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12:33 am
August 20, 2010
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Jae Jun
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Thanks for the information.
From what I gather, the company does have potential growth (not a growth company) and is managed in a conservative and calculated way.
Rather than throwing caution to the wind and going for all out growth, it looks like APNC is looking for organic healthy growth.
What do you think?
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9:32 pm
August 19, 2010
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zehua
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| Member | posts 96 |
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My latest communication with them.
I think this is more like a 7-10% annual growth business. I urge them to keep buying back shares under $2. Not sure how they will respond to that.
Zehua, good morning.
We are optimistic
about our growth potential. Even though we enjoy a high market share of
rent to own stores by brand, the customer participation rates in the
average store can go up significantly. For example our largest customer
has more than 400,000 customers on our program but that represents less
than 50% of their customers. We also don’t have a program with the #2
company in the industry. Their participation would represent many
customers as they have in excess of 1000 stores. Our retail plans
division does not enjoy a very high market share. Companies like
Affineon play in this space and their company’s revenue line is north of
$1.3 billion. Opportunities abound in this segment but we are careful
to build earnings accretive programs versus “taking a flyer” on programs
that are out of our expertise area. The insurance marketing division is
new for us and we are still getting our arms wrapped around it. Much
changes in that segment following the healthcare reform act but as Danny
said in the conference call we are working to optimize the revenue in
that business.
The stock buyout earlier this fiscal year was opportunistic and expected to be a one-time event.
Most of the contracts we have with our business partners are in the
3-year range and they renew at different times. A negotiation occurs
during most renewals and we look for the opportunity to optimize margin.
Remember, we only report the payments we receive from our marketers. If
they raise the price of the program within their stores we don’t
benefit from that increase (or decrease).
We are working on some new products that we believe will be very valuable to a significant number of people.
Thank you for your continued interest.
Regards,
Bob Hoeffner
Senior Vice President of Administration
Access Plans Inc.
405-579-8525
To: Access Plans, Inc.
Comments: I am a shareholder, and I am considering to significantly
increase my holdings given your recent EPS improvement. I am wondering
how much additional growth potential is remaining for this industry?
Through our last talk, I know you have 83% market share in this
industry. When the economy improves and consumer confidence restores,
will they be more willing to participate in your discount programs, or
they will be less likely because they have more money to spend by then?
Currently it looks like you have five growth possibilities: 1. Stock
buyback. Are you planning to keep buying back around 10% of your common
stocks each year, just as you did last year? 2. Increase your market
share. This seems hard as you already have 83% market share. 3. Raise
your product price. How much potential is that? 4. Hope this overall
membership industry to grow. 5. Introduce new membership products. Do
you have such plans in the near future? I am looking forward to hearing
back from you. Thanks! Zehua
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9:29 am
July 13, 2010
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zehua
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| Member | posts 96 |
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Jae Jun said:
Here is a good explanation of the deferred tax asset you are confused about.
What Does Deferred Tax Asset Mean?
An
asset on a company's balance sheet that may be used to reduce any
subsequent period's income tax expense. Deferred tax assets can arise
due to net loss carryovers, which are only recorded as assets if it is
deemed more likely than not that the asset will be used in
future fiscal periods.
What Does Deferred Tax Asset Mean?
An asset on a company's balance sheet that may be used to reduce any subsequent period's income tax expense. Deferred tax assets can arise due to net loss carryovers, which are only recorded as assets if it is deemed more likely than not that the asset will be used in future fiscal periods.
Investopedia explains Deferred Tax Asset
It must be determined that there is more than a 50% probability that the company will have positive accounting income in the next fiscal period before the deferred tax asset can be applied.
If, for example, a company has a deferred tax asset of $25,000 on its balance sheet, and then the company earns $75,000 in before-tax accounting income, accounting tax expense will be applied to $50,000 ($75,000 – $25,000), instead of $75,000.
I didn't realise that APNC had such a large NOL carryover.. It is good for the short term while it lasts because it will inflate earnings slightly by reducing the tax expense.
If the deferred tax asset is gone, APNC will be taxed at the required rate that their earnings will drop. Something to keep an eye on. I wouldn't want to hold this for too long now.
In the short term NOL carryover is a hidden asset but when it is gone, the EPS wouldnt impress.
But the good news is that APNC FCF is still positive. It didn't increase by much so keep an eye our for how FCF trends over the next quarter.
I am actually more concerned with Revenue deferred for financial reporting purposes.
From this table, it means the shareholder reports to us booked less revenue than their tax book? This makes me feel good as this is a sign that their revenue recognition is not aggressive.
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10:54 pm
June 27, 2010
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Jae Jun
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Post edited 10:57 pm – June 27, 2010 by Jae Jun
Here is a good explanation of the deferred tax asset you are confused about.
What Does Deferred Tax Asset Mean?
An
asset on a company's balance sheet that may be used to reduce any
subsequent period's income tax expense. Deferred tax assets can arise
due to net loss carryovers, which are only recorded as assets if it is
deemed more likely than not that the asset will be used in
future fiscal periods.
What Does Deferred Tax Asset Mean?
An asset on a company's balance sheet that may be used to reduce any subsequent period's income tax expense. Deferred tax assets can arise due to net loss carryovers, which are only recorded as assets if it is deemed more likely than not that the asset will be used in future fiscal periods.
Investopedia explains Deferred Tax Asset
It must be determined that there is more than a 50% probability that the company will have positive accounting income in the next fiscal period before the deferred tax asset can be applied.
If, for example, a company has a deferred tax asset of $25,000 on its balance sheet, and then the company earns $75,000 in before-tax accounting income, accounting tax expense will be applied to $50,000 ($75,000 – $25,000), instead of $75,000.
I didn't realise that APNC had such a large NOL carryover.. It is good for the short term while it lasts because it will inflate earnings slightly by reducing the tax expense.
If the deferred tax asset is gone, APNC will be taxed at the required rate that their earnings will drop. Something to keep an eye on. I wouldn't want to hold this for too long now.
In the short term NOL carryover is a hidden asset but when it is gone, the EPS wouldnt impress.
But the good news is that APNC FCF is still positive. It didn't increase by much so keep an eye our for how FCF trends over the next quarter.
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4:35 pm
June 27, 2010
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zehua
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| Member | posts 96 |
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Post edited 5:05 pm – June 27, 2010 by zehua
From their most recent 10-k, the following seems cautious to me:
I am trying to apply the critics learned from 'Quality of Earnings' to here, but I am a bit confused.
The total $2,203,000 is the additional expense for tax reporting purpose?
NOTE 11. INCOME TAXES (continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying
amounts of assets and liabilities for financial reporting purposes and
the amounts used for income
tax reporting purposes. Significant components of our deferred tax
assets and liabilities as of
September 30, 2009 and 2008 are as follows:
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Deferred Income Tax Assets
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2009
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2008
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Revenue deferred for financial reporting purposes
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$
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309,000
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$
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325,000
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Agent advance reserves for financial reporting purposes
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548,000
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—
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Other deferred tax assets, current for financial reporting purposes
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124,000
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—
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Total
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981,000
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325,000
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Book depreciation in excess of tax depreciation
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101,000
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119,000
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Intangible assets for financial reporting purposes
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(644,000
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)
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—
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Covenant not to compete for financial reporting purposes
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94,000
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—
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State tax credit
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200,000
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—
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Other deferred tax assets for financial reporting purposes
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33,000
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18,000
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NOL carryover
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1,438,000
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582,000
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Total
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1,222,000
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719,000
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Total deferred tax assets
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2,203,000
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1,044,000
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Less Valuation allowance
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—
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(700,000
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Net Deferred income tax asset at September 30
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$
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2,203,000
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$
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344,000
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4:11 pm
June 27, 2010
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zehua
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| Member | posts 96 |
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Jae Jun said:
I see. Sounds reasonable.
I missed out on that perfect chance to buy ont he dip. May just have to start nibbling.
The numbers look too good to just pass up and there is consistency to back up the numbers.
The most recent 10-Q shows that the deferred income tax is 362,285, compared with (175,000
) for 2009 March 31st.
That is pretty big change. In 'Quality of earnings', there is a chapter about difference between tax reporting and financial reporting. It seems like in that book, it is recommended to subtract net income with deferred income tax to get the true taxable earnings. Therefore I am a bit concerned here, since in this report, there is not much info about the breakdown of the deferred income taxes.
In addition, in the balance sheet, there is Deferred income taxes item appeared in the current assets section, and another Deferred income taxes item in total assets section. That is pretty confusing to me, and shouldn't Deferred income taxes be a liability instead?
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2:58 pm
April 24, 2010
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Jae Jun
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| Admin
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I see. Sounds reasonable.
I missed out on that perfect chance to buy ont he dip. May just have to start nibbling.
The numbers look too good to just pass up and there is consistency to back up the numbers.
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3:14 pm
April 22, 2010
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DrSues02
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| Member | posts 45 |
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Exchanged emails with the President & CFO – very responsive guy.
Reasoning behind the CFO change: With the increased financial complexity after the merger, the board felt that the CFO should be located in the main office. It looks like the old CFO was located in a satellite location and was unable to re-locate. They still wanted to keep her involved in the affairs so they changed titles & roles to compensate.
Sounds reasonable to me..
With regards to the new health care legislation: The insurance marketing division has been focused on selling commodity-like product, major medical plans, with thin margins. It seems the new legislation will cut further into the margins associated with selling these plans, although it's important to emphasize that all of the impacts are still very unclear.
With this in mind, the company is trying to diversify the division in the pushing alternative methods, such as the medical discount plans, being sold in their other business segments. As I said earlier, if medical premiums continue to rise, it would seem to push the adoption of these alternative plans.
In any case, based on my research, many of the provisions of the new bill won't go into effect until 2014 so the company has plenty of time to put together a solid plan.
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8:26 am
April 22, 2010
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DrSues02
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| Member | posts 45 |
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I don't think anything triggered the recent drop (in the last few days) as the volume was average. Stock moved back to where it was trading in late March.
The CFO change occurred back in February – I'm still unclear as to why this change occurred. Last week, the president of the insurance marketing division left as well. He had only been around since the August 2009 merger.
Although I don't like seeing movements in the executive ranks of companies, I think some changes are normal after such a large merger. In any scenario, some employees will move on: Executives don't like the new arrangement, some managers feel like their responsibilities were cut, general corporate restructuring to make the business more efficient, etc
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1:43 am
April 22, 2010
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Jae Jun
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was the recent drop just because the CFO change? Why did the CFO get demoted to just the Chief Accounting Officer?
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12:05 pm
April 13, 2010
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zehua
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| Member | posts 96 |
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DrSues02 said:
Wholesale Plans: It sounds like they offer rent-to-own stores a marketing and customer satisfaction program for tracking repeat customers. Think loyalty programs.
Retail Plans: I don't think APNC takes any of the risk of paying money out of pocket for the services performed. Doctor's join together in a network, offer a discount to patrons who are members of the network, and APNC takes a cut of the discount for sending more customers their way.
Could always email investor relations t o clear this up as well.
thanks!
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9:17 pm
April 11, 2010
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DrSues02
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Wholesale Plans: It sounds like they offer rent-to-own stores a marketing and customer satisfaction program for tracking repeat customers. Think loyalty programs.
Retail Plans: I don't think APNC takes any of the risk of paying money out of pocket for the services performed. Doctor's join together in a network, offer a discount to patrons who are members of the network, and APNC takes a cut of the discount for sending more customers their way.
Could always email investor relations t o clear this up as well.
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7:48 pm
April 11, 2010
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zehua
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| Member | posts 96 |
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I can't understand their business. For the wholesale plan, what exactly are the plans that they offer to the rent-to-own stores, so they can make money? I know how rent-to-own stores work. They buy products from manufecturers, and rent it out. So how does this company make money between the manufecturer and the store?
For the retail plan, is it like the customer pay $30 per month, so he could buy drugs at a discount of 10%? Then the custom pays 90% of the drug price, and this company pays the 10%. This means they are betting the custom will not overuse their discount plan.
The insurance marketing division is easy to understand. They just try to be a salesman to sell out the insurance companies' products.
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6:52 pm
April 11, 2010
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zehua
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| Member | posts 96 |
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Post edited 12:10 am – April 12, 2010 by zehua
Thank you for your great picks, DrSues02. Do you have a special stock screener for OTC stocks? I use google finance's stock screener but that does not go through OTC stocks.
The numbers from google finance seem to be totally wrong.
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3:27 pm
April 8, 2010
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DrSues02
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Jae,
Thanks for the thoughts.
Russell Cleveland is the President & CEO of Renn Capital Group, an investment management group that has been around since 1972. Their investment philosphy is "based on a bottom-up analysis to identify and invest in small companies having the following characteristics: a defensible position in a growing industry; an established business process; solid potential earnings and cash-flow growth; attractive valuations; and quality management with a stake in the business. RENN invests in publicly traded equities and convertible debentures, but also has a strong emphasis on privately placing convertible debt with small-cap issuers."
From their latest 14-C, it looks like he was a director of Access Plans before the merger (APNC was formerly Alliance Health Card before merging with Access Plans and taking on their name), and became a board member of the newly combined entity.
Based on these circumstances, the newest 13-G filing is probably not as interesting as I thought.
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1:27 pm
April 8, 2010
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Jae Jun
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Finally got around to reading this. Been focusing on reading bankruptcy filings and dockets of late.
- Does looks like the insiders have been buying consistently.
- Is Russell Cleveland a director of the company as well a fund manager for RENN Global Entrepreneurs Fund?
Numbers certainly are VERY undervalued. At least a double in my opinion. But will have to read up on the company. Going on my watch list.
Thanks!
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11:47 pm
March 30, 2010
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DrSues02
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| Member | posts 45 |
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Access Plans Inc
Company Overview: We are a leading provider of consumer membership plans, healthcare savings membership plans and a leading marketer for individual major medical health insurance products. Our current operations are organized under three operating divisions.
Wholesale Plans- provides our clients, primarily rent-to-own and retail stores, customized membership marketing plans that leverage their brand name and customer relationships and typically their payment mechanism, plus offer benefits that appeal to their customers.
Retail Plans - offerings primarily include healthcare savings plans and association memberships that provide insurance features. These healthcare savings plans are not insurance, but allow members access to a variety of healthcare networks to obtain discounts from usual and customary fees.
Insurance Marketing – offers and sells individual major medical health insurance products and related benefit plans, including specialty insurance products, primarily through a national network of independent age
Access Plans is made up of several divisions that sell membership plans in various areas to businesses and consumers. They work closely with rent-to-own stores (like the Rent-A-Center chain), who allow consumers with bad credit or limited cash-on-hand to pay off large items with small monthly payments. Their retail plan division provides ‘insurance-like’ coverage to the uninsured, underinsured, self-employed, small business owners, and the senior population.
During a recession, more people are out of work, uninsured, and diving into credit card debt to live their normal lifestyle. This is leads people to seek out these alternative methods for maintaining the lifestyle to which they are accustomed. The fact is, the vast majority of people are not fiscally responsible but still want to have their toys. And more and more businesses are cutting back on health insurance, forcing people to find alternative sources there as well.
The Good:
-The company has made several acquisitions over the last 5 years and it looks like it is finally paying off. Tangible equity turned positive in 2009. CROIC and ROE were outstanding at 129.4% and 46.1% respectively. Median FCF growth is 51.8%! (although that is driven largely by the acquisitions)
-Insiders hold 71.4% of shares, a huge number. With such a large stake, I have to believe that management is firmly committed to increasing shareholder value. Also, a new institutional fund, Renn Capital, recently disclosed a brand new stake in the company (7.81% of outstanding shares)
-There has been a ton of insider buying since last September, at prices ranging from $.68 to $1.15, always a good sign.
-With the acquisition of Access Plans, the company looks to add $30M in revenue across their retail plan and insurance marketing divisions. For a company of this size, this more than doubles their revenue.
The Bad:
-The company’s debt to equity (126.1%) and intangibles % (31.5%) are both much higher than I normally like to see.
-The Access Plans acquisition was the largest in the company’s history. Although there has only been 6 months of financial information with the combined entity, it looks like the new group is putting some downward pressure on margins. Such large acquisitions are always risky, and management must prove they can successfully integrate the new business while keeping costs down.
-A significant portion of revenue from the Wholesale Plans business comes from a long-term contract with Rent-A-Center. However, this should be less of a factor going forward as the company diversifies its revenue streams (i.e. 55% of total revenue in 2008 vs 30% in 2009)
-The company also picked up several lawsuits with this acquisition as well. Although none of them look terrible, I’m not a legal expert and there is always potential for huge damage in the legal realm. These need to be monitored closely.
-Obama’s landmark healthcare legislation will give millions of uninsured Americans access to medical coverage. This is an incredible transformation and it will probably be several years to fully see the effects on the health insurance companies. It is impossible to tell with any degree of accuracy what effect this will have on APNC’s business plan, but it is a definite risk factor.
Valuation:
 
Conclusion:
Based on the current price point, I think the market hasn’t priced in the potential for the newly combined entity. Even without the acquisition, the company is growing organically across all of its business lines. Compared to the overall economy and most company’s rough 2008 & 2009 numbers, this is an impressive feat. Assuming management can successfully integrate the new business, the company has potential to at least double from its current price.
*Long APNC
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