The Weekly Wrap-Up provides summaries of recent publications from Hidden Opportunities including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas. 

HIGH-CONVICTION RECOMMENDATIONS (LONG):

• XPO, Inc. (XPO)
• Newpark Resources, Inc. (NR)
• TFI International Inc. (TFII)
• Luxfer Holdings (LXFR)
• TriMas Corporation (TRS)

RECENT INITIATIONS:

• XPO, Inc (XPO)
• Luxfer Holdings PLC (LXFR)
• APi Group (APG) 

LATEST PUBLICATIONS & UPDATES:

UPDATE: Matthews international Inc. (MATW)

Barington Capital, a ~2% holder, issues a public letter to MATW’s Board calling for the CEO’s ouster, the addition of three new Board members, cost & leverage reductions as well as the expansion of the ongoing strategic review; base case fair value remains $44 per share

Barington Capital, currently a ~2% owner (up from its initial stake of 0.6%) who has served as a consultant to Matthews pursuant to a cooperation agreement struck in December 2022, sent a public letter to the Board calling for, among other things, the prompt replacement of the CEO along with the addition of three new Board members, the divestment of the SGK Brand Solutions business, as well as cost & debt reduction initiatives.

Specifically, the investors asserts, which in our view is a matter of objective fact, that at least from a stock price perspective Mr. Bartolacci’s 18-year term at the helm of MATW has not been a profitable one for investors. In that context, both the cost structure and leverage profile, which currently stands at 3.6x (i.e., high but not existential), have risen and the share price has languished; as a remedy, Barington recommends $50-$80 million of cost reductions as well as the proceeds of any divestments be directed toward debt reduction.  (Anecdotally, the company has targeted a long-term leverage target of “at or below 3.0x” and indicated that improving its leverage profile remains a “priority” in F2025.)

Additionally, the investor intends to nominate three directors to the company’s Board, which is currently comprised of 10 members (of whom 9 are deemed independent), at the 2025 Annual Meeting.

For context, in November 2024 management announced that given the “growth opportunities” and perceived valuation disconnect the company had retained J.P. Morgan to explore strategic alternatives.  While the review was expected to be comprehensive it, at least anecdotally, seems to be primarily focused on the Industrial Solutions business (which we note itself is comprised of MATW’s Energy Storage, Warehouse Automation and Product Identification offerings).  To that end, Barington’s position calls for the review to widen to include the SGK Brand Solutions business (which we view, for our part, as non-core).

In terms of F2025 guidance, recall the company recently provided a “cautious” full-year adjusted EBITDA outlook of $205-$215 million (compared with the consensus estimate of $205 million, at the time), reflecting the expectations for continued stability at Memorialization, growth at SGK and on-going uncertainty within the Industrial Technologies segment. 

Our base case fair value estimate for MATW remains $44 per share, reflecting a blended multiple of ~9.0x multiple on our F2026E adjusted EBITDA of $~$223.5 million and net debt of ~$632 million (see Exhibit #1 on page 2).

UPDATE: Garrett Motion Inc. (GTX)

GTX announces a long-term capital allocation framework, including a $0.06 quarterly dividend, a $250 million share repurchase program for 2025 and the intent to return at least 75% of adj. FCF to shareholders; base case fair value remains ~$12 per share

GTX announced a long-term capital allocation framework, which included a quarterly dividend, a new share repurchase program for 2025 and the articulated intent to return “75% or more” of adjusted free cash flow to shareholders.

On the dividend front, the company announced a $0.06 per share quarterly dividend (to be paid on January 31, 2025, to shareholders of record as of the close on January 15^th); at current levels, we note the payout, which amounts to roughly $50 million annually, implies a ~2.8% yield.

On the share repurchase front, GTX’s Board authorized a new $250 million share repurchase program for 2025.  (Recall, GTX is on-track to exhaust its previous $350 million repurchase program for 2024). At current levels, the new authorization would further reduce the outstanding share count by ~13%, by our calculation, in addition to the ~10% already repurchased so far in 2024 (through the September-quarter).

For context, GTX ended 3Q 2024 with net debt of $1.399 billion with a net leverage ratio of 2.26x (with a relative near-term target of ~2.0x).

As well, on the guidance front (see Exhibit #2 on page 2), we note that management currently expects full-year 2024 sales of $3.4-$3.5 billion, representing a 10%-12 year-over-year decline on a constant currency basis, with GAAP net income and adjusted EBITDA of $240-$255 million and $585-$605 million, respectively. Cash flow from operations is projected to be $348-$398 million, resulting in adj. free cash flow (FCF) of $300-$350 million.  (Importantly, we highlight that, at the midpoint, management’s FCF outlook implies a current yield of nearly ~17.5%.  Moreover, while the company has not yet provided specific guidance for 2025 the aforementioned capital allocation framework would, by our calculation, suggest a baseline of ~$400 million in FCF for 2025.)

In terms of the longer-term outlook, on which we remind investors that management has solid visibility (with ~80% of sales over the next 5-years have already been award by its OEM customers), we broadly concur with management’s contention that the core turbocharger business is likely to be bigger in 2030 than it is today and that GTX will generate free cash that equals or exceeds the company’s current market capitalization over the next five years.

Our base case fair value estimate for GTX remains ~$12 per share, reflecting an 8.5x multiple on our 2025E adjusted net income forecast of $264 million and a fully diluted share count of ~190 million (see Exhibit #3 on page 2).

COMPREHENSIVE REPORT: XPO, Inc. (XPO)

XPO, Inc. (NYSE: XPO) operates two business segments: (1) North American Less-than-Truckload (60.5% of sales), which is a top-3 provider of asset-based less-than-truckload (LTL) transportation services in North America; and (2) European Transportation (39.5% of sales), which provides dedicated truckload (TL), less-than-truckload, brokerage, last mile, freight forwarding & warehousing services in the U.K., France, Spain & Portugal.  In its pursuit of emerging as a pure-play North American less-than-truckload (LTL) carrier, XPO has spun off its contract logistics business, GXO Logistics, Inc. (NYSE: GXO), in August 2021 and its truck brokerage operation, RXO, Inc. (NYSE: RXO), in November 2022.

XPO’s last step towards a singular focus on the high-ROIC (i.e. 30%-plus) North American LTL business is the divestment of its European business (which is seeing renewed effort/momentum from management). This transaction, along with the company’s own internal initiatives, dubbed LTL 2.0, under the direction of a proven executive brought in from the industry’s best-in-class operator, ODFL, as well as the potential for a cyclical upturn in freight volumes, could unlock value beyond what the company has already achieved.

XPO’s Less-than-Truckload (LTL) business could be valued at ~$192.50 per share, while its European Transportation business could be appraised at ~$13.50 per share.  Accounting for corporate costs and projected net debt of $25 per share yields a base case sum-of-the-parts fair value of ~$181 per share (with bull/bear cases of ~$194 and ~$167 per share).

Radar Screen – December 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Honeywell International inc. (HON), IAC Inc. (IAC), Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from Hidden Opportunities including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas. 

HIGH-CONVICTION RECOMMENDATIONS (LONG):

• XPO, Inc. (XPO)
• Newpark Resources, Inc. (NR)
• TFI International Inc. (TFII)
• Luxfer Holdings (LXFR)
• TriMas Corporation (TRS)

RECENT INITIATIONS:

• XPO, Inc (XPO)
• Luxfer Holdings PLC (LXFR)
• APi Group (APG) 

LATEST PUBLICATIONS & UPDATES:

UPDATE: Matthews international Inc. (MATW)

Barington Capital, a ~2% holder, issues a public letter to MATW’s Board calling for the CEO’s ouster, the addition of three new Board members, cost & leverage reductions as well as the expansion of the ongoing strategic review; base case fair value remains $44 per share

Barington Capital, currently a ~2% owner (up from its initial stake of 0.6%) who has served as a consultant to Matthews pursuant to a cooperation agreement struck in December 2022, sent a public letter to the Board calling for, among other things, the prompt replacement of the CEO along with the addition of three new Board members, the divestment of the SGK Brand Solutions business, as well as cost & debt reduction initiatives.

Specifically, the investors asserts, which in our view is a matter of objective fact, that at least from a stock price perspective Mr. Bartolacci’s 18-year term at the helm of MATW has not been a profitable one for investors. In that context, both the cost structure and leverage profile, which currently stands at 3.6x (i.e., high but not existential), have risen and the share price has languished; as a remedy, Barington recommends $50-$80 million of cost reductions as well as the proceeds of any divestments be directed toward debt reduction.  (Anecdotally, the company has targeted a long-term leverage target of “at or below 3.0x” and indicated that improving its leverage profile remains a “priority” in F2025.)

Additionally, the investor intends to nominate three directors to the company’s Board, which is currently comprised of 10 members (of whom 9 are deemed independent), at the 2025 Annual Meeting.

For context, in November 2024 management announced that given the “growth opportunities” and perceived valuation disconnect the company had retained J.P. Morgan to explore strategic alternatives.  While the review was expected to be comprehensive it, at least anecdotally, seems to be primarily focused on the Industrial Solutions business (which we note itself is comprised of MATW’s Energy Storage, Warehouse Automation and Product Identification offerings).  To that end, Barington’s position calls for the review to widen to include the SGK Brand Solutions business (which we view, for our part, as non-core).

In terms of F2025 guidance, recall the company recently provided a “cautious” full-year adjusted EBITDA outlook of $205-$215 million (compared with the consensus estimate of $205 million, at the time), reflecting the expectations for continued stability at Memorialization, growth at SGK and on-going uncertainty within the Industrial Technologies segment. 

Our base case fair value estimate for MATW remains $44 per share, reflecting a blended multiple of ~9.0x multiple on our F2026E adjusted EBITDA of $~$223.5 million and net debt of ~$632 million (see Exhibit #1 on page 2).

UPDATE: Garrett Motion Inc. (GTX)

GTX announces a long-term capital allocation framework, including a $0.06 quarterly dividend, a $250 million share repurchase program for 2025 and the intent to return at least 75% of adj. FCF to shareholders; base case fair value remains ~$12 per share

GTX announced a long-term capital allocation framework, which included a quarterly dividend, a new share repurchase program for 2025 and the articulated intent to return “75% or more” of adjusted free cash flow to shareholders.

On the dividend front, the company announced a $0.06 per share quarterly dividend (to be paid on January 31, 2025, to shareholders of record as of the close on January 15^th); at current levels, we note the payout, which amounts to roughly $50 million annually, implies a ~2.8% yield.

On the share repurchase front, GTX’s Board authorized a new $250 million share repurchase program for 2025.  (Recall, GTX is on-track to exhaust its previous $350 million repurchase program for 2024). At current levels, the new authorization would further reduce the outstanding share count by ~13%, by our calculation, in addition to the ~10% already repurchased so far in 2024 (through the September-quarter).

For context, GTX ended 3Q 2024 with net debt of $1.399 billion with a net leverage ratio of 2.26x (with a relative near-term target of ~2.0x).

As well, on the guidance front (see Exhibit #2 on page 2), we note that management currently expects full-year 2024 sales of $3.4-$3.5 billion, representing a 10%-12 year-over-year decline on a constant currency basis, with GAAP net income and adjusted EBITDA of $240-$255 million and $585-$605 million, respectively. Cash flow from operations is projected to be $348-$398 million, resulting in adj. free cash flow (FCF) of $300-$350 million.  (Importantly, we highlight that, at the midpoint, management’s FCF outlook implies a current yield of nearly ~17.5%.  Moreover, while the company has not yet provided specific guidance for 2025 the aforementioned capital allocation framework would, by our calculation, suggest a baseline of ~$400 million in FCF for 2025.)

In terms of the longer-term outlook, on which we remind investors that management has solid visibility (with ~80% of sales over the next 5-years have already been award by its OEM customers), we broadly concur with management’s contention that the core turbocharger business is likely to be bigger in 2030 than it is today and that GTX will generate free cash that equals or exceeds the company’s current market capitalization over the next five years.

Our base case fair value estimate for GTX remains ~$12 per share, reflecting an 8.5x multiple on our 2025E adjusted net income forecast of $264 million and a fully diluted share count of ~190 million (see Exhibit #3 on page 2).

COMPREHENSIVE REPORT: XPO, Inc. (XPO)

XPO, Inc. (NYSE: XPO) operates two business segments: (1) North American Less-than-Truckload (60.5% of sales), which is a top-3 provider of asset-based less-than-truckload (LTL) transportation services in North America; and (2) European Transportation (39.5% of sales), which provides dedicated truckload (TL), less-than-truckload, brokerage, last mile, freight forwarding & warehousing services in the U.K., France, Spain & Portugal.  In its pursuit of emerging as a pure-play North American less-than-truckload (LTL) carrier, XPO has spun off its contract logistics business, GXO Logistics, Inc. (NYSE: GXO), in August 2021 and its truck brokerage operation, RXO, Inc. (NYSE: RXO), in November 2022.

XPO’s last step towards a singular focus on the high-ROIC (i.e. 30%-plus) North American LTL business is the divestment of its European business (which is seeing renewed effort/momentum from management). This transaction, along with the company’s own internal initiatives, dubbed LTL 2.0, under the direction of a proven executive brought in from the industry’s best-in-class operator, ODFL, as well as the potential for a cyclical upturn in freight volumes, could unlock value beyond what the company has already achieved.

XPO’s Less-than-Truckload (LTL) business could be valued at ~$192.50 per share, while its European Transportation business could be appraised at ~$13.50 per share.  Accounting for corporate costs and projected net debt of $25 per share yields a base case sum-of-the-parts fair value of ~$181 per share (with bull/bear cases of ~$194 and ~$167 per share).

Radar Screen – December 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Honeywell International inc. (HON), IAC Inc. (IAC), Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from the Spin-Off Report including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas.

UPCOMING SPIN-OFFS AND EXPECTED COMPLETION DATES:

• Western Digital (WDC) / HDD Business – Q1 2025
• Spectrum Brands (SPB) / Home & Personal Care Business – 1H 2025 (sale more likely than spin-off)
• Holcim Ltd. (HOLN SW) / North American Business – 2Q 2025
• DuPont Inc. (DD) / Electronics and Water Business – 2H 2025
• Topgolf Callaway Brands Corp. (MODG) / Topgolf – 2H 2025
• Unilever PLC (UL) / Ice Cream Business – Mid 2025
• Fortive Corp. (FTV) / Precision Technologies Business – 4Q 2025
• Honeywell International (HON) / Advanced Materials Business – 4Q 2025
• Comcast Corp. (CMCSA) / Cable Television Networks – 4Q 2025
• SKF AB (SKFB SS) / Automotive Business – 1H 2026

RECENT PUBLICATIONS:

ALERT:  Unilever (ULVR LN) – November 22, 2024

Unilever Shifts Ice Cream Separation to a Demerger/Spin-Off (From a Sale)

In conjunction with a capital markets event, held on November 22, 2024, Unilever (ULVR LN, UNA UA), indicated its focus for the separation of its Ice Cream business has shifted to a demerger/spin-off. The shift in strategy comes following a tepid response to its efforts to sell the “underperforming” asset, which was announced in March 2024. The company is still targeting completion of the separation by the end of 2025.

Currently, Unilever reports five segments: 1) Beauty & Wellbeing  2) Personal Care  3) Home Care  4) Nutrition  5) Ice Cream which operates Ben & Jerry’s, Wall’s, Cornetto and Magnum brands, accounting for 13.5% of consolidated 2023 sales and 11% of adj. EBITDA.

The Ice Cream division’s closest peer is likely Nestle SA (NESN SW), which trades at ~14x 2025E EV/EBITDA (and to a lesser degree GIS, which trades at ~12x). Applying a 12x multiple to 2025E EBITDA implies a segment valuation of ~€16.2 billion. The Beauty & Wellbeing, Personal Care and Home Care segments could be compared with a broad range of peers, including Beiersdorf AG (BEI GY), Colgate-Palmolive (CL), Church & Dwight (CHD), Estee Lauder (EL), Kenvue Inc. (KVUE), Kimberly-Clark (KMB), L’Oreal (OR FP), Procter & Gamble (PG), and Reckitt Benckiser (RKT LN), which trade at ~16x 2025E EV/EBITDA (in a range of 13x-19.5x). Applying a blended multiple (based on margin profiles) in-line with the peer average implies aggregate value of €128.7 billion. Lastly, the Nutrition segment could be compared with peers, such as Danone SA (BN FP), Kraft Heinz (KHC) and General Mills (GIS), which trade at ~13x 2025E EV/EBITDA. Applying the peer average to 2025E segment EBITDA implies value of ~€40.5 billion.

Accounting for corporate costs as well as projected net debt (and minority interest) yields a preliminary base case valuation of ~€149 billion or ~€59 per share.

ALERT:  Comcast Corporation (CMCSA) – November 20, 2024

Comcast to Spin-Off Selected Cable Networks Assets via a Tax-Free Distribution

On November 20, 2024 Comcast Corporation (NASDAQ: CMCSA) announced plans to spin-off a select group of its Cable Television Network assets into a new publicly traded public company via a tax-free separation. As currently contemplated, SpinCo would include a portfolio of news (e.g., CNBC, MSNBC & USA), sports (e.g., USA & The Golf Channel), entertainment (e.g., E!, USA, SYFY & Oxygen) and digital (e.g., Fandango, Rotten Tomatoes, GolfNow & Sports Engine) properties that generated roughly $7 billion of sales in the trailing-twelve months (TTM) ended September 30, 2024.

The transaction is expected to take roughly one year to complete and remains subject to customary conditions, including the receipt of tax & regulatory approvals, the securement of satisfactory financing arrangements and final Board approval. The two future independent entities will also need to hammer out a so-called “transition services agreement” prior to the transaction’s completion.

Comcast reports two segments: 1) Connectivity & Platforms (~65.5% of consolidated sales), which itself is comprised of two divisions, namely Residential Connectivity & Platforms and Business Services Connectivity; and 2) Content & Experiences (34.5% of sales), which includes three divisions, including Media, Studios and Theme Parks. On a consolidated basis, CMCSA generated $121.6 billion of revenue in 2023 and ~$37.6 billion of adj. EBITDA. In the first nine months, the company posted consolidated top-line growth of 1.7% to $91.8 billion while adj. EBITDA declined 1.2% to $29.26 billion.

The bulk of pre-spin CMCSA value lies in the Connectivity & Platforms, which could be compared with AT&T (T), Charter Communications (CHTR), Lumen Technologies (LUMN), T-Mobile (TMUS), and Verizon Communications (VZ), which trade, on average, at ~7.5x 2025E EV/EBITDA (or ~7x, ex-TMUS). Applying a 7x multiple to 2025E EBITDA implies value of nearly $321 billion. For the Content & Experiences business, Fox Corp. (FOX), Disney (DIS), Paramount Global (PARA), and Warner Bros. Discovery (WBD), which trade, on average, at 8.5x 2025E EV/EBITDA (or ~7.0x ex-DIS), could be considered peers to varying degrees. Applying a blended multiple of ~6x, reflecting a discounted multiple for SpinCo even within Media as well as a modest premium for Studios and Theme Parks, implies value of over $47 billion. Accounting for corporate costs and projected net debt yields an initial sum-of-the-parts valuation (SOTP) of ~$176.5 billion or ~$45.50 per share.

Radar Screen – December 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Honeywell International inc. (HON), IAC Inc. (IAC), Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Spin-Off Report Calendar – December 2024

Published monthly, The Spin-Off Calendar provides one-page summaries of every spin-off under coverage from the announcement date, followed by the filing of the Form 10 and continuing 60 days post completion.

Spin-Off Report Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations.

European Spin-Off Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations in Europe. 

Bits & Pieces – December 2024

Covers mispriced stub securities, tracking stocks and other arbitrage opportunities.

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from Hidden Opportunities including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas. 

HIGH-CONVICTION RECOMMENDATIONS (LONG):

• XPO, Inc. (XPO)
• Newpark Resources, Inc. (NR)
• TFI International Inc. (TFII)
• Luxfer Holdings (LXFR)
• TriMas Corporation (TRS)

RECENT INITIATIONS:

• XPO, Inc (XPO)
• Luxfer Holdings PLC (LXFR)
• APi Group (APG) 

LATEST PUBLICATIONS & UPDATES:

UPDATE: Garrett Motion Inc. (GTX)

GTX announces a long-term capital allocation framework, including a $0.06 quarterly dividend, a $250 million share repurchase program for 2025 and the intent to return at least 75% of adj. FCF to shareholders; base case fair value remains ~$12 per share

GTX announced a long-term capital allocation framework, which included a quarterly dividend, a new share repurchase program for 2025 and the articulated intent to return “75% or more” of adjusted free cash flow to shareholders.

On the dividend front, the company announced a $0.06 per share quarterly dividend (to be paid on January 31, 2025, to shareholders of record as of the close on January 15^th); at current levels, we note the payout, which amounts to roughly $50 million annually, implies a ~2.8% yield.

On the share repurchase front, GTX’s Board authorized a new $250 million share repurchase program for 2025.  (Recall, GTX is on-track to exhaust its previous $350 million repurchase program for 2024). At current levels, the new authorization would further reduce the outstanding share count by ~13%, by our calculation, in addition to the ~10% already repurchased so far in 2024 (through the September-quarter).

For context, GTX ended 3Q 2024 with net debt of $1.399 billion with a net leverage ratio of 2.26x (with a relative near-term target of ~2.0x).

As well, on the guidance front (see Exhibit #2 on page 2), we note that management currently expects full-year 2024 sales of $3.4-$3.5 billion, representing a 10%-12 year-over-year decline on a constant currency basis, with GAAP net income and adjusted EBITDA of $240-$255 million and $585-$605 million, respectively. Cash flow from operations is projected to be $348-$398 million, resulting in adj. free cash flow (FCF) of $300-$350 million.  (Importantly, we highlight that, at the midpoint, management’s FCF outlook implies a current yield of nearly ~17.5%.  Moreover, while the company has not yet provided specific guidance for 2025 the aforementioned capital allocation framework would, by our calculation, suggest a baseline of ~$400 million in FCF for 2025.)

In terms of the longer-term outlook, on which we remind investors that management has solid visibility (with ~80% of sales over the next 5-years have already been award by its OEM customers), we broadly concur with management’s contention that the core turbocharger business is likely to be bigger in 2030 than it is today and that GTX will generate free cash that equals or exceeds the company’s current market capitalization over the next five years.

Our base case fair value estimate for GTX remains ~$12 per share, reflecting an 8.5x multiple on our 2025E adjusted net income forecast of $264 million and a fully diluted share count of ~190 million (see Exhibit #3 on page 2).

COMPREHENSIVE REPORT: XPO, Inc. (XPO)

XPO, Inc. (NYSE: XPO) operates two business segments: (1) North American Less-than-Truckload (60.5% of sales), which is a top-3 provider of asset-based less-than-truckload (LTL) transportation services in North America; and (2) European Transportation (39.5% of sales), which provides dedicated truckload (TL), less-than-truckload, brokerage, last mile, freight forwarding & warehousing services in the U.K., France, Spain & Portugal.  In its pursuit of emerging as a pure-play North American less-than-truckload (LTL) carrier, XPO has spun off its contract logistics business, GXO Logistics, Inc. (NYSE: GXO), in August 2021 and its truck brokerage operation, RXO, Inc. (NYSE: RXO), in November 2022.

XPO’s last step towards a singular focus on the high-ROIC (i.e. 30%-plus) North American LTL business is the divestment of its European business (which is seeing renewed effort/momentum from management). This transaction, along with the company’s own internal initiatives, dubbed LTL 2.0, under the direction of a proven executive brought in from the industry’s best-in-class operator, ODFL, as well as the potential for a cyclical upturn in freight volumes, could unlock value beyond what the company has already achieved.

XPO’s Less-than-Truckload (LTL) business could be valued at ~$192.50 per share, while its European Transportation business could be appraised at ~$13.50 per share.  Accounting for corporate costs and projected net debt of $25 per share yields a base case sum-of-the-parts fair value of ~$181 per share (with bull/bear cases of ~$194 and ~$167 per share).

Radar Screen – December 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Honeywell International inc. (HON), IAC Inc. (IAC), Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from the Spin-Off Report including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas.

UPCOMING SPIN-OFFS AND EXPECTED COMPLETION DATES:

• Spectrum Brands (SPB) / Home & Personal Care Business – 4Q 2024
• Western Digital (WDC) / HDD Business – Q1 2025
• Holcim Ltd. (HOLN SW) / North American Business – 1H 2025
• DuPont Inc. (DD) / Electronics and Water Business – 2H 2025
• Topgolf Callaway Brands Corp. (MODG) / Topgolf – 2H 2025
• Unilever PLC (UL) / Ice Cream Business – Mid 2025
• Fortive Corp. (FTV) / Precision Technologies Business – 4Q 2025
• Honeywell International (HON) / Advanced Materials Business – 4Q 2025
• Comcast Corp. (CMCSA) / Cable Television Networks – 4Q 2025
• SKF AB (SKFB SS) / Automotive Business – 1H 2026

RECENT PUBLICATIONS:

ALERT:  Unilever (ULVR LN) – November 22, 2024

Unilever Shifts Ice Cream Separation to a Demerger/Spin-Off (From a Sale)

In conjunction with a capital markets event, held on November 22, 2024, Unilever (ULVR LN, UNA UA), indicated its focus for the separation of its Ice Cream business has shifted to a demerger/spin-off. The shift in strategy comes following a tepid response to its efforts to sell the “underperforming” asset, which was announced in March 2024. The company is still targeting completion of the separation by the end of 2025.

Currently, Unilever reports five segments: 1) Beauty & Wellbeing  2) Personal Care  3) Home Care  4) Nutrition  5) Ice Cream which operates Ben & Jerry’s, Wall’s, Cornetto and Magnum brands, accounting for 13.5% of consolidated 2023 sales and 11% of adj. EBITDA.

The Ice Cream division’s closest peer is likely Nestle SA (NESN SW), which trades at ~14x 2025E EV/EBITDA (and to a lesser degree GIS, which trades at ~12x). Applying a 12x multiple to 2025E EBITDA implies a segment valuation of ~€16.2 billion. The Beauty & Wellbeing, Personal Care and Home Care segments could be compared with a broad range of peers, including Beiersdorf AG (BEI GY), Colgate-Palmolive (NYSE: CL), Church & Dwight (NYSE: CHD), Estee Lauder (NYSE: EL), Kenvue Inc. (NYSE: KVUE), Kimberly-Clark (NYSE: KMB), L’Oreal (OR FP), Procter & Gamble (NYSE: PG), and Reckitt Benckiser (RKT LN), which trade at ~16x 2025E EV/EBITDA (in a range of 13x-19.5x). Applying a blended multiple (based on margin profiles) in-line with the peer average implies aggregate value of €128.7 billion. Lastly, the Nutrition segment could be compared with peers, such as Danone SA (BN FP), Kraft Heinz (NYSE: KHC) and General Mills (GIS), which trade at ~13x 2025E EV/EBITDA. Applying the peer average to 2025E segment EBITDA implies value of ~€40.5 billion.

Accounting for corporate costs as well as projected net debt (and minority interest) yields a preliminary base case valuation of ~€149 billion or ~€59 per share.

ALERT:  Comcast Corporation (CMCSA) – November 20, 2024

Comcast to Spin-Off Selected Cable Networks Assets via a Tax-Free Distribution

On November 20, 2024 Comcast Corporation (NASDAQ: CMCSA) announced plans to spin-off a select group of its Cable Television Network assets into a new publicly traded public company via a tax-free separation. As currently contemplated, SpinCo would include a portfolio of news (e.g., CNBC, MSNBC & USA), sports (e.g., USA & The Golf Channel), entertainment (e.g., E!, USA, SYFY & Oxygen) and digital (e.g., Fandango, Rotten Tomatoes, GolfNow & Sports Engine) properties that generated roughly $7 billion of sales in the trailing-twelve months (TTM) ended September 30, 2024.

The transaction is expected to take roughly one year to complete and remains subject to customary conditions, including the receipt of tax & regulatory approvals, the securement of satisfactory financing arrangements and final Board approval. (As well, the two future independent entities will need to hammer out a so-called “transition services agreement” prior to the transaction’s completion.)

Comcast reports two segments: 1) Connectivity & Platforms (~65.5% of consolidated sales), which itself is comprised of two divisions, namely Residential Connectivity & Platforms and Business Services Connectivity; and 2) Content & Experiences (34.5% of sales), which includes three divisions, including Media, Studios and Theme Parks. On a consolidated basis, CMCSA generated $121.6 billion of revenue in 2023 and ~$37.6 billion of adj. EBITDA. In the first nine months, the company posted consolidated top-line growth of 1.7% to $91.8 billion while adj. EBITDA declined 1.2% to $29.26 billion.

The bulk of pre-spin CMCSA lies in the Connectivity & Platforms, which could be compared with peers, such as AT&T (NYSE : T), Charter Communications (NASDAQ : CHTR), Lumen Technologies (NYSE : LUMN), T-Mobile (NASDAQ: TMUS), and Verizon Communications (NYSE: VZ), which trade, on average, at ~7.5x 2025E EV/EBITDA (or ~7x, ex-TMUS). Applying a 7.0x multiple to 2025E EBITDA implies value of nearly $321 billion. For Content & Experiences, Fox Corp. (NASDAQ: FOX), Disney (NYSE: DIS), Paramount Global (NASDAQ: PARA), and Warner Bros. Discovery (NASDAQ: WBD), which trade, on average, at 8.5x 2025E EV/EBITDA (or ~7.0x ex-DIS), could be considered peers to varying degrees. Applying a blended multiple of ~6.0x, reflecting a discounted multiple for SpinCo even within Media as well as a modest premium for Studios and Theme Parks, implies value of over $47 billion. Accounting for corporate costs and projected net debt yields an initial sum-of-the-parts valuation (SOTP) of ~$176.5 billion or ~$45.50 per share.

UPDATE:  Berry Global (BERY) / Magnera (MAGN) – November 19, 2024

BUY-rated BERY to Merge with AMCR in All-Stock Transaction Valuing it at $73.59 per share (an ~10% premium to last night’s close and roughly in-line with our FVE); Reports F2024 Results and Issues F2025 Guidance

Radar Screen – December 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Honeywell International inc. (HON), IAC Inc. (IAC), Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Spin-Off Report Calendar – December 2024

Published monthly, The Spin-Off Calendar provides one-page summaries of every spin-off under coverage from the announcement date, followed by the filing of the Form 10 and continuing 60 days post completion.

Spin-Off Report Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations.

European Spin-Off Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations in Europe. 

Bits & Pieces – November 2024

Covers mispriced stub securities, tracking stocks and other arbitrage opportunities.

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from the Spin-Off Report including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas.

UPCOMING SPIN-OFFS AND EXPECTED COMPLETION DATES:

• Spectrum Brands (SPB) / Home & Personal Care Business – 4Q 2024
• Western Digital (WDC) / HDD Business – 4Q 2024
• Holcim Ltd. (HOLN SW) / North American Business – 1H 2025
• DuPont Inc. (DD) / Electronics and Water Business – 2H 2025
• Topgolf Callaway Brands Corp. (MODG) / Topgolf – 2H 2025
• Unilever PLC (UL) / Ice Cream Business – Mid 2025
• Fortive Corp. (FTV) / Precision Technologies Business – 4Q 2025
• Honeywell International (HON) / Advanced Materials Business – 4Q 2025
• Comcast Corp. (CMCSA) / Cable Television Networks – 4Q 2025
• SKF AB (SKFB SS) / Automotive Business – 1H 2026

RECENT PUBLICATIONS:

ALERT:  Unilever (ULVR LN) – November 22, 2024

Unilever Shifts Ice Cream Separation to a Demerger/Spin-Off (From a Sale)

In conjunction with a capital markets event, held on November 22, 2024, Unilever (ULVR LN, UNA UA), indicated its focus for the separation of its Ice Cream business has shifted to a demerger/spin-off. The shift in strategy comes following a tepid response to its efforts to sell the “underperforming” asset, which was announced in March 2024. The company is still targeting completion of the separation by the end of 2025.

Currently, Unilever reports five segments: 1) Beauty & Wellbeing  2) Personal Care  3) Home Care  4) Nutrition  5) Ice Cream which operates Ben & Jerry’s, Wall’s, Cornetto and Magnum brands, accounting for 13.5% of consolidated 2023 sales and 11% of adj. EBITDA.

The Ice Cream division’s closest peer is likely Nestle SA (NESN SW), which trades at ~14x 2025E EV/EBITDA (and to a lesser degree GIS, which trades at ~12x). Applying a 12x multiple to 2025E EBITDA implies a segment valuation of ~€16.2 billion. The Beauty & Wellbeing, Personal Care and Home Care segments could be compared with a broad range of peers, including Beiersdorf AG (BEI GY), Colgate-Palmolive (NYSE: CL), Church & Dwight (NYSE: CHD), Estee Lauder (NYSE: EL), Kenvue Inc. (NYSE: KVUE), Kimberly-Clark (NYSE: KMB), L’Oreal (OR FP), Procter & Gamble (NYSE: PG), and Reckitt Benckiser (RKT LN), which trade at ~16x 2025E EV/EBITDA (in a range of 13x-19.5x). Applying a blended multiple (based on margin profiles) in-line with the peer average implies aggregate value of €128.7 billion. Lastly, the Nutrition segment could be compared with peers, such as Danone SA (BN FP), Kraft Heinz (NYSE: KHC) and General Mills (GIS), which trade at ~13x 2025E EV/EBITDA. Applying the peer average to 2025E segment EBITDA implies value of ~€40.5 billion.

Accounting for corporate costs as well as projected net debt (and minority interest) yields a preliminary base case valuation of ~€149 billion or ~€59 per share.

ALERT:  Comcast Corporation (CMCSA) – November 20, 2024

Comcast to Spin-Off Selected Cable Networks Assets via a Tax-Free Distribution

On November 20, 2024 Comcast Corporation (NASDAQ: CMCSA) announced plans to spin-off a select group of its Cable Television Network assets into a new publicly traded public company via a tax-free separation. As currently contemplated, SpinCo would include a portfolio of news (e.g., CNBC, MSNBC & USA), sports (e.g., USA & The Golf Channel), entertainment (e.g., E!, USA, SYFY & Oxygen) and digital (e.g., Fandango, Rotten Tomatoes, GolfNow & Sports Engine) properties that generated roughly $7 billion of sales in the trailing-twelve months (TTM) ended September 30, 2024.

The transaction is expected to take roughly one year to complete and remains subject to customary conditions, including the receipt of tax & regulatory approvals, the securement of satisfactory financing arrangements and final Board approval. (As well, the two future independent entities will need to hammer out a so-called “transition services agreement” prior to the transaction’s completion.)

Comcast reports two segments: 1) Connectivity & Platforms (~65.5% of consolidated sales), which itself is comprised of two divisions, namely Residential Connectivity & Platforms and Business Services Connectivity; and 2) Content & Experiences (34.5% of sales), which includes three divisions, including Media, Studios and Theme Parks. On a consolidated basis, CMCSA generated $121.6 billion of revenue in 2023 and ~$37.6 billion of adj. EBITDA. In the first nine months, the company posted consolidated top-line growth of 1.7% to $91.8 billion while adj. EBITDA declined 1.2% to $29.26 billion.

The bulk of pre-spin CMCSA lies in the Connectivity & Platforms, which could be compared with peers, such as AT&T (NYSE : T), Charter Communications (NASDAQ : CHTR), Lumen Technologies (NYSE : LUMN), T-Mobile (NASDAQ: TMUS), and Verizon Communications (NYSE: VZ), which trade, on average, at ~7.5x 2025E EV/EBITDA (or ~7x, ex-TMUS). Applying a 7.0x multiple to 2025E EBITDA implies value of nearly $321 billion. For Content & Experiences, Fox Corp. (NASDAQ: FOX), Disney (NYSE: DIS), Paramount Global (NASDAQ: PARA), and Warner Bros. Discovery (NASDAQ: WBD), which trade, on average, at 8.5x 2025E EV/EBITDA (or ~7.0x ex-DIS), could be considered peers to varying degrees. Applying a blended multiple of ~6.0x, reflecting a discounted multiple for SpinCo even within Media as well as a modest premium for Studios and Theme Parks, implies value of over $47 billion. Accounting for corporate costs and projected net debt yields an initial sum-of-the-parts valuation (SOTP) of ~$176.5 billion or ~$45.50 per share.

UPDATE:  Berry Global (BERY) / Magnera (MAGN) – November 19, 2024

BUY-rated BERY to Merge with AMCR in All-Stock Transaction Valuing it at $73.59 per share (an ~10% premium to last night’s close and roughly in-line with our FVE); Reports F2024 Results and Issues F2025 Guidance

Radar Screen – November 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Comcast Corporation (CMCSA), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber Co., Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International (TFII), TriMas Corporation (TRS)

Spin-Off Report Calendar – November 2024

Published monthly, The Spin-Off Calendar provides one-page summaries of every spin-off under coverage from the announcement date, followed by the filing of the Form 10 and continuing 60 days post completion.

Spin-Off Report Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations.

European Spin-Off Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations in Europe. 

Bits & Pieces – November 2024

Covers mispriced stub securities, tracking stocks and other arbitrage opportunities.

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from Hidden Opportunities including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas. 

HIGH-CONVICTION RECOMMENDATIONS (LONG):

• Newpark Resources, Inc. (NR)
• TFI International Inc. (TFII)
• Luxfer Holdings (LXFR)
• TriMas Corporation (TRS)

RECENT INITIATIONS:

• Luxfer Holdings PLC (LXFR)
• APi Group (APG) 

LATEST PUBLICATIONS & UPDATES:

UPDATE: Matthews International (MATW)

MATW to explore strategic alternatives (with a particular focus on its Industrial Technologies segment); posts full-year F2024 results in-line at the low end of guidance along with F2025 expectations in-line with consensus; fair value adjusted to $44 per share (from $46 per share)

MATW reported F2024 consolidated sales down 4.5% to $1.796 billion (versus consensus of $1.79 billion) with adjusted EBITDA down ~9% to $205.2 million (compared with consensus of $194.5 million and guidance of $205-$210 million).  Adj. EPS fell ~25% to $2.17 (compared with consensus of $2.00).  Broadly, results at Memorialization and SGK were roughly flat, which in terms of the latter marks a positive outcome, while Industrial Solutions results were down driven by order delays in Energy Storage along with weakness in Warehouse Automation.

The company ended F2024 with net debt of $735.7 million (versus $776.5 million in F2023) and a leverage ratio of 3.6x (versus 3.7x at year end F2023 and 3.5x at the end of F2022). The company’s long-term leverage target remains “at or below 3.0x” and management indicates that improving its leverage profile remains a “priority” in F2025.  Anecdotally, MATW expects operating cash flow to improve (off the ~$79.5 million level) in F2025 and plans for a capex budget of $50-$60 million.

In terms of F2025 guidance, the company provided a “cautious” full-year adjusted EBITDA outlook of $205-$215 million (compared with the current consensus estimate of $205 million), reflecting the expectations for continued stability at Memorialization, growth at SGK and uncertainty within the Industrial Technologies segment. 

That said, given the “growth opportunities” and perceived valuation disconnect management has retained J.P. Morgan to explore strategic alternatives.  While the review is expected to be comprehensive it, at least anecdotally, seems focused on the Industrial Solutions business (which we note itself is comprised of MATW’s Energy Storage, Warehouse Automation and Product Identification offerings).  

We adjust our base case fair value estimate for MATW to $44 per share (from ~$46 per share), reflecting a blended multiple of ~9.0x multiple on our F2026E adjusted EBITDA of $~$223.5 million and net debt of ~$632 million (see Exhibit #1 on page 2).

UPDATE: Masimo Corporation (MASI)

Close coverage of MASI, with the stock trading toward the high-end of our bull/bear valuation scenario

For context, MASI shares returned ~50% (outperforming the S&P 500 and Russell 2000 indexes by ~18% and 24%, respectively) since our initial recommendation in August 2023.

That said, with the shares trading toward the high-end of our bull/bear valuation scenario (and the primary management change and potential separation catalysts already announced) we prefer to maintain a disciplined approach and close coverage, as of today’s market close (see Exhibit #1 on page 2).

As always, we will continue to monitor shares for an opportunity to re-recommend if valuation shifts or incremental catalysts emerge, but we would note that if (and/or when) a tax-free spinoff of the consumer business is announced coverage will also be resumed by our colleagues at The Spin-Off Report.

Just as an aside, while we will not continue to actively recommend MASI we would point out, in the spirit of honest debate, that if core-MASI were to trade at its historical multiples post any potential separation (i.e., ~25x) and Sound United were simply worth its $1.0575 billion purchase price one could reasonably calculate a fair value closer to ~$185 per share (which is still well below its all-time highs north of ~$300 per share and does not consider any potential legal settlements related to the on-going patent litigation regarding the Apple Watch or the potential impact from new product introductions).

Radar Screen – November 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC),Comcast Corporation (CMCSA), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Intel Corporation (INTC), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from the Spin-Off Report including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas.

UPCOMING SPIN-OFFS AND EXPECTED COMPLETION DATES:

• Spectrum Brands (SPB) / Home & Personal Care Business – 4Q 2024
• Western Digital (WDC) / HDD Business – 4Q 2024
• Holcim Ltd. (HOLN SW) / North American Business – 1H 2025
• DuPont Inc. (DD) / Electronics and Water Business – 2H 2025
• Topgolf Callaway Brands Corp. (MODG) / Topgolf – 2H 2025
• Fortive Corp. (FTV) / Precision Technologies Business – 4Q 2025
• Honeywell International (HON) / Advanced Materials Business – 4Q 2025
• Comcast Corp. (CMCSA) / Cable Television Networks – 4Q 2025
• SKF AB (SKFB SS) / Automotive Business – 1H 2026

RECENT PUBLICATIONS:

ALERT:  Comcast Corporation (CMCSA) – November 20, 2024

Comcast to Spin-Off Selected Cable Networks Assets via a Tax-Free Distribution

On November 20, 2024 Comcast Corporation (NASDAQ: CMCSA) announced plans to spin-off a select group of its Cable Television Network assets into a new publicly traded public company via a tax-free separation. As currently contemplated, SpinCo would include a portfolio of news (e.g., CNBC, MSNBC & USA), sports (e.g., USA & The Golf Channel), entertainment (e.g., E!, USA, SYFY & Oxygen) and digital (e.g., Fandango, Rotten Tomatoes, GolfNow & Sports Engine) properties that generated roughly $7 billion of sales in the trailing-twelve months (TTM) ended September 30, 2024.

The transaction is expected to take roughly one year to complete and remains subject to customary conditions, including the receipt of tax & regulatory approvals, the securement of satisfactory financing arrangements and final Board approval. (As well, the two future independent entities will need to hammer out a so-called “transition services agreement” prior to the transaction’s completion.)

Comcast reports two segments: 1) Connectivity & Platforms (~65.5% of consolidated sales), which itself is comprised of two divisions, namely Residential Connectivity & Platforms and Business Services Connectivity; and 2) Content & Experiences (34.5% of sales), which includes three divisions, including Media, Studios and Theme Parks. On a consolidated basis, CMCSA generated $121.6 billion of revenue in 2023 and ~$37.6 billion of adj. EBITDA. In the first nine months, the company posted consolidated top-line growth of 1.7% to $91.8 billion while adj. EBITDA declined 1.2% to $29.26 billion.

The bulk of pre-spin CMCSA lies in the Connectivity & Platforms, which could be compared with peers, such as AT&T (NYSE : T), Charter Communications (NASDAQ : CHTR), Lumen Technologies (NYSE : LUMN), T-Mobile (NASDAQ: TMUS), and Verizon Communications (NYSE: VZ), which trade, on average, at ~7.5x 2025E EV/EBITDA (or ~7x, ex-TMUS). Applying a 7.0x multiple to 2025E EBITDA implies value of nearly $321 billion. For Content & Experiences, Fox Corp. (NASDAQ: FOX), Disney (NYSE: DIS), Paramount Global (NASDAQ: PARA), and Warner Bros. Discovery (NASDAQ: WBD), which trade, on average, at 8.5x 2025E EV/EBITDA (or ~7.0x ex-DIS), could be considered peers to varying degrees. Applying a blended multiple of ~6.0x, reflecting a discounted multiple for SpinCo even within Media as well as a modest premium for Studios and Theme Parks, implies value of over $47 billion. Accounting for corporate costs and projected net debt yields an initial sum-of-the-parts valuation (SOTP) of ~$176.5 billion or ~$45.50 per share.

UPDATE:  Berry Global (BERY) / Magnera (MAGN) – November 19, 2024

BUY-rated BERY to Merge with AMCR in All-Stock Transaction Valuing it at $73.59 per share (an ~10% premium to last night’s close and roughly in-line with our FVE); Reports F2024 Results and Issues F2025 Guidance

Radar Screen – November 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Comcast Corporation (CMCSA), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber Co., Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International (TFII), TriMas Corporation (TRS)

Spin-Off Report Calendar – November 2024

Published monthly, The Spin-Off Calendar provides one-page summaries of every spin-off under coverage from the announcement date, followed by the filing of the Form 10 and continuing 60 days post completion.

Spin-Off Report Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations.

European Spin-Off Compendium – November 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations in Europe. 

Bits & Pieces – November 2024

Covers mispriced stub securities, tracking stocks and other arbitrage opportunities.

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from Hidden Opportunities including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas. 

HIGH-CONVICTION RECOMMENDATIONS (LONG):

• Newpark Resources, Inc. (NR)
• TFI International Inc. (TFII)
• Luxfer Holdings (LXFR)
• TriMas Corporation (TRS)

RECENT INITIATIONS:

• Luxfer Holdings PLC (LXFR)
• APi Group (APG) 

LATEST PUBLICATIONS & UPDATES:

UPDATE: Matthews International (MATW)

MATW to explore strategic alternatives (with a particular focus on its Industrial Technologies segment); posts full-year F2024 results in-line at the low end of guidance along with F2025 expectations in-line with consensus; fair value adjusted to $44 per share (from $46 per share)

Last night, after the market close, MATW reported F2024 consolidated sales down 4.5% to $1.796 billion (versus consensus of $1.79 billion) with adjusted EBITDA down ~9% to $205.2 million (compared with consensus of $194.5 million and guidance of $205-$210 million).  Adj. EPS fell ~25% to $2.17 (compared with consensus of $2.00).  Broadly, results at Memorialization and SGK were roughly flat, which in terms of the latter marks a positive outcome, while Industrial Solutions results were down driven by order delays in Energy Storage along with weakness in Warehouse Automation.

The company ended F2024 with net debt of $735.7 million (versus $776.5 million in F2023) and a leverage ratio of 3.6x (versus 3.7x at year end F2023 and 3.5x at the end of F2022). The company’s long-term leverage target remains “at or below 3.0x” and management indicates that improving its leverage profile remains a “priority” in F2025.  Anecdotally, MATW expects operating cash flow to improve (off the ~$79.5 million level) in F2025 and plans for a capex budget of $50-$60 million.

In terms of F2025 guidance, the company provided a “cautious” full-year adjusted EBITDA outlook of $205-$215 million (compared with the current consensus estimate of $205 million), reflecting the expectations for continued stability at Memorialization, growth at SGK and uncertainty within the Industrial Technologies segment. 

That said, given the “growth opportunities” and perceived valuation disconnect management has retained J.P. Morgan to explore strategic alternatives.  While the review is expected to be comprehensive it, at least anecdotally, seems focused on the Industrial Solutions business (which we note itself is comprised of MATW’s Energy Storage, Warehouse Automation and Product Identification offerings).  

We adjust our base case fair value estimate for MATW to $44 per share (from ~$46 per share), reflecting a blended multiple of ~9.0x multiple on our F2026E adjusted EBITDA of $~$223.5 million and net debt of ~$632 million (see Exhibit #1 on page 2).

UPDATE: Masimo Corporation (MASI)

Close coverage of MASI, as of today’s close, with the stock trading toward the high-end of our bull/bear valuation scenario

For context, MASI shares returned ~50% (outperforming the S&P 500 and Russell 2000 indexes by ~18% and 24%, respectively) since our initial recommendation in August 2023.

That said, with the shares trading toward the high-end of our bull/bear valuation scenario (and the primary management change and potential separation catalysts already announced) we prefer to maintain a disciplined approach and close coverage, as of today’s market close (see Exhibit #1 on page 2).

As always, we will continue to monitor shares for an opportunity to re-recommend if valuation shifts or incremental catalysts emerge, but we would note that if (and/or when) a tax-free spinoff of the consumer business is announced coverage will also be resumed by our colleagues at The Spin-Off Report.

Just as an aside, while we will not continue to actively recommend MASI after today’s market close we would point out, in the spirit of honest debate, that if core-MASI were to trade at its historical multiples post any potential separation (i.e., ~25x) and Sound United were simply worth its $1.0575 billion purchase price one could reasonably calculate a fair value closer to ~$185 per share (which is still well below its all-time highs north of ~$300 per share and does not consider any potential legal settlements related to the on-going patent litigation regarding the Apple Watch or the potential impact from new product introductions).

Radar Screen – November 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC),Comcast Corporation (CMCSA), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber, Inc. (GT), Intel Corporation (INTC), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International Inc. (TFII), TriMas Corporation (TRS)

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566

The Weekly Wrap-Up provides summaries of recent publications from the Spin-Off Report including links to the full-length research reports.  If you haven’t engaged with the research over the past seven days, the Weekly Wrap-Up will quickly update you on our newest and highest conviction ideas.

UPCOMING SPIN-OFFS AND EXPECTED COMPLETION DATES:

• Spectrum Brands (SPB) / Home & Personal Care Business – 4Q 2024
• Western Digital (WDC) / HDD Business – 4Q 2024
• Holcim Ltd. (HOLN SW) / North American Business – 1H 2025
• DuPont Inc. (DD) / Electronics and Water Business – 2H 2025
• Topgolf Callaway Brands Corp. (MODG) / Topgolf – 2H 2025
• Fortive Corp. (FTV) / Precision Technologies Business – Mid 2025
• Honeywell International (HON) / Advanced Materials Business – 4Q 2024
• SKF AB (SKFB SS) / Automotive Business – 1H 2026

RECENT PUBLICATIONS:

UPDATE: Spectrum Brands Holdings (NYSE: SPB) – November 15, 2024

This morning, before the market open, Spectrum Brands (NYSE: SPB) posted 4Q F2024 (September-ending) results with consolidated sales up ~4.5% to ~$774 million (ahead of the ~$745 million consensus estimate) while adj. EBITDA declined ~38% to $69 million, including ~$26 million of incremental brand investments (compared with consensus of $74.5 million). Adj. EPS fell ~13.5% to $0.97 (versus consensus of $1.07).  For the full year, SPB generated consolidated sales growth of 1.5% to $2.96 billion with adjusted EBITDA of ~35% to ~$372 million. Adjusted EPS were $4.06 (versus $0.64 in the prior year).

Management indicated that the dual-track spin/sale process for the Home & Personal Care (HPC) business remains on-going although we would say that the anecdotal commentary suggests, at least sub-textually, that the sale route is the more likely outcome. To that end, the company indicated it was in active negotiations with two potential buyers but that the unrest in the Middle East and lead up to the U.S. election had somewhat slowed the process.

As highlighted in our initial report, while management commentary has, in our view, consistently supported a sale (as opposed to a spin) it should be noted that per filings “it is more likely than not that the majority of its federal & state deferred tax assets related to loss and credit carryforwards will not create tax benefits in the future”. In that context, we would note that if the HPC business were to be sold (rather than spun) our current valuation framework would implicitly value the HPC business at ~8x (assuming a corporate tax rate of ~21%-25%).

We maintain our NEUTRAL rating but, all else being equal, could envision our warming up to the story on the lower-to-mid $80’s.

UPDATE: Liberty Global (LBTYA) / Sunrise Communications (SUNN SW) – November 15, 2024

Today, Sunrise Communications (SUNN SW) began trading “regular way” on the SIX Swiss Exchange.  On Wednesday, November 13th the American Depositary Shares (ADSs) of Sunrise Communications (NASDAQ: SNRE) began trading “regular way”.  “When-issued” trading ADS shares initially began trading at CHF 36.50 per share and closed Tuesday at CHF 44.37 per share.

The ADSs will only trade for nine months, and all Class A & C ADS holders can convert their shares into SIX traded Class A common shares (ticker SUNN) at any time (with the $0.05 conversion fee waived for the first three months).

Given LBTYA’s ~17% jump post the ADSs debut (versus its split-adjusted closing price of $10.93) we downgrade our rating to NEUTRAL (from BUY), as of today’s close, while maintaining our BUY rating on SUNN given the implied upside to our fair value estimate (and our broad expectation that post-spin volatility is likely to be relatively muted).

Our valuation for SUNN is based on an equal weighted, blended fair value scenario using adj. EBITDAaL and EV/adj. FCF multiples (based on management’s 2024E guidance). For comparables, we looked at Swisscom’s trading multiple and applied no significant discount due to: 1) SUNN’s implied dividend yield of ~6.4% based on our valuation target (compared with Swisscom’s at 4.0%); 2) SUNN’s challenger position and market share gains over the last 3-4 years (versus Swisscom); and 3) SUNN being a pureplay Swiss player (versus Swisscom’s roughly 40% operating exposure to Italy, which we expect will increase from 23% following the completion of the Vodafone Italy deal in 1H 2025).

Post-spin, Liberty Global will consist of its European assets, including the VMO2 JV (UK), Telenet (Belgium), Vodafone Ziggo (Netherlands), and Virgin Media (Ireland), as well as its other investment ventures. We value LBTY using a sum-of-the-parts (SOTP) approach, applying suitable peer multiples to each operating unit and adjusting for factors such as leverage, minority interests, and a conglomerate discount. Despite our lowered rating (based on the limited upside to our initial valuation), we remind investors that LBTY could possess several ancillary levers to generate upside, including share repurchases (i.e., the 10% buyback planned in 2024, of which at least 8% has already been completed), potential incremental value creation from its holdings in the Venture business, and any value unlocking from potential monetization options at UK NetCo (i.e., VMO2’s cable & fiber assets) and Benelux HoldCo (i.e., its stakes in Telnet & VodafoneZiggo).

UPDATE:  Berry Global (BERY) / Magnera (MAGN) – November 5, 2024

COMPREHENSIVE REPORT:  Liberty Global (LBTYA) / Sunrise (SUNN)  – November 1, 2024

UPDATE: MDU Resources (MDU) / Everus Construction (EVG) – November 1, 2024

Radar Screen – November 2024

Monthly publication providing ongoing analysis on companies where we see potential for a value-unlocking event

Companies discussed this month:  Albany International (AIN), Alphabet Inc. (GOOG), Bloomin’ Brands (BLMN), California Resources Corp. (CRC), Comcast Corporation (CMCSA), Crown Castle Inc. (CCI), FedEx Corporation (FDX), Goodyear Tire & Rubber Co., Intel Corporation (INTC), Luxfer Holdings (LXFR), Masimo Corp. (MASI), Matthews International Corp. (MATW), RCI Hospitality Inc. (RICK), Stanley Black & Decker (SWK), TFI International (TFII), TriMas Corporation (TRS)

Spin-Off Report Calendar – November 2024

Published monthly, The Spin-Off Calendar provides one-page summaries of every spin-off under coverage from the announcement date, followed by the filing of the Form 10 and continuing 60 days post completion.

Spin-Off Report Compendium – August 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations.

European Spin-Off Compendium – September 2024

Murray Stahl’s commentary on various investing themes and single stock recommendations in Europe. 

Bits & Pieces – November 2024

Covers mispriced stub securities, tracking stocks and other arbitrage opportunities.

Product Specialist

Rich Albanese
ralbanese@pcsresearchgroup.com
+1 646-839-5566