ToffCap's Monday Monitor #30
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
Lionsgate (LION US). Spin-off of the movie / TV studio business estimated in September. Lots of action with bondholders forming a bond group to block the spin, and appear to be succeeding. UPDATE (Jan 7, 2024) Now intends to spin studio business via SPAC Screaming Eagle (SCRM US). UPDATE (June 17, 2024) SPAC-deal completed.
UPDATE (August 19, 2024) Shares are roughly -30% since listing (August 16). Might be interesting to keep on the watchlist as SPAC listings often get (seriously) discounted while LION does have a few good franchises. Also, overall cinematic revenues are still been pressured by past Hollywood strikes, which should improve as of Q4 24. Still no coverage.
Seaport Entertainment (SEG US). Recent Howard Hughes (HHH) spin. Shares roughly -20% since listing. Classic pre-coverage period.
TransAct Technologies (TACT US). Interesting net cash micro-cap with an actual product 'actively assessing strategic alternatives, including a sale'. Stock has been hammered over the past months.
UPDATE (August 19, 2024) TransAct is showing positive signs of its restructuring, and the company recently disclosed that it 'has engaged with a number of outside parties since the previous update in June and is in various stages of discussion with such outside parties'.
Microvast (MVST US). Busted 2020 SPAC Microvast is exploring alternatives to enhance liquidity. The company is showing very strong revenue growth and gross margin expansion, but will need further cash to fund its growth. That said, the shares have been obliterated and there's some solid revenues and perhaps a few interesting assets on the b/s (just glancing though), which might provide for an interesting set-up.
Green Plains (GPRE US). Announced it will evaluate strategic alternatives. Activist Ancora is pushing for a sale of the company.
UPDATE (August 19, 2024) Green Plains hired a financial advisors to assist reviewing strategic alternatives. As a reminder, there's been a ton of m&a action in this space. Ancora previously estimated that the company could sell for >$50 p/s - compared to $14 today (16/08).
Newpark Recources (NR US). Initiated a strategic review for its Fluid Systems business, with options including selling the entire segment or winding down its working capital. Divestment could generate $200m, and will increase the quality of the business. UPDATE (March 1, 2024) Strategic review expected to be completed mid-2024.
UPDATE (August 19, 2024) Newpark disclosed that the company is working 'tirelessly' to complete the sale of the Fluid Systems division.
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.
UPDATE (August 19, 2024) Stronghold recently noted that it 'has received numerous bids for all or parts of the company'.
MEI Pharma (MEIP US). Clinical stage biotech, attempting to merge with Infinity Pharmaceuticals (INFI US). Interesting dynamics given activists pressuring the company + potential liquidation in case of failure to merge. Cable Car and Anson Advisors nominated new directors. Sounds like 'fight' is becoming more aggressive.
UPDATE (August 19, 2024) After strongly reducing costs (first step before liquidation / sale), MEI hired a financial advisor to help reviewing strategic alternatives.
Frontdoor (FTDR US). Recently announced a $650m buyback, roughly 18% of the current market cap (August 16). The company reiterated its strong outlook and healthy markets.
Phinia (PHIN US). Old TMM highlight Phinia announced a $250m buyback, roughly 13% of the current market cap (August 16). Phinia has some strong tailwinds, and the company is confident it can continue to improve its free cash flow generation.
Cryoport (CYRX US). Initiated a $200m buyback program, or c. 45% of the current market cap (August 16). Cryoport also announced to buy back $160m of converts.
Cineplex (CGX Canada). Cineplex approved a NCIB (max. 10% of s/o). The company is positive on improving fundamentals as the market recovers from the Hollywood strikes.
Enova (ENVA US). Announced a new $300m share buyback, c. 14% of the current market cap (August 16).
LiveRamp (RAMP US). Recently boosted its repurchase authorization by $200m to $1.3bn. We know nothing about this company, but according to BB estimates operating earnings are expected to massively grow over FY24 and the next few years. LiveRamp has c. 20% of its market cap in net cash (August 16) and is trading at roughly 10x ev/ebitda on FY24e for >20% ebitda growth p.a. over the medium term. Stock based comp has been massive, but ccs is projecting positive FCF going forward.
GrowGeneration (GRWG US). GrowGeneration is exploring strategic opportunities for its benching, racking, and storage business, MMI. Screens like an interesting play given (under the radar) ramp of distribution and e-commerce business.
UPDATE (August 19, 2024) Insiders have recently been buying in the open market, which doesn't happen very often. GrowGeneration recently unveiled a restructuring plan to cut $12m costs.
Vimeo (VMEO US). We note that insiders bought quite a bit after (!) the recent strong price move following a good set of results. With ~37% of the market cap in net cash (16/08) and inflecting and growing operating earnings and cash flow, Vimeo screens interesting at ~13x FY24e ev/ebitda. Also, the company has a buyback running.
NCR Voyix (VYX US). Speculation regarding the potential sale of the Digital Banking unit (roughly 25% of pre-corp ebitda). Sale would unlock the strong SOTP dynamics, with >70% upside on our (back of the envelope) estimates. Remainco seems cheap as well.
UPDATE (August 19, 2024) Nice to see insiders buying in the open market in this battered names surrounded by speculation of a potential sale.
Ambac (AMBC US). Insiders at Ambac recently acquired a substantial amount of shares in the open market. This was the first open market purchase in quite some time and comes after the shares dropped quite a bit following earnings. Shares at multi-year lows.
Orion (OEC US). Another company which has seen its share price drop (~30%), where insiders acquired quite a bit in the open market - with generally little activity.
Geo Group (GEO US). Interesting to see the Chairman / Founder of Geo adding quite substantially in the open market. Often a good sign to see insiders buying when the stock moves.
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. Will not take long.
UPDATE (August 19, 2024) Aclaris announced a few asset sales, and BML continues its open market purchase spree.
OneWater Marine (ONEW US). A flurry of insider purchases in August after a long period with little activity. OneWater is experiencing some market headwinds, but insiders seem confident this will not last.
Custom Truck One Source (CTOS US). Continued open market purchases by insiders in this interesting company. Trading at ~7.5x FY24e ev/ebitda for mid-teens % growth over the next few years and solid cash flow generation (according to BB cons), CTOS could have an interesting time ahead,
Sky Harbour (warrants) (SKYH US). We highlight the warrants on this Q1 22 de-SPAC. While not yet visible in the numbers, Sky Harbour should experience a significant and relatively high quality acceleration of earnings growth over the next years as of FY25. The company is experiencing secular demand/supply tailwinds which should sustain the company's targets of 50 airports over the medium term. While the stock is interesting, the r/r on the warrants seems attractive, with another 800+ days runway (when the growth acceleration should already be visible).
Sankyo (6417 Japan). Old value trap that seems to have seen the light. Good cash flow generator trading at roughly 3x ev/ebit, with ~40% of market cap in net cash (16/08). Sankyo bought back >20% of s/o over the past year and has been gaining a healthy amount of market share. Very interesting value play.
Urban One (UONEK US). Urban One provides radio broadcasting services. Classic ex-growth company in an ex-growth industry. But while revenues and earnings over the past years have gone nowhere (ic stable), cash flow generation has remained sustained, which was used to pay down debt. With the stock price absolutely hammered, this one might be interesting to keep an eye on, as Urban continues to delever.
John Wood (WG/ UK). John Wood's share price got clobbered after Dubai's Sidara walked away from acquiring the company. Shares plunged ~35% since (16/08) and are still hovering around multi-year lows. Nonetheless, the company is targeting to generate significant cash flow as of next year, which might be an interesting moment.
Lifecore Biomedical (LFCR US). Strategic alternatives. Potential buy-out. Demand for similar CDMO assets is high. Large shareholders pushing for sale. Potentially 75-100% upside. UPDATE (Jan 7, 2024) LFCR expanded and extended its CDMO activities with main partner Alcon. Reiterated to continue to actively evaluate strategic alternatives; still working on refiling. Trigger could be imminent. UPDATE (April 8, 2024) Stock is depressed after the ‘failure’ of the sale. Might earn $80m ebitda with the expansion by FY27. At 10x (pretty low) and $200m debt (rough figs) that’s 3x in a few years.
UPDATE (August 19, 2024) Lifecore recently filed a batch of several 10-Q's which should finally bring the company current on its financials. This has been a major hangover for the stock, and possibly the main reason of the large valuation discrepancy compared to peers. Multi-bagger potential IF these company-specific issues are finally resolved.
Rockwell Medical (RMTI US). We highlight this interesting micro-cap which seems to be inflecting positively on its turnaround. We know Fresenius a bit and are aware of them losing customers to Rockwell (although almost negligible revenues for Fresenius). The company has a history if operating losses, but inflected positively over Q2. Multi-bagger potential if this trend continues given very little / no growth reflected in the valuation.
Bloomz (BLMZ US). We note the absolutely obliterated IPO of Bloomz, down >70% since its IPO in July. No idea about the company, but interesting action. No coverage (yet).
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.
UPDATE (August 19, 2024) bpost recently closed its transformative acquisition of Staci. To note that >50% of operating earnings are from 3rd party logistics services - and these earnings are currently cyclically depressed. Extremely large SOTP potential IF able to unlock.
Metaplanet (3350 Japan). Metaplanet is planning on raising roughly $70m with a rights offering and buy Bitcoins. We always keep an eye on these kinds of transactions as they might involve a good deal of volatility (hence opportunity). 1-1 ratio; excercise price of Y555 (current share price Y1129 (16/08)).
Dun & Bradstreet (DNB US). DNB received 'inbound interest from third parties and has retained Bank of America to assist with those inquiries'.
Howard Hughes (HHH US). We highlighted HHH regularly in the past in the Insider Purchases section, noting how Ackman (Pershing Square) continues to gobble up shares in the open market. PS sits now at ~37% and recently indicated that it was considering an offer to take-out HHH. We are not surprised, and note the interesting timing - i.c. so soon after the recent spin of Seaport Entertainment (SEG). NAV is >$100 p/s (though would probably not be fully hit in a take-over).
Capri Holdings (CPRI US). Merger arb. Takeover bid from Tapestry (TPS) at $57 p/s. Massive spread, >70% spread (16/08). While already approved by shareholders, the FTC is sueing to block a deal, citing that the combination would result in a too large a player. Trial date in September. Outcome will probably depend on how the market is defined. Also, we note Einhorn's involvement in this one.
Desktop Metal (DM US). Merger arb. Old TMM highlight Desktop Metal is to be acquired by Nano Dimension for $5.50 p/s, roughly 35% above the current share price (16/08). However, the take-over price is subject to quite a few adjustments and could end-up much lower around $4.0 (hence the spread).
Trinity E&P (TRIN UK). Merger arb. The acquisition of Trinity by Lease Operators is progressing well, with the company recently announcing that the first batch of approvals has been granted. Spread still around 16% (16/08). Interesting for smaller accounts which can handle more illiquidity.
Matterport (MTTR US). The last merger arb of today, Matterport is to be acquired by CoStar for $5.50 p/s (50/50 cash/shares), roughly 30% above the current share price (16/08), with the spread mostly the result of antitrust approval risk. If one could get comfortable about the combination, this might be an interesting deal to look at.
OCI (OCI NA). One of the most interesting opportunities on our screens for 2024 in the larger mid-cap space. OCI is trading at 2.5-3x ev/ebitda on a pro-forma basis after the announcement of two large division sales. Peers are trading at 5-7x (on what I would argue are low multiples). UPDATE (May 21, 2024) This first special divided of EUR 4.5 p/s was announced (~18% yield). Roughly EUR 9 more to come. Improving operations and continued ongoing strategic review. OCI now mentions significant inbound interest in the continuing operations.
UPDATE (August 19, 2024) OCI's 'liquidation' continues, with the company recently annoucing that it would sell its Clean Ammonia assets for $2.35bn in cash. This comes on the back of previous large asset disposals and special dividends announced. Despite all the action, OCI's share price is just at the level of a few months ago. We estimate still >40% upside as the asset sales are realized.
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Very good overview. Thank you, as always