New issue color: Molina (MOH)
$325m (50m) sen unsec cb coming tonight from JPM/MER. Terms: 7 yr 1.125-1.625% up 27.5-32.5%, full protections. UOP hedge/$50m stock buy back/CB repurchase. $1.4B Medicaid player which w/benefit from rev growth & Medicaid expansion going forward. Finally seeing rate increases in TX, CA, FL , MI which was reflected in a much better Q4 LTM EBITDA = 114m, FCF = 266m, PF Cash = 1.364B, debt = 562m. We’d assume B+ & L+500. ADV = 734k, no leaps, 2y 90d 50/10ile = 54/36%, we’d assume 33% for 7 yr paper (3.75% CB in 1 pt today, using L+200 = 35 iv). Theo = 102.3. The recent trend of lone VWAPs at maturity continues with 80 days here (no obvious benefit to anyone so why?)
Right sector, right $ px, obv o/r demand which will skew pricing. Would prefer mids but then woke up, don’t miss, BUY.
Medicaid related health plans in CA, FL, MI, NM, OH, TX, UT
Also provide business proc, IT and admin to states Narrow focus on Medicaid plans. FY12 difficult yr/with issues in TX and CA but have recently received rate incr in both along with FL and MI. Co should benefit from Medicaid expansion over next few years. Have won several new contracts in recent months. Expect significant rev growth over the next few years. Liquidity okay w/$160m available on rev after paydown w/prcceeds (sec L+250). Funding cuts and reimbursement rate compression are key risks.
L+500