The bad news about the cut dividend caused mania sell in the stock which drives down the price by almost 20%. Cutting back dividend isn't necessarily an indication of ominous business prospect. It is an opportunity for the management to pay off loans and reset their options' strike price.

The recent loss of the company mostly come from the merging costs of the two companies. Further more, a bad harvest in Brazil has raisen the cost of tobacco leaves. The company isn't able to pass the rising material cost to the tobacco manufacturer in the mean time.

All that said, the surging cost in the last quarter is more like a cyclical phenomena. At current price of 4.03, the marketing cap is 380.77M. Based on its 10Q filed on August 15, the P/B is 0.64, the current ratio is 1.73; Debit/equity is 3.39, making it more critical to pay off existing loans than giving out dividends.

¶ 10:26 AM //

股王做的FA不是我们做的那种简单的，表面的FA，跑到YAHOO的FINANCE去看看公司的PROFILE就以为是在做FA了。股王做FA要花很长时间去调查公司的情况的。例如：

1。细读公司两年内的报表
2。公司的盈亏要点
2。公司的现有CASH
3。公司还能不能再借到钱
4。公司有没有较强的技术
5。公司的对手情况(如果对手强就可能选公司的对手)
6。公司产品在几年后是不是会有大的市场
7。客户对公司产品的反映
7。公司的高层在大公司和金融界有没有连系
8。公司的高层团不团结
9。公司的员工怎么看公司
10。亲自去公司看看。。。

¶ 1:23 PM //

¶ 11:16 AM //

Enterprise Value

From Joshua Kennon,


Determining the Takeover Value of a Company
If you frequently read financial magazines, newspapers, and annual reports, you have no doubt come across something called enterprise value. You may have wondered what it is, how it’s calculated, and why it’s so important.

What is Enterprise Value?
Enterprise value is a figure that, in theory, represents the entire cost of a company if someone were to acquire it. Enterprise value is a more accurate estimate of takeover cost than market capitalization because it takes includes a number of important factors such as preferred stock, debt, and cash reserves that are excluded from the latter metric.

How is Enterprise Value Calculated?
Enterprise value is calculated by adding a corporation’s market capitalization, preferred stock, and outstanding debt together and then subtracting out the cash and cash equivalents found on the balance sheet. (In other words, enterprise value is what it would cost you to buy every single share of a company’s common stock, preferred stock, and outstanding debt. The reason the cash is subtracted is simple: once you have acquired complete ownership of the company, the cash becomes yours). Let’s examine each of these components individually, as well as the reasons they are included in the calculation of enterprise value:

Market Capitalization: Frequently called “market cap”, market capitalization is calculated by taking the number of outstanding shares of common stock multiplied by the current price-per-share. If, for example, Billy Bob’s Tire Company had 1 million shares of stock outstanding and the current stock price was $50 per share, the company’s market capitalization would be $50 million (1 million shares x $50 per share = $50 million market cap).

Preferred Stock: Although it is technically equity, preferred stock can actually act as either equity or debt, depending upon the nature of the individual issue. A preferred issue that must be redeemed at a certain date at a certain price is, for all intents and purposes, debt. In other cases, preferred stock may have the right to receive a fixed dividend plus share in a portion of the profits (this type is known as “participating”). Regardless, the existence represents a claim on the business that must be factored into enterprise value.

Debt: Once you’ve acquired a business, you’ve also acquired its debt. If you purchased all of the outstanding shares of a chain of ice cream stores for $10 million (the market capitalization), yet the business had $5 million in debt, you would actually have expended $15 million; $10 million may have come out of your pocket today, but you are now responsible for repaying the $5 million debt out of the cash flow of the business – cash flow that otherwise could have gone to other things.

Cash and Cash Equivalents: Once you’ve purchased a business, you own the cash that is sitting in the bank. After acquiring complete ownership, you can simply take this cash and put it in your pocket, replacing some of the money you expended to buy the business. In effect, it serves to reduce your acquisition price; for that reason, it is subtracted from the other components when calculating enterprise value.


Why Is Enterprise Value Important?
Some investors, particularly those that follow a value philosophy, will look for companies that are generating a lot of cash flow in relation to enterprise value. Businesses that tend to fall into this category are more likely to require little additional reinvestment; instead, the owners can take the profit out of the business and spend it or put it into other investments.

¶ 11:35 PM //

By Philip Durell (TMFAdmiral)
August 19, 2005

The price-to-earnings ratio (P/E) is probably the most widely used -- and thus misused -- investing metric. It's easy to calculate, which explains its popularity. The two most common ways to calculate it are:

P/E = share price divided by earnings per share
P/E = market capitalization divided by net income
The share price is the market capitalization divided by the number of shares, so the results should be identical. Share price and the market cap are easy to find in the quote section of any financial website. The earnings are usually taken from the trailing twelve months (TTM) and can be found by checking the income statement for the past four quarters. A P/E using TTM figures is often called the current P/E.

Another variation is the forward P/E, which is calculated using analyst future earnings estimates, rather than actual historical earnings. Most financial websites give both the current and forward P/E. I find forward P/E a useful guide for cyclical companies, companies coming out of negative earnings, and those that have significant one-time charges embedded in current earnings. You may also encounter the diluted P/E, which accounts for a company's diluted shares.

You'll often find slightly different P/E values for the same company on different financial sites. Why? Because some sites normalize earnings for one-time items, which distorts the P/E ratio. These small variations are immaterial.

In essence, the P/E tells us how much an investor is willing to pay for $1 of a company's earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

Before you get carried away ...
The "P" in the P/E ratio is determined at any given point by the market value of the company or its shares. Built into this market price are the future expectations of the company's growth. If DVD-rental-by-mail company Netflix (Nasdaq: NFLX) has a P/E of 63.8, and Motley Fool Inside Value pick Endurance Specialty (NYSE: ENH) has a P/E of 7.3, does this tell us whether Endurance is a better value than Netflix?

Probably -- but not certainly. For starters, analyst expectations for Netflix's earnings growth over the next five years range between 17% and 40%; estimates for Endurance are a modest 12% to 14% over the same time period. So clearly, future growth expectations significantly affect the P/E ratio.

Apples to apples
As you'd expect, different industries have different average P/E ratios. Endurance is in the insurance industry, which typically has low P/E ratios. Even industry giants AIG (NYSE: AIG) and Allstate (NYSE: ALL) generally sport P/Es in the 11 to 15 range. In terms of rate pricing, insurance is a cyclical industry. Companies that cut rates during a soft market are usually not adequately compensated for the risk taken. Those that do maintain pricing discipline often see their top-line growth stall or even reverse. Clearly, it's important to understand the industry when comparing P/E ratios -- industries with higher perceived risk attract lower P/E ratios.

Investment returns also affect the P/E ratio. If I can buy shares in a company with a return on equity (ROE) of 30%, then with all other things being equal, I should be willing to pay more per dollar earned than for a company with an ROE of 10%. Consider Tyco (NYSE: TYC) and Coca-Cola (NYSE: KO). Both currently have a P/E around 21, yet analysts expect Tyco to grow earnings at 14%, vs. 8% for Coca-Cola. Coke, however, has an ROE of 31%, vs. just 9% for Tyco. In other words, in the past year Coke returned 31 cents for every $1 of shareholder's equity, while Tyco returned just 9 cents. Be careful in using ROE for companies with a high debt load, because it will be inflated. In that situation, using return on invested capital (ROIC) would make for a more accurate comparison.

Counting earnings
Earnings are an accounting figure that includes non-cash estimates. Since earnings are covered by U.S. generally accepted accounting principles (GAAP), you might expect all reported earnings to conform to the same template. This is certainly not the case -- companies have plenty of latitude under GAAP to manipulate earnings, employing either an "aggressive" or "conservative" approach. Some companies, such as General Motors (NYSE: GM), have massive underfunded pension and health-care obligations that aren't reflected in their income statements. Still others, like eBay, issue excessive amounts of employee stock options, which are also not expensed on the income statement (yet). Both of these items reduce the "E" in earnings and therefore increase the real P/E ratio.

Companies sometimes have true one-time events that can affect net earnings either positively or negatively. If a company sells a division for substantially more than its book value, the difference will be recorded as a positive in net earnings. This will distort the P/E and render it useless as a measure of value. In this case, we'd adjust the net earnings to arrive at a more useful P/E. A wide gap between current and forward P/E is a good sign that there may be a one-time event included in net earnings.

Follow the cash
Many Fools (myself included) prefer to use free cash flow (FCF) for valuation. FCF can also be manipulated, but it's more difficult to fake cash. Over the long term, a well-run company's FCF should be approximate to earnings.

Just because a company has a low P/E does not mean it's a good value. Companies have a low P/E for a reason, and the trick is finding out whether that reason is likely to be short-term or permanent. Conversely, not all companies with a high P/E are overvalued. It may be counterintuitive, but a cyclical company will usually have a high P/E at the bottom of the cycle, where earnings fall much faster than the share price because the market accounts for the cyclical nature of the company.

Fun with P/Es
My favorite use of the P/E ratio is to compare the current P/E of a company with its historical averages. (To do so, I generally use a subscription service, ValueLine, which gives me the past 15 years' average annual P/E ratios. You can also use the free MSN Money Central 10-year ratio.) I then average the annual P/E figures (taking out excessively high or low "outliers") and compare this figure with the current P/E ratio. If the current P/E ratio is significantly less than the average, it could indicate that by historical standards the stock is undervalued. You can do the same thing with price-to-book (P/B) and price-to-sales (P/S) ratios.

There are drawbacks in any historical comparison of P/E ratios. During market bubbles, P/Es can be overinflated for extended periods of time. Caution should be used, particularly with average P/E values from the late 1990s. P/E ratios are also generally higher in a low-interest-rate environment because a company's cost of capital is lower, and also because investors are more likely to take on the risk of owning equities when bond yields and fixed income rates are low.

The price-to-earnings ratio is a useful measure, but it must be used with many other metrics to accurately assess a company's worth.

Philip Durell is the lead analyst of Motley Fool Inside Value. Every month, Philip recommends two of the market's best values. To date, his picks are up 10.30%, vs. just 4.22% for the S&P 500. If you're interested in joining the Inside Value community, Philip is offering a free 30-day trial to the service. Click here to learn more.

Philip Durell does not own shares of any company mentioned in this article. Endurance Specialty and Coca-Cola are two picks from Philip's Inside Value portfolio. eBay and Netflix are Motley Fool Stock Advisor recommendations. The Motley Fool has a disclosure policy.

¶ 9:12 AM //

Courtesy of Tonyxu, here is a list of the 54 stocks he found using his own software that pass the Ben Graham's test,

He didn't put the debt ratio criteria, though, cuz that will screen out
all financial stocks.

Sym, MktCap, Price/Book, PE, ForwardPE, Div, DivYield, ROE, 52WeekLow,
52WeekHigh
ABK, 7.31B, 1.38, 10.08, 9.6, $0.5, 0.74%, 15.27%, $62.2, $84.73
AEP, 14.12B, 1.71, 11.25, 14.31, $1.4, 3.81%, 15.29%, $31.25, $39.34
AFG, 2.58B, 1.1, 6.83, 9.42, $0.5, 1.48%, 16.4%, $27.6, $35.13
ALL, 38.34B, 1.73, 11.54, 9.37, $1.2, 2.06%, 16.14%, $45.5, $63.22
BAC, 175.99B, 1.75, 10.83, 9.89, $1.8, 4.12%, 16.91%, $42.45, $47.47
BER, 4.68B, 1.96, 10.47, 8.93, $0.15, 0.4%, 22.43%, $25.93, $38.45
C, 228.57B, 2.04, 10.94, 9.98, $1.72, 3.9%, 19.88%, $42.1, $49.99
CB, 17.01B, 1.63, 9.57, 10.24, $1.64, 1.89%, 17.82%, $63, $90.17
CFC, 20.33B, 1.75, 9.9, 7.69, $0.56, 1.63%, 20.18%, $30.3, $40.31
CGI, 1.99B, 1.64, 8.06, 10.08, $1.37, 2.29%, 22.59%, $46.84, $70
CI, 14.42B, 2.46, 7.41, 14.09, $0.1, 0.09%, 32.8%, $58, $117.44
CMC, 1.66B, 2.07, 7.06, 7.17, $0.21, 0.69%, 34.3%, $15.8, $39
CMI, 3.92B, 2.43, 8.79, 7.21, $1.2, 1.43%, 34.65%, $63.59, $88.01
COP, 85.74B, 1.82, 8.31, 8.53, $1.34, 2.16%, 24.78%, $35.64, $67.24
CPT, 2.63B, 1.86, 11.49, 14.49, $2.32, 4.55%, 15.13%, $43.9, $56.56
CTX, 8.62B, 1.93, 8.39, 6.47, $0.2, 0.3%, 27.56%, $45.12, $79.66
DRL, 1.52B, 1.08, 3.58, 6.89, $0.69, 4.92%, 27.47%, $9.81, $49.45
DSL, 1.77B, 1.55, 9.51, 9.98, $0.4, 0.64%, 18.14%, $52.3, $80.84
DVN, 25.40B, 1.9, 11.46, 9.29, $0.23, 0.4%, 19.05%, $31.61, $60.46
F, 18.09B, 1.51, 7.57, 9.21, $0.4, 4.03%, 20.25%, $9.07, $15
FAF, 3.89B, 1.46, 9.8, 10.43, $0.66, 1.6%, 15.58%, $27.37, $44.9
FBP, 1.66B, 2.2, 10.18, 8.69, $0.26, 1.27%, 17.22%, $16.27, $32.74
FMT, 1.77B, 1.49, 4.75, 4.51, $0.28, 1.22%, 34.88%, $18.35, $26.99
FNF, 6.71B, 1.94, 6.84, 11.24, $10.93, 28.18%, 25.38%, $30.05, $47
FNM, 49.13B, 2.21, 6.42, 7.55, $1.82, 3.62%, 35.37%, $49.75, $77.8
HMC, 47.72B, 1.6, 10.85, 9.77, $0.24, 0.92%, 15.78%, $23.38, $27.3
IPS, 2.76B, 1.74, 4.23, 7.98, $0.4, 0.71%, 46.7%, $23.52, $59.28
JP, 6.74B, 1.65, 11.76, 11.64, $1.56, 3.12%, 15.25%, $46, $52.73
KOF, 4.91B, 1.7, 10.28, 11.87, $0.3, 1.13%, 17.84%, $19.4, $29
KUB, 8.22B, 1.88, 7.85, 12.44, $0.28, 0.89%, 27.04%, $22.1, $32.6
LEN, 9.31B, 2.18, 9.6, 6.83, $0.68, 1.12%, 26.62%, $41.37, $68.86
MCY, 3.03B, 2.05, 10.93, 11.66, $1.6, 2.87%, 19.87%, $47.6, $60.26
MDC, 3.29B, 2.16, 7.82, 6.32, $0.74, 0.99%, 31.47%, $51.29, $89.63
MTG, 6.24B, 1.52, 10.14, 9.75, $0.45, 0.67%, 15.25%, $56.93, $70.76
NBL, 4.92B, 1.64, 12.66, 9.05, $0.3, 0.36%, 19.54%, $48.97, $89.3
NCC, 23.11B, 1.78, 9.01, 11.1, $1.42, 3.92%, 22.8%, $32.08, $39.66
NHY, 24.52B, 1.8, 11.85, 10.6, $3.2, 3.28%, 15.62%, $62.04, $104.6
NUE, 8.60B, 2.33, 6.16, 9.87, $0.56, 0.99%, 43.79%, $37.52, $65.53
OSG, 2.33B, 1.4, 4.17, 6.46, $0.7, 1.17%, 39.42%, $41, $68.22
OXY, 31.53B, 2.48, 8.24, 8.95, $1.17, 1.49%, 36.06%, $48.85, $84.26
PHG, 33.02B, 1.73, 9.87, 14.95, $0.52, 1.94%, 18.7%, $22.14, $28.84
PHM, 10.94B, 2.17, 9.36, 7.01, $0.2, 0.23%, 26.97%, $47.46, $96.45
PKX, 16.41B, 1.03, 4.13, 6.25, $1.56, 2.97%, 27.03%, $34.55, $55.65
PRE, 3.37B, 0.96, 7.13, 7.96, $1.44, 2.37%, 16.08%, $50.08, $67.11
R, 2.30B, 1.51, 10.54, 9.63, $0.62, 1.69%, 15.02%, $34.52, $55.55
RDN, 4.48B, 1.26, 9.25, 8.85, $0.08, 0.15%, 15.45%, $42.3, $54.94
RLI, 1.14B, 1.7, 11.56, 14.22, $0.57, 1.26%, 16.27%, $35.54, $48.83
RS, 1.55B, 1.71, 8.48, 10.93, $0.35, 0.73%, 22.06%, $33.08, $49.83
SPF, 2.91B, 1.91, 7.37, 6.36, $0.4, 0.47%, 30.65%, $48.8, $99.4
TK, 3.56B, 1.54, 4.48, 10.71, $0.55, 1.27%, 39.82%, $34.26, $54.92
TMX, 22.39B, 2.34, 4, 7.47, $0.4, 2.06%, 33.27%, $15.65, $20.43
WOR, 1.50B, 1.85, 8.4, 12.9, $0.66, 3.82%, 23.9%, $15.11, $22.73
WPS, 2.16B, 1.87, 11.89, 14.71, $2.22, 3.89%, 17.89%, $44.85, $60
X, 4.69B, 1.09, 3.52, 7.3, $0.38, 0.9%, 48.08%, $32.12, $63.9

¶ 10:20 PM //

Very strong balance sheet.

Here are some stats,

Total Shares outstanding: 2.55 mil
Market Cap: 9.42mil (at $3.70 per share)
current asset: 15.832 mil (with 3/31/05 report)
total asset: 16.769 mil
current liab: 1.904 mil
total liab: 1.904 mil (no long term liab)

By Ben Graham's NAV standard, the total NAV is 13.928 mil

So the stock has a safe net of $5.46. Currently it's 1/3 undervalued.

I have been following this stock for a while. The company has a niche market in women's golf dress. There isn't much growth in this market, but the income is stable, the company is nevertheless paid less attention because of its small size. There was an attemp to make it private in the last few months because the general public lacks interest in the stock.

¶ 10:44 AM //

For the past month,






Also the chart for AOI in the past month,

¶ 3:41 PM //

[googit]
又一次看JAMES的分析, 感叹专业分析和业余分析的区别, 就是专业的算细账很厉害.

说实在, 3张表我也天天看, 但是, 和专业人员眼中看的还是不一样. 专业弄的熟练的很, 细节一眼就看见. 而我看的就很粗糙.

但是粗糙也有粗糙好处. 有BUSINESS或行业经验的人, 看到比如一个MODEM公司的REVENUE和FINANCE眼中看的反应就不一样. FINANCE是PURE的分析, 多少M, MARGIN多少. 而行业内人士马上能想到, 他卖了多少个, 在行业中的地位.

尤其对科技公司而非传统公司, 行业内的人, 比FINANCE的人有些优势. 业内人士很容易有感性的行业前景的看法, 看到未来的FA.

当然, FUND内的人, 他们是跑公司的, 而不是主要看报表的.

明白了即使是FA分析, 不同人还是擅长不同的行业和领郁. BUFFETT不买MSFT(虽然BILL是他最好的饭友). BUFFETT不买GOOG(虽然GOOG上市前得到他的指点).
也是有道理的.

同样的因LOAN破产炒底PLAY, 买UHAL用的原理和RRI基本一样. 但是FINANCE的人, 买RRI的可能大些. 而UHAL主要是看BUSINESS的眼光.

买未来的BUSINESS是分析公司增长的. 买现在BUSINESS是分析报告的.

大家都搞分析, 还是各自发挥自己的长处, 避免自己的短处. 我等业余投机爱好者, 更是要努力发挥自己的长处.

[威娜的哥哥]
A：从历史判断现在：
1。 3大报表
2。 10Q，10K

B：从现在判断未来：
1。 CONFERENCE CALL
2。 8K
3。 PR 动向
4。 业内人士对企业在行业内的综合排名
5。 庄家密谋的潜在CATALYST

业余人士没有渠道，B4很难有正确的鉴赏力。B5是秘密，不容易知道，凭经验可能有点直觉。

[回克洗了睡]
两年前我来股匪的时候 ， 就听JJ 叫嚣James 送了他一本RRI秘笈，如何了得
今日恰好得见student 摘录，花了个20分钟看看，哪有那么多玄乎，JJ 不懂FA 罢了 ， 站在巨人的肩膀上，希望作个白话版的讨论,James 大老还望见谅
原文见：
http://www.goofiz.com/forum/viewtopic.php?p=454940#454940

RRI play 的Key在于Yhoo 讲的Brige Loan, 类似的例子Jiaming做过一个经典的抄底:

Key:
用预期的Cash and Cash Equivalents 1.9B 作担保去申请2.9B Bridge Loan(3年期），
Note:bidge loan通常是一年的短期高利率信贷，有点企业级别cash advance 味道，目的是为了维持运作到发行trash bond，其中涉及到一个一年期的1.6B 分步的rollover down

RRI 有狠招
作不成这笔买卖，RRI 大不了鱼死网破，走Chapter 11 , 破产清算
分别为：2002:1.6B 2003:2.5 2004:4B.
为什么会清算额增加:砸锅卖铁,asset sale ; 为什么拖这么长， 电力能源部门的equity sale 需要太多的negotiation(资产评估，讨价还价）

银行有难言之隐
银行为什么要做呢？能不能不作呢？

答案是:不作是最坏的选择，因为as unsecured creditor 无抵押担保的债权人，排队在清盘队伍的最后一个， without interest rate payment, write-off, and receive pennies on the dollar
没有利息，勾销帐甚至可能分文不得。

三方获利，皆大欢喜

大家都为了一个共同的目的在奋斗： issue trash bond ，借钱是为了让你发行bond 去再圈钱。

Investor Banks are Barclays, Bank of America, and Deutsche Bank.他们的目的是中介好处费broker fee , 目的不再与抵押的资产assess value , 实在拍卖对他们也无好处

银行： cash+interest+commitment fee，解决了坏帐，还有利息，手续费。

RRI 则得到起死回生的机会

难道3赢 就没有一个loser ? financing的风险转嫁到了trash bonder的投资者，因为他们可能在将来享受potential bond 的收益

资本主义的精髓在于Finance & Refinance , 降低风险，最大化受益

达到目的一些tricky:
比如加快过程，作帐技巧，诸如secure fewer assets ， 低估secured assets ，这样剩下部分的assets更值钱 easy replacement bonds procedure etc ，...

剩下的是基本PR/News 摘录分析
这是作每个FA 都应当遵循的:

比如: 1 growth rate ( revenue , customers/order 成长, overcapacity)
2 潜在的客户/业务发展群
Texas retail business, profitable New York City assets, and
above market contracts with National Grid and DQE
3 同行业的比较
AES - 2.23
CPN - 6.05
DYN - 1.55
MIR - 2.82
RRI - 5.11

同时潜在的几个担忧
1) Refinancing of a lot of debt in just a few months time (starting this month): 时间拖的越久，越为不利
2) Overcapacity in the Energy Generation business.
当然现在眼光看来， 电力这块都是老巴的青睐

APPENDIX:
Ex:
Goldman Sachs Research Note
RRI---CC
GS Analyst Comment
From WSJ 11/5
U.S. Utility Weekly
10/30 RWR Update
10/15 report on Merchant Energy Providers

窃以为这些都是无关大局生死手的分析

综上所述： James 一代大牛，的却比某些年40% 的 long time holder 强不止一两个台阶
我想阅读速度,对行业/金融的理解是很关键的东西，这些是vision,

希望此文对那些不易看懂的如鸡哥所说很玄乎的人有点点帮助

小生非任何金融科班，错误多多，加之时间短，欢迎讨论 还请高抬贵手，小闭骂口

PS 我觉得最难但是最profitable 的还是作Biotech FA分析, Coming Event 的分析
俺有时间把思绪整理，写一个OSIP 捉大鳖的完整版，这也是估计10年内小生非常愉悦的一个吹牛丰碑.

PS: 最近上海地产周正毅被清盘， 窃以为是个非常失败的例子，原因有几： 涉及政治斗争因素，不清盘不行
但从周的角度讲，他的利益被侵占光，没有一个清晰完整finance 计划，普永是其中最大的受益者，清算费占了3个亿，同时广大的股东也是最大的被愚弄受害者。没有政治人为因素， 周和股民双赢的几率很大。

[James]
债吗，银行要看你有没有能力还钱，有没有抵押，抵押值不值钱，等等。
因为钱已经借给RRI了，。。。
我先给你几十页，您先入入门。

RRI, best info from here
http://www.reliant.com/files/322257_RRI_roadshow_FINAL_white1.pdf

10/29 CEO presentation
http://www.reliantresources.com/files/
338428_3Q02_Earnings_Presentation_FINAL_no _notes.pdf

From RRI IR

1) Financing will probably not get done until last day (Feb 19). Banks will
negotiate to the last hour to gain as much on Terms and Conditions as
possible. They (RRI) will make every effort to get the loan done sooner, but
it may take until the last day when stakes get higher to get their terms.

2) They will be refinancing everything at one time. Their goal is to get a
longer-term bridge loan on the 2.9 million (3 years) to allow them time to go
to the markets at issue longer term bonds. The 1.6 billion in revolvers ( 800
million due on March 1 and the other 800 million later this year) they would
like to a obtain a new revolver on this money and pay the banks back the full
1.6 billion. They figure given current cash flow in the company they will have
close to 1. 9 billion in cash at the time the revolver is due. That would
leave them with 300 million in cash and a credit line of 800 million.

From the banks perspective this is a no brainer. They would get 1.6 billion
dollars bank in money, they would get a secured 2.9 billion loan on RRI assets
and 800 million of secured credit line that would drawn on occasion.

If they don't do the deal. RRI keeps the 1.6 billion. RRI likely declares
chapter 11, RRI Cash in bank (in interest barring accounts that the banks
would have to pay) at the end of 2003 given this scenario would be close 2.5
billion at the end of 2003 and 4 billion at the end of 2004 (it would take
this long to negotiate with creditor what assets RRI would have to sell to pay
of the loans. Look at ENRON it is over a year and they still are negotiating
asset sales and ENE is a willing party. RRI would not be so willing because of
their strong cash flow situation knowing that in a year and half they would
have most of the money to cover the loans). The banks current loan is
unsecured which also causes the long negotiations as described above. The RRI
shareholder would still make out as the company cash flow is very positive,
but would eventually have to sell some assets eventually to pay of the loans.
From a shareholder perspective, much better to have the loans as chapter 11
would put the company in limbo for 2 years, keeping the stock price very low.

The three banks involved in the $2.9 bridge are Barclays, Bank of America, and
Deutsche Bank. First, these companies have reputations to protect and
stockholders to answer to. They aren't interested in either predatory lending
(which will remove future bank clients), and their shareholders will fry them
if they report $2.9B in collective write-down, which they will if RRI goes BK.


Second, you have to understand what a bridge loan is. The reason these guys
lent RRI the money was in anticipation of RRI then issuing either debt or
equity to pay off the $2.9B. The banks are interested in the investment
banking fees here not in owning the assets.

That means their incentive is to get RRI to investment grade as quickly as
possible, so they can issue debt to replace the loan. This will happen, within
a few months of completing the refinancing. It is even possible that the loan
will secure fewer assets than people think, because that will make it easier
for RRI to issue replacement bonds.

Due to laws of full disclosure, RRI legally had to put that “B” words in the
10Q, like 1000s other companies. RRI's current debt is largely unencumbered.
This means that the banks that have the major money on the line, currently
have no assets as security. If these fore mentioned banks refused to work out
a viable deal with RRI, they would be the last in line to receive any funds
from liquidation, due to their unsecured creditor status. The banks will work
with RRI to get secured assets, and a reasonable interest rate. RRI has a
higher book value, and stronger cash flow than any of their peers. Banks will
work with RRI and make lots of money over term of refinance or Let RRI go
bankrupt and wait for years without interest rate payment, write-off, and
receive pennies on the dollar.


Goldman Sachs On RRI Friday 10/4/02
We think RRI is viable entity with potential to rebound meaningfully over the
coming months. Our rationale is simple:
1) RRI shares are `artificially` depressed due to the recent full-spin (shares
dropped from $4 1/2 to below $2) and shares should rebound as the `spun
shares` are absorbed by the market.
2) Recent changes to management are positive which should help restore
confidence in RRI`s realistic direction and
3) Restructuring bank debt is becoming more likely than not and should occur
by Dec/Jan.
4) Financial performance should exceed almost all merchant companies as RRI
benefits from the Texas retail business, profitable New York City assets, and
above market contracts with National Grid and DQE. We are maintaining our 2002
EPS estimate of $1.65 per share and lowering our 2003 EPS estimate to $1.15
from $1.65 per share to reflect $0.40 of higher interest costs on the
prospective bank refinancing and a $0.10 decline in the retail business.
Better refinancing terms and a rebound in the wholesale business could
translate into better 2003 results.


Trading at 1.5x our 2003 EPS estimates and approximately 0.5x
operating cash flow (we estimate $900m-$1 billion), we believe RRI shares
could rebound significantly if investors become convinced the company is
viable. Our new estimates assume an incremental 500 basis points on the $2.9
billion bridge loan, an incremental 200 basis points on the $1.3 billion Orion
debt and 500 basis points higher on the $1.6 billion revolver. Our 2003 EPS
estimate is based on $1.16 B of EBIT ($480 from wholesale, $650 from retail,
and $30 from Europe). Our 2002 EPS estimate is based on $1.16 B of EBIT ($480
from wholesale, $650 from retail, and $30 from Europe). Significant
refinancing risk persists as RRI works to refinance approximately $6.4 billion
of debt by the end of 2003. RRI has $1.3 billion of Orion subsidiary debt
($1.0 billion due in October and $575 million due in December). In 2003, RRI
has a $2.9 billion bridge associated with the purchase of Orion coming due in
February, $600 million worth of European debt maturing in March and an $800
million term loan due in August. Finally RRI has an $800 million revolver
coming due in August 2004. There could also be additional downside to our
revised 2003 EPS if RRI refinances $500 million - $1.0 billion of its loans in
the debt capital markets. According to RRI management, the company has reached
a preliminary three year extension on the $1.3 billion of ORN project debt,
which consists of $442 million, offset by $200 million of restricted cash at
Orion Power New York, L.P. and $1.06 billion at Orion Power Midwest, L.P. We
expect finalization of the Orion project debt to occur by the end of October.
The next refinancing milestone date is February 2003, when the $2.9 billion
ORN bridge loan matures. According to management the primary lenders are Bank
of America ($1.0 billion), Barclays ($1.0 billion) and Deutsche Bank ($750
million). RRI is in ongoing discussions with its lenders and hopes to announce
a resolution by the end of January. We expect the $2.9 billion debt
restructuring to include asset security, materially higher interest costs and
a 2-4 year extension. Details related to costs and new maturities should have
a meaningful impact on share prices. We are lowering our 2002 earnings outlook
for RRI's wholesale generation business to $480 million of EBIT from $500
million. The downward change is a direct result of continued downward pressure
on spark spreads and low market volatility. We currently expect 2003 results
to be equal to or slightly below 2002. Offsetting the decline in the wholesale
generation business are expected increases in the contribution from RRI's
retail business. We are raising our retail EBIT estimates to $650 million from
$570 million. The increase is due to positive realized price differentials
between the North and South Texas electricity markets, lower than anticipated
ancillary services costs, improved margins at RRI's Solutions business
(customers > 1 mW), and an additional month of a higher Price to Beat (PTB).
We expect 2003 results to drop to approximately $600 M due to higher gas costs
and customer attrition. Although a small piece of the overall business, we are
raising our European 2002 EBIT estimate to $30 million from $20 million to
account for the benefits of cost reductions associated with downsizing, the
elimination of start-up related trading losses, and an increase in green power
imports from Europe. We are also raising our '03 EBIT estimate to $40 million
from $20 million. RRI Debt below Investment Grade Due to concerns over the
near-term refinancing risk, RRI's debt has been lowered to junk status by
Moody's, S&P, and Fitch. The addition of incremental security should further
reduce RRI's debt ratings.


There are 2 risks in RRI:
1) Refinancing of a lot of debt in just a few months time (starting this
month);
2) Overcapacity in the Energy Generation business.

But, the positives greatly out-weight the negatives, the positives being:
1) The refis will get done though at expensive prices;
2) The overcapacity is all NG power plants, with NG prices up, those become
marginal producers and only accept prices that at least cover their variable
running costs. That means power prices have for the last 2 months been
tracking 50% OVER 2001's prices. For those generators like RRI that have a lot
of non NG production, that means PROFITS.
3) Actually, although almost all of RRI's debt has to be refi'd it is a
manageable amount of debt;
4) RRI has a strong retail operation to weather this IPP slowdown;
5) RRI will earn north of $1 per share in 2003, which should be the bottom of
this cycle, and since RRI didn't sell assets like mad, RRI will have earnings
upside in the years after that.
6) Given all of the above, RRI is bloody undervalued at today's prices.
Indeed, RRI would be undervalued at $5 per share. Indeed, RRI WILL trade north
of $5 for sure, and it might not take long to do that.

I think that RRI is a better value than MIR because of its retail business. It
has 1.7 million retail and business customers in the deregulated Texas market.
Their retail business is producing $500 million cash flow per year and is
carried on the books for peanuts (just the IT equipment and offices they use
to service their customers.) Cash flow may be lower in the future due to
competition, but still it's a great advantage compared to pure IPPs. They
overpaid for Orion and the European generation but the understated retail
business more than makes up for it, so I feel comfortable about their book
value. I think they will easily exceed $1 a share in 2003 (earning), even
assuming a more than doubling of their interest expense after they roll over
their debt.

The sector in general is in deep trouble. I think RRI is a prime survival
candidate followed by MIR, although I think MIR will be taken over before it
leaves single digits.

CNP got clobbered because they just extended their bank debt for 1 year at an
all in interest cost that is 1% higher than what they paid last year. They
also had to accept some other arbitrary terms regarding raising $300MM (?) in
third party financing by November along with some mandatory paydowns in their
bank lines over the coming year. Even though CNP will earn $1.35 this year
(and expects to earn slightly less next year), the analysts were very unhappy
that CNP didn't do a better job breaking out their comp numbers (i.e. ex RRI)
during their 3rd quarter earnings conference call yesterday. Having said all
that, I believe the worst is over for this stock. I plan on remaining long and
enjoying the $.64/share dividend until the storm blows over and CNP starts
trading at the same valuations as the other regulated utilities.

Comparing DYN, CPN, MIR and RRI, IMO RRI is the most intriguing story. Its
share price recently has suffered from the fact that 240MM shares have just
been distributed to old REI (the new CNP) holders, and the fact is most of the
recipients of this stock dividend want nothing to do with an independent IPP.
As a result, there is a temporary supply-demand imbalance going on that will
eventually work itself out.

I talked to RRI IR a couple of days ago and found out that their is a battle
going on between the 22 senior management types there and RRI's outside
council. It seems that this group wants to load up on RRI shares for
themselves, but their outside council won't let them for fear of class action
lawsuits (I'm not sure I understand what council is thinking about). In any
event, RRI does have 1.7 million retail customers in the Houston area, has a
non binding option to buy the 14MW of generation now owned by CNP in 2004, has
most of its current power plants in the northeast where energy is really not
in oversupply (particularly NYC and environs), and owns 20% of the generation
capacity in the Netherlands (where things aren't as screwed up as they are
here). Even though they have a lot of bank refinancing to do over the next 6
months, RRI has no long term debt on their books and this bank debt is not
guaranteed by RRI at the holding company level. As a result, they are in a
strong bargaining position with the banks since I'm sure the banks would like
to get this debt guaranteed at the parent level.

Merchant Industry Key Success Factors
Source: Banc of America Securities September 2002 Report
“The most successful physical players will incorporate
a dynamic energy infrastructure with regional strength.
Dominant power generation market share in focus regions.
Ability to source gas at the lowest cost, which necessitates a sophisticated
gas marketing and trading presence.
An energy “sink” (i.e., a customer base) to help offset the natural long
position in power.
Logistical sophistication including significant positions in transmission,
pipeline and gas storage capacity.
High credit standings–Lower cost of capital–Preference in capacity contract
negotiations

Not saying this is the right thing. But based on my limited knowledge of RRI
issues hears is what I would do:
Strategic issues
1)Main strategic issue obtain roll over financing for the 2.4 billion dollars
in Feb ( Orion is a done deal!!)
2) The second main strategic issue obtain the necessary financing to procure
the Texas assets in 2003. This will allow RRI to obtain an effective supply
hedge for its retail operation which is necessary if it is to survive. This
will require about 2-3 billion dollars (I have heard this number, someone
correct me if I am wrong).

To do both RRI will need about 5.5 billion dollars in funds. I do not believe
the banks would allow RRI to finance the Texas assets totally in debt, they
would have to issue some equity to support the purchase.
3) Third strategic issue in support of goal number 2 because of the necessary
equity financing to support the Texas purchase is to increase its stock price
from current levels to levels that are more representative of the fair value
of the company. It is imperative that RRI get its stock price above 10
(preferably in the 12-15 range) so its shares will not be diluted to obtain
shareholders support for the move. I feel they will have to issue at least 1
billion in stock to support this purchase to keep its current D/E ratio at
about one.
To do this I believe RRI has to give its stock a positive momentum now to get
its stock at reasonable range by next summer. I would do the follow to obtain
upward momentum that will be sustain through next year:
1) RRI has to sell its European operation. That will eliminate the 800 million
in refinancing that is coming do later next year and put an additional 1-1.2
billion in the bank to help pay down the 2.4 billion due in Feb. The European
assets only add 10 cents a share of dividends to the company, the reduce
financing cost will more than offset the 10 cents thereby increasing earnings.
It will also calm the markets down about the upcoming financing, as they will
view this as very doable.
2) If I were RRI I would have taken the opportunity to buy back shares in the
last month with the thought of reissuing the stock at a later date (assuming
no SEC issues)
It is imperative that RRI get is stock price up more so than the other IPPs
because of their upcoming purchase of Texas assets. RRI needs to start now to
get its stock price fairly valued to obtain this goal.
The combination of the two if announce would send the stock in the right
direction and get the stock at reasonable levels by next year to support their
goals as I see them.

Goldman Sachs Research Note from October 30th

RRI: Reit Recommended List Buy - After the close on 10/29, RRI announced final
terms related to the $1.57 billion secured ORN subsidiary debt. RRI`s
depressed share price continues to reflect investor concern surrounding the
company`s viability. We think success addressing near term financial
challenges should produce a rebound in shares. We now expect RRI to make
progress in restructuring its $2.9 billion bridge loan and several other
pieces of debt. The $2.9 billion loan is due February 2003 and we would expect
a formal restructuring announcement in January.

The terms are good, compared to what CNP got, but this is secured. As for the
February loan, this bodes well for it. All their power plants outside Orion
are unencumbered, so they can use them as collateral. Book value of those
non-Orion plants is around $2.5 billion, which is pretty close to the loan
size. And if the banks want more, there is the retail operation, their jewel
in the crown.

The retail operation produces an annualized EBIT of more than $600 million and
it's debt-free. Of course it's competitive, not regulated. But the way things
are shaping up in Texas, competitive may be better than regulated. You have no
PUC after your behind, keeping your profits down, and some of your main
competitors (TXU comes to mind) have their own big problems and really can't
afford to compete too agressively. The profits in the last couple of quarters
speak for themselves and the banks can see it

How do you collaterilize the retail operation? I have no idea really. I can
guess but don't want to clutter up the board with speculation. The key point
here is the stability of the cash flow, and by the time the February loan
comes around they will have three very solid quarters to show the banks, which
should be plenty in my book.

Diversity of fuel is a plus in this environment. Gas fired plants, although
new and more efficient than their peers will flounder into 2004. If CPN makes
it till then, they will start to shine. I like RRI and MIR (after 2Q is
signed) to survive the sector and come out strong.

In the Orion case, the fluctuation in the short-term rates will not materially
effect the debt that just got refinanced. That is because Orion has a $1bn
swap in place and the effective rate is in the 5.40% range.

The only effect on Orion's interest expense will be the wieghted average
increase of 0.54% in its spread. Again, the add'l interest expense caused by
the rate will be complete offset by the pay-down of debt.

As for the RRI, they will continue to benefit from the LIBOR + 0.85% rate.
Further, if the Fed cuts rates next week by 0.25% or 0.50%, that would
translate into a $10MM to $20MM savings through 02/03.

RRI Refinance is done. It was within expectations, and was about as expensive
as CNP, which will be viewed favorably. (I was expecting this in my last
email) It becomes rather expensive if they don't pay it down further down the
road. But don’t worry, they had earning every quarter. (They beat almost
every Q, beat 16 cents this Q)

Institutions will make RRI go up tomorrow, because the reasonable bank pricing
validates the earnings on RRI. Institutions will believe those earnings,
specially with analysts already saying that RRI is lowballing 2003.

RRI---CC
1, CEO Ledbetter just said that the one day refinance extension was so that
the banks could complete the paperwork and finish up credit approval. It's a
done deal.

2, RRI is lowballing wholesale

1) NG, Electricity prices are higher. (NG is much higher). Currently and in
the future's market. 2) Full year of Orion (they've counted the extra interest
expense, but not the additional EBIT).

3, CFO Mark Jacobs says that they are securing the loans and that there will
be no surprise in the rates that the banks give them. He re-iterated what
Letbetter said about finalizing the loan documentation (which is why they got
a 1 day extension). I'm expecting a refinance news release at the end of the
day or before market open tomorrow.

4, ORION has performed very well.


From a analyst;
"The Houston-based firm also dropped its 2002 full-year earnings estimates to
a range of $1.45 to $1.55 per share. The earlier forecast had been between
$1.80 to $2.00 per share.

Reliant also estimated its full-year 2003 earnings per share would be in a
range of 90 cents to $1.10 per share.

One Wall Street analyst said Reliant may have lowered its estimates too much.

"I think they are being unduly pessimistic. Any kind of increased volatility
and liquidity in the fourth quarter will positively impact them," said
Blaylock & Partners LP analyst Lasan Johong, who has a "hold" rating on the
stock and holds no RRI shares. If the fourth quarter isn't a nice surprise,
the first quarter will be."

Johong said that Reliant would see an uptick in its natural gas and power
marketing if the early winter weather in the U.S. Northeast and Midwest
continues and encourages RRI customers to jump into the market."

I believe that RRI is too pessimistic in its estimates. They are lowballing us
so that they can get
cheap options/stock, stock buyback, etc.



That's the key RRI question and I doubt there is anybody that can answer it
with confidence, expert or not. So, with this caveat, here is my take.

We have two quarters now to judge RRI's retail operations. During these
quarters, when retail operated under full competitive conditions:

RRI gained customers and increased sales. From 1.671 million customers in 2Q
(1.44, .213, .018) they went to 1.71 million in 3Q (1.469, .219, .022). Retail
EBIT increased from $205 million in 2Q to $235 million in 3Q. Finally, they
took almost half of the clawback charge they have to pay CNP in 2004 this
quarter, and indicated in the CC they did it because they don't intend to lose
many retail customers. They also indicated in the CC that customer churn is
minimal (less than 1% if I remember right) and most of the customers that
leave are the ones that don't pay their bills.

All these are powerfull indications that the retail operation has a number of
healthy quarters ahead of it. What happens a couple of years down the road is
anybody's guess, but there is a reason to believe that RRI will emerge as the
best retail competitor, given that they apparently are managing their expenses
extremely well, and seem to be the low cost competitor in the market. Note
that their main competitor, TXU, has suffered some significant blows lately,
has a much worse debt to equity ratio, and apparently suffers from huge
regulated utility bloat and expansionitis -- something that RRI shed a number
of quarters ago by harsh necessity.

1) The texas PUC decided that RRI can stop sending electricity to people who
do not pay (previously, they had to keep the electricity flowing). That means
a) more people will pay; and b) people who don't pay, don't cost RRI money and
will cease being 'customers'. This was just announced on the CC, and it is
strictly beneficial to retail's ops.

2) Reliant is expanding its retail operations. A bunch of Las Vegas casinos
will be their customers, I believe, in January. Reliant is attacking Dallas
too. In other words, I think retail will *expand* not contract.

Right now, RRI's retail unit ALONE could support ALL of RRI's debt (ALL the
consolidated debt at ALL levels, the retail unit's EBIT is enough for that up
to an average cost approaching 7%). RRI's retail until alone would warrant a
HIGHER valuation for the whole of RRI.

There is one easy to see problem: The retail dereg in Texas is very recent
(really started Jan 2002) and people were not expecting this huge success.
Indeed, this huge success meant an unexpected transfer of wealth was made from
CNP to RRI.

So analysts haven't absorbed it yet. And bankers might not have absorbed it
either. Or then again they saw it, and that is what made the first refi easy
and will make the following ones easy too

RRI California Involvement;
RRI did better on the recent refinance than even the parent (CNP) they spun
from. They won't have to pay extortion rates as they have a nice asset base to
secure if necessary. If there is any legal problem they have to indict REI,
now is CNP. If some people in RRI are involved, they should be persecuted on
individual basis. So I think RRI is more or less protected by legality.

From WSJ 11/5
"In general, Ms. Spangler said, the companies can expect to pay higher
interest rates and put up hard assets such as plants and pipelines as security
to get new financing, in some cases turning over to the bank any cash
generated by a plant. She said Reliant is in a better position than some to
use its power plants as security for loans. Mirant, AES Corp., and NEG, on the
other hand, are among a handful of companies whose assets already are largely
encumbered, making it more difficult to refinance, she said."

GS Analyst Comment
November 3, 2002 Under a new framework introduced today by Goldman Sachs
Global Investment Research, we assign an Attractive view to our Electric
Utilities coverage group. We now rate stocks relative to our coverage group
rather than to the broader market: under this system, our new stock ratings
are
Outperform (OP) –
Calpine, Energy East, Edison International, Exelon,
FPL Group, PG&E, Pinnacle West Capital, PPL, and Reliant Resources;
In-Line (IL) –
AES Corp., Allegheny Energy, Ameren, American Electric Power, Aquila, Cinergy,

CMS Energy, Cleco, Centerpoint Energy, Consolidated Edison,Constellation
Energy, Dominion Resources, DPL, DQE, DTE Energy, Duke Energy,Entergy, First
Energy,IDACORP, MDU Resources, Mirant, NSTAR, Progress Energy,PNM Resources,
SCANA, Southern Company, Sierra Pacific Resources, TXU, and ExcelEnergy;
Underperform (U) - Hawaiian Electric, Northeast Utilities, OGE Energy,
Public Service Enterprise Group, and TECO.

11/7 U.S. Utility Weekly - "Reliant's business model remains highly exposed to
the wholesale energy business. However, the company's strong retail
contributions provide a level of stability.... Reliant is still plagued by
investigations relating to the company's trading and accounting practices, and
still faces lawsuits relating to the California energy crisis, but we believe
these issues will continue to be resolved over the next year.
"The main question for most investors is whether the company will be able to
refinance its bank debt and maintain adequate cash flow. We strongly believe
that Reliant's announcement that it successfully completed its refinancing of
the Orion subsidiary debt is a strong indication that the banks are still
willing to work with the company. The banks are not likely interested in
writing off up to US$1 billion or more from allowing Reliant to go under.
Additionally, we believe the banks realize that the assets will be worth
significantly more in the future than they would be by forcing the company
into liquidation in the current market environment. The banks would be
practically shooting themselves in the foot."

10/30 RWR Update - "Reliant's business model remains highly exposed to the
wholesale energy business. However, the company's strong retail contributions
provide an added level of stability compared to its peers....
"We recomend that risk-avers investors HOLD positions in Reliant Resources.
However, we believe there could be significant upside as the company secures
new bank facilities. After discussions with the company, we have revised our
net asset value to US$6.93/share, a 274% premium to Tuesday's closing price of
US$1.85/share.... While trading at 1.85x our revised EPS03 estimate of
US$1.00/share, we believe that Reliant has been oversold and is worth
considerably more than current trading levels." [Note: earlier NAV estimate
was 5.11]

10/15 report on Merchant Energy Providers - "Reliant Resources faces an uphill
battle over the coming months, leaving us skeptical until management is able
to accomplish several key catalysts. These catalysts include resolving ongoing
investigations relating to trading activities and accounting practices,
settling with California, and securing new bank facilities.
"With over US$5 billion in debt that matures by February, Reliant may find it
difficult to renew its credit facilities on attractive terms. We believe
Reliant is one of the most undervalued companies in the sector, but we are not
bullish on the stock until the steps outlined above are accomplished." [It is
VERY important to note that the above was written before the Orion refi was
completed, and note the change in RWR's perception after that refi was
announced.]

For comparison purposes, here are NAV's for the IPPs as estimated by RWR.
"Asset Valuation is basically the company's NAV. This tells us how the company
would be valued in a liquidation scenario and provides a base trading range."

AES - 2.23
CPN - 6.05 [see notes below]
DYN - 1.55
MIR - 2.82
RRI - 5.11 [later revised upward to 6.93]

The biggest ringer on NAV's is CPN's, about which RWR says the following.

"Calpine's NAV is difficult to calculate. The company often points out the
importance of including their above market contracts in any NAV calculation,
but with a total value of over US$6 billion, the contracts significantly
inflate the NAV.... If we exclude the contracts, we actually have a negative
NAV due to Calpine's high debt load."

All material quoted above is copyright ReedWasden Research

RRI Refinance
It isn't hard to refinance debt when you have a good cash flow generating
business like RRI's retail division, plus a lot of unencumbered assets to
offer as security.

I thought that RRI faced a very tough/impossible refinance schedule, until I
studied it further and saw the cash flow benefits of having a retail unit
during this wholesale downturn.

Right now, I have no doubt RRI will refinance easily, albeit on a secured
basis.

It should make you think that on the wholesale side RRI is about a perfect
equivalent to MIR, yet it has less debt and a retail unit that right now
generates 2 times MORE EBIT than the wholesale division. As a rule of thumb,
one could say that RRI is now worth at least 3 times MIR's value.

"Near term refinancing", is not a problem if you are producing a good cash
flow like RRI is. Banks are in the business of lending, they WANT to lend,
just as long as those taking the loans can pay them back, and in this case,
offer security in exchange.

And in fact, RRI refinanced 1.5Bn at attractive rates weeks ago.

RRI will have no trouble to secure the financing in February for the following
reasons:
1) Ample assets to put up as security for debt. They could easily put up
assets valued at 3-4 billion to securitize 2.6 Billion in debt easy and still
have several billion of unsecured assets left over.
2) Why would a bank force chapter 11 on a company that has strong positive
cash flow. It puts them at the mercy of the courts while RRI takes in cash and
stuffs it in bank and negotiates liquidation sales with bank over a several
year period all the time RRI is taking in money and the banks are receiving a
cent. That is not good business
3) RRI cash flow is strong. Its cash flow easily covers the debt and allows
for future debt retirement at a rate of several hundreds of million of dollars
per year.
4) After the financing is done RRI Debt/Equity ratio will still be below 1.
One of the strongest in the industry (better than DUK)
5) It would force undo duress to the utility industry already under fire. It
would call into question any financing that a utility would be doing in the
near future. Few are as strong as RRI. It would eventually cause electric
rates because of the further risk they put on the industry and would
potentially cause further harm to the economy.
I believe the stock will not be able to seek its to true level until this gets
done as the doubt of obtaining it (do to shorts progating fear for their
advantage) will way on the stock.


Final Words
I don't want to put too much money in the IPP sector. Most investment
professional will say that one should buy a basket of these companies so that
even if some fail the survivors will make up for them. So I have put money in
PCS and a new area I just found. However, I believe that RRI is so much better
than the rest, that it's not worth to diversify in this sector, especially
because the problems in the sector are so similar among the various companies.

I think MIR is the 2nd best choice in the IPP sector right now, but at a very
large distance to the first. I started with CPN. And after some research I
switched to MIR cause I then found MIR to be in the same situation - it was
way better than CPN. You have to keep your mind open and fall in love with
numbers and facts, not the stocks.

I think CPN is a great momentum player because of its large short position and
its immunity to California issues. CPN is good for day-trading, not a
investment.

When PCS was twice as much as NXTL earlier this year. I kept bashing PCS on
Mei-gu-lin-tan with “wireless is bottomless!” and “NXTL should be twice as
much as PCS”. It is more than twice now! But I was wrong of saying “PCS will
file chapter 11 by end of 2003.”

I am researching a new area, which I believe was "slaughtered."

From Lycos/Raging Bull 11/18/02
Now that we have that out of the way, let's review RRI's financial position.
They bought Orion for $2.9B in equity and the assumption of $1.3B in debt
during Feb 2002. They just refinanced Orion's total debt ($1.3B) at the Orion
sub level in a 3 year bank deal that was collaterallized by Orion's power
plants. RRI will be paying an interest rate of only LIBOR + 250 basis points
the first year with the rates going up moderately from there during the out
years. Since Orion's assets are primarily in the Northeast (where there is not
a power glut) and a lot of its power is under long term contracts, spot spark
spreads are really not an issue except on the margin. What the banks are
hoping for and what RRI expects to do is for a significant portion of this
debt to be paid down during this 3 year period (better known as a lot of
breathing room) with the rest financed long term in the capital markets by the
end of this 3 year period. In the interim, RRI will not receive dividends at
the parent company level from its Orion assets. In short, all free cash flow
generated by the Orion sub will be devoted to reducing Orion debt.

At the parent company level, RRI has no secured debt. The major piece of
refinancing that has to be done by RRI involves refinancing the $2.9B 1 year
bridge loan that was used to buy the equity in Orion which expires February
2003. The only debt RRI has above and beyond this at the parent company level
(or anywhere else except for Orion) is another $1B odd (all non recourse)
which it expects to refinance also as part of a total parent company package
(even though RRI doesn't have to).

If you listen to the RRI's 3rd quarter CC, their CFO (who was, until very
recently, a managing director at Goldman Sachs) laid out very clearly how they
expect this to be done. For one (as pointed out in an earlier post), RRI has a
retail business with 1.6MM customers, an EBIT of $600MM+, only $150MM in
assets and no debt. What that means simply is that all $600MM of this EBIT is
presently available to service this $4B odd total debt. In addition, RRI has
unecumbered power plants in the West and elsewhere that could be put up as
addional collateral. And on top of that, remember that RRI paid a total of
$4.3B ($2.9B equity plus $1.3B debt) for Orion and that so far only $1.3B has
been borrowed against those assets. With the realization that the enterprise
value of the Orion purchase is no longer worth $4.2B in this depressed energy
environment, it is still worth in any scenario more than the $1.3B currently
being borrowed against it. This additional value (whatever it is) is fully
available to RRI at the parent company level to pledge as additional
collateral against their parent company loans as a second lien.

Bankers may be dumb, but they are generally not stupid. Right now they are
sitting in a position where none of the money loaned by them to RRI is secured
by anything. As a result, if RRI filed for bankruptcy because of its inability
to renegotiate its bank debt, the banks would be sitting in the back of the
bus during BK hearings. What RRI has told them quite clearly is that RRI is
more than willing to over collateralize all these loans in a renegotiated bank
deal, but with the caveat that they want a deal similar to the one done at the
Orion sub level ((i.e. extended maturity (3 years or more) at a reasonable
interest rate)). IMO RRI (when compared to other IPPs) is sitting in the
driver's seat with 3 strong trump cards to play (lots of available collateral,
the willingness to pledge it, and a strong retail franchise to support it) in
these bank negotiations.

A simple fact about RRI - Assuming that the current depressed energy
environment continues unabated throughout 2003 (which is what RRI is basing
their 2003 projections on), RRI expects to generate $300MM in EBIT from its
wholesale operations, $600MM EBIT from its retail franchise, and $40MM EBIT
from Europe. Interest costs on all debt (including Orion) is expected to be
$425MM. On that estimate, RRI is forecasting an EPS of $1 during 2003. For
every 100 basis points change (up or down) in interest rates from those
forecast, the EPS would change (up or down) $.08/share.

It is fascinating to me that so many people panic when they read a statement
in a 10Q that does nothing more than state the obvious. In terms of RRI, it
shouldn't come as a surpise that if the banks don't extend RRI's bank
financing at the parent company level that Chapter 11 would be a possible
result. Since, last time I checked, a good bank was measured by its ability to
get back with interest the money it loans to others, and given the above
scenario; I see no reason for RRI's bank refinancing to proceed on any basis
other than the one described above.

If you want to talk about scary, then let's talk about GE having $100B+ of
commercial paper outstanding with less than half secured by bank lines. Now I
find that (unlike RRI's current situation) scary.

¶ 11:21 AM //

Since the market becomes hot again, more and more companies would come to the market to raise money. I assume most of us don't have more than 1M assets. which means the most of us don't have access to IPOs.
Don't worry, though. The good news is we can invest newly IPOed stocks.

Newly IPOed stocks are under full control by their underwriters. As a matter of fact, it's quite easy for underwriters to manipulate. Why? First, floating shares of newly IPOed stocks are few during their locking periods. Moreover, those newly IPOed stocks pretend to have
sound fundamentals in order to attract investors; second, underwriters have their interests involved. They got paid commissions by cash plus profit from selling alloted stocks; third, underwriters care about their fames. If a newly IPOed stock performs weak, the chance to underwrite a next IPO is dim. For this reason, underwriters would use their fund money to buy or contract third-party funds to buy. This happened a lot back during the 1999-2000 IPO rush hour.

Not all newly IPOed stocks would perform well in the market. I successfully invested CPST, ACPW, SONS and also lost a bunch in PTIE in 2000. Like investing other stocks, TA and FA matter. The lessons I learned by putting $ and efforts can be shared with others here. Name a few:

a. Underwriters must be Wall Street monsters: Goldman Sachs (GS), Merril Lynch (ML), or Morgan Stanley (MS). As for others, piss off. I lost $ in PTIE because I didn't strictly obey the rule. I lost $40 grand in 30 minutes as a student. I still remember I almost had a heart-burn at that time.
b. It must be in a hot sector. For instance, I definitely invest an oil related stock at this point (July 2005).
c. Floating shares must be less than 20 M. The few, the better; the more, the worse. It definitely cannot be more than 100 M.
d. The first day turn-over rate must be over 100%. If it is over 100% during the first trading hour, I would definitely jump in.
e. Jump in based on its intraday technical charts (e.g. 5 minutes). Don't chase though!!!
f. Its open price on the first day must be above its IPO price. Its IPO price must be the top of its IPO price range.
g. WHEN TO SELL? SELL BEFORE ITS LOCKING EXPIRES OR WHEN UNDERWRITERS PUBLISH THEIR RATINGS (usually one month later).
etc.

No pain, no gain. Do your hard work, and you'll be rewarded."

Case study:

BIDU's a perfect example that it satisfies all the conditions I listed, especially condition d "If it is over 100% during the first trading hour, I would definitely jump in." clearly reminds readers that BIDU is the one worth speculating.

For more information about SwingBH's other investment strategies, please visit our "RecNeck Investment Club". Thanks for reading this message.

--SwingBH

¶ 11:16 AM //

A REIT - office company that offers stable dividend income,

Dividend History 12-00 12-01 12-02 12-03 12-04
Dividend $ 1.75 1.52 1.62 1.54 1.26
Year-end Yield % 19.94 11.26 12.85 10.11 6.72
S&P 500 Yield % 1.02 1.19 1.55 1.39 1.44

5 Year History Splits and Dividends Amount Per Share
06-28-05 Cash Dividend 0.3000
03-29-05 Cash Dividend 0.3500

12-29-04 Cash Dividend 0.3400
09-28-04 Cash Dividend 0.3400
06-28-04 Cash Dividend 0.3400
02-19-04 Special Dividend 0.2430

12-29-03 Cash Dividend 0.3800
09-26-03 Cash Dividend 0.3800
06-26-03 Cash Dividend 0.3800
03-27-03 Cash Dividend 0.4000

12-27-02 Special Dividend 0.0200
12-27-02 Cash Dividend 0.4000
09-26-02 Cash Dividend 0.4000
06-26-02 Cash Dividend 0.4000
03-26-02 Cash Dividend 0.4000

12-27-01 Cash Dividend 0.4000
09-26-01 Cash Dividend 0.3800
06-27-01 Cash Dividend 0.3750
03-28-01 Cash Dividend 0.3650

¶ 11:48 AM //

bought this stock at 50 and sold it in the 70 range. but still feel this is an excellent stock. the real value should be around 70. will decide if to get in if the price fall back to 70.

Morningstar Quote

¶ 12:11 AM //

Profile:

Alliance One International, Inc. (AOII) operates as a leaf tobacco merchant worldwide. The company engages in selecting, purchasing, processing, storing, packing, and shipping tobacco. It primarily offers flue-cured, burley, and oriental tobaccos that are used in international brand cigarettes. The company, through its wholly owned subsidiary, Compania General de Tabacos de Filipinas S.A., also operates as a dealer in dark tobaccos primarily used for cigars and smokeless tobacco products. AOII’s customers include manufacturers of cigarettes and other consumer tobacco products. Alliance One International was formed in 1995. It was formerly known as DIMON Incorporated and changed its name to Alliance One International, Inc. in May 2005. The company is headquartered in Danville, Virginia.

Reason for downfall:

no news coming out. volume isn't big either, so maybe just speculation?

¶ 10:58 PM //

Profile:

BlueLinx Holdings, Inc., through its wholly owned subsidiary, BlueLinx Corporation, distributes building products in the United States. The company’s principal product categories include structural products and specialty products. Its structural products include plywood, oriented strand board, lumber, and other wood products, primarily used for structural support, walls, and flooring in residential construction projects. The company’s specialty products include roofing, insulation, moulding, engineered wood products, vinyl products, and metal products. BlueLinx’s customers include building materials dealers, industrial users of building products, manufactured housing builders, and home improvement centers. It was formerly a subsidiary of Georgia Pacific Corp. BlueLinx Holdings is headquartered in Atlanta, Georgia.

Reason for the downfall:

BlueLinx forecast quarterly earnings of 22 cents to 26 cents per share, on revenue of roughly $1.48 billion.

Analysts' average forecast is a much higher 53 cents per share, the mean estimate of three analysts surveyed by Thomson Financial.

Shares of BlueLinx fell 74 cents, or 7.1 percent, to a new 52-week low of $9.75 in morning trading on the New York Stock Exchange. Since hitting a high of $18.25 in March, the stock has lost about half its value.

BlueLinx also projected gross profit of about $115 million was hurt by a "significant decline" in structural product prices, with the price of pine plywood, oriented-strand board and lumber down sharply from the prior-year period.


Key Stats:

Market Cap (intraday): 274.67M
Enterprise Value (7-Aug-05): 1.02B
Trailing P/E (ttm, intraday): 4.61
Forward P/E (fye 01-Jan-07) 1: 5.95
PEG Ratio (5 yr expected): N/A
Price/Sales (ttm): 0.05
Price/Book (mrq): 1.82
Enterprise Value/Revenue (ttm): 0.18
Enterprise Value/EBITDA (ttm): 7.255

Random thoughts
book looks all right. debt/equity ratio is kind of high, but most debts are long term liability; intereset expense for the quarter is over 9 mil, which isn't too much of a concern.
volume has been extremely low (38000)
Primarily, the downfall has been due to the "significant decline in structural product prices", "the Random lengths composite price index for pine plywood, oriented strand board and lumber declined 8%, 26% and 9%, respectively, during the quarter. In addition, structural rpoduct sales through the lower cost-to-serve direct channel grew disproportionately, which contributed to a lower gross margin rate."

So the analyst all missed the target because of a public-known price information. Why do they miss fire?



The majority shares (60%) are owned by Cerberus Capital Management, L.P. , who has 7 Billion under management. Here's the quote from Hoover about the nature of the hedge fund, "Named after a three-headed dog that guards the gates of hell, Cerberus Capital Management's investment strategy is to keep companies from flaming out. Holdings include a 49% stake in Japanese bank Aozora, US tech firms ICG Communications and SSA Global Technologies, and cable operator Galaxy Cable. The firm often injects capital into retail ventures -- struggling music retailer Wherehouse Entertainment was a former investment, as was beleaguered fashion house Esprit de Corp (now known as Esprit Holdings). More recently, subsidiary Riley Property acquired real estate services firm LNR Property, and Cerberus paid about $2.3 billion for MeadWestvaco's paper business, forming NewPage Corporation."

¶ 9:46 PM //

Here are some further filtering, for these 12 stocks,

BXC : 3.71
NIPNY : 1.71
AFCE : N/A
TRCI : 1.19
COOL : 0.80
SWM : 1.36
TG : 1.17
SXT : 1.57
VNT : 0.72
JNY : 1.33
AOI : 3.54
HOMZ : N/A

I would treat BXC and AOI as the candidates for the moment.

¶ 10:47 AM //

Symbol Company Name Rank Market Capitalization P/E Ratio: Current Price/Sales Ratio Today's High Price 52-Week Low Price/Book Value Current Ratio Today's Low Price Industry Name

BXC BlueLinx Holdings Inc. 6 283,437,000 9.20 0.08 9.40 9.05 1.82 2.00 9.05 Building Materials Wholesale
NIPNY NEC Corporation (ADR) 12 9,996,983,000 17.30 0.22 5.14 5.05 1.33 1.20 5.04 Computer Based Systems
AFCE AFC Enterprises, Inc. 2 386,557,000 2.30 1.34 13.19 12.67 1.28 3.70 12.67 Food - Major Diversified
TRCI Technology Research Corporation 3 22,926,000 11.70 0.58 4.00 3.95 1.33 2.20 3.84 Industrial Electrical Equipment
COOL Majesco Entertainment Co. 1 69,790,000 1.00 0.34 3.13 2.93 0.92 4.30 2.93 Internet Service Providers
SWM Schweitzer-Mauduit Int'l 11 393,454,000 12.50 0.59 25.85 25.75 1.35 1.20 25.20 Paper & Paper Products
TG Tredegar Corporation 7 567,413,000 17.50 0.63 14.50 14.37 1.18 2.00 13.15 Rubber & Plastics
SXT Sensient Technologies 4 871,615,000 12.50 0.84 18.61 18.45 1.34 2.20 18.25 Specialty Chemicals
VNT C.A. Nac. Telefonos de Venezuela (ADR) 10 1,346,430,000 6.00 0.60 13.14 12.00 0.64 1.30 11.17 Telecom Services - Foreign
JNY Jones Apparel Group, Inc. 9 3,492,749,000 13.30 0.71 29.47 29.06 1.33 1.40 29.06 Textile - Apparel Clothing
AOI Alliance One International, Inc. 5 496,325,000 19.60 0.38 5.69 5.41 1.20 2.20 5.41 Tobacco Products, Other
HOMZ Home Products International, Inc. 8 10,243,000 2.00 0.04 1.15 1.01 1.81 1.40 1.01

¶ 1:04 AM //

Market Capitalization Display Only
Industry Name Display Only
P/E Ratio: Current <= 20
Price/Sales Ratio <= 1.5
Today's Low Price <= 52-week low
Price/Book Value <= 2
Today's High Price >= 1
Current Ratio High as possible

¶ 12:32 AM //