Wednesday, January 25, 2012

CBU/Edgen Murray/Lottery Ticket Purchases: 100 DRAD at $1.9 & 40 FOE at $6.32

Edgen Group has filed a registration statement with the SEC to sell common stock.  Press Release of Edgen Group Inc. dated December 29, 2011  BusinessWeek I am not seen yet an actual offering. Form S-1

I own 1 senior secured bond maturing in 2015 issued by the Edgen Murray Corporation Bought 1 Edgen Murray 12.25% Senior Secured Bond Maturing 2015 (March 2011). This firm has a convoluted ownership structure as shown at page 5 of that bond prospectus.

If the IPO is successful then there will be a reorganization of that structure into something more convoluted, as shown at page 8 of the registration statement. Form S-1 The company states that it plans to use the proceeds of an IPO to purchase additional limited partnership interests in Edgen Murray II LP and to redeem a portion of the senior secured notes. Apparently, the purchase of additional units in EM II will be used to repay certain amounts under a term loan and revolving credit facility for a company called Bourland & Leverich Holdings which will become a wholly owned subsidiary of EM II after the reorganization. Since EM II and any subsidiary that is at least 80% owned by it guarantee  the senior secured note issued by Edgen Murray Corporation,  I would view the pay down of debt to be a positive.  In sum, I would hope for a successful stock offering since debt will be reduced by equity.

The company filed an IPO registration in 2008 and subsequently withdrew it.

1. Bought 100 DRAD at $1.8949-LT Last Friday (Lottery Ticket Basket Strategy)(see Disclaimer): This is my second entry into DRAD as a LT selection. My prior round trip consisted of a 100 share buy at $1.24 and a sell at $2.14. Those shares were sold in July 2009. After that sale, the shares did continue to rise some, hitting a high of $2.75 in September 2009, before declining again to $1.78 last August. DRAD Interactive Chart 

There are a few statistics that remain interesting to me. The price to sales ratio is at .67 and the price to book ratio is at .86. The company also has $1.68 a share in cash with no long term debt. DRAD Key Statistics At the $1.89 price, the market cap of the company is covered almost entirely by its cash. 

For the Q/E 9/2011, the company did manage a $99,000 profit or 1 cent per share on $13.439 million in revenues. 

While it is just my opinion, this company is just too small to remain independent and really needs to be absorbed by a larger company. 

Digirad Profile Page at Reuters
Digirad Key Developments Page at Reuters

Digirad closed yesterday at $1.92.

2. Bought 40 FOE at $6.32-LT Last Friday (Lottery Ticket Basket Strategy)(see Disclaimer): This is another statistical selection. According to FOE Key Statistics, price to book is .86; price to sales is .24; the forward P/E is 8.9; and the five year estimate P.E.G. is .71. 

Another characteristic of a LT selection is a smashed stock price. Ferro was trading at over $23 in 2008. The stock then went into a tailspin, hitting $1 by March 2009, and then spurted up to over $16 by March 2011 before entering into another descent. FOE Interactive Chart On a more positive note, the stock did recently cross its 50 day SMA to the upside. 

Ferro Profile page at Reuters
Ferro Key Developments page at Reuters

When Ferro issued its last quarterly report, it did guide down its 2011 earnings and revenue estimates. SEC Filed Press The main culprits behind the shortfall were customers working down their inventories and a downturn in Ferro's solar paste business.

I read the latest Credit Suisse report on Ferro. That report is available to Charles Schwab customers. CS has FOE rated at outperform with a $10 price target.

Ferro closed yesterday at $6.29, down 13 cents for the day.

3. Community Bank System (own: REGIONAL BANK BASKET STRATEGY): CBU reported net income for the 4th quarter of 19 million or 51 cents per share, up from 47 cents per diluted share in the year ago quarter.  SEC Filed Press Release The consensus estimate was for 53 cents a share.

As of 12/31/2011, the efficiency ratio was at 57.2%; the net interest margin was 4.06%; NPAs to total assets stood at just .36% (NPLs at 1.36%); and the allowance for loan losses as a percentage of NPLs was 204%.

CBU also recently announced that it would purchase 19 HSBC branches in New York. Three of those branches will be purchased from First Niagara and the remainder directly from HSBC. This is a far more sensible and prudent expansion than the one recently completed by First Niagara. First Niagara: Just Another Incompetent Bank Board of Directors

CBU plans to sell approximately $50 million in common stock to finance this purchase. The company priced 1.852 million shares eat $27, with an over-allotment option of 277,800 shares.  Pricing of $50 Million Common Stock Offering

The CBU Board also declared the regular quarterly dividend of 26 cents, compared to the 50% slash made by the First Niagara Board. First Niagara Dividend Slash

I currently own 50 shares of CBU. Bought 50 CBU @ 23.18

Community Bank System closed at $28.15 yesterday. The dividend yield at that price according to Marketwatch is 3.69%.

I would note that the Board of First Niagara declared a 8 cent quarterly dividend yesterday, a 50% reduction from the prior 16 cent rate. FNFG did not remind its shareholders of the recent slash slash in the press release announcing this reduced dividend. FNFG Press Release

4. F.N.B. (own: REGIONAL BANK BASKET STRATEGY): F.N.B. reported net income of $23.7 million, or 19 cents per share, for the 2011 4th quarter. This was unchanged from the year ago quarter. The consensus estimate was for 19 cents.

As of 12/31/2011, the efficiency ratio was 59.27%; the net interest margin was 3.79%; NPLs to total loans stood at 1.55%; allowance for loan losses to NPLs stood at 94.76%; and the tangible equity to tangible assets ratio was 6.65%.

After selling my highest cost FNB shares, I am left with 50 shares purchased at $7.8

5. Trustco (TRST) (own: REGIONAL BANK BASKET STRATEGY): TrustCo reported net income of 8.7 million for the 4th quarter, or $.093 per share. As of 12/31/2011, the efficiency ratio was 46.68%; the net interest margin was 3.35%; the allowance for loan losses to NPLs was 99.9%; NPAs to total assets was 1.27%; and the tangible equity ratio was 7.97%

I apparently own more TRST shares than I have been including in my regional bank table. I noticed the other day some shares in an infrequently visited satellite taxable account, bought no doubt by gremlins. I own 420 shares bought in the market plus reinvested dividends. 

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