Using Veritas to Construct the "Per…

29-04-2017 Hits:85784 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:80012 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:79872 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:84351 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80891 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:83138 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:54149 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:82274 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:82124 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:81993 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:88018 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:85893 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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This is the full forensic analysis of the Encore Corporation, an industrial that specializes in copper wiring for residential and commercial builders (that's right, Uh Oh!). I will be changing the format of the posts, including only summaries in html and leaving the bulk of the report as a downloadable PDF file. From this point on, I will focus on only those manufacturers and industrials that I consider to be bankruptcy candidates, with a macro report to show the reasoning behind these actions coming up soon. Enjoy!

 Encore

Fast declining spreads between average selling price of wire containing a pound of copper and average cost of a pound of copper on account of an intense competitive environment in the US building wire and cable market has adversely impacted the performance of Encore Wire Corporation (Encore) over the past two years. The problem has been compounded by a slow down in residential construction which witnessed a sharp decline in 2007 and 1H2008. Further, slowing commercial construction in the US off contraction in economic activities, as evidenced by a decline in the manufacturing and non-manufacturing sectors, and rising unemployment levels, has had a dampening impact on Encore's average selling price and margins. This resulted in Encore's 1H2008 net earnings and EPS declining 42.8% and 41.8%, respectively, to $14.9 mn and $0.64 compared with $26.1 mn and $1.10 in 1H2007.

With no near-term turn around expected in the current deteriorating conditions in the US construction sector, Encore should expect to witness continued compression in its gross margins, with almost flat revenues in 2008 and 2009. While the continuing slow down in the US commercial construction activities should continue to strain the Company's near-to-medium term revenue growth, the margins are likely to be compressed amid volatile copper prices and Encore's lower bargain power on the pricing front. As a result, we estimate Encore's gross margins to be 8.0% and 9.0% for the next two years, down 140 and 40 basis points from the 2007 levels, resulting in our EPS estimate of $0.87 and $1.14 for 2008 and 2009, respectively. We believe that the Company's near-to-medium term performance will be determined by its ability to withstand the current volatility in the copper prices, which after rising 34.8% in 2008 to its highest ever level of US$8,985 per tonne on July 3, 2008, have subsequently fallen 14.6% till August 20, 2008, and to maintain sustained and reasonable margin levels with moderate growth in its revenues. Based on the relative valuation approach, we have valued Encore at $14.7 per share, down 22.5% from its current price of $18.9 as of August 20, 2008.

 

 

    I.   KEY POINTS

 

Tough times expected for Encore in the wake of impending US commercial construction deceleration. Encore's revenues rely largely on demand from commercial construction in the US. Currently about 74% of the Company's total sale volumes are attributable to the commercial construction sector. In the past few quarters, the impact of slackening demand in the residential construction sector on Encore's revenues had been compensated through simultaneous demand expansion in the commercial construction sector.

See the PDF for pro formas, valuation and further opinion on this company's prospects. You must register to download this report (click here to register for free) -  pdf  Final Encore (452.14 kB 2008-08-26 12:07:06)