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NORSB - North State Telecommunications Corp "B"


DTEJD1997
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Hey all:

 

Anybody else following NORSB?

 

Dividend yield is almost 10%.

 

Dave Waters did a detailed write up of it over on "OTC Adventures".  As usual, he did an excellent job on writing it up.

 

The company seems to have a very valuable wireless interest.  They also have been increasing data-center revenue.

 

The latest quarterly report was a little bit of a letdown.  Even so, I think the odds are high that they maintain the dividend.

 

Any thoughts, opinions?

 

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I really need to dig into the latest quarterly report & look at some older ones.

 

If I remember correctly, they have a bit more capital spending lately.  I think they are building/beefing up their data center capabilities.

 

I noticed an odd thing...some of the "A" shares have been trading, and also at a big discount.

 

It would good to know who is selling, and why.  Could be an estate or perhaps somebody needs liquidity.  A few thousand shares can knock 5%+ off the market cap of the company. 

 

If that is true, this thing is a "table pounding" bargain sporting a 10% dividend.

 

Wish I had more liquidity!

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So I was in this equity for maybe 1.5 years.  I disposed of my stake in mid-2015.  I think I came out a little less than even after factoring in the dividend + capital loss. 

 

Anyways, I got into NORSB because my simple thesis was that consumers would start to pay more for broadband and TV as we moved farther and farther away from the Great Recession.  This would offset declines in traditional phone-line spending.  The share price seemed to factor in no-growth or a slowly melting ice cube.  I figured that the dividend was nice and sustainable in a no-growth environmental, and in all likelihood they would be able to grow their revenue and FCF slightly faster than inflation.  I also figured that they might be able to monetize their wireless stake at some point for a nice sum of money.     

 

In hindsight, the red flag I should have noticed was their purchase of DataChambers LLC in December 2011.  They spent $55 million, net of debt, to acquire a data center company doing ~$10 million per annum in revenue out of a single Wintson-Salem location. 

 

Two more red flags popped up which ultimately caused me to dispose of my stake:

1. Since the 2011 acquisition of DataChambers LLC, they have invested at least $24 million dollars in data centers ($10 million for the Charlotte NC location and $9 to expand their existing Winston-Salem location).  They also spent money to acquire and build out their Raleigh NC location ($4.7 million for the location [http://services.wakegov.com/realestate/Account.asp?id=0292729&stype=addr&stnum=2100&stname=garner&locidList=14070&spg=1], plus the cost to build out the facility which I can not determine).  So they have expended at least $80 million on data centers, and likely more when you factor in the build-out of Raleigh location.  The annualized revenue, broken out for data center operations, is currently ~$15 million.  That is 5.3x revenue, not 5.3x cash flow or earnings, so my first inclination was to question their capital allocation. 

2.  Their recent acquisition of Stalwart, essentially a cyber-security firm.  I don't know the multiple paid for this company, however my concern is that they are straying a bit too far, too quickly, from their primary focus.  IT services, particularly cyber-security, is a different ballgame than providing broadband, TV, and phone service.

 

It is possible that the data center ramp-up will be a far slower, multi-year process.  However, I am not entirely convinced.  Given the capital they have expended on data centers relative to their annualized revenue and revenue growth, that was my cue to exit stage-left.             

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  • 3 weeks later...

Hey all:

 

This just keeps going down!  Dividend yield is now well over 10%.

 

My guess is that a shareholder with a rather large holding is selling, the book of buyers is thin, thus the price is going down...

 

I wonder if somebody know something?

 

Any thoughts?

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  • 4 months later...
  • 1 year later...

DT, did you hang in there with this one?

 

Yes, I've got it, and am fairly pleased with it.

 

More astute family members also have it and they are even more happier with it.

 

They seem to have increased earnings & cash flow in the past few quarters.

 

Sure would be nice if they got a buyout offer!

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DT, did you hang in there with this one?

 

Yes, I've got it, and am fairly pleased with it.

 

More astute family members also have it and they are even more happier with it.

 

They seem to have increased earnings & cash flow in the past few quarters.

 

Sure would be nice if they got a buyout offer!

 

I've been following this as well and the news just keeps getting better.  They pivoted their business at the right time and in the right direction.

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  • 2 years later...

DT, did you hang in there with this one?

 

Yes, I've got it, and am fairly pleased with it.

 

More astute family members also have it and they are even more happier with it.

 

They seem to have increased earnings & cash flow in the past few quarters.

 

Sure would be nice if they got a buyout offer!

 

Hey all!

 

I was right on this one, but it certainly took a while.  NORSB is getting taken out at $80/share.

 

Please see:

 

https://www.northstate.net/blog/2019/12/09/northstate-enters-into-definitive-agreement-to-be-acquired-by-segra/

 

Looks like I and family will get one more dividend before getting bought out.

 

Interesting that there is still a $3 spread....might be opportunity?

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