TransGlobe Energy: this company is silly

The bulk of TransGlobe’s operation is in Egypt, where all oil production goes through the Egyptian General Petroleum Corporation (“EGPC”).  The problem is that the EGPC has not been paying oil companies on time and owes massive debts.  At YE2012 TransGlobe had $221M in accounts receivables (the majority of it is due from the EGPC).  At this point, some common sense should kick in.  Egypt is not a place where you want to do business.  The government will likely keep most of the oil profits… if not all of the profits.  Despite the obvious, TransGlobe continues to expand heavily in Egypt.

*Disclosure:  No position in TGA.  I have no intention of shorting it.

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Altisource Q3 2013 update: they are shooting for the stars

Altisource continues to take on more debt to fuel its growth.  $70M was used to buy Equator, a company that makes software for mortgage servicing companies.  (Equator competes with Altisource’s REALServicing platform and Altisource’s Hubzu.)  Equator’s sellers are eligible for up to another $80M in earn-outs in the future.  Altisource also previously purchased mortgage servicing businesses from Ocwen.  On top of that, Altisource has been using debt proceeds to repurchase shares. I believe that the interest rate on the debt (5.75%+) is higher than the earnings yield (~3.5%) on Altisource stock.  The repurchases will only work if Altisource continues to grow its earnings.

Canada Lithium update: the end may be near

I’ve previously thought that Canada Lithium’s mine would be extremely uneconomic.  It looks like the thesis is playing out.  The company is desperately raising capital to shore up its working capital.  It hasn’t been able to generate cash flow from the mine yet, which raises doubt about the company as a going concern.  I’ve quoted the company’s financial statements below and added my own emphasis:

The Company has secured off – take partners in major Asian markets, but has not generated revenue or cash flows from its operations. The Company has limited financial resources and no current source of recurring revenue and continues to rely on the issuance of shares, debt or other sources of financing to generate the funds required to develop the Québec Lithium Project, for corporate expenditures, and to satisfy debt obligations as they fall due.

Due diligence

Here are places I look for information when researching a stock.  There is a lot of useful information online that you won’t find in the 10-Ks and other documents filed with regulators.

Crocs Q3 2013 earnings: smoke and mirrors

Crocs’ latest earnings release is titled: “Crocs Inc. Reports Third Quarter Financial Results and Announces 15 Million Share Increase in Share Repurchase Authorization“.  The title clearly highlights the increase in the share repurchase authorization.  However, Crocs did not repurchase any shares in the last quarter!  The press release is trying to trick people into thinking that Crocs will aggressively buy back more shares, which is unlikely.  The intentionally misleading press release is not a sign of a CEO who is honest with shareholders.

My investing mistakes and lessons that I’ve learned

This is a list of the most important things that I’ve discovered.  Sometimes I have learned these things the hard way.

MTY Food Group (MTY.TO): Fast food, faster growth

MTY Food Group is a collection of fast food franchises.  A large part of its growth has come from buying second-rate and third-rate food franchises.  MTY is a very good operator as purchased concepts have generally become much more profitable and have grown into much larger franchises since being bought.  The company’s CEO and founder, Stanley Ma, has been referred to as “the king of the food courts”.

Return on equity: around 22.75%.  (The company has virtually no debt.)
Growth in book value from 1996 to 2012:  21.5%/year.
Growth in share price from 2003 to today:  Over 100X.  (Yes, over one hundred times!)

*Disclosure:  Long 1 share as a tracking position.