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With a small delay, a couple of ideas on the “strategic overview course of” at Logistec, a inventory I had written up and added to my portfolio two months in the past.
Govro has already revealed a wonderful put up in regards to the scenario in his Wintergem Weblog right here. He estimates {that a} sale at ~9xEV EBITDA might end in a proposal of CAD 76 per share. Nevertheless, he factors out that that is simply the beginning of a course of and it might nicely be that there might be no sale on the finish, particularly as because of the excessive rates of interest, the infrastructure sector just isn’t tremendous sizzling in the meanwhile.
The Logistec share value has elevated from round 43 CAD per share earlier than the announcement to round 60 CAD on the time of writing. Funnily sufficient, that is nearly precisely half method between the “undisturbed value” and Govro’s sale value estimate.
Correcting a mistake: Additional Asset
In my preliminary write-up, I made a (small) mistake: I sort of double counted the “additional asset”, the minority share within the Tremont Container Terminal. I calculated an adjusted worth which was partially flawed. I do suppose that container terminal commerce at a better EV/EBITDA multiples than Logistec, however from that desk, one ought to ignore the adjustment:
What was the preliminary funding case ?
Earlier than deciding what to do after such information and the ensuing value motion, one ought to at all times return and mirror what the unique funding case was. This was the part from the preliminary write-up:
So implicitly, I had assumed that I might obtain mabye one thing between 50-100% over a 3-5 yr interval and that there was no catalyst. So clearly we do now have a possible catalyst-
The present 60 CAD can be on the very low finish of my expectations, though clearly at a really compressed time interval.
Timing issues and who would possibly purchase this
General, the timing of this gross sales course of actually seems odd. They simply made the biggest M&A transaction of their historical past (FMT) and issues appear to go rather well in accordance with the Q1 report, particularly the Environmental section appears to have absolutely recovered and buzzing properly.
General, the Infrastructure Sector is at present somewhat bit strained. A number of the massive infrastructure traders (Pension funds, Insurance coverage firms) have develop into obese fairness because of the loss in market worth in bonds.
The one exception is the transport sector. All the massive shippers have made an absolute fortune final yr. MSC, the secretive Italian/Swiss market chief is rumoured to have made 36 bn EUR EBIT from container transport alone final yr, accroding to TIKR, Maersk made 30 bn USD and Hapag-Lloyd 17 bn EUR.
For these guys, Logistec can be small change, nevertheless, I’m not certain that they’d be really occupied with proudly owning the break bulk and Environmental property. Perhaps they’re planning to promote the minority stake seperately (to companion MSC?) and store the opposite section to Infrastructure funds.
GIP, one of many largest Infrastructure traders is closing a 15 bn fund by the tip of the yr (down from an initially focused 25 bn) and so they do like Terminals. EQT, one other supervisor, plans to lift 20 bn this yr, so a variety of dedicated capital from this new funds is on the lookout for funding regardless of the problems I had mentioend above.
One potential state of affairs could possibly be, that Madeleine Paquin has thought of succession and determined that possibly one of the simplest ways is to companion with a PE/Infrastructure fund, stay (partially) invested for an additional 5-7 years and exit then. That is one thing these sort of traders can do fairly nicely. If I’m not completely flawed, she’s going to flip 60 this yr and possibly she has determined to resolve succession on this particular yr of her life.
So general, the timing actually surprises me and clearly places a dent into the “investing alongside the household” thesis, however I do suppose that they will obtain an OK value and I believe (and hope) that they won’t screw minority share holders.
I additionally suppose that this determination has not come evenly to them, particularly for the CEO, who has spend nearly 40 years or 2/3 of her life on the firm.
Particular scenario math
If this might be a particular scenario and we might assume the 76 CAD exit value from Govro is sensible, the market would value in a 50/50 probability of a deal occurring or not, which might be my very own assumption at this stage within the course of.
In case of the deal not occurring, the inventory value would clearly go down, possibly even again in direction of the 40-44 CAD vary, esepcially as it’s now clear that the household, especiall Madeleine, the CEO, just isn’t in for the long term.
So shopping for addtional share on the present valuation with out additional data just isn’t an possibility for me, particularly as I’m not aware of such a course of. In Germany, this type of course of doesn’t exist, as now we have seen within the Steico case, the place the intend to promote “accidentially” leaked to the press.
What to do abstract
When I attempt to summarize what I’ve written above, it seems like this:
the timing just isn’t optimum for this overview and stunning, however additionally it is not tremendous unhealthy
Including to the place on the present stage makes little sense, because the implict 50/50 likelihood appears to be truthful
Promoting the share is perhaps too early, as the present value is on the very low finish of my anticipated final result and as I don’t have that many higher concepts on the moment-
My evaluation might change if new data comes up or if I discover a variety of nice new concepts, however in the meanwhile, I stay a sahreholder. The unique thesis clearly has modified from investing alongside the household to “undervalued inventory with a catalyst”, however to date I believe there isn’t any purpose to vary something.
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