ToffCap's Monday Monitor #29
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
Vivendi (VIV France). Trying (again) to figure out ways to reduce the conglomerate discount. Now exploring a split of the company into several entities (Havas, Canal+ and an InvestCo). UPDATE: Recently provided an update on its spin project. So far Vivendi seems serious about the plans (and share price is reacting).
UPDATE (July 15, 2024) Vivendi is said to be working on listing Canal+ in London. Target is IPO by year-end. This is yet another (good) step towards unlocking the significant SOTP value.
AFC Gamma (AFCG US). Intends to spin its commercial real estate loan portfolio into a (to be) REIT, "Sunrise Realty Trust". The separation will create two companies, one focused on the cannabis industry and the other on CRE. Separation expected to be completed 'mid-2024'. Might be interesting given different character of businesses. UPDATE (July 1, 2024) AFC Gamma will spin-off its CRE portfolio Sunrise Realty Trust (SUNS) on July 8 (trading as of July 9).
UPDATE (July 15, 2024) SUNS spin completed. Strong performance since listing. Classic pre-coverage period.
Cargotech (CGCBV Finland). Approved the split of Kalmar, "a technology forerunner in container handling and heavy logistics with strong market positions, geared to grow by making the industry electrified and more sustainable". Planned completion date is 30 June 2024.
UPDATE (July 15, 2024) Kalmar spin completed. Initial strong performance, then reversion. Classic pre-coverage period.
Aimia (AIM Canada). Aimia recently announced that it will review strategic alternatives. All possibilities are open, i.e. potential sale / spin of holdings, recapitalisations, mergers, etc. Review expected to be completed by Q3.
Aerovate (AVTE US). Another net-cash busted biotech that announced to be reviewing strategic alternatives after the shutdown of its Hypertension trials.
E2open (ETWO US). Recent blow up. Busted SPAC, (Low quality) software. Activists circling the company; Elliott recently upped its stake to 14%
UPDATE (July 15, 2024) Strategic review expected to be completed 'in the near future'.
Aclaris (ACRS US). Aclaris is another one (i.c. net-cash busted biotech, -45% workforce reduction, 'evaluating strategic alternatives'). Guesstimating (mainly assumptions for cash burn going forward and value NOLs), we can see a bear-bull case of $1-3 per share here, or -20% to +140%.
UPDATE (July 15, 2024) We note the VERY strong acceleration of open market purchases by BML Investment Partners (Leonard Braden) in recent weeks. Like, a LOT. Really looks like we could see some action soon.
Check Point Software (CHKP US). Announced a $2bn buyback, roughly 10% of the market cap (July 12).
Skillsoft (SKIL US). We note the buyback from busted deSPAC Skillsoft. $10m, roughly 8% of the current market cap (July 12). Skillsoft shares recently found its way back up on the back of the reiterated FY25 guidance (~$105m ebitda). The company is trading at ~6x ev/ebitda, quite below peers given the large debt profile. Should it be able to deliver and deleverage, shares could significantly rerate.
Meihua International Medical (MHUA US). Profitable, net cash micro-cap Meihua announced a $3m buyback, roughly 14% of the market cap (July 12).
Wetouch Tech (WETH US). Another profitable, (very) net cash micro-cap that announced a large buyback - $15m on a market cap of $25m (July 12).
Lithium Americas (LAAC US). We note the recent pretty large insider purchases at Lithium Americas Argentina. The stock has been absolutely clobbered since the spin-off, but with the operations coming online, earnings are forecasted to sky-rocket. We're no mining experts, but mgt clearly thinks this is an interesting valuation to add.
Barnes & Noble Education (BNED US). After the massively dilutive arrangement to equitize the 2L holders and infuse more equity, the company trades at a PF market cap of $160m + $100m of net debt = $260ish EV. Assuming you subscribe all your rights. Probably many old shareholders selling after the painful outcome. If they can make $80 and $100m EBITDA on their FEC biz for FY24 and FY25 as they promise, this is too cheap. UPDATE (June 17, 2024) We note the substantial (to put it mildly) short interest in BNED.
UPDATE (July 15, 2024) Outerbridge Cap recently bought a pretty large stake, and so did insiders. Again, this one is setting up to become quite explosive.
Friedman Industries (FRD US). Quite some purchases from insiders. Interesting little company with a clean balance sheet. No coverage. Cyclical industry, which makes the insider action interesting.
UPDATE (July 15, 2024) Another week, another batch of insider purchases at Friedman.
TXO Partners (TXO US). Insiders bought a MASSIVE amount recently. No idea about the company, but the few analysts covering are putting TXO at ~4x ev/ebitda on FY25e, with quite some cash flow generation (and clean b/s).
Gauzy (GAUZ US). We note the busted IPO of Gauzy, which according to Bloomberg 'develops, manufactures and markets visions and light control tech'. We know nothing on this one, but note the -45% (!) since IPO roughly a month ago. Classic pre-coverage period. Bloomberg doesn't even publish financials yet.
Grifols (GRF Spain). Founding family and asset manager Brookfield have made an approach to buy the company. Grifols’ share price has been quite turbulent (and a total loser) over the past years. Recently the shares took another plunge after Gotham City’s short report. Could be interesting to play the spread - i.c. buying the B shares and shorting the A shares.
Centuri (CTRI US). Centuri is a utility which recently spun off Southwest Gas. The share price performed well but dropped ~25% recently as the (pretty new) CEO announced to leave for the much larger American Electric Power. This screens like an interesting opportunity; large unregulated asset base, 10+% ebitda growth pa, relatively low risk (utility) and ~10x forward ev/ebitda.
Reservoir Media (RSVR US). Acquires music publishing and recording rights. One of the few 2021 SPACs that actually met guidance. Big disconnect between private and public market valuation. If they get sold at a similar SONG multiple, could be >double. Activists engaging with management. H/t @FernandoInvests for the idea.
ZoomInfo (ZI US). Betaville reports that several PE might be interested in ZoomInfo. This wouldn't surprise us, as ZI is your classic slow growth, highly cash flow generative, growing by M&A software company. These types tend to be a very good fit within PE given the strong leveraging and SOTP potential.
HilleVax (HLVX US). Massive (and we mean really massive) net cash busted biotech. Stock crashed as important trail did not meet endpoint. Could announce a strategic review, but this one is pretty early still. But nonetheless interesting to keep an eye on.
STAAR Surgical (STAA US). Alcon is reported to be interested in visual implants developer STAAR. Would make a good fit. STAAR has a strong b/s (~10% of market cap in net cash) and is trading at 50x forward ev/ebitda. Not the cheapest but synergies should be very good and there's clear secular strong growth.
JAMF (JAMF US). Jamf popped up again. The company seems ready to rapidly scale into profitability. Jamf is targeting accelerating top-line growth, and resp. 25% and 26% operating income margin and unl. FCF by 2026. If achieved, JAMF will trade at c.12x ebit and plenty of growth potential left (>80% GMs).
Thyssenkrupp Nucera (NCH2 Germany). Thyssenkrupp Nucera is another spin that we have been keeping an eye on that is getting absolutely smashed - roughly -60% since listing. While the clobbering makes sense (green hydrogen company) we note that if revenues keep growing at the DD pace, Nucera will reach operating profitability pretty soon. There'll still be some cash burn, but with c. 60% of the market cap in net cash, this should be well covered. Perhaps still too early, but very interesting.
Falcon Metals (FAL Australia). We flag this interesting junior miner with tons of optionality. Falcon is a gold exploration company that recently found a massive (and very valuable) high grade mineral sands deposit. Estimates vary, but we could easily see $1bn+ value. This is non-core and Falcon will probably sell it. The company will do more drilling in Q4 (after harvest season). Value accrued to Falcon will depend on stage of project (ic the sooner it gets sold, the lower the value). Mgt has a good track record.
East Side Games (EAGR Canada). This micro cap has a significant number of game releases over the next few months. Very cheap valuation, strong b/s, combined with high insider ownership and stock buybacks makes this a very interesting case. Trading at ~3x forward ev/ebitda for >20% ebitda growth.
Five9 (FIVN US). Activist Anson Funds is urging the company to sell itself. Five9 shares are hovering at multi-year lows while the Street is expecting strong operating earnings inflection and cash flow generation. Based on BB estimates, the company is trading at c. 18x FY24e ev/ebitda for 30% ebitda growth pa over the medium-term.
Centrotec (CEV Germany). CEV sold its climate solutions business to Ariston and received both cash and stock. Stock is trading at €53 (July 12), while net cash is €71 per share and doesn’t include the remaining operating business. Main owner is almost at >90% and should do a squeeze-out soon. Minority shareholders are (somewhat) protected in Germany and squeeze-outs are usually done at BV per share which is ~€80 per share. H/t @absreturnchaser for the idea.
Bpost (BPOST Belgium). We note the completely hammered share price of Bpost, Belgium's postal operator. There's a ton going on here, with a relatively new mgt team, new national framework for delivery of newspapers and the (very large) acquisition of 3rd party logistics provider Staci. All this, incl. the previous' issues at the managerial level, have smashed the share price. Extremely large SOTP potential IF able to unlock.
Indivior (INDV US). Recently crashed (June 9) after slashing the FY outlook. Primary listing recently switched to US (from UK). There's a litigation overhang that is close to be over.
Calumet (CLMT US). Calumet is preparing to spin its MR unit, targeting > CLMT's current EV. Management recently dedicated a slide to what they believe is an intrinsic value range for Calumet’s equity, $31-56 p/s. UPDATE (July 1, 2024) Transition to C-Corporation in July should provide some boost (increase the investor base) and pave the way for further action (like the long-awaited spin).
UPDATE (July 15, 2024) Transition to C-Corp concluded. Focus is back on operational catalysts. Is something now (finally) going to happen at Calumet?
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Belgian Post looks wild, thanks for that idea. Still very early in my research, but - latest guidance from 3 July is for EBIT of 165-185m Plus EUR 100m annually from Staci. So we are talking EUR 265-285m annual EBIT company trading for MC of EUR 530m? Of course, Staci acquisition will add EUR 40-50m worth of interest costs from the additional financing so at net income it won't be that rosy, but still - this looks too cheap.
It has all the ingredients of a classic European value trap, but I am definitely putting it on my watchlist!
Thanks for the great coverage!
Great publication, as always.