ToffCap's Monday Monitor #32
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.
Enjoy!
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
Webjet (WEB Australia). Webjet recently announced that it is exploring a separation of its two divisions. This screens very interesting as one of the divisions is WebBeds, a very profitable and solid growing b2b hotel distribution platform - which nobody knows.
UPDATE (September 23, 2024) Webjet completed the separation of its divisions. Webjet Group (WJL) (the spinco) comprises of the B2C businesses, while WEB Travel Group (WEB) is the renamed WebBeds. Screens like a very interesting opportunity.
Marlowe (MRL UK). Shares down strongly on recent results. Strategic review ongoing; company is considering sale or spin-off of TIC. Currently trading at ~6.3x FY23e ebitda, roughly 40% below peers. UPDATE (April 8, 2024) To sell GRC software and service assets. After the deal, Marlowe will have a net cash position ~GBP200m (current market cap of c. GBP500m). The company will return at least GBP150m through share buybacks and/or dividends. There remains significant upside potential in our opinion.
UPDATE (September 23, 2024) Optima Health spin on September 26. Anticipated market cap on admission of GBP 190m. Will trade on the AIM market. This is an interesting spin to keep an eye on given the relative size compared to the holding.
TC Energy (TRP Canada). Recently approved the spinoff of the company’s Liquids Pipelines business. Shareholder to receive 0.2 shares in a new public company ('South Bow') per TC share.
UPDATE (September 23, 2024) South Bow spin distribution set for this week (September 25).
SITE Centers (SITC US). SITE Centers announced that its intends to spin-off its Convenience assets into a separate publicly-traded REIT to be named Curbline Properties ('CURB'). Interesting, unique growth company. Will list with a net cash (debt free) balance sheet. Timing H2 24.
UPDATE (September 23, 2024) We note the upcoming spin of Curbline (CURB) on the first of October; ratio 2-1. Curbline will have a strong net cash position upon listing.
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.
UPDATE (September 23, 2024) Liberty Global will spin off its Swiss telecoms operator Sunrise in Q2 2024. Liberty said it expects 'broadly stable revenues for 2024 and 2025', and adjusted free cash flow of CHF 360-370m Swiss for FY24 and CHF 370-390m for FY25. In the mid-term, it expects the figure to rise to >CHF 410m.
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.
UPDATE (September 23, 2024) We note the completion of the split.
23andME (ME US). Evaluating options. Might split company. Stock price strongly under pressure given continued cash burn. Net cash balance sheet. Split goodco/badco might create an interesting opportunity. UPDATE (April 22, 2024) CEO Anne Wojcicki (~49% voting control) stated she's weighing a buyout bid.
UPDATE (September 23, 2024) The action continues at 23andME as quite a few directors resign, discontent with CEO Anne Wojcicki's lack of actionable proposal. The company has a few weeks to regain Nasdaq compliance. The CEO recently mentioned to be open to takeover bids.
DMC Global (BOOM US). Small diversified industrial company heavily levered to energy recently announced strategic alternatives for 2 of its 3 business lines, including DynaEnergetics, which many consider its crown jewel. Decent balance sheet, trades under book (though tangible book is negligible) and near 5-year low price. Recently refinanced. UPDATE (June 17, 2024) Steel Connect (10% owner) offered $16.50 per share. DMC Board considering the offer. Current share price $14.43 (June 17).
UPDATE (September 23, 2024) Steel Connect reiterated its offer of $16.50 (current price $12.91 - September 20). SC also added the possibility of acquiring a few DMC's businesses for $185m. Important to note that, in a reply to SC, the DMC board noted that SC demanded (ao) 'the details of all offers and indications of interest provided by other participants' in the strategic alternatives process (implying there are other offers on the table).
Urbana (URB Canada). Urbana recently renewed its NCIB. Based on our quick scan, Urbana generated quite the earnings growth over the past few years. No coverage.
Helen of Troy (HELE US). Dear old battered Helen of Troy recently announced a $500m buyback, roughly 37% of the current market cap (September 20). In theory, while growth is limited, Helen should have strong cash flow generation.
WEX (WEX US). Payment processing services provided WEX increased its buyback by $1bn to $2.05bn. WEX is a major cash flow generator and has all the traits to become a true cannibal. While growth is not exciting, it seems pretty solid, which, in combination with SBB could lead to interesting share price movements.
Build-A-Bear Workshop (BBW US). Recently adopted a $100m buyback program, roughly 23% of the current market cap (September 20).
Gorilla Technology (GRRR US). Gorilla announced a $6m buyback, c. 14% of the current market cap. The company seems positive on continued growth over the next few years, which should drive positive cash flow inflection.
Zedge (ZDGE US). Another micro-cap Zedge approved a $5m buyback. Zedge has been steadily growing revenues and cash flows. As a results, the company now sports a $20m net cash position, roughly 57% of the current market cap (September 20).
Iridium Comm. (IRDM US). Iridium is your classic stalwart telco, with an attractive cash flow generation. The company approved a $500m buyback (roughly 14% of the current market cap). Since 2021 this company has been buyback back shares at a very strong pace. Again, another interesting combo of low share price + strong buyback potential.
AerSale (ASLE US). We note the relatively large insider purchases in this battered stock.
PENN Entertainment (PENN US). Substantial share purchases on the open market by insiders over the past few weeks. PENN's share price has been all over the place (in good part thanks to the M&A activity + debt load) but seems to have found footing again. Could be interesting is fundamentals start to improve.
Treace Medical Concepts (TMCI US). We note the very large insider purchases. Treace's share price has been an absolute dog over the past years (was expected looking at the insider sales), but mgt now seem to think it’s a good opportunity to buy. Strong net cash b/s (though still some cash burn). UPDATE (June 17, 2024) Insiders continue to buy shares in the open market. Like, a lot.
UPDATE (September 23, 2024) Yet another batch of pretty large open market purchases by insiders, this time its the CEO for ~$260k.
Inhibrx (INBX US). Will spin-off 92% of its subsidiary Inhibrx Biosciences on May 29 (record date May 17) on a pro-rate basis. Might be interesting to keep an eye out. UPDATE (June 17, 2024) Spin completed. Inhibrx Biosciences trading under ticker INBX. UPDATE (September 2, 2024) VERY strong insider action over the past few weeks.
UPDATE (September 23, 2024) We note the continued strong open market purchases by insiders over the past few weeks.
Heartland Express (HTLD US). Nice insider purchases by ao the CEO. If you believe the cycle will turn (as well as profits), Heartland seems relatively cheap.
UPDATE (September 23, 2024) The CEO continues to hit the buy button in the open market. IF Bloomberg ccs pans out, Heartland is trading at <7x ev/ebitda on FY24e for >20% ebitda growth pa over the medium-term. The CEO at least seems to believe the next upcycle is ahead.
Friedman Industries (FRD US). Quite some purchases from insiders. Interesting little company with a clean balance sheet. No coverage. Cyclical industry, which makes the insider action interesting. UPDATE (July 15, 2024) Another week, another batch of insider purchases at Friedman.
UPDATE (September 23, 2024) A LOT of open market purchases by insiders recently, most notably by the CEO.
Westaim (WED Canada). Very interesting looking trade with a great risk / reward. Pro-forma the full sale of their Skyward (SKWD) position Westaim will have ~90% of their market cap in net cash. Management intends to decrease the discount to NAV (C$ BV 5.44 vs C$ 4.00 stock price (May 17)). Company has a history of paying out excess cash.
UPDATE (September 23, 2024) Westaim completed the sale of its remaining interest in Skyward, adding US$ 79m to the balance sheet. This remains a very compelling case with a strongly protected downside given the massive cash balance, and its Arena investment which is starting to show growth.
Agilysys (AGYS US). If you like growth companies, you might want to check out Agilysys. Agilysys is a software company targeting the hospitality segment. While not cheap on near-term earnings, the company's recent wins are poised to accelerate growth even more going forward. Combined with good visibility (>50% of revenues are subs, and growing), Agilysys' earnings and cash flow generation growth appear very promising.
VitalHub (VHI Canada). Another interesting but smaller growth company is VitalHub, a software provider for the healthcare sectors. In a combo of organic growth and acquisitions, VitalHub has been posting very impressive growth over the past few years. With ~16% of the market cap in net cash (September 20) and now ramping earnings and cash flow generation, we can expect this trend to continue, and perhaps accelerate. While not cheap at ~20x ev/ebitda on FY24e, this would be attractive for >30% ebitda growth p.a. over the medium- to long-term.
InPost (INPST Netherlands). Advent (PE) sold another stake (5%) to PPF. PPF now owns ~22%, with option for the another 10%. Shares have reacted positively (again) as 'shareholder overhang' is reduced. UPDATE (April 22, 2024) Advent sold another stake tp PPF. PPF now owns c. 29% of InPost shares.
UPDATE (September 23, 2024) Advent continues to sell down its stake in InPost; now ~10% remaining. This comes on the back of yet another quarter of very strong growth. All seems to move in the right direction for this company, with continued strong growth ahead.
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.
UPDATE (September 23, 2024) Falcon's share price corrected strongly following an announcement that further mineral drilling could be delayed as landowners previously in favor are now against providing consent. The reaction seems overdone as legally landowners are required to allow drilling. Only one case in the history of Victoria went to court, which would not be good for landowners as they would miss out on millions $. But this is still mining.
Brain Biotech (BNN Germany). Brain Biotech recently concluded a royalty deal valued € 129m. Brain is to receive € 18.4m immediately, another € 18.4m upon regulatory approval, and € 92m upon reaching certain milestones. Despite the strong share price reaction, the company is still valued much below this deal, but more importantly showcases the potential of Brain's pipeline. The company intends to 'commercialize and monetize additional projects with high value... over the next years'.
Playtech (PTEC LN). Very busy few weeks for Playtech, with the company announcing several deals within (a.o. with old TMM flag FLUT). While the share price has been moving up, our back-of-the-envelope math suggests continued very strong upside based on the deals. Market seems to be sleeping and perhaps put off by the extreme compensation package mgt seems to have arranged for themselves. On the latter, activists are already starting to take aim at the company.
Harbor Diversified (HRBR US). Harbor faced delisting given their inability to file current financials. The stock has been suffering (a lot) as a consequence, crushing the valuation to extremely low levels. Despite this, Harbor has a few very good contracts which seem to continue to ramp. This, combined with the company getting current (and eventually uplisting again) might create an interesting set up.
Talkspace (TALK US). Talkspace is an interesting company that we have been eyeing as of lately. A busted de-SPAC (and that's putting it nicely) providing online mental health treatments, with seemingly inflecting earnings. Should growth continue and operating leverage do its work, TALK could generate mid- to high teens ebitda next year, putting it at ~15x ev/ebitda for 50-100% growth pa over the medium-term. >30% of the market cap is net cash, with quickly declining burn. Interestingly, insiders have started to add in the open market. Also TALK has recently approved a buyback.
Ambase (ABCP US). Ambase has a an undervalued litigation asset and summary judgement in Sep 2024. This has been going on for quite some time, but there's now better visibility on an outcome. Multi-bagger if good, otherwise 0.
UPDATE (September 23, 2024) Despite the shares soaring +90% since our highlight (and guest write-up on the blog), the upside remains very compelling as recent depositions have dramatically strengthened Ambase's case. The risk/reward might actually have improved.
Benson Hill (BHIL US). Micro-cap Benson Hill received a buyout offer from its largest shareholder Argonautic for $0.2236 p/s, roughly +47% above the current share price (June 28). Fwiw, Benson shares have been in a solid base all year. Also, the shares even went down on the announcement.
UPDATE (September 23, 2024) Investor Group (Argonautic) increased its offer to $8.60 per share, vs a current share price of $6.87 (September 23).
Vestis (VSTS US). Strong insider buying here after the large correction.
UPDATE (September 23, 2024) Vestis received an early inquiry from Elis regarding a potential transaction. Vestis is now assessing all alternatives available.
Glatfelter (GLT US). Lots of action at GLT and Berry Global (BERY) given spin + assets movements.
UPDATE (September 23, 2024) Important upcoming shareholder meeting (October 23) which should pave the way for the GLT-BERY transactions.
Enfusion (ENFN US). Reuters reports that the company is exploring a sale after receiving takeover interests. Enfusion would have hired bankers to asses options.
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On Playtech important to consider who owns the majority of Caliente (some time on wikipedia will throw up some interesting background) and also look at the performance of the B2B business ex the special fee they have agreed to give up
EXCELLENT REPORT.
UPDATE: Journey Energy Inc. announced that it has received approval from the Toronto Stock Exchange (the “TSX“) to undertake a proposed normal course issuer bid (the “Bid“) to purchase up to 4,666,445 common shares, representing approximately 10% of the public float of Journey’s outstanding common shares as of August 14, 2024.