Amerco (NASDAQ: UHAL), the parent company of U-Haul, North America’s largest do-it-yourself (DIY) moving company, operates three reportable segments: (1) Moving & Storage (91% of sales and 96% of EBITDA in F2018), which rents trucks, trailers, and towing equipment as well as owns/operates a large portfolio of self-storage space; (2) Property & Casualty Insurance (2% of sales and 2% of EBITDA), comprised primarily of Repwest Insurance, which provides insurance to U-Haul customers and equipment; and (3) Life Insurance (7% of revenue and 2% of EBITDA in F2018), which  serves the senior citizen market via its Oxford Life Insurance subsidiary.  UHAL is the dominant player in the DIY moving & storage market, with durable competitive advantages in proximity, availability, and price. In our view, at ~5.5x F2020E EV/EBITDA, UHAL is undervalued relative to the sum value of its parts, particularly the high-margin/low incremental capex Storage portion of its core Moving & Storage business. While we think the company will continue to gain share and has ample room to expand margins over the next several years (to the benefit of shareholders), we see several potential strategic options, including (in order of likelihood) the tax-efficient monetization of attractive real estate (e.g. Chelsea), the sale of non-core assets (e.g. Oxford) and/or the spin-off of the Storage segment as a real estate investment trust. Considering our financial projections as well as peer valuations, value of $551 per share and $28 per share can be assigned to UHAL’s Moving & Storage and Insurance businesses. Accounting for projected net debt of ~$109 per share yields a sum-of-the-parts value of roughly $470 per share.

On July 3, 2017, BGEO Group PLC (BGEO LN) announced plans to demerge BGEO Group into two separately listed, publicly traded companies: one company will focus on BGEO’s banking business (Bank of Georgia) while the other will focus on BGEO’s investment business (to be rebranded as Georgia Capital). The transaction will be completed on May 29^th, 2018, prior to the market open. Following the demerger, Georgia Capital will retain a 19.9% stake in Bank of Georgia. Shareholders of record as of 6:00 p.m. May 25, 2018, will receive one share of Georgia Capital for each share of BGEO owned. Georgia Capital is expected to trade on the London Stock Exchange under the ticker “CGEO”.

On a pre-spin, sum of the parts basis, shares of BGEO can be fairly valued at GBP 36 per share, implying 10% upside from the current share price. Post spin, shares of Bank of Georgia can be fairly valued at GBP 20 per share while Georgia Capital is fairly valued at GBP 17 per share, including the GHG and Bank of Georgia ownership stakes. As such, the separation of the investment business from the banking operations appears to unlock value. While 10% upside heading into a spin-off typically results in a pre-spin recommendation, given the uniqueness of BGEO’s regional focus, we suggest awaiting post spin trading prior to initiating positions. We would suggest either a minimum of 15% to 20% discount to the fair value estimates would provide a better margin of safety, or at least one quarter’s performance as stand-alone entities to show management’s ability to drive financial performance before recommending shares.

On August 2, 2017, Wyndham Worldwide Corporation (NYSE: WYN) announced its intention to separate its hotels business from its timeshare and exchange rental businesses—Wyndham Vacation Ownership and Wyndham Destination Network—in a tax-free spin-off to WYN shareholders. Following the spin-off, Wyndham Hotels & Resorts Inc. will be an independent, publicly traded company (listed on the New York Stock Exchange under the ticker symbol “WH”) and will own and operate Wyndham Worldwide’s hotel business. Wyndham Worldwide Corporation (the parent company in the spin transaction), which will be renamed Wyndham Destinations Inc., will continue to own and operate its vacation ownership, timeshare exchange, and vacation rental businesses, and is expected to be listed on the New York Stock Exchange under its new symbol, “WYND”. The distribution is expected to occur after the market close on May 31, 2018 to WYN shareholders of record as of May 18, 2018. Each Wyndham Worldwide shareholder will receive one share of Wyndham Hotels & Resorts common stock for each share of Wyndham Worldwide common stock held by the record date. When-issued trading of shares of Wyndham Hotels & Resorts and Wyndham Destinations is expected to begin on or about May 17, 2018, under the ticker symbols “WH WI” and “WYND WI”, respectively. Wyndham Destinations and Wyndham Hotels & Resorts are expected to begin regular-way trading on June 1, 2018.

Based on an analysis of projected EBITDA, EPS, free cash flow, and dividend yield, WYN can be fairly valued, on a pre-spin sum-of-the-parts basis, at $127 per share. With the fair value estimate representing 14% potential upside from current levels ($111 per share as of this writing), the transaction appears to unlock incremental upside. As such, pre-spin shares are recommended for purchase.

On December 7, 2017, Dover Corporation (NYSE: DOV) announced its intention to separate its upstream energy business, also called the “”Wellsite”” business, into an independent publicly traded company to be named “”Apergy,”” via a tax-free spin-off. On April 18, 2018, the company announced that its Board of Directors had approved the spin-off as well as set the distribution ratio, record date, and distribution date for the spin-off. The distribution is expected to be made on May 9, 2018 to Dover shareholders of record as of April 30, 2018, the record date for the transaction. Dover shareholders will receive one share of Apergy common stock for every two shares of Dover common stock held as of the record date. Shares of Dover common stock will continue to trade on the New York Stock Exchange (NYSE) under the symbol “”DOV”” through and after the May 9, 2018 distribution date. When-issued trading for Apergy is expected to begin on or about April 27, 2018 on the NYSE under the symbol “”APY WI””. Beginning on May 9, 2018, Apergy will trade on the NYSE under the symbol “”APY””.

Based on an analysis of projected EBITDA, EPS, free cash flow, and dividend yield, Dover can be fairly valued, on a sum-of-the-parts basis, at $110 per share. Post-spin, assuming a 1:2 distribution ratio, DOV and APY can be fairly valued at $95 and $30, respectively. With the fair value estimate representing 15% potential upside from current levels ($95 as of this writing), the transaction appears to unlock incremental upside. That said, DOV shares have had a strong recent run, having appreciated 20% in the last 12 months, versus 13% for the S&P 500 over the same period. With the shares trading at 11.3x forward EBITDA, above a 10-year average of 9.1x, and just below a peak multiple of 12.4x (December 2017), near-term catalysts appear limited and it may take time for the post-spin shares to grow into their ‘re-rated’ valuation resembling industry peers.

Reading International (NASDAQ: RDI) reports two distinct business segments, each with operations in the U.S., Australia, and New Zealand: (1) Cinema Exhibition (92% of sales and 78.5% of EBITDA in 2017), which operates 59 cinemas; and (2) Real Estate (8% of sales and 21.5% of EBITDA in 2017), which controls nearly 1 million square feet of income-producing retail, commercial, and theater space. Additionally, RDI has a portfolio of investment & development properties across the same three countries. In our view, RDI trades at an attractive discount to the sum value of its parts, particularly its investment & development portfolio, which includes desirable properties in New York City, as well as the potential value of its Cinema business in a consolidating industry. Clearly, the diversity of RDI’s operations, both functionally and geographically, presents myriad avenues of potential optionality, including the separation and/or monetization of one or all of its assets. That said, the Board has resisted strategic alternatives and has also rejected an $18.50 per share takeout offer. Thus, while the potential auction of a controlling interest in RDI due to a long-running legal battle within RDI’s founding family could be a latent catalyst for change at the company, we see additional opportunities for value to be unlocked for shareholders, including the completion and lease-up of RDI’s 44 Union Square project (likely in 2H 2018), the potential redevelopment the Cinema 1,2,3 property in midtown Manhattan and/or the monetization/development of other investment properties in the U.S. and New Zealand. Considering our financial projections as well as peer and M&A valuations, value of $17 per share and $8 per share can be assigned to RDI’s Cinema and Real Estate businesses, with an additional $8 per share attributed to the company’s portfolio of investment & development properties. Accounting for corporate costs and projected net debt of $12.50 per share yields a base case sum-of-the-parts value of roughly $21 per share. 

On August 3, 2017, Spirit Realty Capital, Inc. (NYSE: SRC) announced its intention to spin off a separate, publicly traded real estate investment trust (REIT). The REIT spin-off entity, to be named Spirit MTA REIT (“”SMTA””), will consist of substantially all of the company’s properties currently leased to retailer Shopko (privately held) and the assets that collateralize its Master Trust 2014 (part of Spirit’s asset-backed securitization program, “”Master Trust A””), an asset-backed securitization vehicle. The spin-off is expected to be completed in the first half of 2018. Based on an analysis of estimated adjusted funds from operations (AFFO), projected EBITDA, NOI, and dividend yield, SRC can be fairly valued, on a sum-of-the-parts basis, at $9.01 per share. Post-spin, assuming a 1:1 distribution and an estimated 448.8 million fully diluted shares outstanding, SRC and SMTA can be fairly valued at $6.93 and $2.08, respectively. Note that the distribution ratio has not been announced as of this writing. With the fair value estimate representing 12% upside from current levels ($8.05 as of this writing), the transaction appears poised to unlock modest upside. That said, we expect near-term volatility owing to shareholder churn as investors initially sell SMTA. As such, we would not be buyers ahead of the spin-off transaction.

Aerojet Rocketdyne (NYSE: AJRD) is primarily a provider of propulsion systems to the U.S. government via its Aerospace & Defense business segment, which accounts for substantively all of the company’s revenue and earnings. The company also operates an ancillary Real Estate unit, Easton Development Co., which leases excess office space as well as rezones, entitles and sells surplus real estate, which includes more than 5,500 acres outside Sacramento, California. At less than 9x adjusted 2019E EV/EBITDA, AJRD is undervalued relative to peers, particularly considering its attractive exposure to well-funded space and defense programs, its position as the only remaining pure-play propulsion company, and the value of its excess real estate. On the former point, aerospace & defense (A&D) peers currently trade at ~12.5x 2019E EV/EBITDA, and Orbital ATK (NYSE: OA), a direct peer, recently agreed to be acquired by Northrop Grumman (NYSE: NOC) at almost 13x (which is roughly in-line with the average M&A multiple in the A&D sector over the last five years). On the latter point, AJRD owns more than 5,500 acres of developable real estate just outside Sacramento, CA, which it will work to monetize in coming years and whose net present value could be calculated in the $2-$5 per share range. Considering financial projections as well as peer, M&A, and asset valuations, value of $38 can be assigned to AJRD’s operating business, while our base case estimate of the net present value of ARJD’s land assets is ~$3.50 per share. Accounting for corporate costs and projected net debt, including pension liabilities, of ~$6 per share yields a base case sum-of-the-parts value of ~$36 per share. Potential catalysts include the monetization of land holdings, increased defense spending, new program wins, margin improvement and/or a strategic combination. Potential risks include reductions in government spending, increased competition, a lack of execution on internal restructuring, technological disruption, cyberattacks and environmental remediation/pension costs. 

On July 26, 2017, La Quinta Holdings Inc. (NYSE: LQ) announced the filing of a Form 10 registration statement with the SEC for the tax-free spin-off of its real estate business as a Real Estate Investment Trust (REIT), to be named CorePoint Lodging Inc. (CPLG), from its franchise and management business. On January 18, 2017, LQ announced that the company had agreed to sell its franchise and management businesses to Wyndham Worldwide Corp. (NYSE: WYN) for approximately $1.95 billion. The sale of the management business will take place immediately following the spin-off of CorePoint, and is expected to be completed in 2Q 2018.

On a pre-spin basis, shares of LQ are fairly valued at $21 per share, consisting of $12.40 in value from CPLG and $8.40 in value from the WYN acquisition of New La Quinta. Given recent REIT performance, the near 15% implied upside from the current share price ($18.22 as of this writing) may not provide a significant margin of safety to new investors. The potential for share price pressure in a rising rate environment may warrant a further discount before a new position is initiated. Further, upon separation, there is a likelihood of shareholder turnover, which could provide a more attractive entry point for real estate focused investors. In the near term, Corepoint may garner a reduced valuation relative to peers, owing to lower EBITDA margins (5% management fee), higher leverage, and small size with a lower prospective dividend. Anecdotally, any post-spin discount to CorePoint’s FVE may eventually be reduced upon the eventual conversion to a REIT as index funds and ETF’s demand is likely to increase.

On April 4, 2017, Liberty Interactive Corp. (NASDAQ: QVCA, QVCB, LVNTA, LVNTB) announced plans to acquire General Communication Inc. (NASDAQ: GNCMA) (“GCI”). Following the acquisition, Liberty Interactive will effect a tax-free split-off of the controlling interest in GNCMA and the contributed Ventures assets into a new, stand-alone publicly traded company, which will adopt GCI Liberty Inc. as its corporate moniker. The split-off is expected to be completed on March 9, 2018, after the market close. Trading in post-split entities is scheduled to commence on March 12, 2018. Following the split-off, Liberty Interactive will rename itself “Qurate Retail Group.” The company will begin referencing itself under the new corporate moniker post split, and will formally effect the name change at a later date.

Based on current share prices for the publicly traded ownership stakes, and the GCI purchase price of $1.2 billion, post-split shares of GCI Liberty are expected to have a net asset value of $7.3 billion, or $68 per share, representing 27% upside from the current share price, based on 108.3 million shares outstanding. It can be noted that significant optionality exists within the publicly traded holdings, which provides additional upside to $80 per share in a bull case scenario.

Based on forecasted earnings and cash flow of the combined QVC and HSN operations, and including its stake in leisure services provider ILG (NASDAQ: ILG), shares of new QVC Group are fairly valued at $32 per share, representing 9% upside from the current share price.

Given the current discount to NAV, the impending change to an asset-backed stock (from a tracking stock), and the high likelihood of further transactions that would narrow the discount to NAV, shares of Liberty Ventures are recommended for purchase prior to the split-off. Shares of QVG Group are not recommended for purchase, given limited upside potential and risks associated with the HSN and QVC business model.

On May 9, 2017, Pentair Plc (NYSE: PNR) announced plans to separate its Electrical business into a new, stand-alone publicly traded company, to be named nVent Electric Plc,  via a tax-free spin-off. The transaction is expected to be completed during 2Q 2018 (targeted date of April 30). Based on an analysis of estimated 2019 revenue, EPS, cash flow, and dividend yield, a pre-spin sum-of-the-parts fair value estimate of $77 for PNR can be derived. Post-spin, Pentair and nVent can be fairly valued at $45 and $32, respectively. Note that these estimates are preliminary, as post-spin capitalization structure has not been disclosed as of this writing. With the implied fair value estimate representing 8% potential upside from PNR’s current price ($71 as of this writing), the shares appear to be fairly valued. Given the lack of near-term upside we recommend waiting for evidence of improved fundamentals before becoming more constructive on the shares.