Heineken-Ashi said:
I actually think this is a topping pattern. Not to mention, their new debt is floating rate. Could be awful if rates don't go down.
But just like POWL, if you got in low, what a freaking run.
It is ahead of itself on historical results (really Q3) which gives it a .40 run rate. So 20-25x is $8-$10.
But we know in Q3 the facility was not optimized. Q4 will be worse than Q3 as xAI phase 2 started late in the quarter.
But what is interesting and hard to properly value. They moved on purpose to a new facility that is 2x the old one and were not at capacity yet. Mgmt noted they can do 5x what the previously did as they do buildout primarily for power.
Dell is sold out for 2025, at least that is the rumor. That flows to TSSI, which means better optimization of facility. So hard to tell what the revs will be in Data Integration and Facility Mgmt. Don't look at total revs and Procurement ($50M in Q3) is basically an extremely low margin business of in and out. Margin is really about 4% and then they factor those receivables too. Makes cash look larger than it is as they receive the cash from factoring but dont make payments for 30 days. So truly have to look at payables/receivables too.
Debt, is up to $20M and a little over 7% and yes variable as you noted. This is a new expense. So is higher rent (guessing) for double the the size, and could be quite large amortization of leasehold improvement. Mgmt previously said $25M to $30M. If lease term is 5 yrs that could be $6M nut right there. If 10 then is a bit more modest.
So is extremely difficult to model at the moment. I asked mgmt about lease etc and they just said that isnt public. Well why the hell not, it should be. But whatever. I think they get to a run rate of $1.00 in Q2 or Q3 (ie earn .25/qtr). They are turning some business away and focused on larger customers. I expect robust business over next 2 years, and certainly could be longer. But what about in 5 years, etc. No one knows how this shakes out so a 25x multiple could be too high, but I think momo at times will push it that high. So I still have low $20's FV until more info is available to model. But my model is fuzzy till more more concreteness is achieved. Hopefully that occurs in the next earnings call as they talk 2025. From what I have seen, mgmt plays it a bit close to the vest and thus I probably dont get as much visibility as I like, but I do expect a whole lot of positive vibes emanating from the call and given low float this could really push higher (as long as investors ignore the Q4 numbers as I said I expect to be lower than Q3).
