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Investment Pitches
TL;DR:
First article for this weeks snack is a bit different because it deals with a spin-off within Worthington Industries (WOR) by
. Worthington has 4 segments — 1) steel processing, 2) consumer products, 3) building products, and 4) energy solutions. WOR’s steel business, which makes up ~70% of revenue is the part of the business that is spinning off. Recently, the stock price has trended upwards with the completion of the spin-off as investors digest the market opportunity for each new business. What’s intersting is that the steel part of the business is seeing some downward pricing on steel and risk exposure with the automotive industry. However, management believes they can target 10% EBITDA margins (from a 6-7% historical rate). The bet here is if you believe that SpinCo, in it’s isolated state, is a better bet than just holding WOR which is basically everyhing but steel processing. While not directly in my wheelhouse, this could be interesting for those that are more well-versed in this space then I am.
TL;DR:
A fun one I came across is Playmates Toys (869.HK) by
. Playmate Toys is a Toy maker who designs and produces toys for Teenage Mutant Ninja Turtle ("TMNT"), Ladybug Miraculous, Star Treck and Spy Ninjas. This trade isn’t a sexy one and it does have Chinese risk exposure since it is traded on the HSE, however, Playmate derives ~60% of its revenue in the US and ~30% in Europe. The author highlights that while the overall company can still be profitable without the TMNT line of business, Playmate still pays out ~30% of its earnings via dividends. They also suggest that new deals secured by the company could make it a longer term hold, but at the moment, the company is trading for less than net-cash, and is trying to capitalize on their newest round of production of products which if history says anything, could be very rewarding for the company in the short-term.
TL;DR:
Okay, this one by
is great. He talks about Avation PLC (AVAP.L) which is an aircraft lessor trading in the UK. Long story short, it’s a company that’s trading well below NAV, has big shareholders involved at ~25% (Jermey Raper & Chris DeMuth Jr.), CEO owns 18%, and everyone’s looking to maximize shareholder value. Before COVID, the company was trading between 1-1.25x P/B but even with COVID being over, the company still hasn’t recovered to former levels. The author labels this trade as an intersting event-driven play, which I agree, and while aircraft leasing companies have leverage at the moment due to the shortage of planes, it will be very interesting to see if any activism will come from it. Just because they’re involved, doesn’t mean anything will actually come to fruition.
Tweets of the Week
General Research
Appreciate you taking the time to read Weekly Snacks. I hope you have found at least some of these links to be interesting enough to dive into yourself.
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Until next week,
Paul Cerro