With a small delay, just a few ideas on the “strategic evaluation course of” at Logistec, a inventory I had written up and added to my portfolio two months in the past.
Govro has already printed a wonderful put up in regards to the state of affairs 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 properly 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 mean time.
The Logistec share worth 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 virtually precisely half approach between the “undisturbed worth” and Govro’s sale worth estimate.
Correcting a mistake: Additional Asset
In my preliminary write-up, I made a (small) mistake: I form of double counted the “further asset”, the minority share within the Tremont Container Terminal. I calculated an adjusted worth which was partially incorrect. I do suppose that container terminal commerce at the next 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 worth motion, one ought to all the time return and replicate 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 could be on the very low finish of my expectations, though clearly at a really compressed time interval.
Timing issues and who may 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 based on the Q1 report, particularly the Environmental phase appears to have absolutely recovered and buzzing properly.
General, the Infrastructure Sector is at the moment slightly bit strained. Numerous the massive infrastructure buyers (Pension funds, Insurance coverage corporations) have turn out to be chubby fairness because of the loss in market worth in bonds.
The one exception is the delivery sector. All the large 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 delivery alone final yr, accroding to TIKR, Maersk made 30 bn USD and Hapag-Lloyd 17 bn EUR.
For these guys, Logistec could be small change, nevertheless, I’m not certain that they’d be truly excited about proudly owning the break bulk and Environmental belongings. Perhaps they’re planning to promote the minority stake seperately (to companion MSC?) and store the opposite phase to Infrastructure funds.
GIP, one of many largest Infrastructure buyers is closing a 15 bn fund by the tip of the yr (down from an initially focused 25 bn) they usually do like Terminals. EQT, one other supervisor, plans to lift 20 bn this yr, so lots of dedicated capital from this new funds is searching 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 the easiest way is to companion with a PE/Infrastructure fund, stay (partially) invested for one more 5-7 years and exit then. That is one thing these form of buyers can do fairly properly. If I’m not completely incorrect, she’s going to flip 60 this yr and possibly she has determined to resolve succession on this particular yr of her life.
So total, the timing actually surprises me and clearly places a dent into the “investing alongside the household” thesis, however I do suppose that they’ll obtain an OK worth and I believe (and hope) that they won’t screw minority share holders.
I additionally suppose that this choice has not come calmly to them, particularly for the CEO, who has spend virtually 40 years or 2/3 of her life on the firm.
Particular state of affairs math
If this could be a particular state of affairs and we’d assume the 76 CAD exit worth from Govro is sensible, the market would worth in a 50/50 likelihood of a deal taking place or not, which might be my very own assumption at this stage within the course of.
In case of the deal not taking place, the inventory worth 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 info just isn’t an possibility for me, particularly as I’m not acquainted with such a course of. In Germany, this type of course of doesn’t exist, as we have now 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 evaluation and shocking, however it’s also not tremendous dangerous
Including to the place on the present stage makes little sense, because the implict 50/50 chance appears to be honest
Promoting the share could be too early, as the present worth is on the very low finish of my anticipated end result and as I don’t have that many higher concepts on the moment-
My evaluation might change if new info comes up or if I discover lots 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 thus far I believe there isn’t any purpose to vary something.
