|Shares Out. (in M):||85||P/E||0.0x||0.0x|
|Market Cap (in M):||286||P/FCF||0.0x||0.0x|
|Net Debt (in M):||0||EBIT||0||0|
I first submitted this idea to VIC when this trading at $2.75, about 3 weeks ago. It took until today to get my membership approved! I still think its really attractive, but I just wanted to let you know why the share prices in the writeup dont match up to today's market price.
BFCF is a heavily mispriced and underfollowed equity with an extremely complex corporate structure. Through its subsidiaries, BFCF owns a variety of liquidating assets, NOLs, and a timeshare business that sells/finances vacation ownership interests in over 60 domestic & Caribbean resorts (Bluegreen Vacations).
BFCF is currently hard to analyze due to its complex corporate structure and management’s poor disclosures, which make it very difficult to identify the company’s assets and time-consuming to properly value those various assets. In addition, the company is OTC listed with no sell-side analyst coverage.
I believe the above-stated overhangs will be eliminated in the next 12-18months, resulting in a jump to the equity’s fair value. The catalysts to drive this price correction include:
For the current share price of $2.90 you are buying the net asset value of the liquidating assets & NOLs at their fair value, plus you are getting the Bluegreen Vacations business (which generates $101.5mm of annual EBITDA and $78.1mm of FCF) for free, providing ample margin of safety while you wait. I believe the current fair value of BFCF shares is currently in the range of $8.00 to $12.00 based on timeshare industry comparables.
Full writeup: https://db.tt/9kgiSOst
|Entry||02/26/2014 05:02 PM|
Involved as well, think there could be upside to the real estate assets' book value. Think you should make some adjustments down for minority interest and HoldCo SGA
|Subject||RE: We agree|
|Entry||02/26/2014 05:06 PM|
SGA is already included in the analysis. I applied comparable timeshare EBITDA multiples to the holdco SG&A and netted against the overall valuation.
Minority Interest, I think, is covered by me using a discounted EBITDA multiple from timeshare comps.
Thanks for the thoughts. Please give more.
|Subject||RE: We agree|
|Entry||02/26/2014 06:26 PM|
My largest personal position.
I think there is real upside to the BV of the real estate as well.
They could lever up Bluegreen as it is underlevered.
They could also buy back stock or pay large divs with Bluegreen cash flow.
I just hope mgmt does not buy any more chocolate companies.
|Subject||RE: RE: We agree|
|Entry||02/26/2014 06:45 PM|
My largest position as well, by a huge margin.
Glad to see there is a following for this name. I have had trouble finding others who knew anything about it.
|Subject||RE: RE: RE: RE: We agree|
|Entry||02/26/2014 10:43 PM|
I agree with this thesis. A few questions just to drill down on risks and estimates for upside potential:
1) You mention potential BBX merger bust as a risk. Given BFCF has sufficient voting stake to consummate the merger without any additional shareholder votes, what other reasons could potentially cause the planned merger to fail?
2) Shareholder litigation liability - you estimate $0-50mm liability. What is the basis for this range? Is there a source for your est. max of $50mm?
3) NOL usage - if BFCF plans on utilizing the NOLs through acquisitions, wouldn't there be an IRC Section 382 limitation on annual usage based on long-term tax exempt rate (~3.5% or so)?
|Subject||RE: Bluegreen Merger|
|Entry||02/27/2014 09:28 AM|
1) There is ongoing shareholder litigation. Pre-req for the merger is uplisting BFCF to NYSE. Cannot uplist until litigation is settled. Therefore, cannot merge until litigation is settled. The trial was rescheduled for Nov 2014 from Jan 2014 in the last few days.
2) Im just guessing they settle out of it for something in that range. There is no source, but I think it is reasonable for a company of this size. We can double it and knock another 40c off of the low-end target price if you think that is better/more conservative.
3) I admittedly do not know. Can anyone else help with this? Wish I knew more about NOLs :(
|Subject||RE: Bluegreen Merger|
|Entry||02/27/2014 09:44 AM|
if I recall correctly, Levan bought BXG shares on the open market back in '09, up to 50-ish percent ownership. They took over, and later merged the rest of the BXG public shares into the greater BFCF complex.
|Subject||RE: RE: Bluegreen Merger|
|Entry||02/27/2014 09:48 AM|
Thanks for your reply. Any sense on expected duration of the litigation trial? How long have the other major consumer lenders' trials lasted? Trying to better gauge timing of expected litigation resolution - seems that is the primary risk and also the primary catalyst.
|Subject||RE: RE: RE: Bluegreen Merger|
|Entry||02/27/2014 09:50 AM|
what is the PF market cap / EV though....
|Subject||RE: RE: RE: RE: Bluegreen Merger|
|Entry||02/27/2014 12:29 PM|
I got 127.7mm PF shares. Midpoint target market cap is ~$1.3B
|Subject||RE: RE: RE: Profitability and inventory|
|Entry||02/27/2014 03:33 PM|
Thanks for the thoughts. Looks like Im going to have a movie night this weekend.
I dont have the answers to any of your deeper questions on the timeshare industry. I'd also love to hear other people's thoughts are on these topics as well, particularly on owned timeshare inventory sustainability (not timeshares built by other developers and brought into the bluegreen system). Is it simply ongoing mortality (like 15% annual foreclosure), aided by cyclical waves of foreclosures that provides inventory?
Regardless of that curiosity, even if we assume that the 8-10% pickup in GM on the VOI sales is an accounting gimmick, and it materially reduces the EBITDA from my original analysis, there is still EBITDA from the mgmt fees, VOI financing, and 3rd party sale commissions. Something like $7.25 - 11.50 is still realistic/conservative to me based on discounted multiples (see my last post for my logic).
|Subject||RE: litigation estimates for bfcf etc.|
|Entry||02/27/2014 11:40 PM|
can you explain the status of the class action litigation against the company? i thought the class action had been dismissed?
what is allegation, what is risk to company - what reserves they have or don't have for that litigation?
what is your range based on in terms of the 0 - $50 mm liability to company?
also, re the sec case do you know if the sec is seeking monetary damages separately from seeking to have Levan barred as officer and director?
my reading of some of the trial pleadings seems to suggest judge is sympathetic to govt's case. is that your read? in speaking to IR at the company he is posturing that judge needs to appear sympathetic to govt for political reasons but in fact is balanced? what's your view? ultimately, do you have any intuition/predictions on whether the case goes to trial or is settled and if it goes to trial whether bbx loses and if so whether a loss is immaterial because Levan Sr. steps down and Levan Jr takes over?
|Subject||RE: RE: litigation estimates for bfcf etc.|
|Entry||03/06/2014 04:52 PM|
Can someone attempt to give me the PF MARKETCAP and EV fully diluted / fully merged / fully everything.
What is PF NET DEBT/PF NET CASH ex debt that is backed by receivables...
Is there cash flow available for repurchase?
What is the delta between the 70 mm in pretax for the 9months reported by BXG (should be 94mm for YE 13) and the .12 in the merger proxy...
Are the other assets losing them money? Should that be subtracted from the NAV?
How do you intellectually value all the disparate parts.
|Subject||RE: RE: RE: litigation estimates for bfcf etc.|
|Entry||03/06/2014 06:18 PM|
the writeup already has most of the answers to these questions, or at least the pieces needed to get to the answer with simple math.
|Subject||RE: RE: RE: RE: litigation estimates for bfcf etc.|
|Entry||03/14/2014 01:11 PM|
Cries, would you please address Credit guy's questions re: the SEC? Thanks.
|Subject||RE: RE: litigation estimates for bfcf etc.|
|Entry||03/14/2014 02:13 PM|
Just to be clear, I don't understand the distinction creditguy is making about the SEC asking for monetary damages separately from having Levan barred. They are separate requests in the original law suit.
I am asking about your take on the rest of the SEC related questions he asks about. Also, is there a significant incentive on the part of BFCF to settle early to complete the merger in a timely manner? Thanks.
|Subject||RE: RE: BBX 10-K|
|Entry||03/17/2014 10:53 PM|
4th qtr ebit looks pretty weak and especially in the context of reasonable VOI Sales in 4th qtr. Seems like the are having to spend more to get the same Closerates...
82mm of ebit at BXG is not bad but it seems to be lagging the industry substantially. DRII, VAC, WYN are all showing strong ASP/EBITDA growth.... Any thoughts on this?
|Subject||Problems with Dropbox link|
|Entry||03/19/2014 10:00 PM|
I think your Dropbox link is dead. Can you refresh? Thanks
|Subject||RE: Problems with Dropbox link|
|Entry||03/24/2014 10:01 PM|
by buying BFCF you are basically buying Bluegreen, NOLS, and some RE....
Why not just buy DRII..
It's a better timeshare provider, mgmt team who wants to create value, and also has significant NOLs.
My 2014 Estimates are:
300 - 325 mm of EBITDA
20 MM of PF Interest Expense for Aug. 2014 Refi
20 MM of Corp Capex
25 mm of Inventory Purchases
235mm - 260mm of FCF on a Market Capital of 1.3bn....
Seems like a safer way to play the same view with more liquidity/better mgmt team/and growing biz (bluegreen not growing!!!!)
|Subject||RE: Problems with Dropbox link|
|Entry||03/25/2014 09:55 AM|
It still seems to work for me.
Please reoncfirm if you are having problems. I can email it to you if you like?
|Subject||RE: RE: Problems with Dropbox link|
|Entry||03/25/2014 11:24 AM|
it worked the next day (march 20) for me. go figure.
|Entry||04/09/2014 02:11 PM|
Just a quick update after talking to IR (and I recommend you all contact their IR director; he is very open & responsive).
|Entry||05/13/2014 06:48 PM|
alan levan would prefer to invest the money in chocolate cos. at 10x ebitda than give it back to shareholders.
If he started buying back stock or special dividending out the proceeds of these RE sales maybe people would care more. Or go back to doing conference calls. These guys dont want to be accountable and thats why the stock trades at such an egregious discount to NAV...because A) NAV is not being returned to you and B) there is an opportunity for NAV to go down by bad investments....See 2007-11 video...
|Subject||RE: RE: earnings|
|Entry||05/13/2014 07:10 PM|
Certain people prefer to look in the rear view mirror. Levan made a lot of money before the crisis for shareholders. The chocolate deals were immaterial in terms of capital deployed. There are lots of opportunities to make money with subpar management particularly when the stock is trading at 1/3 to 1/2 of what it's worth. We'll see where the stock price is in 12 months. I'll bet it's substantially higher. Bluegreen is a great asset that Diamond has tried to acquire multiple times.
|Subject||RE: RE: RE: earnings|
|Entry||05/13/2014 07:35 PM|
do you think they will engage in active dialogue with shareholders about capital allocatoin going forward?
How do they think about ROIC?
How can you buy anything else when you can be buying your own stock at 1/3 to 1/4 of NAV?
What about insider buys of stock? Couldnt they be buying it themselves if it was so cheap?
I want management teams that stay up at nite like I do...
Subpar mgmt teams just widen the risk of six sigma / bad outcomes...I would argue that this team is worse than subpar/stupid but more characterisitcally dangerous.
I could get behind this if they would do a MEA CULPA and accept fault and say this is how I am gonna be going forward. Howard Jonas at IDT did that and it was a great outcome. Buyback, Dividends, Spins, whole thing.
What I dont like here is that they wont admite they f*cked up......
|Entry||06/27/2014 04:09 AM|
As diamond resorts moves higher bfc languishes. I think mgmt has done a poor job of articulating the free cash flow of blue green and it's attractive investment attributes. Has anyone been able to engage anyone other than investor relations at the company? I think ir I well meaning but ir clearly is not mgmt who thus far refuses to engage investors.
|Subject||RE: RE: patience|
|Entry||06/27/2014 11:25 PM|
I agree with everything you said I just find it frustrating that blue green remains poorly articulated by mgmt. Time and execution should narrow the discount to intrinsic value. We shall see if our thesis is proven out. I believe it will.
|Subject||RE: RE: RE: RE: patience|
|Entry||06/30/2014 04:25 PM|
Im not sure teh difference is too big. Litigation could very well drag on for a while, and you could be waiting a long time for it to close. May end up having to recut the deal. There are some BBX-only holders who have been complaining about the equity compensation being insufficient.
|Subject||RE: RE: RE: NOL NAV, G&A etc|
|Entry||07/16/2014 01:39 PM|
Thanks - much appreciated. I'd appreciate it if you could pencil out your thoughts on BG valuation? I struggle with all the timeshare businesses in properly accounting for COGS - the legacy VOI sales still look like a big part of the business and I think that's a lower multiple business.
Also, how do you think about valuing the minority interests?
Thanks for the help - interesting idea.
|Entry||08/05/2014 03:09 PM|
We thought solid as well. Of course, our valuation seems to matter little here. We just took fair value from $11.50 to $12 . . . but trading at $3.85.
But assuming it gets to fair value after the lawsuit and cap structure are resolved, it will go that much higher.
We continue to like a lot.
|Subject||RE: RE: update?|
|Entry||10/09/2014 05:10 PM|
Cries / mpk391 -
Appreciate the affirmation, and good to know that the three of us concur on where this stock stands... The market is going nuts today, but I think I will be buying some more BFCF in the coming days...
|Subject||Re: Re: RE: RE: RE: RE: update?|
|Entry||12/11/2014 02:49 PM|
cameron- am I correct that if Levan is found guilty he will have to step down as CEO, because a guilty verdict would prohibit him from running a NYSE listed company (BBX)?
|Subject||Re: Re: Re: Re: RE: RE: RE: RE: update?|
|Entry||12/11/2014 06:11 PM|
>continues to compound value but trades in no-man’s land
Is there evidence that Levan has compounded value in the past?
|Subject||Re: Re: Re: Re: Re: Re: RE: RE: RE: RE: update?|
|Entry||12/12/2014 08:25 AM|
If BBX / Levan appeals, would not be surprised to see the merger re-cut so that an exchange listing is no longer a condition. Would be worth the time and expense at that point.
|Entry||12/15/2014 04:47 PM|
Found guilty. March 4th penalty hearing. Merger likely won't close in Q1. The mark sucks but what's the next step? Continue to dilute ad infinium while the Levan appeals and the case drags on?
|Entry||12/16/2014 11:32 AM|
dilute who? when has anyone been diluted? this company isn't raising equity and has no need to do so.
|Entry||12/16/2014 11:40 AM|
yes, it's frustrating that the catalysts (merger, exchange listing) are getting pushed-out, but eventually either:
A) the appeals courts uphold the guilty verdit and Levan has to step down (a positive in my mind), or
B) guilty verdict overturned and merger and uplisting go through
anyone have a sense for how long the appeals process will take?
|Subject||Re: Re: Levan?|
|Entry||12/16/2014 11:59 AM|
not my comment but I think Chalk is referring to mgmt compensation.
|Entry||03/17/2015 10:13 AM|
anyone have updated thoughts on BFCF/BBX? maybe i missed something, but the operating results at BBX/Bluegreen are just meh. Is today's move entirely due to the tender signaling insiders' view of intrinsic value of Bluegreen and/or potential consolidation will simplify reporting/highlighting value?
|Entry||03/17/2015 11:09 AM|
Operating results are secondary here. The value here will be driven by whether mgmt/board cleans up structure and then acts in shareholder friendly (or at least not unfriendly manner). And this is a positive in that regard. I am surprised it is not up more.
And the announcement does NOT contain any new chocolate purchases!
|Subject||Cries, anybody involved?|
|Entry||03/15/2016 06:58 PM|
Is there any chance of a catalyst here? I have it trading at 2x the unlevered FCF of the Bluegreen business.
I am not sure it matters, but the Bluegreen biz continues to chug along nicely. Today's released results surprised me to the upside.
At the current stock price, I have:
all-in market cap (including BBX shrs not held by BFCF) = $300mm
cash + financial assets (not incl restr cash) = $374mm
debt = $275mm
TBV = $400mm
The Bluegreen business produced $90mm in unlevered FCF (taxes, capex included) on inventory of about $200mm. The asset-lite business is here. And the business is growing nicely.
But none of this much matters without a catalyst from the Levan's. Merge BFCF/BBX. Get rid of legacy assets. Return all cash flow from Bluegreen. The April share tender of $100mm of BBX stock gives me hope.
|Subject||Re: Re: Cries, anybody involved?|
|Entry||05/27/2016 04:41 PM|
I've been following this one for what I thought was a while, but then yesterday I went back and read the 2001 VIC post by jim77 along with all the comments. It felt like deja vu all over again. Very similar situation 15 years ago. Price was $5 a share back then (though a lot fewer shares as you might imagine). Some choice quotes about BFCF being a vehicle that exists solely to enrich the Levans. Crazy that this has been going on for so long.
|Subject||Apollo buys DRII|
|Entry||06/29/2016 05:02 PM|
I'm sure many of you saw, but today Apollo agreed to buy timeshare competitor DRII
Some quick and dirty metrics (admittedly from CIQ). DRII Acquired at:
Today BFCF trades at
I haven't adjusted any of the above for the giant tax gain or the legal settlement or any of the real estate deals, but still it gives an idea of private market value for the timeshare business.
Also this makes me feel a little bit better about the potential for CFPB action... as Diamond was identified as the industry member with the pushiest sales tactics and the most agressive financing. Apparently Apollo was ok with this risk.
Also interesting that BFCF barely moves on the news. Either the value is so locked away in Levan's clutches that it doesn't matter or the market isn't really paying attention.
|Subject||Re: Apollo buys DRII|
|Entry||06/30/2016 01:47 PM|
it actually makes sense that BFCF barely moved... they're not going to monetize Bluegreen because it's the only FCF+ asset in their little empire. without it, there is nothing to fund mgmt's bloated salaries (roughly $5M/year each to Levan and Abdo, last I checked).
Now you might say, "sure, but they would benefit from a sale via their large shareholdings." True, but this presumes mgmt understands capital allocation and are rational. Their history makes it pretty clear that neither are the case.
|Entry||12/22/2016 02:14 PM|
Not sure if anyone is still out there but the merger is done now. The Q4 10-K will be the first completely merged filing and will also contain a lot of updates which could be a nice catalyst.
On the SEC suit side (which matters because ostensibly when it is all over one way or the other NASDAQ will let them apply for a listing) Alan Levan won his appeal and the case was remanded back to the original court for a potential retrial without the start-of-trial summary judgements saying that Levan definitely made untrue statements. Levans trying to get the case dismissed outright but assuming that fails it still remains to be seen whether the SEC has the appetite for a retrial. He's already stepped down for about a year now for what was originally a two year sentence.
|Subject||Re: Merger Done|
|Entry||12/23/2016 09:25 AM|
BFC is significantly undervalued and there are multiple catalysts that could cause the stock to rerate in 2017.
First, ignoring any catalyst, the business is worth over $7.50 per share:
(1) Bluegreen is worth $1.1 Bn - $1.3 Bn at 7.0x-8.5x EBITDA (ILG, VAC, MYCC trade above 7x)
(2) Real estate and loans are worth $150m at book and $225m at appraised values (KBW fairness opinion discusses appraised value: http://bit.ly/2hXUGvO)
(3) Zero value for Renin + Sweets. Renin profits and Sweets losses just about net to zero (there is value here, Renin is profitable and Sweets is in the midst of a turnaround, but they’re not major drivers).
(4) Deduct $300m - 350m for the burden of $60m of corporate at 5x - 6x (could be reduced post-merger).
= Enterprise Value of $900m-$1,225m*
(-) Net Debt & Minority Interest of $93m (debt $315m, cash $264m, MI $42m)
= Equity Value of $800m-$1,100m
/ 103.2m FDSO
= $7.75 - $10.65 per share (+60% - 120%)
*No credit for $500m+ Federal and $900m+ State NOLs (~$1.25 per share at 15% Federal and 5.5% Florida tax rates).
(1) The company will be out marketing at conferences and investor meetings in 2017. They are also hoping to add sellside coverage. The message will be heavily focused on the undervaluation of Bluegreen within BFC. They also plan to improve financial disclosures so the segments are more easily separable.
(2) Apollo’s Diamond Resorts might be interested in acquiring Bluegreen. Bluegreen is a superior business: customers have higher FICO scores and lower default rates; higher % of sales to new customers; properties are better. Bluegreen also has lucrative distribution relationships with WalMart and Bass Pro Shops.
a. Apollo’s long/short fund owns BFC and I think they understand the industry and why consolidation would make sense.
(3) The company is generating a ~20% free cash flow yield and just expanded its Fifth Third credit facility so they could announce a large buyback (I’m not counting on it, but management knows the complex is undervalued so I wouldn’t rule it out).
(4) BFC will eventually relist on a major exchange. This may not be a 2017 event.
(5) Trades above the $5.00 per share “penny stock” threshold.
|Subject||Re: Re: Merger Done|
|Entry||12/23/2016 01:35 PM|
Well said. Agree with most of it. Can I ask about your math on the NOLs? How are you getting to that number? This is one part i have had difficulty with. Do you think the full value allowance will be lifted? Have talked to a tax CPA friend and he is not sure but suggested yes, once the merger is complete.
|Subject||Re: Re: Merger Done|
|Entry||12/23/2016 01:39 PM|
I also would add to your list of catalysts that some of the biggest real estate projects (Altis at Bonterra, CC Devco at Bonterra, Gardens at Millenia) will be coming to fruition through end of 2017.