tag:blogger.com,1999:blog-2080506270244832638.post8881214990920890340..comments2024-03-28T07:17:13.573-05:00Comments on Clark Street Value: Laureate Education: Asset Sales, Informal Liquidation, RemainCo CheapMDChttp://www.blogger.com/profile/10679835609782815537noreply@blogger.comBlogger28125tag:blogger.com,1999:blog-2080506270244832638.post-18994975396844012652021-08-13T10:56:36.637-05:002021-08-13T10:56:36.637-05:00Good to hear they're talking, but they might h...Good to hear they're talking, but they might have missed the window to preserve some value for the common, its quickly losing its meme status.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-36033679762547304982021-08-13T07:46:07.341-05:002021-08-13T07:46:07.341-05:00Yea, you're right, pointed that out in the wri...Yea, you're right, pointed that out in the write-up as well, the stock sort of seems to already incorporate that in the price. Even if it takes some time to get Peru and/or Mexico sold, the Walden sale just closed yesterday, there's like an increased buyback, tender or special dividend coming shortly, still continue to think its an attractive situation in the near term.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-34073407351251910402021-08-13T05:46:39.360-05:002021-08-13T05:46:39.360-05:00A major portion of remainco EBITDA is in Peru. The...A major portion of remainco EBITDA is in Peru. They just elected a socialist (and an actual one, not one of those American "socialized healthcare is socialism"). Maybe he wants to imitate China in the for profit education sector. At the very least it might be tougher to find a buyer and might compress multiples? And might also take longer because potential buyers might want to hold out and see how much of a socialist Castillo really is. And if this is going to be a second Venezuela. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-51373548355701318702021-08-12T14:08:39.026-05:002021-08-12T14:08:39.026-05:00Makes sense.
In turn, a small nugget from RHE. In...Makes sense.<br /><br />In turn, a small nugget from RHE. In response to my inquiries, CFO Ben Waites said, basically: Yup, it's game theory, RHE-A is only senior in liquidation, we're talking to Charles Frischer and hope it's not a waste of time. A somewhat hardball response, unsurprisingly.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-6762135589948100202021-08-12T11:48:25.181-05:002021-08-12T11:48:25.181-05:00Thanks for the all the ideas.
Coming back to PFSW...Thanks for the all the ideas.<br /><br />Coming back to PFSW, I received back a predictably unhelpful response from IR, but I think the LiveArea deck is "standalone" as in it includes some corporate overhead (the 8-10% EBITDA number would be including a fair amount of cuts to overhead compared to the TTM number of $18.5MM). But that's my best guess, sounds like they're shopping the segment, 3PLs are hot, GXO (the XPO spin) has done well out of the gates, this is obviously much smaller but would make for an easy tuck in, pretty fragmented market, guessing there would be buyers.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-68789888636327705422021-08-11T16:00:02.359-05:002021-08-11T16:00:02.359-05:00100% endorsed, especially the long weekend plan.100% endorsed, especially the long weekend plan.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-83989528136670965772021-08-11T15:01:14.810-05:002021-08-11T15:01:14.810-05:00ADES is an interesting name that I own a bit of an...ADES is an interesting name that I own a bit of and have traded around a bit in the past few months. Capital allocation seems somewhat decent (perhaps apart from the decision to buy the Red River plant in the first place). Under $7 the implied price of the Red River plant seems reasonably cheap compared to 1) where they bought it and 2) what some simple modelling suggests post Cabot, post price hikes. That said, I'm a bit wary to value the plant too optimistic as it seems like it is basically profitable by the grace of Cabot only.<br /><br />Also, I thought the VIC write-up was very good - not sure I have an edge compared to others looking at this name.<br /><br />LMRK I looked at a while ago - interesting situation but I know nothing about the assets and am a bit wary about some random party trying to overbid insiders. Decided that it was too difficult for me.<br /><br />My look-into-later list is getting longer and longer. Time for an early weekend now - I'm a lazy European.writserhttps://www.blogger.com/profile/04755781938953507727noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-83609598569220761432021-08-11T12:41:20.362-05:002021-08-11T12:41:20.362-05:00You are, of course, correct, Writser; closer to 1....You are, of course, correct, Writser; closer to 1.3 than 2. My apologies for being slapdash, which is the peril of going entirely on memory. I recalled just enough of the transaction to give a gross figure, not EV.<br /><br />Obviously, 1.3% would be great for MN too. My back-of-the-envelope valuation put MN at $14-24, and in a situation like this where it's a pure guess I like to be in at 50-60% of the low end of value range to account for uncertainty, so I'm not buying any more now. No real insight into MN vs WDR as an institution; though I know there are some sharp divisions between best and worst, and delineations on client and strategy, I think of them both as more or less middle of the pack, vanilla asset managers/advisors, roughly equivalent. I tend to miss a lot of nuance and tell myself it's not important (unlike the 30% miss in valuation above!).<br /><br />Speaking of, there are a lot of "imaginary arbs" out there these days, of deals which might not be real or might not get done:<br /><br />IVAC--strategic review; not much info.<br /><br />ITI--ditto; triggered by a stock and cash offer from REKR that at the time offered $8+ of value and at today's price would be just a bit above $4! So it maybe speaks well to ITI management that they rejected it basically out of hand.<br /><br />SMTS--ditto, with the eternally-impatient Leon Cooperman involved, which is a plus; plans to update in a few weeks.<br /><br />ADES--interesting situation where company will soon be trading around cash (on business coming to an end shortly); I feel like there's a bunch of info on it around. <br /><br />LMRK--2 bids in, plus a third bid that seems suspect to me; trading a dollar above highest bid, but $1.80 below overbid.<br /><br />CXP--strategic review triggered by an offer at $19.50 this spring; maybe they lost the bird in hand because gateway city office/retail assets and high-end repositioning plays might not be looking as attractive now as they were a few months ago. Bought a bunch of Jan 15 calls yesterday because they seemed very cheap. Company has an interesting niche.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-16229364563038103452021-08-11T04:11:43.368-05:002021-08-11T04:11:43.368-05:00Regarding WDR: was it really taken private at 2% E...Regarding WDR: was it really taken private at 2% EV/AUM? Quite a bit of cash and investments on the balance sheet, purchase price seems around an EV of ~$1b for $75b AUM or ~1.3%? Maybe it is a crappier investment manager though, haven't really looked in depth at either yet.<br /><br />Both Cairn and PFSW look interesting, thanks for flagging them.writserhttps://www.blogger.com/profile/04755781938953507727noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-74461877350260909032021-08-10T13:28:39.544-05:002021-08-10T13:28:39.544-05:00Ah, great!
Can't fault that stance on Cairn. ...Ah, great!<br /><br />Can't fault that stance on Cairn. I swore off all gold miners but can't yet quit speculative petro. Just about the only O&G with an apparent, unadventurous path to returns I can think of is EPM (Maybe EPSN too, though I haven't done the work on it), though their recent purchase has changed their profile and bears watching (or ignoring, since there might be easier ways to make money!). <br /><br />Can't recall (maybe I'm repeating myself!) whether I've mentioned EPM, but they own non-operated, low-decline mature assets without exploration risk and tend to run modestly net cash without hedging and with a shareholder-return mandate, via dividends and buybacks. Basically doing their best to imitate an old industrial-products company in a very different field. <br /><br />Not much reason to own, unless you want O&G exposure or want to express a view on hydrocarbon prices. But a more active IR effort of late (double edged sword) and line of sight to a dividend above the current 5% (my back of the envelope gets me to ~10% with unheroic assumptions in the mid term), with a balance sheet and operations that let a person sleep.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-50633097956322994802021-08-10T10:04:29.760-05:002021-08-10T10:04:29.760-05:00I emailed PFSW's outsourced IR, probably won&#...I emailed PFSW's outsourced IR, probably won't get a response, but I'll revert back if I do.<br /><br />Cairn is a little too adventurous for me, but good work!MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-9663203285426197182021-08-10T08:27:11.644-05:002021-08-10T08:27:11.644-05:00Sorry, I'm probably the wrong person to ask ab...Sorry, I'm probably the wrong person to ask about a gold miner, never really look at them.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-57626683515843442872021-08-09T21:58:26.501-05:002021-08-09T21:58:26.501-05:00Hey MDC, looking at $GAU; would love your input. L...Hey MDC, looking at $GAU; would love your input. Looks to be trading below book and producing cash. Not sure if I am missing something. RevelationOnVacationnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-34295781202654117142021-08-09T14:31:52.954-05:002021-08-09T14:31:52.954-05:00PFSW looks interesting; have same question.
FYI t...PFSW looks interesting; have same question.<br /><br />FYI to anyone reading my previous screed(s): Cairn Oil +30% 2 days after I wrote the above on Indian govt. attempt to resolve tax issue by paying them their billion dollars but not any interest due. <br /><br />TBD whether Cairn will take it but seems like they'd be crazy not to, as this is the ultimate bird in the hand. <br /><br />I thought there might be a quick resolution to this but in no way anticipated anything this quick! In any case, still think they are potentially quite undervalued as post-settlement they will have an EV not very far above zero with significant production (albeit in some hairy locales) and some potential exploration home runs. <br /><br />Of course, the cash could just give them a longer, richer slide to bankruptcy; really depends on how you feel about junior E&Ps.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-64793117238777667422021-08-09T12:26:34.464-05:002021-08-09T12:26:34.464-05:00Can't tell if you're just trolling, but ob...Can't tell if you're just trolling, but obviously there's a lot of noise in their financial statements right now, I'll let you make your own adjustments to determine net profit/loss. But on the larger question of EBITDA here, it's clear they're in the middle of a process and management is probably using that $280MM in EBITDA as a valuation metric with bidders. We can all agree that EBITDA isn't owners earnings, but its what is typically used in deals like these, so I'm not advocating for EBITDA, just the world we live in.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-28447960048186274552021-08-09T12:24:25.168-05:002021-08-09T12:24:25.168-05:00PFSW does look interesting, I'm trying to squa...PFSW does look interesting, I'm trying to square the guidance in the LiveArea sale deck of $184MM in revenue and 8-10% EBITDA margins for the PFS Operations business with them doing ~$26MM in LTM EBITDA at that segment. I know they're a covid beneficiary, but they're still guiding to 5-10% topline growth. What's the right number to use?MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-69284774014460847752021-08-09T10:49:03.758-05:002021-08-09T10:49:03.758-05:00EBITDA is fine but what is the profit situation?EBITDA is fine but what is the profit situation?Anonymoushttps://www.blogger.com/profile/17000396047409389928noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-90745865260672479662021-08-08T15:39:34.999-05:002021-08-08T15:39:34.999-05:00PFSW looks pretty very interesting. Basically very...PFSW looks pretty very interesting. Basically very similar to many of the deals discussed recently. Sale of major business lines with strategic alternatives on the horizon for the rest. Pro forma for sale: 6x ev/ebitda. There could be huge strategic value to remaining PFS business. Warehouse automation and fulfillment is a hot business. <br /><br />Also no position in BSIG. But would be interested to see if someone had a differentiated view. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-32067760559057392272021-08-07T01:29:41.786-05:002021-08-07T01:29:41.786-05:00Agree. Also probably easier to sell a $1 billion E...Agree. Also probably easier to sell a $1 billion EV biz than a $100 million one; it's not that much more hassle and moves the needle more for any acquirer. ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-71029306628669868922021-08-06T15:29:43.945-05:002021-08-06T15:29:43.945-05:00Hmm, yeah very similar and worth digging into, jus...Hmm, yeah very similar and worth digging into, just listened to the latest conference call, the tone sure sounds like a management team that intends to sell Acadian.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-26391512702715060022021-08-06T13:22:56.088-05:002021-08-06T13:22:56.088-05:00Any thoughts on BSIG? Similar story. Paulson 25% o...Any thoughts on BSIG? Similar story. Paulson 25% owner, has been winding down at a nice pace. Pro forma ~900m in net cash, making some noise about returning capital and/or selling themselves.<br /><br />One remaining asset manager, Acadian, a quant shop, with ~118b AUM. So, quite a bit more expensive (1x EV/AUM?), but some pluses: looks like it is winding down, special dividend / tender upcoming, one large opportunistic shareholder, yada yada yada.<br /><br />No position though.writserhttps://www.blogger.com/profile/04755781938953507727noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-35706161972941239512021-08-05T20:03:16.446-05:002021-08-05T20:03:16.446-05:00Don't listen to anything I say, s445203!
That...Don't listen to anything I say, s445203!<br /><br />That said, MN is also worth looking at, maybe. I mentioned it in the comments previously: a plain-vanilla asset manager simplifying its cap structure and building cash. It has a pristine balance sheet and is quite profitable on recent terms. Valuation was compelling earlier, less so now; my back of envelope says at 1% EV/AUM it's worth ~$14, but I stopped buying in the 7s because with no-catalyst, meh-quality situations like this you want to- be in at a valuations that's fine even if nothing happens for a few years. <br /><br />They've reinstituted a dividend and are making the right noises about buybacks and have pretty much consolidated the ownership of operating assets in the public co, which is all to the good. They've also hinted that they may finally be stanching the outflow of funds; growth in AUM has been pretty much all market-appreciation based. They are pretty generous about rewarding themselves, and have spent a lot on internal systems which may or may not be as helpful as they wish. <br /><br />There's not really any reason for a company like this to exist. They're reasonably-competent asset managers trying to be asset gatherers, with an excellent balance sheet and a future that looks a lot dimmer than the (more distant) past. But because there are so many asset managers in the same boat, they would be an attractive target IF (I theorize) they can attract some capital inflows. Everyone is in the asset-gathering game, but nobody wants to take on control premium and integration risk for a melting ice cube. But if they can show stabilization of assets (net of market moves), I think it's a whole different ballgame. Management has not offered any body language about selling, but it seems like the obvious move to me: dress up systems, drum up price (with dividend, etc.), present a sleeker org, sell out. <br /><br />Though not a perfect analog, I am sure they are cognizant of WDR's buyout last year, and are doing the same math as I: let's say they get to $25 bln AUM YE 2022 and are taken out at 2% AUM, around where WDR was. Even getting no credit for the few dollars per share of net cash, and wit further dilution, you're looking at ~$20/share. If markets keep being a tailwind, they are actually able to add meaningful assets and use cash to buy back shares, maybe they get to $30 billion AUM in, say, 2 years, and get taken out at $30. <br /><br />or maybe they keep moseying along, sharing a pittance of their profit with outsiders!<br /><br />Anyway, worth watching, maybe. Like I said, can't reco buying right now because it's outside margin of safety level and is not a moonshot stock where r/r dictates a flier. The key is, IMO, net inflows. If those start, and sustain, this rerates further than it already has, one way or another.ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-76476610176067622312021-08-05T15:59:47.308-05:002021-08-05T15:59:47.308-05:00I agree its confusing, I think it's a combinat...I agree its confusing, I think it's a combination of things: 1) doesn't screen well, its not screening at 4x EBITDA; 2) the for-profit education sector still has a stink on it for US investors; 3) its not a true risk arb that would get picked up by bigger funds, has that uncertainty to itMDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-69866848027886977292021-08-05T15:19:55.845-05:002021-08-05T15:19:55.845-05:00And from the LAUR cc:
"We are still very com...And from the LAUR cc:<br /><br />"We are still very committed to returning excess capital to our shareholders. We have -- we had a strong cash position now, and we will be even in a stronger position at the close of the Walden transaction. And we are working on ways to return capital in the most tax-efficient manner for our shareholders, and we will provide more details on that after the closing of the Walden transaction."<br /><br />"Bill, there is just some -- what I would characterize as mainly administrative matters at standing to satisfy the CPs for closing and both Walden and Laureate are working collaboratively and expeditiously towards a successful closing in the near future. I can't be more specific on that, but certainly, we have a high confidence that that this is a third quarter item."<br /><br />I'm honestly quite puzzled by the way this is priced. Is the market skeptical about the Walden transaction closing? All the circumstantial evidence I see suggests that this will close quickly.<br /><br />Is the market skeptical about the return of capital? I also don't see any problems there: given PE ownership, repeated comments by management and the size of the pro forma cash balance I'm pretty sure a lot of cash will be coming our way one way or another when the Walden deal closes.<br /><br />So I guess that leaves the last option: the market is very skeptical about remainco. Which is probably the case. But with an EV of ~$1.3b, 2021 guidance of 210m and 2022 guidance of 280m this seems quite cheap on a standalone basis and even cheaper if they wind down, which probably is the end game.<br /><br />Confusing. I mean it is either quite a bit mispriced or I completely misjudge remainco.writserhttps://www.blogger.com/profile/04755781938953507727noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-23104478490453785282021-08-05T15:01:09.937-05:002021-08-05T15:01:09.937-05:00Some marginally positive news: ATGE had quite a bi...Some marginally positive news: ATGE had quite a bit of management turnover the past few months. I missed this initially, but activists were pressuring the company to try and cancel the Walden purchase ( https://www.highereddive.com/news/activist-investors-urge-adtalem-to-pull-plug-on-walden-u-purchase/593775/ ) . <br /><br />However, according to todays PR ( https://investors.adtalem.com/press-releases/press-releases-details/2021/Adtalem-Announces-CEO-Transition/default.aspx ) the new CEO "spearheaded the acquisition of Walden University and is driving the integration planning process that will allow us a running start when the acquisition is completed by the end of 1QFY22.". So, looks like they are not trying to walk. Also, the timeline is still Q3 2021. Of course it's just a press release ..<br /><br />I'm also pondering a bit how to interpret the July 27 purchase agreement amendment. Looks like both parties agreed that the DOE response (even though it was only initial) was good enough to prevent either party from terminating the agreement. Again suggesting that both parties are committed, why would ATGE voluntarily commit to that if they try to squeeze out? And as a quid pro quo Laureate provided additional indemnification? Or am I misinterpreting this.<br /><br />Finally, looks like CACREP will notify ATGE / LAUR on August, 25 ( https://www.cacrep.org/organization/walden-university/ ). Perhaps an important date.writserhttps://www.blogger.com/profile/04755781938953507727noreply@blogger.com