Google Finance
SEDAR Filing
July 26, 2012
2011 Data
All data is for FPLP, which FPI held 49% interest of it.
Check list:
1.Major Business.
Newspapers: Winnipeg Free Press, Brandon Sun,etc. Derksen Printing.
Segments: as 2010, Ads: 67%, Circulation: 26%, Printing: 3%. Digital: 2%.
Seasonality: Fourth quarter the best, First quarter the weakest.
2.Balance sheet.
Recent Price: $4.00, Tangible book value: <$0: , Share outstanding: $14m, Market Cap: $56m.
Debt: $49m .
3.Credit facility.
at June 2012, $50 with HSBC, Banker's acceptance rates + 1.75%-2.75%. $48.3m outstanding. $1m principle payment/year. Expire at Jan. 31, 2016
4.Financial data by years.
| 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 111 | 110 | 114 | 121 | 126 | 122 | ||||
| Earning | 16.2 | 16.0 | 7.2 | 8.1 | 13.4 | 9.1 | ||||
| CF-WC | 19.5 | 21.4 | 12.6 | 13.4 | 18.6 | 15 | ||||
| CAPX | 3.7 | 0.5 | 0.5 | 2.0 | 2.0 | 1.5 | ||||
| Cash | 14.3 | 11.5 | 9.2 | 7.8 | 9.9 | 3.7 | ||||
| Debt | 50.3 | 55.2 | 60 | 116* | 115.7 | 119.7 | ||||
| Dividend | 10.1 | 10.8 | 9.5? | 11.8? | 12.1? | 11.5? |
5.Cost structure
Leasing obligations. Flexible cost structure or fixed cost structure? Cost controls.
6.Insider holding, options, Insider trading info, share buy back.
CanStar: 7m shares, 51%. controlled by Ronald Stern.
FPI: 6.9m shares, 49%.
4065565 Canada Inc. 1.67m shares of FPI. 24.2% of FPI. also controlled by Ronald Stern.
7.Management compensation.
Ronald Stern (CEO): $0.
Other 4 officers: around $1m/year for the past 3 years.
8.Employee numbers. Revenue/Employee. Compensation/Employee.
at 2011, 442. Including 362 unionized worker. Oct. 2002: strike for 9 days. Oct. 2008: strike for 16 days.
Current contract is up for renew at June 30, 2013
9.Industry comparison.
At Winnipeg, adult reading rate: 39%, Compete with Winnipeg Sun (19%), Global Mail (4%).
10.Auditor
Better be among the big four.
11.Major events.
Business acquisition, law suit etc.
12.Comments.
Negative Side:
(1) Newspaper circulation is in steady decrease.
(2) Union worker strike.
(3) Pension plan underfunding.
(4) Dividend might decease.
(5) No tangible book value.
Positive Side:
(1) Decent FCF ( > 20% of Market Cap). Conservative CAPX.
(2) High dividend rate( >15%).
(3) Ronald Stern has a big portion and don't take salary. Other management were paid not much.
Updated Dec. 17, 2012
Close my position at small gains. The company is doing OK now. The management is capable and well ding good in near term and will keep cost low. I expect next years dividend will be $0.48 per/share. However, if we think about 5 or 10 years later. There is much uncertainty ahead for the company. With more likely go downward. So it is better not to touch those stocks.
Dec. 16, 2014
Q3 2014 Data
Recent price $2.56, Tangible book value still < 0.
(1) The stock is recently down due to news release that starting Q4 2014, dividend will be cut to $0.08/quarter. Which make future yield around 12% based on current price. For past 3 years, dividend is $0.60/year.
(2) The company is doing a little better than I expected. While revenue is down, its EBITDA remains at $20m level. It continued paying $0.60/year dividend until this quarter. However, I estimate 2014's EBITDA number would decrease to around $17m.
(3) The maintenance CapX is about $1m/year which is $3m lower than depreciation expense.
(4) In 2010, it converted from income fund to a corporation. Thus the subordinate notes converted to common shares.
(5) In past 10 year, it had pay out pretax income of $115m. While equity changed very little. It is quite consistent with the $11.2m/year income. There is also $23m increase in net cash position. Which is caused by $3m deference mentioned above and also some pension over contribution as well.
(6) In recent 3 years, it paid around $3.5m/year in tax
(7) Using $17m EBITDA, $2m interest expense, $1m CapX, $3m in tax. It would generate $11m in cash. Dividend is around $4.5m/year. That would give it around another $6m in cash to pay debt or do other stuff.
(8) Current net debt is around $32m. Added current market cap $36m, its EV is less than $70m. While its earning before interest payment is close to $13m/year.
(9) In latest 3 years, it contributed a lot more than average in pension plan. It states that its because of discount rate change. Current fair value almost 5 times of 10 years before and employee number actually decreased. I feel there is some value exist in the pension funding.
(10) In my opinion, this is much attractive price than $4.00 which is 2 years ago. The underline business wasn't that getting that bad, but the price dropped by 40% . Off course it is related to the dividend cut, but all the money saved still goes to stockholder. It might pay down the debt, or invest in new business. The management are quite decent and I think they would do a proper job. The major risk is still the down of the whole newspaper industry. But I think it will still be profitable for many years to go. Eventually it might switch to another business. Only if it get worse too quickly which should keep an eye on.
Update
August 17, 2015
Q2 2015 Data
Current Price $0.7
(1) On Q2 2015 release, the company cut dividend totally. 2Q 2015 EBIDTA is $6.9m compare to $7.9 in same period of 2014. CapX $0.5m. Interest expense $0.8.
(2) The company does get worse than I expected. Last year it actually generated around $18m in EBIDTA. This year, it might just generate $12 to $14 in EBIDTA or even less. So my $17m EBIDTA estimate is not achievable anymore. One of the reason is the customer continue switch to digital advertising, second reason is local economy is down which make advertisement suffers.
(3) The company paid down debt to $39m. Net debt now is $29m. If using $10m in EBIDTA, $1m in CapX, $1.6m in interest expense, $2m in tax. It still can generate over $5 in annual cash. I think the risk of a bankruptcy is low unless the business is getting really bad.
(4) Overall, it is sure a mistake to get into this stock, the lesson I learned is that swimming against the current is really hard. When get into a industry that is doomed, we must be extra careful. Although there always will be newspapers, it doesn't means this company will survive. The company is lack of a sound digital strategy which is big concern for me. Unfortunately I just ignored it.
(5) However, when compare to $5m in real income to just a $10m in total market Cap. Current price is more a reaction of dividend cut than the real business result. I do have a feeling that the business it not that bad. But again it remains to see. Should monitor it quarter by quarter closely.
Update
Nov. 16, 2015
Q3 2015 Data
Current price $0.65.
(1) First 3Q EBIDTA is $9.4m. Net debt is still $29m.
Mar. 10, 2016
Q4 2015 Data
Current price $0.45.
(1)Full year EBIDTA is $13.6m. Net debt is around $28m. Pension asset value is $41m at year end. Pension contribution is $4m at 2015. Pension discount rate is 4.05% compare to 4.9% year ago.
