Fire sale going on

[brewer12345]

Q2 results are out. Not exactly a beautiful piece of artwork, but this was kind of a throwaway quarter anyway, what with all of the merer & integration noise. I also think that HLYW used far less conservative accounting than MOVI, so some of Q2's results reflect further tightening up now that MOVI is in charge. Having said that, it looks like they did eke out a touch over $8 million in free cash flow for the quarter (excluding the purchase price of HLYW).

Based on what is in the PR and what BBI said earlier this week, it looks very much to me like most of the merger integration in the back office is done. I suspect that Q3 will be soft, but its not a big quarter for the industry anyway, and resumably mgmt will use the time to complete integration/optimization. The entire industry appears to be salivating at the prospects of the movies that will be released to rental in Q4. I suspect that MOV will be well positioned to capitalize on it in Q4 and Q1.

[JPatrick]

Quote:

Originally Posted by brewer12345 Q2 results are out.* Not exactly a beautiful piece of artwork, but this was kind of a throwaway quarter anyway, what with all of the merer & integration noise.* I also think that HLYW used far less conservative accounting than MOVI, so some of Q2's results reflect further tightening up now that MOVI is in charge.* Having said that, it looks like they did eke out a touch over $8 million in free cash flow for the quarter (excluding the purchase price of HLYW). Based on what is in the PR and what BBI said earlier this week, it looks very much to me like most of the merger integration in* the back office is done.* I suspect that Q3 will be soft, but its not a big quarter for the industry anyway, and resumably mgmt will use the time to complete integration/optimization.* The entire industry appears to be salivating at the prospects of the movies that will be released to rental in Q4.* I suspect that MOV will be well positioned to capitalize on it in Q4 and Q1.

MOVI is a textbook example of the perils of investing just before earnings in a market that expects perfection.*
For the traders there may be the fabeled "dead cat bounce" to play, but this is no place for serious money.
This stock is one of hundreds that fit the old saw:::
Got great future potential, but not worth a damn today.

[wildcat]

I would like to see DVD purchases. *Consumers have been buying DVDs on release and skipping rentals but if consumption slows (i.e. high gas prices and other) people may return to rentals. *Bodes well for small ticket entertainment. * *

Brew I think it is the 3 or 4 inning on the MOVI story and time is on its side. *Despite the small drop in price margin of safety is still high. *

[brewer12345]

Quote:

Originally Posted by wildcat I would like to see DVD purchases. *Consumers have been buying DVDs on release and skipping rentals but if consumption slows (i.e. high gas prices and other) people may return to rentals. *Bodes well for small ticket entertainment. * * Brew I think it is the 3 or 4 inning on the MOVI story and time is on its side. *Despite the small drop in price margin of safety is still high. *

I'm inclined to agree that the margin of safety is ample here. I have a long investment horizon and the stomach for volatility, so I could care less what the stock does in the next 6 months unless it is absurdly low or absurdly high. The business appears to be weathering a couple of crappy quarters, but is otherwise sound and fully capable of generating mounds of cash. In the meantime, the shorts will have their fun, but ultimately they have to cover. I expect MOVI to be a home run in the next few years.

[Nords]

Quote:

Originally Posted by brewer12345 Not exactly a beautiful piece of artwork...

... to put it mildly. Those schmucks seem to think Reg FD means that everyone should be surprised at the same time.

I used to feel this way about Nortel & Sun. Well, time to buy more!

[preben]

Down 7% or $350 as we speak! The pain.....

[brewer12345]

You pays your money and you takes your chances, I guess. This sort of thing is why I always say: do your own due diligence.

[wildcat]

Just one day my friends 8)

[vinhmen]

Wow, ugly. *Earnings missed completely and stock is down 9%. *

This quote by the CEO makes me suspicious:

"The company said its same-store revenue in both rural and urban markets declined more than expected due to what it termed "the worst box-office slump in more than two decades,"

The Hollywood box-office slump happening now is at *theaters*. *One of the reasons for this movie-going slump is the explosion in home theater technology, i.e., wide-screen TVs, surround sound systems, etc. *People enjoy simulating the theater environment at home. And what do people watch at ome? *Yep, rentals! *Based on this, you'd think a Hollywood box-office slump would be good for the industry! *

And think about how you go about renting. *I might decide on a Friday night, "I want to watch a movie at home", and then me and DW go to the video store to check out what's available. *Isn't that what most people do?

Bottom line - B&M video rental is not necessarily a place I'd want to be for the long-term. *

[brewer12345]

I listened to the call. *I have always been impressed with management: no nonsense, down to earth, and never get their heads turned away from the business by some newfangled business school notion. *This still holds, IMO.

They said that they simply think this is due to a boxoffice/rental release slump and expect the wave of big rreleases in Q4 and the new DVD format and game platform releases to drive business next year. *In the meantime, they are hunkering down, tending to business, and that's it. *The CEO expressed clear perplexity at BBI's actions over the past year and reiterated that they see the online rental thing as 5% of the market at most, and have no interest in it at this time. *Interestingly, they will be testing some DVD rental vending machines that can hold 1000 titles.

Bottom line: Looks like a cheap asset run by smart people. *I bought last year in the teens with the intention of holding for years. *There will no doubt be ups and downs in the short term, but I think this company is a winner over time.

[wildcat]

Quote:

This quote by the CEO makes me suspicious: "The company said its same-store revenue in both rural and urban markets declined more than expected due to what it termed "the worst box-office slump in more than two decades," The Hollywood box-office slump happening now is at *theaters*. One of the reasons for this movie-going slump is the explosion in home theater technology, i.e., wide-screen TVs, surround sound systems, etc. People enjoy simulating the theater environment at home. And what do people watch at ome? Yep, rentals! Based on this, you'd think a Hollywood box-office slump would be good for the industry!

Not necessarily. I go to the rental store and if I don't find anything interesting I don't rent. So technically it could leak down to rental business and be bad for the industry. The sector is not going to hit the ball out of the park but it will be stable/slow grower. Cash flow is solid so good chance for buybacks if management is smart. EPS growth prospects are fine IMHO even with slow growth. Looks like the aquisition cycle is over among the majors.

BBI is full of overpaid exceutives and is trying to recoup after Red's savy deal, or at least from Viacom's perspective.

Online rental again IMHO does not appeal to a large population and there is no real threat of it taking over the brick & mortar.

[brewer12345]

I think we are also talking about stuff on the margin. I mean, the movies that do the best at rental only gross $25 to $75 at box office, but what often drives traffic to the stores is the big headline stuff (StarWars 3, etc.). With a sloppy big-time film release schedule util Q4, traffic will likely remain soft. When there are big, exciting films released, the other stuff does well too, because people will often rent an "also-ran" at the same time or instead of a headlne film.

[MRGALT2U]

Quote:

Originally Posted by ben Down 7% or $350 as we speak! The pain.....*

I thought it was "Ze plane! Ze plane!" Surprised I had the herve
to post this. Got to go tend my lamas.

JG

[Nords]

Quote:

Originally Posted by ben Down 7% or $350 as we speak! The pain.....*

Happy Monday, everyone! Brewer, looks like Wall Street has been following up on your math.

I really need to go longboard shopping...

[brewer12345]

Beats the hell out of me why the market acts like this, BWDIK? This is why I try to focus on the business and just ignore the day to day stuff.

BTW, SPH is starting to look awfully attractive. Nice yield, too, especially if it gets to 30 or less.

[Nords]

Quote:

Originally Posted by brewer12345 BTW, SPH is starting to look awfully attractive.*

What are you using for a screen?

[brewer12345]

Quote:

Originally Posted by Nords What are you using for a screen?

Huh? You mean criteria, or some sort of formal mechanical thing?

I think SPH starts to look attractive at a yield around 8% because:

- I know and understand the business (used to own the stock)
- I think I understand the reason why it has sold off
- When I do a simple single stage DDM with a ~3.5% div. growth rate, 4.3% risk free rate, and some assumption about risk premium (3.7% isn't a bad start), I come up with a MUCH bigger number (~55) than the current stock price (~31)
- tax deferred yield is nice
- IMO, mgmt is reasonably good. Conservative, competent, but still willing to strike if they think they see a good opportunity (Agway Energy deal of a year or so ago).

[Nords]

Quote:

Originally Posted by brewer12345 Huh?* You mean criteria, or some sort of formal mechanical thing?

Yeah, I'm just wondering how a particular stock gets on your radar. Do you run a screening tool daily or work from what you encounter on the job or from what you read on the internet or in magazines?

[wildcat]

If I had to guess I would say Brew doesn't mess with screens too often. I bet he has an idea of what companies he would like to own and waits for the right price. Screens only tell you so much.

[brewer12345]

Yeah, wildcat is partially like. I also use screens to generate deas for further study (and to wait for my price). Sometimes I have to wait a long time. I really liked NLS in 99 and 00, but it was way too expensive. I bought it for peanuts in 2002.