ToffCap's Monday Monitor #31
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 Media (LSXMA US). Shareholders approved the split of SiriusXM (to combine with SIRI). Last trading day for Liberty Media (LSXMA) will be on September 9.
Gaming Innovation (GIG Norway). Operates two divisions; GiG Media which is going strong, recently achieving record revenue, player intake and ebitda growth, and Platform & Sportsbook a relatively more commoditized business. GIG is on track to split the units; the spin should be completed in Q2. Overall upside of >100% as >50% upside just on Media alone, while the rest is 'free'.
UPDATE (September 2, 2024) We are finally in the final stages of the split of Gaming Innovation. It took some time, but first day of trading of the Platform & Sportsbook spin is expected to be October 1. GIG also reported solid results, with continued solid momentum of Media revenues and ebitda. The company also communicated FY25 targets for the separated Platform & Sportsbook division, targeting >EUR 44m revenues and at least EUR 10m ebitda by FY25.
Voxx International (VOXX US). Announced that it will review strategic alternatives to maximise shareholder value, incl. the sale of the business.
Forward Air (FWRD US). In a letter to the company, activist Ancora urged Forward Air to initiate a strategic review and consider a sale. The letter notes that 'holders of approximately 22% of Forward Air’s outstanding shares have already independently disclosed support for a strategic review'.
Ocean Wilson (OCN UK). Investment holdco trading at a significant discount to NAV. Announced strategic review of Wilson Sons ($PORT3) which might unlock value. Strong upside in case of liquidation. UPDATE (April 8, 2024) Strategic review ongoing but company expects it to be completed in 2024.
UPDATE (September 2, 2024) The company confirmed that it is in talks to sell its 57% stake in Wilson Sons to I Squared.
Avnet (AVT US). Recently expanded its share buyback to $600m buyback, roughly 12% of the current market cap (August 30).
Vipshop (VIPS US). Net cash Chinese online marketplace announced a $1bn buyback, ~15% of the current market cap (August 30).
Taiga Building Products (TBL Canada). Trading at less than 3x ebitda with strong FCF generation and a good balance sheet. They've >70% owned by Avarga, a Singapore holdco, which seems a good owner. No coverage. Stock has good momentum.
UPDATE (September 2, 2024) Taiga recently extended its NCIB (5% of s/o). This remains an interesting case.
Trinseo (TSE US). We note the strong recent insider buying by directors. Trinseo did not navigate the end-market turbulence over the past few years very well and has been suffering from a high debt load, despite very decent long-term market prospects. The company is looking top sell some assets to reduce the debt. The shares have multi-bagger potential if the companies is able to go reduce its debt and go back to generating cash.
EOS Energy (EOSE US). Substantial buys in the open market mainly by CEO Mastranello. Old deSPAC EOSE bottomed at $1.0, but has found its way upward again. We have no idea if this time is different, but qoq revenues have been inflecting positively.
Leslie's (LESL US). Interesting insider purchases in this battered name. After a few good years Leslie's has been facing strong headwinds. Might be an interesting time to look at this name again if growth stabilises.
US Antimony (UAMY US). Insiders bought shares on the open market for the first time in quite some time. We know nothing on this market, but we understand that antimony prices have been surging as major producer China has been curbing exports. The company might have some good times ahead.
Inhibrx (INBX US). Will spin-off 92% of its subsidiary Inhibrx Biosciences on May 29 (record date May 17) on a pro-rate basis. Might be interesting to keep an eye out. UPDATE (June 17, 2024) Spin completed. Inhibrx Biosciences trading under ticker INBX.
UPDATE (September 2, 2024) VERY strong insider action over the past few weeks.
Badger Infrastructure Sol. (BDGI Canada). A flurry of insider purchases over the past few weeks. Badger has been enjoying strong cyclical tailwinds, and based on the action insiders seem to believe this will continue. BB cons is putting the stock at ~6.5x FY24e ev/ebitda, not expensive (if you believe that the cycle will continue for some time).
Leatt (LEAT US). Leatt seems an interesting company on the verge of inflecting operating earnings. The company had quite some headwinds over the past few years suffering a very strong destocking cycle which depressed earnings quite a bit. Leatt remained cash flow positive nonetheless, and with roughly 25% of the market cap in net cash and the potential of a return to growth as headwinds subside, the stock could have multi-bagger potential on relatively conservative assumptions.
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.
UPDATE (September 2, 2024) Falcon recently presented its minerals lab works results, which were excellent on all fronts; metallurgy, monazite content and overall grade are all (much) better than expected. This was an important step in reducing project risk, and bodes very well for the overall value of the project. We believe these results significantly improved the risk/reward profile.
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. 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. UPDATE (May 21, 2024) The strategic review (of Perceive) 'is progressing and expected to be completed by the end of summer 2024'.
UPDATE (September 2, 2024) Sold Perceive to Amazon for $80m. Xperi could have I estimate $140-150m net cash by the end of the year, on a market cap of $400m. There's a reasonable scenario for $100m+ ebitda in a few years, IF the Tivo OS roll out continues to progress well, putting the company at roughly 3.5x ev/ebitda on FY24e b/s for >20% ebitda growth over the medium term.
Sequans (SQNS US). Wireless semi company. Renesas agreed to acquire for ~$3 p/s but pulled out because of (allegedly) adverse tax decision, tanking the stock to ~50c. SQNS just got a 1-month maturity pause from debt holders (including Renesas) to "effectively negotiate and finalize a strategic transaction." Claims termination of MOU with Renesas led to "interest from multiple key industry participants." Might be interesting.
UPDATE (September 2, 2024) Sold its 4G IoT technologies to Qualcomm for $200m. Will retain a license for this tech (thus continuing to serve this market). Sale brings in $175m cash immediately. Sequans had a c. $50m net debt position as of Q2 - hence will be significantly net cash on pro-forma basis. Furthermore, company noted that 'due to the anticipated increase in products moving into mass production over the coming quarters, the company expects higher product revenue for the full year of 2025 compared to 2024'.
Bet-at-home (ACX Germany). We highlight this net-net pico-cap. €25m net cash on a €22m market cap. Stock suffered over past few years due to new regulations and ongoing legal battles. Business might be slowly but steadily improving. No large cash burn (it seems).
Clarus (CLAR US). Clarus has been facing tough headwinds over the past few years. The stock recently took at hit on poor results. While this does is a high quality company, Clarus' strongly addressed its dire leverage position over the past year. Also, the company is positive on a return to operating earnings growth. We also note that insiders have been buying in the open market for the first time in quite a bit. Lastly, Clarus has received in the past bids for certain assets.
Enzo Biochem (ENZ US). Interesting net-net with quite some action going on while the share price is not moving. Enzo has a substantial net cash position after the sale of a segment. Cash burn slowed significantly, current operations seems to gather momentum and management's compensation package seems very geared towards a sale. @ragingbullcap has done a ton of work on this one.
UPDATE (September 2, 2024) Enzo recently announced that it has settled the pending data breach lawsuit (and agreed to pay $4.5m). This might pave the way for capital returns and/or a sale.
Arabian Mills (tbd). We note the upcoming IPO of Arabian Mills (September). Saudi Arabia has been hitting the IPO market quite a bit over the recent years (compared to almost never in the past). Might be interesting to keep an eye on.
Shoals Technologies (SHLS US). We highlight renewable energy equipment company Shoals. Shoals has been suffering from project pushbacks, and its share price has been decimated (also as the green energy hype of the past years dissipated). Nonetheless, the company has been steadily growing operating earnings, and more recently more decent cash flow. Shoals focused on deleveraging, repaying ~$100m over the past few years. The company is trading at ~10x ev/ebitda on FY24e; if end-markets stabilise and growth accelerates, this does not look demanding at all, for what could be >30% ebitda growth p.a. for quite some years.
Sodexo (SW France). Sodexo to spin-off Pluxee in early 2024. Pluxee current growing much more rapidly at much higher margins than Sodexo. Might be interesting to keep an eye on. Pluxee spin to be completed by February 1. Ebitda projected to grow mid-teens% pa + strong cash flow generation. UPDATE (Feb 2, 2024) Pluxee now listed (PLX)
UPDATE (September 2, 2024) We highlight the poor performance of Pluxee since the spin (-30%, September 2024). PLX is trading at <6x FY24e ev/ebitda (FY ending August), for 10-15% ebitda cagr over the medium-term and a net cash b/s. Might be interesting to keep an eye on.
CSP (CSPI US). 14% shareholder Nerges 'intends to enter into discussions… with the intention to make a take-private proposal'. Barely any share price reaction.
RIV Capital (RIV Canada). RIV is to be acquired by Cansortium (TIUM/U). The deal has been announced in May and is expected to close by the end of the year. We understand that the deal is progressing well, while the spread is still ~40% (August 30).
Americanas (AMER3 Brazil). From our friend @SpecSitsCapMgmt. Large Brazilian retailer coming out of bankruptcy protection with almost no debt. Americanas has R$15bi in revenues and assuming normalized margins of 10% from 2025 on, it could be trading close to 1x ebitda. (We note that we did not assess the math).
Evolent Health (EVH US). Reported to be in talks for a potential sale after receiving interest. Despite the share price move, Evolent is still trading at ~18x FY24e (August 30, 2024) for >25% ebitda growth p.a. projected over the medium-term (BB cons).
Compass Minerals (CMP US). After the horrible share price performance, 17% shareholder Koch Industries filed a 13D and 'intends to discuss operational and strategic matters… including strategic alternatives'. Koch to take CMP private?
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 announcing 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 realised.
UPDATE (September 2, 2024) OCI completed the sale of IFCO for $3.6bn. Of all the deals OCI announced, by far this one got the most pushback. The company is on track to liquidate $9.5bn worth of assets. This remains an interesting opportunity with a significantly protected downside.
Liquida Technologies (LQDA US). Patent litigation. Could stand to gain a lot if resolved and product brought onto market. See old VIC write-up. UPDATE (Jan 7, 2024) Recently won litigation against United Therapeutics (UTHR US). Secured additional funding. LQDA could be a multi-bagger if product successfully brought onto market. UPDATE (April 8, 2024) FDA to probably approval for PAH and ILD indications. LQDA can start to sell immediately, which is a major catalyst for growth.
UPDATE (September 2, 2024) Liquidia shares sharply fell after the FDA granted tentative approval, but simultaneously granted regulatory exclusivity to its competitor product. Liquida filed a complaint. Stock down on no near term catalyst + questions on continued financing. Might be interesting to assess as such developments push many to throw the towel in the ring.
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.
UPDATE (September 2, 2024) BB reported that Brookfield is working with banks to refinance Grifols' debt for a potential take-over. Might also be interesting to look at Grifols' debt.
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RightMove has also just started a "we might get bought" situation.