Re: First good idea
Kimchi,
Although I don't understand anything you wrote, I liked it much better than the first TA piece. [img]/images/graemlins/smile.gif[/img] Here is my take on things.
Q1 report was good. Above expectation with regard to gross margin/end markets. Levered to non-residential construction which was seen as strong. Stock also rose on strong language regarding debt refinance. Management guides to 80m in EBITDA for '07. Stock pushes to $14.
Subprime meltdown begins and DSUP decides not to refinance at 8.5%. They believe debt markets will improve and they can get a better rate on their 330M in debt. Concurrently, rains in Texas delay construction (they are a concrete additive company) and it looks like they will miss analyst expectations for Q2. It's a new company and analysts through up numbers around the guided 80M in EBITDA.
DSUP misses Q2 on weather and backends the EBITDA numbers (AKA the kiss of death). Other than revenue shortfalls, rest of stats, margin trends, utilization look okay. I wasn't worried at this point. Stock falls sharply to 8. Analysts adjust models to account for stronger EBITDA generation in Q3/Q4.
Q3 non-residential construction starts to slip particularly in florida and baltimore/washington. Q3 report comes in and DSUP misses badly. 80M EBITDA is no longer doable. Looks like 80M in '08 is reasonable. Debt refinance comes in at a blended rate of ~7.6. Market kills the stock dead.
Krishan
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