Vonage(VG)

May 8. 2008

New quarter data analysis:

Facts:

1. Gross subscriber line 281,329. Net subscriber line additions 30,133.

2. Total subscriber 2.61m. Previous period end is 2.58m.

3. Monthly customer churn: Jan 2008: 3.6%. Feb: 3.2%. Mar: 3.1%.

3. Marking expense 60.9m. Marketing costs per gross subscriber line addition $216.47

4. Share outstanding 156m

5. Net lose 8.96m. $0.06 pre share.

Analysis:

1. It lost (281,329-30,133) = 251,196 user during this quarter. 9.7% of 2.58m user.

2. Real earning should added the cost to acquire new customer 30133x216.47 = 6.5m. Even adding this number to their income. They still lost money.

3. Originally their marking expense is a big issue. Now the churn rate is the biggest. It doesn't make sense to acquire a number of new customers while lost 89% of the number of existing customers at the same period.

August 26, 2009

Luckily I have sold shares of VG after holding it close to 2 years for a little profit. When I bought it I have convinced myself for several reasons:

1. Their user line worth a lot of money. Based on 2.5m user line. If each line worth $500(with net profit close $100 per line), then they worth $1.5B. Even if they go bankruptcy, they still be able sold each line for at least $200. That is still $500m.

My mistake on this point is that I totally ignored the churn rate. With a churn rate around 3% a month, they could lost 36% of their users in one year. It cost a lot of money to replace them.

2. They are actually making money if they don't spend that much on marketing.

Again this is about the 3% churn rate. It is unacceptable. VOIP is generally good, but Vonage is not. With $25 a month it is still too expensive for most people who want to switch to VOIP. The only valuable service they provided probably is the unlimited international calling they given out recently. This might attract some immigrants.

3. Two year ago, they got big problem on lawsuit. But I think their legal issue is temporary.

Actually I am correct on this issue. However, I totally bypassed their $183m debt issue which is due at end of 2008.

It doesn't fit to any value standard which I follow latterly. So hopefully I will never get involved in the same type of stock again. But most valuable lesson I learned is: if I don't like the business, don't buy it. That is I should be more "business like".

Logistec Corp.(TSE:LGT)

Google Finance

Apr.13, 2009
Year 2008 data

Logistic Company with long history.

Checklist
1. Major business.
(1) Marine Services: $188m revenue at 2008

(2) Environmental Services: $40m revenue at 2008 


2.Price/Book ratio.

Shares: 6.67m. Current price around $10. Book value $13.7.

3.Current ratio. Debt/Current Asset ratio. Inventory level.

Current asset $68.4m. Current Liability $32.1m. Total Debt $29.2m. From Dec.2006 to Dec.2008, added debt by around $20m. No Inventory.

4.P/E ratio.Deficit check.Revenue/price ratio.

Average earning per share for last 5 years around $1.5 per share. No deficit since go public(1969). 2008 Revenue $228m. Revenue/Price around 3.4.

5.Dividend.

Paid dividend since go public(1969). For last 5 years paid dividend from 0.23 to 0.32 per share. Paid special $1.50 dividend at 2007. Paid total $1.30 at 1984 and total $0.66 at 1996.

6.Cash flow

              2008    2007   2006    2005
FCF        6.4m   -6.0m   9m      11m

Dividend  2.2m   12.5m  1.8m   1.6m

FCF looks OK. However, looks like all the dividend paid in 2007 and 2008 are main cause of debt increase.

7.Grows related.

Fore past five years, revenue grew from 180m to 230m. Earning grew from $1.17 to $2.01.

8.Management compensation.

Top five officer:
         S+B      LTIP     Pension   Total

2008  $1.8m   $1.0m   $1.7m      $4.5m

2007  $1.7m   0          0             $1.7m

2006  $1.2m   $1.0m   0             $2.2m

Don't know why the pension is so big in 2008.

9.Industry comparison.

Based on 2006 data, it mentioned 0.2m TEU handling which is 15% of Montreal port.
                  2006      2007      2008

Vancouver  2.20m     2.49m    2.49m

Montreal    1.29m     1.36m    1.46m
Halifax       0.53m
Montreal Port terminals: Cast, Racine, Termont(Owned by Logistec), and Bikerdike.
Montreal Gateway Terminals(MGT): Owned by Morgan Stanley(80%) since 2007. It owns terminal Cast and Racine. Handling around 80%-90% of TEUs of Montreal port.
From Jan. 1, 2009 MGT reduce both port open hour for Truck service from 6:00-24:00 to 6:00-16:00.
From May. 4, 2009 MGT reduce Cast port open hour for Truck service from 6:00-16:00 to 8:00-16:00.

Port Metro Vancouver:


10.Buy back, insider holding and trading info.

               Total  Voting Right  Dividend    Other
Class A  3.80m    30                100%      Can be converted to class B at any time.

Class B  2.85m    1                  110%

Sumanic Investments Inc. 2,88m 75.9% of Class A. It is controlled by Suzanne Paquin(President)(1/3), Madeleine Paquin(CEO)(1/3), Nicole Paquin(VP)(1/3)

159585 Canada Inc. 1,27m 44.4% of Class B. It is controlled by Pierre Somers. He is not a director of the company.

John Springer(Director) 0.22m of Class A.

In 2007, the company buy back some shares at around $20 per share.

From 2008 to now, continue to buy back. in 2008 bought back 20,000 share. Average volume of the stock is pretty low.

11.Major events.
Nov. 2008, bought Sydney Coal Railway(SCR) from Quebec Railway Corporation(QRC) which it owns 16% share. Paid $11m in cash and also issued $9m 5% notes to QRC due at Oct. 2009. Get back $5.9m of notes at end of 2008. Balance is $3.1m.

Since the rest $3.1 will be paid this year. So roughly this investment is to convert the $9m invest of QRC + $11m cash to SCR( $1m cash + $3m good will + $16m Assets).

McCoy Corporation(TSE:MCB)

Google Finance

May 21, 2009

2008 and Q1 2009

1.Major Business.

(1)Drilling equipment: 60%. Percentage increased during the past five years.

(2)Truck & Trailer: 40%. Income down and are negative now.

Geographic: Canada 60%, U.S.A: 25%, International: 15%.

2.Price/Book ratio.

Shares: 26.5m. Recent price $1.00. Book value $1.70.

3.Current ratio. Debt/Current Asset ratio. Inventory level. Debt maturity and interest.

Current Asset: $49m. Current liability: $17.3m. Total debt: $7.9m. Inventory: $25m.

Debt: must pay $2m to $3m each year for next 3 years. Interest cost $0.8m per year.

4.P/E ratio.Deficit check.Revenue/price ratio.

Earning per share(2008-2004): (0.38+0.36+0.45+0.35+0.16)/5=$0.34.

2003: 0.05

2002: -0.17

2001: 0.02

Revenue around $170m. revenue/price = 6.4.

5.Dividend history.

1c in 2004, 3c in 2005, 4c in 2006, 8c in 2007, 12c in 2008. Now back to 1c per quarter.

6.Cash flow

FCF 2008-2004: $7.0m , $-16m, $-15m, $4m. -$8m

In 2007, it got $40m by offered new shares around $5 per share.

7.Grows related.

It acquired almost one business per year since 2004 and target to become $500m revenue in 2013. Seems not possible now.

8.Management. Employee numbers. Revenue/Employee.

SG&A increased a lot for the past several years. This includes new business acquired each year.

Employee around 676. Revenue/Employee around $250,000.

9.Management compensation. Options.

Top 5 officers: $1.7m and no options for 2008 compare $1.4m and some options in 2007.

10.Industry comparison.

1. Eckel Manufacturing: US company. Seems a major player focus on Hydraulic power tongs.

11.Buy back, insider holding and trading info.

By year end Dec. 2008. Bought back 1.4m share at price $1.65. Around 5% of total shares. No more buy back until Sept. 2009.

Insider control around $11m share which is 43%.

12.Major events.