저자: DavidHong · 외국인
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결론: GEO 그룹은 저평가 매력이 있으나 정부 계약 축소·고금리 부채 위험이 커서 현재가 기준 투자 매력은 제한적이라는 분석. [사업 구조] GEO는 교도소 운영(매출 약 2/3), 재진입 서비스(약 12%), 전자감시(약 12%), 해외(약 10%)로 구성. 미국 민간 교도소 시장은 GEO와 CoreCivic이 약 80% 점유. [수요·고객] 고객의 약 50%가 연방정부 기관이며 ICE가 매출의 약 25%. 신규 시설 인허가가 어려워 진입장벽이 높다는 점이 장점. [리스크] 코로나 시기 타이틀42로 점유율이 90%대에서 80%대 중반으로 하락. 최근 국경 유입은 회복 추세이고 타이틀42는 위법 판결로 악재가 해소될 것으로 전망. [정책 리스크] 바이든 행정명령으로 연방기관의 민간 구금시설 계약 갱신이 금지되어 계약 갱신 감소 위험. ICE는 제외. [재무] 매출은 2020년 이후 감소했으나 영업이익은 2021년 중반 신임 CEO의 비용 절감으로 증가. 배당은 두 회사 모두 0으로 축소되고 영업현금흐름은 부채 상환에 사용. 순부채/EBITDA는 약 4배 수준으로 하락. [신용등급·부채] 신용등급은 CCC+에서 B/B3로 개선됐으나 여전히 정크본드. 부채 만기는 2026년 이후로 연장. 부채의 약 55%가 변동금리라 금리 상승 시 이자비용 증가. [밸류에이션] 정상화 잉여현금흐름 기준 장기 연환산 기대수익률 14.3%(10년). 실제 위험을 감안하면 20% 이상이 적정하다고 봄. 과거 매수가 약 7달러 기준 기대수익률 28.4%였으나 주가가 70% 이상 오른 상태라 안전마진 축소. [가격 시나리오] 20% 이상 수익을 원하면 주당 8달러 이하 매수를 고려. 주가가 역사적 평균까지 오르면 투자 의미가 없다는 입장. [출연자 전망] 현재가 부근에서는 투자 매력이 낮고, 8달러 이하로 떨어질 때 매수 고려.
다듬은 글
foreign group is the largest position of microberry according to the latest 13f filing by his hedge fund and currently two other super investors also have positioned in this prison management company in this video we will explore some pros and cons to see why super investors are buying this stock and finish with a quick valuation of the company the Geo Group was originally founded in 1984 with a different name but in 2013 based on its stable business model it became a read which boosted its stock price and using its highly valued stock Geo acquired its competitors to get very large however in 2021 Geo gave up its Rich status and now is a normal Corporation again this lowered its stock price to 15 years old and such beaten down price created a great buying opportunity this company has three main operations in the US the first is secure service which owns and manages prisons and also provide transportation to and from these facilities the second is re-entry service which provides education and facilities and help people adjust to society quickly when they are released the third segment provides electronic monitoring of 260 000 individuals across all 50 states and now if we look at the revenue breakdown the first secure service contributes about two-thirds of the revenue while re-entry and electronic monitoring segments contributing about 12 percent each and the rest 10 comes from International facilities the secure facilities Market in the US are quite Consolidated with Geo and core Civic the first and second largest players holding about 80 market share FYI microberry also invested in the second player which shows how aggressive he is about the industry this industry in general are considered a high mode business because they have more than 75 years of very long useful life and also because the nature of the facilities most neighborhoods avoid new facility which means it's hard to get new licenses in addition the main customers of these facilities are government agencies and so the customer credit quality is quite high and it's important to note that about 50 is from the three federal government agencies and we will discuss the ramification of this later in the video These combination of factors makes Geo a very stable business overall but the company is not without risks first of all there was covid-19 issue ice the largest Geo customer that contributes about 25 percent of Revenue largely uses the facilities to lock in illegal immigrants mostly from the southern border of the United States however in 2020 when coronavirus risk was high the government used title 42 which kicked out illegal immigrants immediately to stop spread of the virus and since the occupancy rate at its facilities are important revenue for geo the starting of title 42 in mid-2020 lowered the occupancy rate from 90s to mid 80s but more recently two important changes took place first as coronal risk is going down more people are floating the southern border again as this graph shows in fact more people are reaching the Border in the past two years compared to 2019 before kovid in addition as U.S Court ruled that title 42 is not legal the negative impact from this first challenge is expected to go away however another risk surfaced with Biden Administration in early 2021 which is that President Biden signed an executive order which forbid these federal agencies from renewing their contracts with privately owned criminal detention facilities many of which are run by Geo as a result of such change in government attitude Geo is getting hit by lower contract renewal from the federal government side although this executive order only relates to these two federal agencies but not ice and although Geo can respond by changing the form of its detention facilities such operating risk Force Geo to give up its Rich status and also triggered even lower stock price now let's move on to the financial analysis as you can see in the blue bar here Geo's Revenue began to fall since 2020 but interestingly its operating income shown in Orange actually increased this is thanks to the new CEO who took charge in mid-2021 and is focused on cutting costs in the face of aforementioned operating headwinds core Civic the second player that microbrewery also invested in had lower Revenue as well while this company's operating income decreased along with the revenue as these two companies gave up rich status in 2021 they both caught dividend down to zero now they're retaining instead of paying off dividend but as we can see here the operating cash flow shown in the blue bar continued to come in so what did Geo do with this cash flow the answer is shown in the gray bar which shows significant cast uses for financing so basically Geo spent the money to pay down the dam which had large impact in 2022 and thanks to such effort depth to ebitda ratio of Geo shown as the blue bar fell from seven to eight times to near four times core Civic also focused on the debt reduction and so its leverage ratio is also below four times the reason why geo focused on their production so much even by giving up rich status was because when the negative operating risk broke out and the depth level so high thanks to the large mnas to get larger in the past Geo's credit rating deteriorated to Triple C plus and six Banks even announced to stop lending to The Firm as a result Geo rearranged its depth structure and the result is shown here the green bar which shows the original depth maturity is now pushed back to the Blue Bar further into the future and more spread out and so Geo is now free from that burden until 2026.
in Geo's credit ratings slightly improved to B and B3 but it's still at a junk bond category an investor should be aware that 55 of geostep are floating rate which means if fat keeps increasing rates Geo's interest expense will also increase significantly so far it looks like Geo has meaningful pros and cons so in the end it will come down to the intrinsic value of the company to make a Sound Investment decision and for this I use GEOS normalized free cash flow numbers basically using the pre-copy numbers and increase it by one percent per year this is somewhat simplified and optimistic but not too aggressive and as a result the model showed 14.3 percent annualized return over the next 10 years in general anything above 10 means reasonable valuation because over the long term the stock market in general also creates about 10 return however if I look at some real risk that Geo still faces before generating the fully normalized for cash flow I feel like the expected return should be much higher at least 20 percent or more if that's the case why is microburry investing so aggressively in not only Geo but also its competitor core Civic the answer relies in this stock chart based on public filing Barry traded in and out of Geo since late 2020 and but the stock nearly six to seven dollars per share range so if I run the model using seven dollars per share purchase price the long-term expected return turns out to be 28.4 percent which seems to compensate for the potential risks that we discussed before so basically worry about the stock when it was much cheaper and he could expect more than 25 annualized return at those lower prices but since the stock price went up already by more than 70 percent from various purchase price even if the stock is still somewhat underpriced there is less margin of safety and more risk now for those of you who like to make numbers based investment decisions this is a scenario analysis of the annualized return depending on the price we pay for the Geo stock for example if you like to make more than 20 from Geo investment then you can decide to buy if the price Falls to low eight dollars per share but if the stock price continues to climb from the current level up to the historical average then it will not make sense to invest in Geo all right that's gonna do it for today's video and thank you all for watching I really appreciate it if this video benefited you in any way please click the like button below and also subscribe to the channel and I will deliver Deep dive numerical analysis on companies that are chosen by super investors also feel free to share your thoughts on Geo why are you buying it or avoiding it please share in the comments OK thanks again and I'll see you in the next company analysis take care thank you
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