Do you think that the business of providing yellow pages is a viable, long term business? I think that the geezers will always need yellow pages? RH Donnely market cap right now is $500 million. In October, they refinanced almost all their debt, ~$10 billion… they did it when their market cap was over $4 billiion (is it any wonder the bond market is so fried). Ever since then the stock price has dropped like a rock. I bought some RHD today just because I figure I can buy a stock for $7 that controls $146 worth of assets. Those assets are generating a 13% return. I’m sure it will drop another couple bucks cuz i never get the bottom but this leverage aspect makes me really excited. Woo hoo!
The yellow pages probably throws off a lot of cash…but It is a shrinking base….any acquisition wouldn’t likely be at a meaningful enough premium to make it worth the risk of owning it…not to mention that management is stubborn. Interesting stock action, don’t expect another etrade pullback though.
it’s throwing off 120% of it’s market cap! Hello…? I guess the market doesn’t think that’s sustainable as opposed to 4 months ago when the market lent them $10 billion in cash at 8%. Stuff like this is why I love the markets. You can’t create stranger scenarios.
that’s correct, it is not sustainable as the business.com acquisition is not really value added at this point. and the 120% of mkt cap is based on “current post earnings massacre 500 mil” mkt. cap so that’s not what was used when the $10 bil was refinanced. good luck, let me know how long you hold it.
I’d say its a viable business but I wouldn’t invest in it as p/m’s are surely going to shrink.
YELL’s stock (UK yellow pages) has been creamed recently. Don’t know a huge amount about the business. I think it’s very financially geared, so it is super-sensitive to the macro-picture. I think the business model will survive. Clearly, a) there will be a niche off-line segment and b) very strong brand will facilitate migration to on-line platform (albeit relevance is reduced by Google etc.). However, this is not to say that it won’t go bankrupt first…
If there’s one lesson to be learned from these yellow pages stocks it is how stupid the bond market is.
Isn’t this a case of how management will use the free cash flow when it’s core business is dying? If the CEO is on a power trip he may spend cash in crappy acquisitions when he ought to return it to shareholders.