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Howard Marks Adds to Portfolio TMS International Corp.
Posted by: Dianne Tordillo (IP Logged)
Date: October 29, 2012 02:24PM

With a transaction total of more than $10 million, Oaktree Capital (OAK)’s Howard Marks acquires 1,068,288 shares of industrial steel mill services provider TMS International Corp. (TMS), documented in Marks’ latest 13G SEC filing, reported on GuruFocus Real Time Picks.

This positions Marks as 7.37% owner of TMS International.

With a focus on risk control, Marks is legendary for investing in companies ridden with distressed debt, that do well in unstable, less efficient markets.

The Oaktree Capital website described it best: “Above average gains in good times are not proof of a manager's skill; it takes superior performance in bad times to prove that those good-time gains were earned through skill, not simply the acceptance of above average risk. Thus, rather than merely searching for prospective profits, we place the highest priority on preventing losses. It is our overriding belief that, especially in the opportunistic markets in which we work, ‘if we avoid the losers, the winners will take care of themselves.’"

The new addition of TMS International seems to reflect Marks’ investment mantra.

Despite the company’s second quarter financial results revealing a $1.4 million decrease in the company’s total revenue compared to the same time last year, TMS International also experienced several increases, including for its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), net income attributable to common stock and revenue after raw materials costs.

“TMS International produced solid second quarter results…” said Joseph Curtin, TMS International president and chief executive officer, in a press release. “We are pleased that the risk-minimizing features of our business model enabled us to avoid material inventory write-downs despite significant declines in commodity pricing, which occurred during the quarter.”

TMS International’s basic and diluted earnings per share were up 92.3% for the second quarter compared to the same time last year, from $0.13 to $0.25.

Its revenue after raw materials costs went from $137 million in the second quarter of 2011, to $153.6 million in the second quarter of this year, a 12.1% increase; its adjusted EBITDA for the quarter rose 13.1% from $33.5 million to $37.8 million.

The company’s six month fiscal results also reflected increases for all categories, this time including total revenue.

“Despite the continued uncertain global economic environment, we continued to produce strong financial results by focusing on creating value and delivering exceptional service for our customers globally,” Curtain said.

TMS International will announce its 2012 third quarter financial results on Nov. 1.

As parent company of Tube City IMS Corp., TMS International operates about 80 facilities in 11 countries, and about 30 brokerage offices that buys and sells raw materials across five continents, according to its website.

In July and August, TMS International announced vast new opportunities for expansion, after acquiring several new contracts with various outsourced mills services in and outside of the U.S. (a $91 million transaction), and the opening of several trading offices in Brazil, Florida and Texas, marking the company’s first formal trading group presence in both Brazil and Florida.

Trading at $10.21, TMS International has a market cap of $401 million. It has a P/E (ttm) of 17.5, a P/B ratio of 1.4 and a P/S ratio of 0.2.

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Guru Discussed: Howard Marks: Current Portfolio, Stock Picks
Stocks Discussed: OAK, TMS,
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