If ikeGPS can sell for $1.00 a share, what else can sell for a 62% premium?
Plus: M&A Speculation, Puig, and US Steel
IkeGPS — I never thought I’d write about this NZ small cap, but here we are! A whopping +62% premium in the form of an NBIO. Now, as we know, NBIOs don’t always go through but c’mon — $1.00 per share for a stock that was previously trading well below that?! It’s a “gimme”, in the parlance of one fellow I know.
My bigger point here is that the NZX is home to so many woefully underpriced small caps that the whole field looks ripe for the picking (while I think private equity globally is in for a hard time — can’t load off businesses and they have closed-end funds — I think PE looking at small caps probably would do fairly well — cos they’re so cheap).
So, you know, consider AoFrio again — this one has been a “it’ll be better next year” story for a while, but finally pace feels like it is picking up — some decent results recently. If picked up and hocked on to a bigger firm then of course you’d see a similar bid lobbed. And/or those PE dudes. Etc.
Crypto Bayly — Noting that Andrew Bayly is pro-crypto — link here. “We should embrace it”, he sez. Will he make a “Bayly coin???”
Allan Gray loves value — Another snippet — noting Allan Gray has built up a +15% holding in SkyCity. Allan Gray loves to buy “value”, i.e. their large holding in Fletcher Building. I would rather avoid this “value”.
More M&A
Also noting Distrestee Lauder has reorganised its business units into so-called “clusters”, which sounds like a new wave bullshit fad way of saying “we are a bit screwed”. I think sales of said “clusters” is likely — hearing rumours that LVMH could gobble up the whole thing but I doubt that — LVMH buys brands, not whole companies. But will LVMH buy a “cluster”? Possible — the higher tier brands would sit well in LVMH’s only double digit growing business — Sephora. EL currently trades at $65 per share, or a ~70% decrease in stk price in the last five years (eek). It’s ripe for the picking, though I’m unsure if current mgmt really have what it takes.
Look — you’ve gotta remember that EL still does +$15bn in sales, and has a market cap of $25bn, and about $2.3bn of EBITDA. That’s not nothing. The question is — I guess — is when does the “floor” become the new “ceiling”?
Over in the world of booze noting Pernod has hired Rothschild to look for buyers for Mumm. Mumm is one of Pernod’s prized brands — in my opinion this feels a bit like selling the Crown Jewels (and then you’re left with, what, exactly?). Could happily command over 3x revenue (i.e. a 600mn EUR asking price), but still … I’m not sure about this one, folks. Don’t particularly favour Pernod.
Puig
I wrote about Puig when they first listed. Every investor has a wish list of companies they could own at the right price (and companies they would own, if they were listed). Puig is a bit of a strange one — they’re an old family owned company that has decided to not have any family involvement after this generation. They’re too small to really compete with LVMH, or even Kering, but they have an impressive portfolio — Charlotte Tilbury, Byredo (I am partial to their candles), Dries van Noten, etc. It’s a fragrance-heavy portfolio which tends to command both brand loyalty (to those Mecca-favourite perfumes) and fairly steady revenues. Anyway — since listing stock is down +27% and I’ve started to think about when it gets cheap enough to buy. 23x earnings right now — perhaps at 20x it’ll be interesting.
The whole Paramount thing
Not that long about, David Ellison (son of Larry) was thinking about moving into the big seat at Paramount pretty soon. Shari had finally made a deal — many years too late — and it was a fairly nice deal for her. But now! We have Trump. CBS is owned by Paramount. CBS is currently being sued by Trump for $10bn, over the Kamala interview. I can’t believe we live in a world where this is a serious topic of discussion — president of US sues major TV station over an interview and merger is in the balance. And yet! That’s where we are!
I still think the Paramount merger will happen, but given the currently fashion for kowtowing to Trump like a little dog, I expect CBS will end up paying some kind of settlement (the irony being that David’s dad, Larry, is one of Trump’s biggest supporters…)
Also in media-land, I’ve been thinking about both SkyTV and Comcast. SkyTV has been a speculative target for ages (they had an NBIO a couple of years ago, then nothing happened). Their main value is those sports rights … it’s not a melting iceberg, folks — it’s a melting iceberg with sports rights.
And yet Comcast is weirder. They do a lot of broadband — and just reported quite disappointing numbers — but they also do TV and movies (Peacock, NBC, Universal). The general line that’s been floated is that Comcast will float a new unit as a seperate stock containing all their cable assets (and excluding growth assets). It’s kind of like — “who wants to buy this turd?! Line up, line up!” A better idea has been floated by Peter Supino, the respected media analyst at Wolfe Research. He calls for carving the company into three units — legacy, cable, and NBCU. Wolfe points out that on a peer basis, Comcast’s streaming + growth segment trades at a considerable discount to peers (13x EBITDA for Disney, 7x for WBD, a measly 5.6x for Comcast).
That’s all true, but remember Comcast CEO Brian Roberts suffers from Shari-disease … he has not listened for years and the stock has traded down as a result. He’s also been paid in excess of 340mn in compensation over the last ten years. Hefty paycheck, disappointing company. There’s clear room for value to be carved out, but as always, it’s a question of time and how sure you are that Roberts will do anything.
US Steel
Dylan doesn’t believe me when I say that US Steel will eventually be acquired by Nippon Steel. Here’s the kicker: Donald Trump just announced 25% tariffs on imports of aluminium and steel come Monday (so much of finance these days seems to be, sadly, guessing what Trump will do). If Nippon acquires US Steel, it happily sidesteps some of those tariffs by owning a US-onshored business. That’s valuable!