Time to Travel to TA?
The following is my preliminary notes on TravelCenters of America (TA). I will likely look into this stock in greater detail in the future, but I have to hit the road for the holiday weekend.
TravelCenters could very well be a dead man walking. Still at this point the company appears to be trading for less than its liquidation value. Here's a peek at how I came to that conclusion:
+ $156 million in cash / equivalents (applied at 100% of value).
+ $179 million in inventory, receivables, and other current assets ($255 million assuming a 30% discount which is conservative considering this consists of things like fuel, parts, and other "new" items. There certainly is some ambiguity here to it's best to be really conservative.
+ $293 million in property, plant, and equipment ($418 misted value discounted again by 30% to be conservative). This includes nine fully-owned TravelCenter locations and 2 joint venture TA locations (source page 31 of 2009 annual report).
+ $0 for intangible and other assets ($59 million on balance sheet, completely written off).
- $571 million in liabilities.
= $57 million left for shareholders in the event of a liquidation.
Compare that to the company's current market cap of $39 million and TA looks fairly attractive at this level.
Another way to look at this is to divide the $57 million in approximate liquidation value by 17.27 million shares outstanding and it comes out to $3.30/share, 50% above the company's current price of $2.20/share.
Yes TravelCenter has a ton of debt and it was slightly cash flow negative last quarter. Hey what do you want? No stock that's this cheap is going to be perfect.
According to ycharts, last quarter TA was barely cash flow negative, burning $360,000. The Company was actually cash flow positive by $15 million in the disastrous year of 2009. One could make a strong case that the economy is better today than it was at this point last year.
Now one could argue that an investment in TA would be dead money for a while, until Mr. Market realizes how cheap this stock is, but unless management does something incredibly stupid it doesn't appear to me as though there is much downside at this level.
I need to do further research on this company to see if there are any other issues with it. Is anyone out there familiar with TA? I'd love to hear your thoughts. Bear cases are very welcome.
TA quarterly cash flow:
TA Balance Sheet
P.S. Have a great 4th of July everyone!