Telit Communications Share Discussion Threads

[youcancallmeal] 18/11/2015 17:26

Buffy, funnily enough I kept reposting because people kept replying, just as you did, and this is called a discussion board, which implies more than writing one post does it not? Interesting behaviour on this and other websites that people often write messages such as yours when someone new posts something negative yet not when a newcomer posts something positive.

I have raised a fact (working capital loans $10m, that are usually used by small companies with cashflow problems, despite there being $36m cash in the bank) and said that it is worth investigation in my opinion. All you've done is make a load of spurious and unfounded assumptions about me.

I don't understand what the issue is. If my points are irrelevant you can ignore them, if they are wrong you can rebut them. But nobody has yet addressed my main point, they skirt around the edges or play the man not the ball, like you are. You talk about taking cheap money but yet again ignore the $10m in short-term loans. You know as well as anyone that short-term usually means high interest, and Telit are not helping themselves or investors by not revealing the interest rates of those $10m loans.

I note the fact that in your spurious assumption-filled post you ignored that I am a qualified accountant and have led software development projects for an Internet of Things company (as I've mentioned previously), two elements of experience that make me more qualified to speak on this issue than some others. So you ignore that and create a persona for me with no evidence, based on things that suit your agenda.

You say you'll have the last laugh. Well seeing as I've said several times I wish people good luck then I'll be laughing with you. I don't wish people harm just because I disagree with them.

[buffythebuffoon] 18/11/2015 15:15

youcancallmeal,

People do join all the time. It just seems a little bit of a coincidence that you start posting, and reposting on the same issue. You've said it. Why not leave it there?

Or maybe ask why a director would spend £72,000 buying shares?

My guess is that you read Paul Scotts comments on Stockopedia and you fancied coming on here posing as smart investor. Did Globo have the contract wins that TCM have had, and did they not have numerous red flags?

Paul is very good at reading accounts, but a bit flaky with his decision making. He makes impulsive buys driven by greed (which I'm sure he'd confirm, as he's a very honest bloke) but he can also be a bit selective with his red flags, depending on whether he likes a company for some reason. There are plenty of companies with a decent cash position that have loans. Did Paul investigate the interest/ cost of the debt? No, of course not. He was fair enough to say they've done nothing illegal, but he's not interested in investing so just made the single comment and left it there. Then, the Globo 'wise after the event' bulletin board readers suddenly become experts when they see a company with cash having net debt.

If I ran a company where I was going to be acquisitive and needed money in the future, with lumpy contract wins (as opposed to frequent 'sales') I too might take cheap money when it was available during a successful period. If I was Enrico Testa, I would use my head (Testa...head...geddit?) and buy shares when the market panicked. Anyway, I have put my money where my mouth is. No, not wrapped around a chocolate croissant....I bought some more.

I'll have the last laugh. Assuming I haven't got my gob stuffed with pastries that is.

Buffy

[staverly] 18/11/2015 14:03

Red: thanks

[staverly] 18/11/2015 14:02

Al, never defined those captions as small print. Everyone has a different approach and also, how they prioritize their fundamental evaluation. My first port of call when sizing up a business with critical mass is: value creator/destructor, admittedly a subjective judgement but i'm not looking for fine calls.

[reddave999] 18/11/2015 13:49

Stavely: RNS Number : 9432E Nov 9th reference buy back.

[youcancallmeal] 18/11/2015 13:41

I'm genuinely not trying to be difficult but $36m cash and $10m working capital loan is not "small print". It's a very sore thumb. Ignoring it is not sensible. Taking a head in the sand approach only opens up risks that could be avoided or mitigated.

For whatever reason you seem determined to ignore this but I hope it works out well for you. I've nothing against you as a person whatsoever. I hope I've at least helped you consider a different perspective.

[staverly] 18/11/2015 13:35

mmelody: where do they mention buybacks?

[joestraughan] 18/11/2015 13:33

Ennismore have made £0.8m in 3 days shorting tcm - will be interesting to see how much longer they hold their position.

[staverly] 18/11/2015 13:24

Al, i should have clarified the context better. FWIW My main concern with Telit is not capital structure, it's the fact that current business model is no where near covering it's WACC - that much is glaring and perhaps explains Ennismore's shorting interest. Let's see if the increased R&D spend of recent years can close the gap next year then i'll happily invest my time to read any small print in the context of its debt structuring arrangements.

[mmelody] 18/11/2015 12:45

2nd Dec is going to be interesting. How are they going to fund debt and buybacks!

[youcancallmeal] 18/11/2015 12:44

Thanks, joe. I haven't checked this year's Sierra accounts but you're taking a very reasonable / sensible view there.

[joestraughan] 18/11/2015 12:32

Al - swirs's cash balance is much less that that now, having made 4 acquisitions in 12 months.

PS - but your point is valid and can be put to the forthcoming general meeting.

[youcancallmeal] 18/11/2015 12:27

staverly, have you read the Sierra end of 2014 report?
www.sierrawireless.com/~/media/pdf/investors/2014/2014_annual_report.ashx?la=en

If you have then have I missed something, because I can't see any significant similarities between the two companies in the context we are discussing:

Their cash is $207m to long-term debts $27m, so about 7:1 cash to debt, as opposed to Telit's odd ratio of 1:1.

More importantly, they have NO working capital loans. Such loans are used for day-to-day running of the business. I ask again: why would Telit, with $36m in cash, need to borrow short-term (which means high interest rates) $10m to operate basic/essential business functions? There may be a good reason, but without hearing what that is you wouldn't catch me investing here, no matter what the share price is doing.

I get why people are interested in this share - so am I, that's why I'm here - but it is disturbing that nobody is questioning this. If you are a current Telit investor you should be on the phone to them right now asking them to explain.

[joestraughan] 18/11/2015 12:24

Interesting - he did well to sell half a million at 345 back in September.

Al - it is common practice for companies to hold onto as much cash as possible at reporting dates and then pay it out to creditors soon after that date.

[reddave999] 18/11/2015 12:09

Director buying.

[staverly] 18/11/2015 12:08

Al: Given the capital structure of their nearest competitor (Sierra Wireless) it would appear that the business model lends itself to this. Primarily due to very material w/c obligations to OEMs.

[youcancallmeal] 18/11/2015 12:04

Any conjecture is absolutely fully justified because Telit have $10m short-term loans being used for day-to-day running of the business, despite having $36m in the bank. Nobody has been able to explain why you would take that approach. If current or potential investors don't at least question that apparent anomaly then they're mad in my view. If this is a profitable investment then it's more luck than judgement. You could close your eyes, block your ears and have enough luck to successfully walk across a busy road, but it doesn't mean it was a sensible thing to do.

I'm not saying there is something dodgy (more information is needed to decide either way), but there is most definitely something unusual and illogical in the accounts, and I recommend that anyone clears that sort of thing up before investing in a company. There are plenty of other investment opportunities out there without anomalies such as this.

Investment is not like unquestioningly supporting your favourite football team. If there is something seemingly not quite right then it should be challenged.

That said, I genuinely hope things work out for Telit investors in the long term. I'll be following with interest and will happily join you if these questions go away.

Best of luck.

[staverly] 18/11/2015 12:02

Stegrego: CEO stock purchased from long standing business partner, so not arms-length, more of a RPT IMHO.

Revoman: be interesting to see Berenbergs terminal value workings.

[joestraughan] 18/11/2015 11:15

Nice post revoman.
I'm surprised that Nomad Canaccord did not make the same case as Berenberg. Perhaps Canaccord will be replaced.

[mmelody] 18/11/2015 09:50

s/p putting up a fight and all quiet on here..

[bernieboy] 18/11/2015 09:43

Good post revoman - makes for good reading. :-D

[deanroberthunt] 18/11/2015 08:45

top of falling channel is 225p.....technically.

[mmelody] 18/11/2015 08:43

'We are not aware of any operational or other issues that would justify the decline in our share price in recent weeks.'

[stegrego] 18/11/2015 08:06

Well Mr Cats spent 25 million buying shares at 280p, so he is either incredibly stupid or this is just market momentum getting out of hand.
This talk of GBO or QPP is pure conjecture and just there to scare.