Wednesday, August 06, 2008

Asensio Says NYT Article on Freddie Mac's Richard Syron Neglects His Problematic Past

Freddie Mac (FRE) caught Asensio’s attention. Asensio has issued a press release making the point that the recent New York Times article on Richard Syron should have been more complete. To quote the press release Asensio said “The pertinent question, which the New York Times does not ask, is why Mr. Syron was even offered the job at Freddie Mac. Syron was the chairman of the American Stock Exchange ("AMEX") from 1994 to 1999. Syron bore responsibility for trading practices that resulted in a congressional investigation into the AMEX's failure to comply with securities laws, and resulted in SEC sanctions that required major changes at the AMEX.”

So maybe the wrong guy was captain of the ship. I am not sure than any one individual could have avoided the sub prime mess. Sub prime is clearly a testament to the madness of financial crowds. But maybe the right guy would have had the intestinal fortitude to steer the ship away from the storm as much as was humanly possible. One of the problems on Wall Street there clearly is a shortage of the “Right Guy”

Anyway have a read on for the complete press release, links to media articles and more background on Asensio’s role with AMEX when Richard Syron was at the helm.

Cossette Communications Is It Stable?

Cossette (KOS) came out with Q3 earnings and let the world know that the US operations served up an asset impairment charge. OK its all non cash and this is a communications company with strong roots in advertising. A couple of warning signals to be considered here. The CFO is leaving and a new guy is being brought in from outside. There is a short overlap period to ensure continuity. When the CFO leaves I always want to look a little harder; especially when the impairment charges are coming up. The year end audit is a big issue in Q4 and the old guy will not be around.

Read the comments they have about the US operations. “As for the U.S., we are well engaged in this market, as demonstrated by the recent acquisition of Rocket XL. The teams we have in place in our U.S. operations are energetic and dynamic. We are very confident of the quality of the service we can deliver in this market and are optimistic about the future success of the operation."

That’s a pro forma promise with a possibility of resembling GAAP at some point in the future. It is rather empty when describing just what is going on and what they are doing. If you still do not believe there are warning signals then please take a look at the balance sheet. Short term borrowings including over draft is just under $42 million. Cash flow before non cash items is $8.2 million. This is a services company without tangible assets.

Be afraid very afraid.

Tuesday, August 05, 2008

EchoStar Lazy

Echostar ( SATS) reported Q2 results at approximately 6:45 ET Monday Aug 4. The press release is positively one of the laziest pieces of financial information that I have come across in a long time. They throw out a few terse words about profitability which seems to have improved and then they refer you to the 10-Q.

The conference call transcript as carried by also shows two disturbing aspects. Firstly there was no management discussion or commentary about any of the results. They just jump into Q&A with the sell side analysts. They also ask the media to not quote any of the analysts or the first they work for. The transcript usually shows where the analyst works but in this case Echostar’s wishes are complied with. Except for two firms (Stiffel Nicolaus and Knott Partners) What gives? What we have here is the failure to communicate?

China Medical Sounds Good?

China Medical (CMED) came out with Q1 results and essentially popped their revenues by 50%. This is a young company selling medical devices to Chinese hospitals and the market seems to be very good. I normally am not impressed with sell side analysts but in the conference call transcripts carried by the analysts did not seem to be swallowing the reasons for margin increases. A major factor is that China Mediacl no longer sells microscopes and refers the hospital to the manufacturer. Management claims this is easier and removes a lower margin product from the product sales cycle. Why not just take a referral fee and fax in an order? What is it that is much slower under the old process? The rationale does not clearly wash out in the discussion.

The company is in a rapid growth mode. But if the products and services are so hot and in demand why are customers not paying their bills more quickly. Accounts receivable are well over 100 days. There has been some improvement but you cannot survive with accounts receivable the age to 100 days. At the present time accounts receivable well in excess of the quarters revenues. Cash is king. The kings throne does not appear to be situated on this balance sheet.