No one is making the case that BYD’s fundamentals are rock solid right now or their upcoming quarter will be good. Quite the opposite. However, I don’t need to whip out my calculator to know that even if my discounted estimates are cut in half, the FCF yield would still be a whopping 20%.
From a liquidity standpoint, BYD has no significant maturities until 2013. Covenants shouldn’t be an issue either as leverage is coming down at the same time the leverage restriction rises. Please see the chart. EBITDA would have to fall over 25% below my estimate in Q4 to bust a covenant. Not likely.
Something is going on here. BYD dropped 13% today when the DOW rocketed up 400 points. Even HOT was up today. Somebody is blowing up.