ToffCap's Monday Monitor #25
Your regular monitor for interesting event-driven trades and companies
ToffCap’s Monday Monitor is our overview of interesting event-driven trades and companies we find while turning over many rocks. The list is dynamic; it continues to grow and change. If you have interesting additions to the list, feel free to contact us at contact@toffcap.com or on Twitter.
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Disclaimer. ToffCap’s Monday Monitor is provided for informative purposes only. No due diligence has (yet) been performed on the names on this list. The list might change strongly on a regular basis. This overview does not constitute advice; always do your own due diligence.
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This week’s additions, highlights and updates of event-driven trades
Liberty Global (LBTYA US). On May 2, 2024, Liberty held its quarterly earnings call where the CEO discussed the proposed spin of Sunrise GmbH to Liberty Global's shareholders. Following the successful integration and synergy delivery of the UPC combination, Sunrise should have a very strong FCF profile, offering an attractive shareholder remuneration framework. More detail at a CMD later this year. Sunrise will list in Switzerland.
Embracer (EMBRACB Sweden). Embracer announced its intention to split into three listed entities over time: "Asmodee", “Coffee Stain & Friends” and “Middle-earth Enterprises & Friends”. Besides the cool and weird names, a three-way split will definitely cause some action and might thus be interesting to keep assessed.
Maersk (MAERSKB Denmark). As a reminder, Maersk will spin Svitzer Group in the near-term (effective spin date April 30). Very profitable unit (c. $250m ebitda in 2023 at almost 30% margins).
UPDATE (May 6, 2024) Svitzer listed. Despite c. $1bn market cap, this spin is relatively small compared to Maersk. Also, largest player in the global towage market.
PZ Cussons (PZC UK). PZ Cussons announced it is evaluating options for certain assets and brands.
Stronghold Digital Mining (SDIG US). Stronghold Digital Mining initiated a strategic review to explore alternatives to maximize shareholder value, including a potential sale of all or part of the company or other strategic transactions involving its assets. No definitive timetable has been set for the completion of the review process.
Sharecare (SHCR US). Evaluating strategic alternatives. Sharecare is actively engaging with parties interested in acquiring the company. Sharecare has a strong net cash b/s (though relatively high cash burn). Little share price reaction so far.
UPDATE (May 6, 2024) We note the recent write-up on VIC (45 day waiting period for non-members).
Akili (ALKI US). Net cash, med-tech micro cap, announced the exploration of strategic alternatives and associated workforce reduction. Also, Akili will be selling their rights to their ADHD products, giving it a sizeable discount to net cash. H/t @Lord_of_Biotech for the idea.
Xperi (XPER US). Rubric Capital (7.6% owner) pushing for strategic alternatives for the company's AI unit. Officially announced to be evaluating strategic alternatives (of Perceive business). Based on Bloomberg ccs, XPER will grow very quickly over the next few years and is trading at <3x 25e ev/ebitda. Co has a solid balance sheet (net cash). UPDATE (March 15, 2024) Activist Rubric Capital nominated two independent Directors. Rubric also taking increasingly strong stance. Very interesting action.
UPDATE (May 6, 2024) Launched a $100m buyback, c. 21% of s/o (May 6). Also, Rubric Cap sent quite the spicy letter to shareholders. Heat is on!
Secure Energy Services (SES Canada). Announced that it had entered into a purchase agreement with TPG Angelo Gordon to purchase and cancel c.5% of shares outstanding. Also SES announced a $250m issuer bid (c 8% of s/o). H/t @310Value for the idea.
ProPetro (PUMP US). ProPetro recently increased its buyback authorization to $200m, roughly 20% of the current market cap (May 3). Looks like ProPetro will be quite cash generative over the next few years.
The Dixie Group (DXYN US). Heavily indebted Dixie approved the repurchase of up to $2.8m of outstanding shares - that'll be almost 30% of the current market cap (May 6). Despite the heavy debt load, FY23 seems to have been a more normal year for Dixie, with ~$1.5m in CFO-capex. Might be interesting to keep an eye out as might set up for an explosive move.
Vishay Intertechnology (VSH US). Announced a $1bn buyback, roughly 20% of shares outstanding (16/02). VHS has a net cash b/s and is trading at roughly 7x 2024e ev/ebitda. UPDATE (Mar 1, 2024) Will be holding its first capital markets day on April 2. Could be interesting given relatively low valuation and what seems trough earnings. Might be bullish. UPDATE (April 8, 2024) Hosted the first ever analyst day. VHS is looking for >$5 EPS and $700m FCF by FY28.
UPDATE (May 6, 2024) Mountaineer Partners urging Vishay to adopt a $600m share buyback program.
Firan Technology (FTG Canada). We note the insider transactions at Firan Tech. Firan's performance has been very strong, with good growth. Despite that the company is still trading at roughly 6.5x ev/ebitda on FY24e (May 6). Firan seems on the verge of some good FCF generation. Clean b/s.
Quarterhill (QTRH Canada). Continued strong open market purchases from insiders at Quarterhill. The company seems on the verge of a strong inflection in profitability.
Ascend Wellness (AAWH US). Quite some open market purchases from insiders at Ascend Wellness as well. Ascend's free cash flow generation seems to have inflected in FY23. The company is trading at c 6x ev/ebitda on FY24e (May 6) for good growth. Should FCF indeed grow strongly, that'll be a strong catalyst for the shares given 4x net leverage.
Mobile Infrastructure (BEEP US). Very large purchases from the CEO at busted Mobile Infrastructure. Also, funny ticker (company invests in parking lots...)
Heartland Express (HTLD US). Nice insider purchases by a.o. the CEO. If you believe the cycle will turn (as well as profits), Heartland seems relatively cheap.
KB Home (KBH US). To buy back as much as $1bn of shares, roughly 20% of current market cap (May 6).
ASGN (ASGN US). Announced a new stock buyback program for $750m, roughly 17% of the current market cap (May 6). ASGN has been executing pretty well over the past few years on the stock buyback front.
Guardion Health Sciences (GHSI US). Guardion Health Sciences is considering liquidation following the sale of its outstanding equity interests of Activ Nutritional for $17.2m in cash. Following the sale the company has minimum operations (i.c. low cash burn). GHSI had a net cash position of $6.4m as at FY23.
M-Tron Industries (MPTI US). We note that M-Tron announced an investor day on May 8. Given the small size of the company and the good market circumstances, we might get some interesting fireworks as managements details its growth strategy. Nice small, profitable and growing company.
ContextLogic (WISH US). Pro-forma the transaction with Qoo10, ContextLogic will be a shell with c. $6.5 per share in cash and NOLs, on a current share price of $5.30 (May 3). Interest on cash should cover ongoing expenses. Assuming the company looks for an acquisition candidate, and does not destroy even more capital in the process, its arguably a very compelling risk/reward at these levels. H/t @loneelmcapital for the idea.
Venator Material (VNTRF US). Chemical producers (ao TiO2), recently restructured. Solidly profitable now ($150-250m ebitda). Still trading OTC and very illiquid, hence interesting triggers. H/t @kingdomcapadv for the idea.
Global Fashion Group (GFG Germany). Online fashion marketplace with quite some issues. Roughly € 170m net cash. The market is pricing a very low probability of success for the ongoing turnaround.
Allete (ALE US). Global Infrastructure Partners and CPP Investments are nearing a deal to buy Allete for about $5bn, according to the generally well informed Financial Times. Based on BB consensus, Allete is trading at c. 12.5x FY24e ev/ebitda. H/t @owl_n1 for the idea.
Chrysalis Investments (CHRY UK). As of the most recent disclosure (May 2), Chrysalis' unaudited NAV was 147.46p, on a share price of 84.10p (May 3). An interesting liquidity event is the IPO of Klarna, which would unlock GBP 100m (or roughly 20% of the current market cap). There are other disposals in the works.
Vista Outdoor (VSTO US). Vista to sell its Sporting Products operations for $1.9bn (or about 5x ev/ebitda on the unit's FY24e). Spin off the table. Current public stockholders of Vista Outdoor to receive shares of Outdoor Products (recently rebranded as Revelyst) and approximately $750 million in cash in the aggregate. UPDATE (December 3, 2024) Activists ColtCZ disclosed a stake and launched a bit for $30 p/s and a $900m buyback, which the company rejected. Interesting to keep assessed, could continue to see some fireworks.
UPDATE (May 6, 2024) Revelyst to reschedule its investor day. Bloomberg reporting that a deal with MNC Capital could be reached over the next few weeks.
Zuora (ZUO US). Reports out (ao Reuters) that Zuora hired Qatalyst Partners to explore a potential sale and that founder/CEO Tien Tzuo could participate in the transaction.
UPDATE (May 6, 2024) Appointed a new director in connection with a 'cooperation agreement' with Scalar Gauge, a 3.7% shareholder. SG is a "special situations investment firm".
SoftwareOne (SWON Switzerland). Once again reports that the company is for sale.
UPDATE (May 6, 2024) Current board replaced by founders. Action continues. Very bullish sell-side projections.
FlatexDeGiro (FTK Germany). CEO Frank Niehage to step down. We generally don't comment on C-suite changes unless it’s a big deal. This is a big deal. Expect either an acceleration towards adjacent new businesses, or perhaps even a (preparation for a potential) sale of the broker.
UPDATE (May 6, 2024) Very strong results, indicating good momentum ahead + FTK announced a 10% buyback program. Also, Founder and ~18% owner Bernd Foertsch is looking to remove the head of the SB and adding himself (a.o.). Still 40-70% upside to peers.
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Terrific work, as always. Can’t thank you enough
Appreciate all the thought and effort that goes into this. Thank you.