market folly

We're posting up notes from the Ira Sohn Conference 2013 in New York.  Next up is a summary of the presentation from Kyle Bass of Hayman Capital.  He presented the bull case on Dex Media (DXM), the newly formed entity after Dex One and SuperMedia merged and restructured.  He also touched on Japan again.


Long Idea: Dex Media (DXM)

Bass likes the former Yellow Pages play.  Combined destroyed $25B since 2006, since spun from VZ. Print yellow page ads have dropped at a 15% CAGR since 2002. SuperMedia and Dex One merged, two of the worst performing restructurings. Print is declining 18% per year ad infinitum, but Digital is growing 22%. Digital should be bigger than Print by 2016. Total revenue will flatten out, from $2.3B now to $2.0B. Could be $700M of EBITDA, debt looks attractive.

Sales team approach customers to run their online presence. Bank debt creates company at 2x EBITDA. IRR is in the 30s if it gets re-fi'd in next year. DXM, with more actual digital revenue than pure-play peers, trades at a cheaper multiple. $3.2B of debt on $2B Rev, $700M EBITDA, but FCF pays down debt. Equity is a tiny sliver, only $180M. Equity could go up 300% with a 3x multiple. Yes, fraught with risk, but bank debt is worth par. Equity is very small.


On Japan

He still believes they will have a full bond crisis in next few years. 10 Finance ministers in last 10 years.

For more on this manager, we've previously highlighted Kyle Bass on MBS, housing and gold.


Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.