Levy Acquisition Corp.: A Hot Taco At A Not So Loco Valuation
- LEVY, following its acquisition of Del Taco at less than 9x EV/EBITDA, represents a significantly mis-priced security and a compelling opportunity trading at a massive discount to peers.
- LEVY has a great story to tell, but as a SPAC has been ignored. Bulge-bracket coverage likely in June should close the valuation gap vs. QSR peers.
- LEVY bears an uncanny resemblance to LOCO. We think LEVY/LOCO represents a compelling pair trade, with an 8x difference in EBITDA multiples.
- LEVY warrants (LEVYW) appear to offer compelling value and could further amplify returns.
- We see 50%+ upside to LEVY and 150-200% upside to LEVYW over the next 3-6 months.
Sears Hometown And Outlet Stores: A Classic Value Trap Headed To Zero
- Initial franchise fees have inflated gross margins and reported EBITDA.
- SHOS is now running at a loss on an EBITDA basis, and SSS declines are accelerating.
- A return to profitability is unlikely, and the company's ABL facility expires in 2017.
- Liquidation analysis suggests common equity recovery of zero.
Landauer - New Competitive Product Threatens Core Business
- LDR's Radiation Measurement business drives nearly all of LDR's profits and faces a new competitive threat that could erase more than 50% of EBITDA.
- We believe Instadose 2, developed by LDR's primary competitor, privately-held Mirion, is ramping up commercial production and will beat Verifii to the market by at least 1 year.
- LDR hopes to launch Verifii (similar to Instadose 2) in calendar 2016. We are skeptical LDR hits their timeline and think late 2017/2018 is more likely.
- At a recent industry conference, Mirion noted a waiting list of nearly 195,000 units of Instadose 2 badges (~10% of the market), many of which are currently LDR customers.
- LDR trades at 10.7x FY15 EBITDA with 3x leverage. We think the stock is worth $5 to $25 and that investors are unaware of the threat posed by Instadose 2.
John B. Sanfilippo: Severely Mispriced With Significant Near-Term Upside
- Trading at a very low multiple for a CPG with high returns, low economic sensitivity, and an attractive growth profile with limited capex needs.
- Ongoing mix shift leading to significant margin expansion and value creation.
- Recent overreaction/misunderstanding surrounding immaterial news has created a unique buying opportunity.
- Stock has +50% upside and potentially upwards of 140% in the event of a sale.
Sphere 3D: A Short So Fat, When I Yell 'Hey Kool-Aid!' It Comes Crashing Through The Wall
- Sphere 3D is a recent assembly of four money-losing companies.
- The majority of the company's valuation is linked to its "Glassware 2.0" virtualization software.
- I believe the company is setting up for disappointment with material downside in the share price possible, if not likely.
Williams Companies: Playing The Gas Infrastructure Super-Cycle
- WMB offers top-class capex pipeline to support robust dividend growth for the foreseeable future.
- Market valuations don't fully reflect the post-merger benefits of WPZ/ACMP deal.
- Little linkage of revenues to short-term energy price swings with majority contracts being fixed-fee.
- Under-appreciated value of the company's GP interest in Williams Partners.
FRP Holdings: Small-Cap Real Estate Spin-Off Valued At 35%+ Premium To Current Market Value
- Spin-off of FRP Holdings creates a repricing opportunity.
- Margin of Safety: The market incorrectly assigns a negative value to the company's developed land.
- Board and management have a long-term view and are shareholder-friendly.
Wayfair's Slow Growth Won't Be Able To Uphold Its Ultra High Valuation
- Given Wayfair's recent IPO, excitement has caused it to have a very high valuation which will likely correct post lock-up expiration on 3/31/15.
- Traffic analysis of Wayfair.com shows that traffic is no longer growing significantly, and might be actually declining, which suggests growth expectations will disappoint.
- Peer e-commerce firm Zulily, has been decimated after high expectations disappointed. Wayfair has a similar business model – could it become ZU’s horror film sequel?
- Right now is the opportune moment to sell or short Wayfair since it’s up 60% year to date and its lockup expiration is next week.
Gray Television: Another Shade Of Gray
- Retrans fee hikes have been surprisingly strong, which has boosted Gray's share price, but network reverse comp hikes are being underestimated by the company and investors.
- TV ad sales have been sluggish. Now that the economy has recovered from the Great Recession, TV ad sales may be showing signs of "glacial melt" due to digital encroachment.
- We are short (and have been short-term wrong), but remain so with a $9 one-year target price.
TimkenSteel: Deteriorating Fundamentals Create Short Opportunity
- TimkenSteel is facing a prolonged period of downward pricing pressure due to the supply/demand dynamics of the steel market.
- Dividend and share repurchase will not be covered by cash from operations in 2015, forcing the company to increase leverage above internal targets.
- Exposure to the exploration aspect of Oil & Gas drilling leaves the company very exposed to declines in the North American rig count.
- The company is trading at a significant premium to peers, but looks cheap when initially screened due to lofty sell-side expectations.
- Return characteristics of an LBO do not look attractive, making a takeover less likely in my opinion.
Wheelock & Co.: A Very Cheap Stub
- Wheelock shares are trading substantially below the value of the two publicly traded underlying equity positions and the development company.
- The recent restructuring of Cheung Kong, another large Chinese real estate conglomerate also trading at a discount to NAV, could provide the template for Wheelock.
- The development company has accumulated a large land bank in premier areas of the city which you are getting for free when you buy the shares.
- The development company is also starting to harvest significant properties in the next two years which should boost cash flow and the dividend payout.
Essex Rental: Technical Default Masks Massive Value; Triple-Digit Returns Possible
- ESSX trades at under $0.80 per share, with an appraised orderly liquidation value of over $5/share. Going concern value could be significantly higher if/when crawler utilization improves.
- Given the debt load, the situation is not without risk, but the current enterprise value is below the company's borrowing capacity as assessed by conservative lenders.
- The valuation discount seems too extreme; investors could see triple-digit upside over the next year or two.
Sina/Weibo Relative Valuations Present Huge Arbitrage Opportunity
- We estimate the value of Sina's stake in Weibo, plus the cash and investments on its balance sheet, is worth over $50/share, or 55% upside from SINA's current share price.
- Sina's stake in US-listed Weibo alone is worth over $28/share to SINA shareholders. Net cash and investments are worth another $22+/share.
- SINA management has been taking advantage of its ample balance sheet and this market inefficiency by aggressively buying back its stock, a fact that has gone largely overlooked by analysts.
- We lay out a relatively simple long/short pair trade in SINA/WB to capture this arbitrage opportunity.
Outerwall - The Company Everyone Loves To Hate
- Continued share buybacks at depressed prices.
- Management's commitment to share buybacks.
- 1-year PT - $90.
Activision Blizzard: Priced For Perfection, With Headwinds Coming
- ATVI has gone from a 10-12x P/E stock to a current valuation near 20x 2015 guidance.
- The massive repurchase of Vivendi's stake has hidden the fact that the net income has been flat for five years.
- With the market assuming perfect execution and lowballed guidance, any slip in Q2 numbers could lead the stock down sharply.
Despite Recent Strong Gains, There's A Lot More Upside In Panoramic Resources
- Panoramic has re-rated 56% since mid December, when I highlighted the 20% plus cash flow yield the company offered to investors in 2015 and 2016.
- Since then, Panoramic has announced a potentially significant new discovery within its Lanfranchi Mine, potentially extending it 3 years beyond late 2016 and further de-risked its other exploration projects.
- The next 3-6 months of resource definition drilling will be a tipping point for Panoramic, with the stock likely to increase 129% as these additional reserves and resources are booked.
- PAN should also see a re-rating in its share price as its current short mine life discount is removed, which alone should increase to the share price some 74%.
- Even ignoring the strongly encouraging exploration drill results recently, the company's existing reserve base is already sufficient to deliver an investor today a payback period of around 2.5 years.
Rogers Communications: Undervalued Canadian Large-Cap Cable Co. With 40% Upside
- The astonishing amount of wireless data usage in Canada and its forecasted growth is hastening the rollout of 4G LTE network infrastructure in Canada.
- RCI is well positioned to leverage this behavioral shift in consumer psyche through quality spectrum assets, strong cable network and coveted media assets.
- RCI is trading at a forward EV / EBITDA of 7.8x as compared to the national carrier average of 8.6x.
- This discount is unsustainable and stems from myopic market perceptions regarding recent loss in subscribers, high leverage and the uncertainty around the rise of a 4th national carrier.
- DCF suggests fair value of CAD 60 per share, 40% return over current price plus dividend yield of 4.3%. Worst case scenario capped at 8% downside (excl. 4.3% dividend yield).
Grupo Televisa: A Good Time To Look South For Opportunity
- Investor sentiment towards Televisa appears tempered by 2014 challenges related to a soft economy and regulatory issues which muted growth in Televisa's revenues. We expect growth to accelerate in 2015.
- The prospect of a Univision IPO could highlight Televisa's 37% stake. An IPO appears increasingly likely based on recent comments from Televisa and Univision.
- Despite being among the most vertically integrated media and entertainment companies in the world Televisa trades at a discount to other media leaders.
Bancolombia: Buy This Fast-Growing Bank At 5-Year Lows
- Mr. Market has castigated both Colombia (the nation) and Bancolombia (its largest listed company) due to oil's decline.
- The market overreacted grossly. Colombia is still growing strongly, and Bancolombia will rebound rapidly when investors return.
- Colombia's banking sector will continue to grow exponentially in coming decades.
- Bancolombia could offer investors 20-50x returns over the coming decades, unfathomable upside is possible.
- Buying Bancolombia at this 5-year low offers fantastic reward set against merely moderate risk for the patient long-term investor.
Rovi: Multiple Catalysts, 29% Upside Using Conservative Assumptions
- License renewals in 2015 and 2016 expected to increase annual revenues by approximately 25%; incremental annual costs for additional revenue will be minimal.
- Activist investor has contacted the company.
- Short-term short-selling pressure on the stock by convertible arbitrage funds.
- ~37% operating margin; ~30% free cash flow/sales; shareholder friendly management actively buying back shares with strong free cash flow.
- 29% upside based on a discounted cash flow; trading 9% lower than lowest sell side target.
Monsanto: A Very Compelling Long Opportunity Rarely Seen In Large Caps
- We think the shares of Monsanto represent a compelling long opportunity with strong demographic and secular tailwinds and a massive competitive moat that is unrivaled.
- The possibility of Eastern European expansion could present a large opportunity within Ukraine and possibly to other former Soviet Republics.
- The recent launch of Intacta is in its third year, which is typically the largest adoption year. A large ramp in revenue is expected.
- The Climate Corporation (Precision Farming) acquisition two years ago represents a massive call option with the potential of a $20B revenue opportunity.
Inotek: Tepid IPO Only Postpones Existential Threat And Significantly Delays Product Launch
- Inotek Pharmaceutical is developing a new class of medication to treat glaucoma.
- Initial SEC S-1 filing indicated a target maximum of $132 Million to be raised, the actual IPO raised far less than the initial goal.
- A very tepid IPO on February 17, 2015 raised a net ~$53 Million with the overallotment so far not exercised.
- Significant secondary offerings (likely $50M+) will be needed to fund ongoing product development.
- Details on the efficacy of Inotek's lead product trabodenoson leave little to be enthusiastic about.
Nordic American Tankers Offers Tremendous Potential Upside
- The oil tanker market has struggled since 2011, but is now showing strong signs of resurgence.
- Despite market improvement, NAT has barely moved, likely due to limited and negative coverage.
- Long-term data suggests 2011-2014 was the trough of the cyclical oil tanker market.
- NAT has 50-100% of near-term share price upside based on current market fundamentals alone.
- Near-term catalysts including a likely huge dividend increase in May and oil volatility should continue to promote share price upside.
Zulily: Reset Expectations On This Growth Story Create Substantial Opportunity
- E-commerce flash sales leader continues to be a phenomenal growth story with a massive addressable market.
- Stock is 80% off its highs post IPO and 40% below its IPO price.
- Valuation, cash hoard, and FCF generating ability, and reset expectations make this a top pick.
Resonant: All Hopes Gone After Q4 Announcement, 50% Downside
- Resonant has no revenues, no developed products and no customers after three years of operations. Only one new questionable potential customer has been secured.
- The majority of the investor base is retail, and the share price has tripled on the back of articles proclaiming RESN as a must-have acquisition for SkyWorks.
- Neither venture capitalists nor institutional nor trade investors have shown any interest in putting money in Resonant's "promising" technology.
- Any hopes of successfully monetizing its products (or Resonant being acquired) have been completely destroyed with the company's announcement of not being able to meet the required design specifications.
- At least 50% downside, with clear catalysts. The latest announcement about a "second customer" is a promotional non-event.
Keryx: The Company That Saves More Money Than Its Market Cap
- Much has been said about Keryx and its phosphate binder Auryxia, but the most important argument has been missing in the discussions so far.
- In fact, scientific studies have shown that using the drug could lead to enormous potential savings.
- The sum of these savings could easily surpass the company's current market cap - annually.
- This clear indicator of undervaluation is further supported by the likely prescription growth trajectory and additional foreign sales opportunities.
- I believe that Keryx could easily double over the next 2-3 years.
Noranda Income Fund: Get Paid To Wait For A Win-Win
- NIF, an entity designed to provide stable dividends to shareholders, has been oversold due to newly added cautionary language about the end of the supply agreement between Glencore and NIF.
- As a going concern, NIF is valued today at C$5.12 per share, a 73.0% a premium to the current share price.
- In an unlikely conservative liquidation scenario, NIF is valued today at C$3.55 per share, a 19.9% premium to the current share price excluding the value of the smelter or land.
- Tredegar has experienced years of stagnant growth, despite spending $339 million on growth capex and acquisitions.
- Failing to meet management's stated targets, the shares lagged in 2014.
- Earnings, however, are set to recover in 2015 as: 1) the new flexible packaging line ramps up; and 2) nonresidential construction continues to pick up steam.
- Multiple avenues are available to unlock value, including: 1) spin-off or sale of the company's Film or Aluminum business; 2) sale of the entire company; 3) a more aggressive capital return program.
TransCanada: Blue-Chip Canadian Pipeline Company At A Depressed Valuation
- TransCanada stock has dropped significantly in the past few months, despite a business model largely insulated from commodity price risk.
- The company intends to grow EBITDA by 8-10% per year through 2020.
- Despite its growth potential and solid business model, TRP trades at a 25% discount to its peer group.
Avolon: Growing, Underfollowed Business At Steep Discount To Comps, 40%+ Upside
- AVOL, a medium-sized aircraft leasing company, is under-followed and unappreciated, despite a young, high-quality fleet and strong growth prospects.
- Recent Q4 results solidly beat expectations and FY15 guidance was good, with top line growth expected to continue apace and adjusted RoEs rising to mid-teens in FY15.
- AVOL is rapidly growing its fleet, and with average age already at a best-in-industry 2.5 years, there is a substantial margin of safety built into the stock at current levels.
- If we were to value the stock in line with its closest peers, AVOL would trade closer to $28 (40% upside). The downside looks limited, given its young fleet and conservative valuation.
Top Retail Play 2015: Regardless Of Style, Ann Inc. Will Fit Your Portfolio
- ANN has traded below peers due to an ineffective promotional strategy, depressed operating margins, and macro headwinds.
- The company has temporarily avoided a takeover through its partnership with Golden Gate Capital and focus on internal initiatives to drive margin expansion.
- Recent calls for a sale of the company from Red Alder and Engine Capital target a fair value range of $50-55, which is in line with DCF and relative valuation.
- Whether through internal initiatives or acquisition, investors should see upsized returns from ANN over the next 6-12 months (+35-50%).
SemiLEDs Remains A Terminal Short
- Negative gross margin and significant cash burn should lead the stock to zero.
- Modest revenue improvements seem likely to be 'too little, too late' in a highly competitive industry.
- Recent equity sale could be a monkey wrench for shorts, but seems unlikely to alter LEDS' trajectory.
SandRidge Energy: What Happens Once The Cash Pile Runs Out?
- By the end of Q1 2015, SandRidge will have essentially exhausted its entire enormous cash pile. The company's drilling carries have also run out.
- With its 2015 capital spending curtailed, SandRidge's oil production is expected to decline steeply. Cash flow will contract. Additional funding will be needed as working capital shrinks.
- The ratio of Total Debt-to-trailing EBITDA may climb to ~6:1 by year-end 2015.
- Oil production decline will likely extend into 2016, even if the oil price recovers to the $100 per barrel range.
- Despite the significant decline since last summer, at $1.82 per share, the stock's risk/reward appears skewed strongly to the downside.
Fairchild Semiconductor: Ignored And Unloved Cash Flow/Buyback Story With 50%+ Upside
- Transformative shift in manufacturing strategy will result in $110M ($1/share) greater FCF exit 2015 run-rate than at year-end 2013.
- Fairchild has the most aggressive share repurchase program in the semiconductor industry with 100%+ of FCF used for buybacks in 2014 (8% of outstanding) and the same planned for 2015.
- Despite the aforementioned facts, shares are unloved by the sell-side and not owned by high profile hedge funds. With its $2bn+ market cap this can be owned by large funds.
- The semiconductor sector is rapidly consolidating. With its exceptional free cash flow and net cash position, Fairchild is extremely attractive. In a sale scenario, we believe FCS would fetch $30+.
- With ~10% FCF yield, FCS shares are compelling. At current prices the company could repurchase 35% of its shares over 4 years - we don't expect the opportunity to persist.
Bail From TrueCar Before This Lemon Gets Totaled
- TrueCar is a low quality lead gen business that is poised to plummet – we see 85% downside.
- Business momentum has meaningfully decelerated since the company went public.
- Mounting competitive forces will hinder TRUE’s ability to maintain pricing and expand into new verticals.
- The CEO was recently at a conference and provided investment/expense guidance that potentially contradicts guidance from the earnings call and which suggests a guide down may occur in 2015.
- In our view, TrueCar management appears to be hyper-focused on supporting TRUE’s stock price and their tone on the 4Q call was troubling.
Control4: No Control Of Its Destiny
- Structurally flawed business model and sells a single technology product that is rapidly falling into obsolescence.
- Facing insurmountable competitive headwinds following Apple, Google, Samsung, Microsoft and others’ entrance into home automation in 2014.
- Produces an uncompetitive, antiquated hardware product, an overstated market potential, marginal IP, generates no recurring revenue and deserves a significantly lower multiple.
Philips: Company Breakup Will Unlock Value For Shareholders
- Philips remains a well-respected brand with market-leading positions in many segments of Healthcare, Consumer Products, and Lighting.
- The company had a challenging 2014, which has overshadowed major positives.
- The stock is undervalued on an SOTP valuation, and the pending company break-up should unlock this value near term.
- Improving margins and cash flow make the stock also attractive for dividend growth investors.
Green Brick: Top Opportunity To Profit From The Complicated And Under-Followed Structure
- Complex reverse-merger deal generated significant tax benefits and created well-hidden opportunity.
- Highly attractive business model and operating markets create great growth prospects.
- Estimated breakup value at 15% below current price offers strong margin of safety.
- Control and backing of David Einhorn and large management shareholding should support effective growth.
RCS Capital: Misunderstood With Tremendous Upside
- Institutional support helps solidify RCAP's potential upside.
- RCAP's main asset is largely untouched by the recent turmoil.
- Returning to fair value suggests upside potential greater than 100%.
- Emotions, not fundamentals, have punished this company.
QAD Inc. - Overlooked Enterprise Software Name With 100% Upside
- QAD Inc. is a nearly $300M annual revenue ERP software vendor to manufacturing companies worldwide.
- QAD has shown consistent, if not exciting, growth through its history and is solidly profitable and free cash flow-positive.
- The company now has a rapidly growing Cloud business; as this continues to gain scale, it should drive a higher multiple for the stock.
- A reasonable sum of the parts suggests a fair value of nearly $40/share, or almost 100% upside.
- Recent sell-side coverage launches mean this company will not fly under the radar at an absurdly cheap valuation of just 1x Sales for much longer.
Linn Energy: In Need Of A $100 Oil And $4.50 Natural Gas
- Linn's capital spending and distributions will be effectively funded by derivative settlements in 2015, assuming the current strip pricing.
- In the longer term, I estimate that a maintenance capital spending of $1.3-1.4 billion per year would be required to sustain production.
- The reported year-end PV-10 value disappoints, raising renewed valuation concerns.
- A long-term commodity price assumption of ~$100+ per barrel for WTI and ~$4.50+ per MMBtu Henry Hub appear to be required to justify the current price.
- The units' risk/reward profile appears skewed to the downside.
Hudson Global - Selling At 30% Less Than Activists' Cost Basis And Offers Significant Upside
- Lone Star Value Management's cost basis is at around $3.50; stock is now at $2.30.
- Valuation is 0.07x EV to sales; 55% of market cap is in cash.
- Initiatives are underway to make the company consistently profitable by 2nd half of 2015.
- Cost cutting and product shift is catalyst to move the stock meaningfully higher.
- Price target is for $9 to $11 by late 2015 to 2016.
Luxottica: Competition Will Reduce Profitability, 30% Downside
- As a near-monopoly, Luxottica has demonstrated fast growth, improving operating margins, and a high return on equity.
- However, an upstart with a unique business model is making an aggressive push into the eyewear business, undercutting Luxottica's prices by 70+%.
- Trading at 28x 2015 estimated earnings, Luxottica seems priced to perfection. Should operating profit growth slow, the author sees 30% downside.
Chesapeake Granite Wash Trust: Oil Volumes Disappoint; Recent Rally Creates Downside Risk
- Q4 2014 oil volumes came in substantially below my estimate, indicating continued weakness in well performance. There is a risk of a downward reserve revision in the year-end 2014 report.
- Oil over-hedging enhances distributions through Q3 2015. The subordination mechanism may remain in place through Q2 2017. Once protections expire, distributions will contract sharply.
- I estimate the distribution to decline 60-70% within 2 years (depending on commodity prices).
- The Trust's current $8.19 per unit price reflects ~$110 per barrel WTI and $4.50/MMBtu Henry Hub (based on the illustrative scenarios outlined in this note).
- At the current price, the risk-reward profile is skewed to the downside, in my opinion.
Beadell Resources: The Hidden Value Of Tucano Is About To Be Unlocked
- Beadell Resources has been slaughtered over the last year, and the market has now (more than) priced in all negative effects.
- The high-grade Duckhead pit isn't really empty; the Urucum Deep zone will add a lot of high-grade low-cost ounces, and the power cost will drop dramatically.
- Two major banks have refinanced the company's debt at a very low interest rate of LIBOR +3%, another sign of strength.
- Beadell could easily double from here, and I will average down my position shortly.
H&E Equipment: Exposure To Oil Is Misunderstood Presenting Strong Upside Case
- We feel that H&E is getting unfairly hit due to perceived high exposure to the upstream oil and gas industry.
- Actual industry exposure is actually quite low, around 12% of revenue. Even still, we think the thesis surrounding the bearish stance is overdone given oil economics.
- Relative valuation with their main competition, United Rentals, presents a strong long case. H&E shares have fallen 55%+ while URI has only seen a 22% drop, despite higher oil exposure.
Tuesday Morning: A Retail Turnaround Priced For Perfection, Up To 40% Downside
- TUES, a close-out retailer of home furnishings, operates a structurally low-margin business in a hyper-competitive environment.
- A modestly successful 2-year turnaround has precipitated a beyond-frothy valuation of 29x current-year EV/EBITDA and ~15x FY16 EV/EBITDA - a level many turns above larger, more cash-generative competitors.
- TUES' recent comp sales gains and margin improvements likely reflect the "low hanging fruit" of restructuring. Go-forward margin improvement and comp gains will be much harder to achieve.
- With the stock priced for perfection, any misstep in execution will be punished severely. A more appropriate multiple - still at a premium to all comps - suggests ~40% downside.
Intersections Inc.: Company At Inflection Point Positioned For Sustainable Growth With 95% Upside
- Intersections Inc. primarily provides subscription based identity protection services through both direct and third party channels.
- After years of working through regulatory setbacks stemming from the financial crisis, the company is now at an inflection point where it is positioned for sustainable profitability.
- The market has subsequently written off INTX, leaving it at an attractive valuation with a conservative two-year price target of $7.00.
Forestar Group: A Land Of Opportunity As Change Appears On The Horizon
- Land has historically represented a very profitable investment offering consistent and stable annual appreciation.
- Landowners such as Forestar Group sell at a significant discount to homebuilders, yet operate higher-margin businesses that can withstand significant drops in housing prices.
- Forestar sells at a 30% discount to our conservative $20.05 estimate of NAV per share. Significant upside to NAV exists if Forestar successfully exits the energy business to focus solely on real estate development.
- The Company can create significant shareholder value if it pays heed to the direction of the newly appointed activist-backed directors who bring credibility and real estate expertise to the board.
- Our NAV does not include the potential value of water rights, and uses discounted valuations that reflect the potential impact that weak oil prices might have on the company's assets.
Continental Building Products: High FCF Yield, Asymmetric Upside Make This Our Largest Position
- Continental Building Products is a ready-made LBO just starting to hit its stride.
- We expect double-digit revenue growth, meaningful margin expansion, and significant deleveraging of the balance sheet to drive attractive equity returns going into 2015.
- With a projected ~13% free cash flow yield and at least $80 million of debt repayment in 2015 (7% of current enterprise value), CBPX provides a nice margin of safety.
- With the opportunity to invest in the low cost producer in - what we believe - is the early innings of the U.S. construction cycle, CBPX offers asymmetric upside.
- Pay attention to this stock going into the Q4 print (February 23, 2015).