Or Bob Gauld for that matter?

 

http://www.theglobeandmail.com/globe-investor/seeking-speculative-thrills/article2349528/

 

Worst move

 

Mr. Gauld readily admits he “fell in love” with the Yellow Media Inc. (YLO-T0.140.0053.85%)story, as well as the strong yield – around 12 per cent when he bought it two years back at $6.75. But the once blue-chip income trust has cratered, last closing at 14 cents. Mr. Gauld dumped most of his holding just before Christmas at just 19 cents, the only upside being he was able to use the loss to offset other taxable capital gains.

 

Five years from now:

Best Move

 

Glen Bradford readily admits that he “fell in love” with the Yellow Media Inc. ((YLO-T0.140.0053.85%) story, as well as the fact that they cut their yield, which I bought around 5 years back at $0.15. The blue chip-income trust had cratered and people came out of the woodwork with their public profession that the company was worth at most a penny and other people came out of the woodwork voting it their worst move, ever. At $0.15, Glen saw unbelievable upside and didn’t mind paying future taxable capital gains on the difference between the company’s intrinsic value and the price he paid. The company, when he took most of his position, was trading at a P/FCF of about 0.25, a P/S of less than 1 month’s sales, 1/40 of P/B, was able to retire debt at less than 50% of face value, had a debt/ebitda ratio of 2.5x, was solvent and meeting its debt obligations and would continue to meet them as they came due, had consensus price targets of around a penny, had debt ratings downgrades !

out the wazoo, panic selling out of the wazoo, and was in the midst of having all of the shorts covering their positions as the stock was in the process of bottoming.

 

Glen went out and wrote articles on seekingalpha and the motley fool and perpetually sent annoying email blasts to anyone who would lend him their eyes as they glanced over his thoughts on the company. Glen invested heavily after visiting their office in indy and sitting on personal conference calls with the company where he debunked his greatest fears.

 

Assuming that Mr. Gardner, the analyst with the price target of $0.01, is correct with his EBITDA assumptions for 2012 and 2013, this highly qualified CFA is predicting EBITDA close to $1.1B over the next 24 months. All for a price of around $50M. How exactly do you assign a price target to a company able to make $1.1B of EBITDA in your future time frame of the next two years a price target of $5M is beyond me, sir, especially with a net debt of $1.8B, Glen thought to himself. “That seems extremely serviceable.” $5M seems a bit ridiculous. That would be like me walking up to someone who makes $100,000 a year and who owes $250,000 and offering to buy their future income stream for $2000.

If you know anyone who will take this deal, do it. Dare to be rich. At present, at $0.13, the price to buy that future income stream is equivalently $26,000. That is still ridiculous.

Here is the payout schedule for C’s and D’s:

D
2012 – 4 1.725
2013 – 4 1.725
2014 – 4 1.725
2015 – 2 0.8625 + 25
Total Value on June 2015 $31.0375

C
2012 – 4 1.725
2013 – 4 1.725
2014 – 3 1.29375 + 25
Total Value on September 2014 $29.74375

With a price of $0.89 on the D’s, and a payout of $31.0375, I am getting an upside of 3387.35955%

In order to be a millionaire, you would need to own 32220 shares with this payout.

So the cost to be a millionaire at present assuming all of this goes through is $28,674.99

Dare to be rich. If you are curious about measuring the cost to be a millionaire at any price here is your calculation:

= (32220 / Current price) = Cost to be a millionaire.

So if the current price goes to $0.50, the cost to be a millionaire is $16,110.

If you go with A’s and assume conversion to common and assume that the company will eventually get a P/E of 6 and 700M shares fully diluted, you’re looking at $0.312 EPS and a price of $1.872.

The preferred A’s just traded at $0.75, which should convert at a par value of $25.27 which leads to not 12.5 but 12.635 exchange rate. which implies that the A’s are trading at a common conversion value of $0.0593589

Which, with an intrinsic value of $1.872 gives you an upside percent return of 3053.69% ex any dividends, but if they ever bring back the dividends that this bad boy had, I figure they can cut 2 cents of dividends per month, which would juice your return even further.

So, for every monthly dividend they bring back your adjusted return on the preferred A’s goes up 40%. So if they bring back a full year’s dividend payment by 2014, that’s another 480% return in perpetuity that you’re clocking with the A’s.

http://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=30724187&l=0&r=0&s=YLO&t=LIST

Folks,

I have been following Yellow Media on this board for over a year and have been a participant since August 2011.

In one of my early postings (Sep 25, 2011) I outlined my assessment of how Yellow had declined in value and discussed some of the factors I thought had contributed to the decline.

Here’s a link back to that post for anyone who wants to see it:

http://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=YLO&t=list&m=30220516&l=0&pd=0&r=0

Since that earlier posting there have been a lot of other changes. Here are a few highlights:

• Dividend was eliminated on common shares
• Dividend was eliminated on preferred shares
• CFO resigned
• Yellow sold LesPAC
• New lending agreement has become partially known
• Market cap dropped so much that it forced a reassessment of goodwill and that resulted in $2.9B goodwill impairment charge.

As of market close on February 25, the stock price was sitting at 0.135 in spite of the fact that all normal  indicators of value (as bradford86 and Lestat continue to point out) would suggest the stock is ridiculously undervalued.  There have been plenty of postings which suggest how unusual this is, like market cap is about half month of revenue. Additionally, with normalized earnings per share of 0.53 for 2011 then the P/E(normalized) ratio is 0.25 against an industry norm of approximately 10.2 (per RBC), Price/Book ratio is standing around 0.03  when the industry norm is around 1.7 (again RBC)

So exactly what factors are contributing to the current share price levels? IMO we have:

Shorts - With the shorting level somewhere around 45M (anyone have a more recent figure) there are clearly folks who have a vested interested in seeing the price stay where it is or go lower. I am not sure exactly what the shorts can do but if they are, for example, willing to put out lots of buy orders at 0.13 and lots of sell orders at 0.135 they can accumulate a lot of shares from folks who are just giving up on Yellow. The danger with this approach, from the shorts perspective, is that it must be closely watched because anyone who came along who wanted the shares could potentially accumulate quite a few before it could be stopped. Did this play into the reasoning for Yellow being denied permission to buyback any of its common shares in the current lending agreement? Clearly the shorts have a huge vested interest in keeping the price low. Who exactly are the big players that are shorting?

2011 Financials - With a loss of $5.88 per share for the year, most investors would look at that and dismiss this company as an investment opportunity. Without digging any deeper to see this was mostly about a goodwill write down and net earnings from continuing operations were 172.6M (Yellow News release Feb 9, 2012) there would be no reason to consider investing.

Business Model - The “print revenues are in decline” concern remains. So, yes, it isn’t going away in the near term future but it continues to create uncertainty to keep investors away. The threat of competition, however real, is also a factor that plays to real or perceived risk.

Confidence in the Management Team - Clearly, the management team has been wrong about a lot of things – too numerous to detail here. Whether they fell victim to a serious attack from the shorts that they didn’t know how to address doesn’t really matter. They gave their investors incorrect information (I am speaking from hindsight) on numerous occasions and that has greatly eroded shareholder confidence in their ability to perform effectively. I am a proponent to replacing Tellier because I don’t believe he has fulfilled his single most important duty as a CEO and that is to drive shareholder value. So, yes, he may be doing the right things now but I am not sure that it matters – the confidence is just not there. We need someone new, with undamaged credibility, who can rally the troops and stimulate interest in the investment community. This is a big ship and it needs a capable captain.

Weak Lending Agreement - Yellow allowing itself (that is, breaching covenants from previous lending agreements) to be in a position where the lenders could dictate any lending terms they wanted has clearly paralyzed Yellow. This is also a concern for future investors as it positions the lenders to pull Yellow’s strings and force them into default at almost any time they please if it seems advantageous. Yellow needs to mitigate this weakness and I hope some of the new blood on the Board of Directors can help to facilitate this.

—

There always seem to be more questions than answers.

The big one for me right now is what is Yellow doing with that war chest full of cash?

 

—————————

—————————

Look to the facts. A fact is a commonly held belief. Am I wrong?

According to the analysts, this company is wildly profitable.

According to the analysts, this company is worthless.

According to the analysts, the company will be able to meet its debt obligations.

One of these things is not like the others. One of these things doesn’t belong. Can you tell which thing is not like the others by the time we finish our song?

http://www.youtube.com/watch?v=FClGhto1vIg

So, it is a fact that the market is saying that this company is facing a 95% risk of bankruptcy in the next 12 months. Facts are not axioms. It used to be a fact that the world was flat, or that the sun revolved around the earth. It is also a fact that the price that something trades at is influenced by the people that show up at market on any particular day at any particular time and either want to buy or sell. In my opinion, everyone who owned a year ago needed to sell out, mostly driven by fear and misunderstanding.

Lestate even says:

“YLO is a value, yes, but let us never underestimate the human factor.”

http://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=30723334&l=0&r=0&s=YLO&t=LIST

The human factor has far more impact on price than it does on fundamentals, sirs. When you know something and have a high degree of confidence I really must point out that 10% is not enough. My level of confidence in Yellow Media and management is far higher than just a 10% position. I don’t care about the past much beyond how it allows me to intelligently predict and forecast the future. If you are honestly reading this and you find yourself wondering if management is in it for the shareholders, I can assure you that they are. This message board will be dust in the wind that powers my sail on a forward basis, but this is my plea to the people that read it. Look at the numbers, look at the facts. Look at how banks ACTUALLY make decisions as opposed to how they might make decisions if they were concerned about Yellow Media’s ability to pay at 2.5x Debt/Ebitda.

Frankly, I’m indifferent to what any of you actually decide to do. I’m going to do my thing and bet appropriately. To not own this indicates to me that you either:

1. Do not understand how to price companies using fundamental discounted cash flow analysis.

2. Are afraid of things that do not exist.

3. Let the past dictate your future.

I don’t know about you guys, but I wake up every single day and look at myself in the mirror and fully understand and comprehend that I am a product of all of my decisions past and present. I have spent countless hours studying this company and I very well could be wrong. I am a man that has priced over 10,000 companies in the past two years. I own Yellow Media. I stand by my purchase decision at present. I believe that this is the most undervalued opportunity that is scalable that I’ll be able to find in the next 2-3 years. Part of being undervalued is being misunderstood by “the masses.”

People that don’t know what they are doing are quick to cast their decision based on correlation as opposed to causation. A lower stock price is a source of great opportunity if the lower price is unsustainably low as I believe it to be here, in this case.

To those of you who are long and are licking your chops over the millions of dollars that you are about to make, I fully encourage you to contact me about future similar opportunities that come up and pass them my way for evaluation.

Hey Lestat,

I am an abrasive person and personality. Let’s do this.

I noticed that you changed your vote from Stay to Go for Tellier. That’s reasonable. Here is why I think you’re wrong.

 

1. It is in the company’s best interest and the shareholders’ best interest to send all prices of debt and equity lower in the short term because that will allow the company to kill debt at a faster rate with any given cash flow as well as allow the company to buy back shares at a lower rate. If you are in this for 5-10 years, you win.
2. It is not the job of the CEO to manage stock price and debt prices on a day-to-day basis. The stock market is volatile and unpredictable. Obviously the market is voting that Tellier is going into bankruptcy. A lot of this is likely due to the price chart and hopeless sellers, aka the sellers that look at the price, don’t care about the fundamentals, and then liquidate as they grit their teeth.
3. If Tellier comes out with a plan that is reasonable before they lock in prices to buyback their debt, the price to buy back their debt goes up. Thus, foreshadowing the move in anyway is disadvantageous for shareholders but is advantageous for daytraders.

 

So, let’s make a distinction here.. is he in it for shareholders or daytraders. All evidence points to me that he doesn’t give a shit about daytraders but there is still no significant evidence that he is royally trying to screw shareholders. As a shareholder, I believe that I have all of the information that I need.

 

1. The company is not a going concern.
2. The company is strongly cash flow positive and has told me that they believe that they can meet their debt obligations as they come due. I believe that they can re-upp the revolver when it comes due.
3. The company has brought on smart people who are experienced with troubled situations. This is a situation where there is a LOT of opportunity.
4. The rumors of CCAA are just that, rumors. Completely unfounded and you wouldn’t know much about them unless you read message boards on which they are the heat of unpractical discussions. CCAA enables the company to eyeball one creditor at a time and treat the others as unaffected parties by the way.
   1. no need to refinance
   2. out of court refinance
   3. cbca
   4. prepackage cbca/ccaa
   5. ccaa
   6. bankruptcy
   7. The valuation of the company is less than their monthly revenue.
   8. The company is trading at less than 1/10^th their book value.
   9. The company is trading at ridiculous P/E and P/FCF multiples.
   10. The company was able to draw out their entire revolver.
   11. The company can retire debt at a fraction of face value.
   12. The company can renegotiate their debt agreements so that they have more ability to act and take action and retire debt/preferreds/common stock/etc.

 

So, In summary, it is my opinion that your justification to have tellier removed as CEO is a function of your own personal fatigue. You’re probably frustrated with paper losses and losing scope of reality at this juncture. I can assure you that he is aware that he is working for the common shareholders best interest. IF he was lazy, he wouldn’t have brought in refinancing experts and he wouldn’t have fired the CFO that made the mistake last year. IF he was lazy, he would have already converted various debentures to common shares. IF he was misincentivized, he would be doing a lot of other silly things that I don’t see him doing.

 

These are my thoughts, they are subject to interpretation and personal bias. I am an owner because I fully expect to sell at higher than what I paid for every share I bought. Even at current prices I am not selling, I do not expect to sell at lower prices unless things change to make me question my intrinsic valuation of YLO. Pessimism is raining supreme. Can you deny that fact?

 

You have the right to disagree much like I have the right to change my opinion and not tell you or even lie about my opinion. This is just how I see it.

 

But, it is my opinion that your recent change in bias regarding Tellier Stay/Go is more based on personal fatigue and ignorance of the facts than anything else. Go on with your rebuttal.

Do Not Lose,

Mr. Bradford

That’s about all you need to know.

Monthly revenue = $1.2B / 12 = $100M revenue / month

Valuation at present is around $65M

Monthly free cash flow $20M.

 

Hi, my name is Glen Bradford. My favorite thing in life at present is when I find a value opportunity that becomes an even better value. I’ve recently highlighted my favorite investment at present here at the Motley Fool. It is called Yellow Media(NASDAQOTH: YLWPF.PK). I actually drove past their Indy office earlier today. This is an opportunity that is very misunderstood based on my analysis, which I will provide for you today in all of its glory. The first and most important part of this discussion is that yes, this is a phone book company. Yes, the price has dropped 97% in the last 12 months. Check out the chart! As you can see, the stock price has fallen through the floor and is virtually at all time lows. Hated, unloved, and ignored. That is the sentiment. I am saying that as of today’s prices, an investment in Yellow Media offers over 2000% upside. Some would call this a speculative investment. Call it what you will, but I encourage you to poke holes in my research and my investment hypothesis and if you are unable to do so I encourage you to take an ownership stake for fun and profit.

My Investment Thesis

My investment hypothesis is simple. Based on my cash flow analysis, I see no risk of default. CCAA is off the table because they will meet their debt obligations as they come due. The market is pricing in bankruptcy. I believe that markets are not always rational, much like I think that people are not always rational. I can see how people who have owned from much higher prices would liquidate on any news. Any news is bad news when you’ve lost 80%+. That, combined with the company fulfilling their fiduciary responsibility of cutting the preferred dividends, which according to me is the most advantageous thing to do for common shareholders if the company stock drops below $2, has caused a sell-off that I find ripe with opportunity. On their latest call, they announced that they figured out how to save $125M that I wasn’t expecting them to save in taxes in FY 2012. Not only that, but they beat their own expectations this last quarter as well as my own.

I encourage you to look at my cash flow analysis, and to look at their financials and ask yourself, when exactly are they going to default on their debt? Do you see this happening? If you don’t and you agree that they will make all of their obligations then you, my new friend, have found what I believe to be the most undervalued company in the world as of February 10th 2012.

The Fear: Will Prices Go Lower?

I hope so! I would love to see another 50% drop in price. A lower price to me is a lower cost basis. Instead of seeing 2000%+ upside I would see 4000%+ upside upon this sort of drop in price. If things get worse and my cash flow analysis proves to be faulty, obviously the intrinsic valuation of the company would go down. Want a list of reasons why people have been selling the past 6 months, start here.

Short Analysis

There is a huge short position. I’ve graphed this here. This to me implies that the shorts are greedy. Power to them. If they can get people to sell out lower than they bought in, driven by the panic and fear that seems to be driving this stock, that’s great for the shorts. At this point though, it appears that the shorts should be covering at these bargain bin prices. They are not. Maybe they’re right and I’m wrong. I have been wrong before. It’s not impossible for me to be wrong this time as well.

Positives in the last call

1. $125M Saved on Taxes.
2. Beat their own EBITDA Expectations.
3. Raising cash (Fulfilling their fiduciary responsibilities to common shareholders).

Why raising cash is advantageous?

Take a look at the fully diluted share count and the debentures. The debentures, if the company runs out of money, would be converted into over 1 Billion common shares at the present valuation. Thus, in light of this dilution, the company should prefer to withold dividends from the preferred shares, take out their full lines of credit, and maximize their cash on their balance sheet to make absolutely certain that they do not default on these debentures. That kind of dilution would be devastating and I think that the recent action acknowledges this and I think that it is not responsible to pay those dividends until the terms of the debentures are re-negotiated or the share price of commons goes above $2.

Combine this logic with the fact that their debt is trading at a fraction of face value. I believe at present, if they were able to buy back their debt at market prices as opposed to at par value, they could pay off 40% or so of their debt with their cash balance. That’s serious opportunity, and the company sees this and that’s why they are bringing in new board members that specialize in this. I’d be more than happy to assist with these decisions personally if called upon.

How I am playing it:

I don’t own the common. I don’t want to own the common when I can own Preferred Series 1 that I anticipate will be converted to common giving me a cost basis of 10 cents instead of the 15.5 cents that common is presently trading at. Mostly, I am buying Preferred Series 1, Preferred Series 2, Preferred Series 3, and Preferred Series 5. The dividends on these just got cut and the prices dropped huge! I love it. When I buy Preferred Series 5, I am buying $25 of Par value for around $1 as well as accruing a cumulative dividend yield of 172%. I know, it sounds absolutely ridiculous. The market is pricing in bankruptcy and the equity getting wiped out and as I mentioned earlier, my cash flow analysis just doesn’t see this being in line with the future reality of Yellow Media.

So there you have it. I wish that we could get lower prices so that I can make even more money. The net result of the last conference call was that my intrinsic valuation of the company went up, not down. Subsequently, the price has gone down significantly. When price goes down and the perceived worth goes up, I get greedy and buy. What would you have me do? If you’re interested in learning more, I advise you start here and here.

If you are looking to acquire a position, they have shares traded on the Toronto Exchange. You can open an account at Interactive Brokers and trade on that exchange after a currency conversion from USD to CAD on their platform. If you want to trade them from a US retail brokerage account, the tickers that you are interested in are:

• YLWPF – Common Shares
• YLWNF – Series 1 (A)
• YLWMF – Series 2 (B)
• YLPWF – Series 3 (C)
• YLMPF – Series 5 (D)

For me, my largest positions are in Series 1 and Series 5. If you want to see more analysis files, look here. That’s all for now, happy investing!

Below are the C & D payment schedules assuming that they turn their dividends back on and you get cashed out per the prospectus.

http://www.sedar.com/GetFile.do?lang=EN&docClass=9&issuerNo=00020539&fileName=/csfsprod/data100/filings/01474131/00000006/x%3A%5CASedar%5C2009%5CYPG%5CPrelim%5CFinal%5CProEng.pdf

D
2012 – 4 1.725
2013 – 4 1.725
2014 – 4 1.725
2015 – 2 0.8625 + 25
Total Value on June 2015 $31.0375

C
2012 – 4 1.725
2013 – 4 1.725
2014 – 3 1.29375 + 25
Total Value on September 2014 $29.74375

I’ve said it before. I’ll say it again. The time is right. The iron is hot.

I am certain that uncertainty will work for me.

Action	Quantity	Symbol	Unit Price	Principal Amount
Bought	600	YLWNF	$1.8953	$1,137.18

These are the shares you want to buy. Series 1 Preferred. If you can trade on the TSX, it is YLO-A or YLO.PR.A or some variation of that.

Best of luck, except I don’t believe in luck.

I was just thinking about how nervous I was that the global banking system is insolvent. This means, consequentially that there are two outcomes:

1. The end of global banking and a collapse back to some crap standard that basically is a standard that is proven to fail over time, aka the gold standard

2. Banks and governments and rich people effectively keep bailing each other out and occasionally let the biggest liars fail to lend to everyone else’s credibility. The credibility of the system is tied to everyone’s individual understanding that there is some level of fairness to it. Fact is, there isn’t. Fact is, I don’t care if it is fair or not and neither should you.

So, because all of the banks are insolvent, I understand all of the doom boom and gloomers, but I don’t think that they understand the incentives behind those who make and drive the decisiosn that guide what actually happens. Power to decide is a function of your wealth and your ability to persuade others which is a function of the rules that you lead them to believe that are fair.

The banking system will not collapse but we are in for some turbulence. Trading is going to be awesome, I love the volatility. Also, inflation is low at present because of all of the jobs that are being “lost” due to automation. If they were framed a little different, “Forced into early retirement” — the attitude that we’d all have would be a little better but that’s effectively what is happening here with social programs etc. You can earn a better retirement if you want to work, but you can effectively do nothing and continue to exist this way.

 

Cheers to insolvency!

from: http://whataboutmarx.blogspot.com/2012/01/citigroup-tells-it-like-it-is.html

 

http://www.theglobeandmail.com/globe-investor/yellow-media-to-close-canpages-division/article2321873/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Home&utm_content=2321873

 

yep. That’s what’s new. Still my largest position by a mile. The price is retarded.