OMI update
The short idea has worked with the stock down about 64% over the last 8 months. To be clear, I did not expect the stock to decline this much, although the market environment has changed a lot over the last 8 months for highly levered companies like OMI.
So naturally the question is…is there more downside from here? Let’s do some math.
It looks to me that the company is now run-rating to $500M of EBITDA, but it is possible that it is much lower depending on how Q3 turn out. It was very possible that things were fine for the first 2 months of Q3 and then got really bad thereafter and so the run-rate EBITDA is actually much lower…but let’s just use $500M as our base case
Capex in this business is really closer to Opex. Apria is really a leasing/distribution business and so Capex is needed to keep the business running. So I believe the annual capex of $180M as not optional. So we are talking about a business with an EBITDA - Capex of $320M
Interest expense for this business is pretty high at about $35M per quarter which means $140M per year. So that leads the company with about $180MM of EBITDA - Capex - Interest
The company also have to pay taxes so that leaves the company with about $130M of profit
Considering the company has over $2.5B of net debt, deteriorating business fundamentals, no viable operating levers, and rising rates on debt refinances, it does not seem likely to me that the equity has meaningful value as it currently stands
That said, I am not great at shorting equity stubs so I will leave it to the credit investors from here. Just wanted to give a quick update on what I am seeing. Hope everyone made money.
kinda funny how it dragged on for 2 years at that (share price) level and now were back to 2019 (with 25% more shares out).
your assessment kinda holds up to this day, they're talking about 345 adj. EBITDA 120M Interest Expense and 170M CapEx for the remain co now since the PH&S segment was 0% margin.
Fantastic call on this name. You really nailed the issues