Asian Television Network (SAT, TSX-V)
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Posted: Saturday Sep 3 10:21:59AM 2005
Sorry everyone, I have been really busy and have not had a chance to look at the debt a little closer.
I agree that EBITDA to interest expense is a valuable measure of debt service capacity. Operating cash flow to interest expense and "Times interest earned" (also called interest coverage ratio) are also useful if you know how to interpret them. The measure that I prefer the most is operating cash flow or EBITDA to debt service payments required during next 12 months (principal + interest). I then subjectively examine the likelihood of the refinancing of loans coming due over the next year (sometimes longer) and the expected effect on this ratio and DILUTION.
Will get to it soon..
Posted: Thursday Aug 18 10:16:51AM 2005
Ok, now that I’ve done that, I would like to expand a bit on the level of debt. These media companies take a lot of money to launch. I haven’t looked at Rogers or CanWest Global lately, but at one point the level of debt in relation to income for these companies was staggering. Having said that, successful media firms command high P/E’s and are prime takeover targets.
I wouldn’t use a cash flow to interest expense ratio to determine debt serviceability because SAT uses all available cash for expansion (and that’s a good thing at this point in its history – just witness the number of new channels coming on stream). Instead, let’s use EBITDA to interest expense. Based on Q2:
Earnings were $435,512
Add back financial expense $102,894
Add back amortization $41,363
Add back taxes $0
Equals EBITDA $579,769
So EBITDA to Financial Expense Ratio was 5.63 to 1 which is pretty good IMHO. Yes, there are lots of cash needs for the company, but I hope that this analysis helps to put things in perspective.
Given its current level of profitability, I would think that renegotiating outstanding loans won’t be a problem; however, I too await the results of dundee’s investigations. We would all love to find outstanding growth opportunities that have positive equity and debt/equity ratios of less than .5. Perhaps this company will be the exception to the usual rule.
By the way, SAT insiders have been buying consistently for quite a while. And do keep in mind that SAT will not be paying taxes for probably at least the next year (almost 6 quarters at its current level of earnings), which should allow it to keep expanding nicely.
Posted: Tuesday Aug 16 8:25:07PM 2005
The debt doesnt concern you? Assets 2.3 million. Liabilities 5.8 million. Deficit of 3.5 million.
Posted: Tuesday Aug 16 6:51:27PM 2005
I picked up some today at .31 ... i should have pulled the trigger yesterday at .26, but was still doing my DD.
After doing the research I am happy with my entry price of .31.