast Guard, the company’s sales pitch should get easier and stronger. I expect big sales growth for the company in next year.

Categories: Updates

Howard Marks: Margin for Error

September 28, 2010 Leave a comment

A good recent article, from the CFA Institute, on Howard Marks and Oaktree Capital Management.

Categories: Reading

ATPG: Monetization of Titan

September 27, 2010 4 comments

Today the company announced the event that shareholders of ATP had been waiting on. Devon Shire has listed the key points from the agreement to monetize Titan. This should take away some of the risks associated with the capital concerns for the company.

One of the disappointing news from today’s announcement was the second well at Telemark will take another 3-4 weeks to start producing. The management has been disastrous in being optimistic on the launch date for the second well and then continuously missing the deadline. I don’t understand why management doesn’t get conservative for once and just give a very conservative timeline that the company has a strong chance of achieving.

Categories: Updates

HNR: Potential sale of assets or company

September 27, 2010 Leave a comment

In the previous quarter, management had mentioned there were interests from third parties for company’s assets and for acquisition of the entire company. Today’s announcement by management shows that there has been an offer made by a third party.

Harvest Natural Resources, Inc. today announced that it has retained BofA Merrill Lynch to provide advisory services to assist the Company in exploring a broad range of strategic alternatives for enhancing shareholder value.  These alternatives could include, but are not limited to, certain extraordinary transactions, including, possibly, a sale of assets or a sale or merger of the Company.

Harvest President and Chief Executive Officer, James A. Edmiston, said:  “The decision to engage BofA Merrill Lynch reflects the Board and management’s careful consideration of Harvest’s current enterprise value as indicated by its stock price relative to our own internal valuation of the asset portfolio, the near and mid-term capital requirements of our business plan relative to our financial position, and preliminary expressions of interest received from third parties.  This initiative is designed to examine all possible alternatives to unlock the potential of our assets and maximize value to our shareholders.”

Although the company did not mention the details of the third party interests, my take from the language is that the company has received a low ball offer to acquire the entire company. Management is now going to look to get a offer close to the company’s internal valuation, I think this is in the $15-20/share range.

Also, in today’s 8K the company mentioned that the reserves will be increased substantially with the coming months.

Edmiston continued:  “Since the contract conversion in Venezuela at year-end 2007, Petrodelta’s production growth and the potential of the Temblador and El Salto fields have been clearly demonstrated.  We have recorded significant reserve growth over that short period, primarily due to the outstanding results of the initial drilling in El Salto.  It is anticipated that our interim reserve report, due to be released in early October, will continue to build on that trend. Additionally, our Antelope project in Utah, beginning with the successful Monument Butte northern extension and followed by our Bar F discovery, has positioned the Company for a sustained oil appraisal and exploitation project on our extensive acreage position.

This increase in reserves should substantially up any acquisition offer for the company. The timing of hiring Merrill Lynch and the update on the reserves in early October leads me to believe we could see a transaction happen very quickly.

Categories: Updates

Weekend reading

September 24, 2010 Leave a comment

How the Tea Party organizes without leaders: An interesting study of how a group of individuals with a shared belief are challenging established organizations.

Land of the free, home of the tightwad: How the credit crisis is leaving a long impression on the US consumer spending

The Gillette Razors and Blade Myth: What you think about the Gillette’s success with the razor and blade model might not be true.

An Interview with Eric Sprott: The legendary fund manager, Eric Sprott, discusses the current market condition and his take on commodities.

Benjamin Franklin on American Happiness: Franklin’s take on how people can find happiness in the American society.

Categories: Reading

YNG: Huge discount to cash flow generation

September 23, 2010 Leave a comment

Yukon-Nevada has been an extremely good buy for us. One of the main reasons for the buy was the huge discount to cash flow. The company’s second half of 2010 cash flow is very good, but the 2011 cash flow is what is mind boggling. One of the analyst for Bryon Capital Markets recently talked about the 2011 cash flow projections:

Why we like Yukon Nevada is not only for its production growth and its development project in the pipeline, but also because of the fact that it’s still got a table-pounding value proposition. Our 2011 production forecast, 237,000 ounces, produces a cash flow estimate of $0.16 a share. That puts the forward price multiple of our estimated cash flow at a little over three times, a level normally not seen by anyone generating such significant profitable gold production.

Based on my buy prices, I got in at less than 2x 2011 cash flow estimates. It is absurd that a gold producer is selling for such low multiples. Even with the recent increase in the share prices, the company still sells at a huge discount. I see 2011 as the big break-out year for the company.

Categories: Updates

D3 Funds’ Letter to Radisys

September 21, 2010 Leave a comment

This is an excellent letter from a fund manager to management of a company on how to raise shareholder value. Also, a company to keep an eye on incase the shares plummet.

Categories: Reading