Newest Publications & Updates

MDU Resources Group Inc. (MDU) / Knife River (KNF) – Comprehensive Report
May 5, 2023

On August 4, 2022, before the market open, MDU Resources Group Inc. (NYSE: MDU) announced that the company plans to separate its aggregates-based, vertically integrated construction materials and contracting provider, Knife River Corp., into a standalone, publicly traded company via a tax-free spin-off.  MDU will distribute at least 80.1% of outstanding shares of Knife River Holdings to MDU shareholders and the company is expected to trade on the NYSE under the ticker “KNF.” MDU will retain up to 19.9% of KNF shares, which the company intends to dispose of via a debt exchange, distribution to shareholders, or in a sale for cash. The separation will be completed on May 31, 2023, after the market close, with shareholders of record as of May 22, 2023, receiving one share of KNF for every four shares of MDU held.

Given what appears to be the first step in fully separating the regulated businesses from non-regulated, we expect that following the spin-off of Knife River, shares of the regulated business would begin to be re-rated to more closely approximate the underlying utility operators, while Knife River would be comparable to other aggregate and construction services companies. Notably, if the company does end up separating the regulated businesses fully (via another spin-off or through another method such as a sale), the parent MDU company would significantly reduce its earnings volatility, which may attract a more dividend-focused investor base, while Knife River and the third company would attract more industrial/cyclical industry focused investor base.

On a pre-spin, sum-of-the-parts basis, we assign a fair value estimate of $32 per share to MDU Resources. On a post-spin basis, we value shares of Knife River at $28 per share and MDU Resources at $25 per share. Given limited upside to our fair value estimate, we rate shares of MDU at NEUTRAL prior to the Knife River spin-off.

Radar Screen – May 2023

Monthly publication providing ongoing analysis on companies with potential for a value-unlocking event

Companies discussed this month:  Alphabet Inc. (GOOG), APi Group Corp. (APIG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), MDU Resources Group, Inc. (MDU), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Spin-Off Report Calendar – May 2023

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 – April 2023

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

European Spin-Off Compendium – April 2023

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

Bits & Pieces – April 2023

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.

Newest Publications & Updates

UPDATE:  Matthews International Corporation (MATW)
April 28, 2023

Matthews reports 2Q F2023 results slightly ahead of our expectations and maintains “cautious” full-year F2023 adj. EBITDA guidance

MATW reported 2Q F2023 consolidated sales up 7.8% (or ~10% on a constant currency basis) to $479.6 million with a ~6% increase in adjusted EBITDA to ~$58.5 million. Adj. EPS were $0.65 (down ~12% versus $0.74 in the prior year period).

By segment, sales at the Memorialization segment rose 1.3% to $222.9 million with an 11.8% increase in adj. EBITDA to $48 million while Industrial Technologies sales increased 60.5%, most notably driven by the energy storage business (including the Olbrich and R+S acquisitions), to $125.5 million with an ~8% increase in adj. EBITDA to $15.5 million. At SGK, sales fell ~10.5% to $131.2 million while adj. EBITDA declined 18% to $11 million (as adverse conditions in Europe as well as currency headwinds continued to negatively impact the business).

Anecdotally, management indicated on this morning’s conference call that its outlook reflects a “cautious” stance on the timing of revenue recognition of existing orders in the energy storage business as well as the timing of future orders, of which management suggests it is in multiple later-stage negotiations (e.g., “all” of the battery manufacturers in the Asia Pacific region).

Our base case fair value estimate for MATW remains ~$50 per share, reflecting a blended multiple 9.5x multiple on our F2024E adjusted EBITDA of ~$245 million and net debt of ~$704.5 million.

Radar Screen – April 2023

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

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Product Specialist

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

Newest Publications & Updates

UPDATE:  Madison Square Garden Entertainment
April 21, 2023

Madison Square Garden Entertainment Corp. (NYSE: MSGE) completed the spin-off of its traditional live entertainment business. New Madison Square Garden Entertainment Corp. now trades on the NYSE under the ticker “MSGE”. The parent company has adopted the corporate moniker MSG Sphere Co. and trades on
the NYSE under the ticker “SPHR”.

Based on the initial trading prices, incorporating net debt as well as the implied market capitalization of New MSGE, we calculate shares of SPHR have an adjusted market capitalization of just $306 million and an enterprise value of $1.4 billion.

Notably, the implied valuation is in stark contrast to our valuation of MSG Networks and the Sphere venue, which we value at approximately $1.8 billion on an enterprise value basis.  Incorporating net debt of $1.0 billion, we fairly value shares of SPHR at $38 per share and assign a BUY rating to MSG Sphere Co.

In terms of New MSGE, the current pricing is roughly in line with our $31 fair value estimate, as such we assign a NEUTRAL rating to MSGE.

Radar Screen – April 2023

Monthly publication providing ongoing analysis on companies with potential for a value-unlocking event

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Spin-Off Report Calendar – April 2023

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 – April 2023

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

European Spin-Off Compendium – April 2023

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

Bits & Pieces – April 2023

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.

Newest Publications & Updates

UPDATE: Garret Motion Inc. (GTX)
April 17, 2023

GTX announced preliminary 1Q 2023 results indicating net sales rose 8% (or ~13% on a constant currency basis) to $970 million with adjusted EBITDA growth of ~15% to $168 million (versus $143 million in 1Q 2022). Net income was ~$81 million (versus $88 million in the prior quarter) while adj. free cash flow (FCF) was $88 million(compared with $38 million in the year ago period).

The company still expects to report actual 1Q 2023 results before the market open on Monday, April 24, 2023 (with a conference call that morning at 8:30
a.m.).

At quarter-end, the company had net debt of $902 million, including $291 million of cash and $1.19 billion of debt. That said, following the aforementioned debt offering the company expects a pro forma net leverage ratio of ~2.7x (compared with 1.65x at the end of 2022 and 2.3x at the end of 2021). The company’s longer-term leverage target remains ~2.0x.

Our base case fair value estimate for GTX remains ~$11 per share, reflecting an 8.0x multiple on our 2024E adjusted net income forecast of ~$348.5 million
and a fully diluted share count of ~263.5 million.

Radar Screen – April 2023

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

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Product Specialist

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

Newest Publications & Updates

UPDATE:  Madison Square Garden Entertainment
April 21, 2023

Madison Square Garden Entertainment Corp. (NYSE: MSGE) completed the spin-off of its traditional live entertainment business. New Madison Square Garden Entertainment Corp. now trades on the NYSE under the ticker “MSGE”. The parent company has adopted the corporate moniker MSG Sphere Co. and trades on
the NYSE under the ticker “SPHR”.

Based on the initial trading prices, incorporating net debt as well as the implied market capitalization of New MSGE, we calculate shares of SPHR have an adjusted market capitalization of just $306 million and an enterprise value of $1.4 billion.

Notably, the implied valuation is in stark contrast to our valuation of MSG Networks and the Sphere venue, which we value at approximately $1.8 billion on an enterprise value basis.  Incorporating net debt of $1.0 billion, we fairly value shares of SPHR at $38 per share and assign a BUY rating to MSG Sphere Co.

In terms of New MSGE, the current pricing is roughly in line with our $31 fair value estimate, as such we assign a NEUTRAL rating to MSGE.

Radar Screen – April 2023

Monthly publication providing ongoing analysis on companies with potential for a value-unlocking event

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Spin-Off Report Calendar – April 2023

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 – April 2023

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

European Spin-Off Compendium – April 2023

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

Bits & Pieces – April 2023

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.

Newest Publications & Updates

UPDATE: Garret Motion Inc. (GTX)
April 13, 2023

On April 13, GTX announced an agreement with Centerbridge and Oaktree to convert all of its 11% yielding Series A Preferred stock into common stock on or about July 3, 2023. 

In conjunction, the company will also repurchase ~$570 million of the Series A stock from the aforementioned investors (at ~$8.10 per share in a range of $7.875-$8.50 depending on the VWAP of its common shares over the next 15 days), which will reduce their combined pro forma ownership to ~30% (from ~45%).  As a result, the investors will reduce their allotted Board representation to 2 directors (down from 6).  Also, the investors have agreed to “lock-up” restrictions for 50% of their shares for six months and the remaining 50% for twelve months.

Importantly, this transaction will complete the simplification of GTX’s capital structure into a single class of equity (with a pro forma market capitalization of
~$2 billion based on current market prices), which we expect will widen its investor base, including the potential for index inclusion and increased sell-side research coverage/visibility, while also eliminating ~$160 million of annual dividends paid to the Series A Preferred holders.

Our base case fair value estimate for GTX remains ~$11 per share, reflecting an 8.0x multiple on our 2024E adjusted net income forecast of ~$350 million and a fully diluted share count of ~263.5 million.

INITIATION: APi Group Corp. (APG)
March 21, 2023

APi Group Corp. (NYSE: APG) operates two business segments: (1) Safety Services (69.5% of sales and 73% of adj. EBITDA in 2022), which designs, installs, inspects, monitors, repairs and services occupancy systems, including fire safety, electronic security & HVAC systems; and (2) Specialty Services (30.5% of sales and 27% of adj. EBITDA), which provides similar services for critical infrastructure, including electric, gas, water, sewer & telecommunications lines.

APG operates an asset-light, variable cost, recession resistant/statutorily mandated business that possesses mid-to-high single digit organic growth prospects, numerous tuck-in M&A opportunities in a fragmented market and a clear path to ~300 basis points of incremental margin improvement over the next 2-3 years. Moreover, with shares trading at ~9x 2024E EV/EBITDA and a free cash flow yield of ~10% APG trades at a significant discount to publicly traded peers, which trade at EV/EBITDA multiples of nearly 14x and FCF yields of ~3.5%, as well as relevant private market transaction valuations, which have averaged ~16x EV/EBITDA in recent years. In addition to fundamental upside, we also see the potential for APi to separate/monetize its Specialty Services segment, via spin-off or sale. Such a transaction would unlock value and provide APG with incremental capital to either rapidly de-lever, pursue accretive tuck-in M&A and/or be returned to shareholders via share repurchases (while also increasing focus on the higher margin/faster growing Safety Services business). Recent commentary suggests “everything is on the table”, in terms of unlocking value for shareholders.

Based on management guidance and commentary as well as peer and M&A valuations, APG’s Safety Services and Specialty Services businesses could be valued at ~$34 per share, and $7 per share, respectively. Accounting for corporate costs and projected net debt of ~$11 per share yields a base case sum-of-the-parts fair value of $30 per share (with bull and bear cases of ~$36.50 and ~$23.50 per share, respectively).

Radar Screen – April 2023

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

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Product Specialist

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

Newest Publications & Updates

UPDATE: Crane Holding Co. (CR)
April 4, 2023

On April 3, 2023, after the market close, Crane Holding Co. (NYSE: CR) competed the spin-off of Crane Co. The spin company now trades on the NYSE under the ticker “CR”. CR shareholders of record as of March 23, 2023, received one share of New CR for every one shares of Crane Holdings Co. owned. Following the separation, the parent company has adopted the corporate moniker Crane NXT Co. and trades on the NYSE under the symbol “CXT”.

On a post-spin basis, we assign a fair value estimate of $58 per share to Crane NXT.  Given the implied upside to our fair value estimate, combined with our favorable outlook on an eventual re-rating of the company, we recommend shares of Crane NXT and continue to rate Crane Co. at NEUTRAL.

The European Spin-Off Report – Sodexo SA (SW FP) – FLASH
April 5, 2023

On April 5, 2023, Sodexo SA (SW FP) announced the intention to spin-off its benefits and rewards services businesses (“BRS”) into a standalone, publicly traded company. The transaction, which is scheduled to be completed in 2024, is supported by SW’s founding family’s investment firm, Bellon SA, who expects to remain a long-term shareholder in both post-spin entities. Bellon SA controls 42.8% of the shares and 57.5% of the voting rights. Today, the company, which was founded in 1966 and is headquartered in Issy-les-Moulineaux, France, describes itself as “the global leader in sustainable food and valued experiences at every moment in life: learn, work, heal and play.”

Based on management’s guidance for the group and BRS, along with the assumption that growth moderates in F2024 on less benefits from COVID re-openings, it could be projected that BRS would generate EURO 387 million in EBITDA and OSS would generate EURO 1.66 billion in F2024. Based on peer multiples, this would imply BRS and OSS enterprise values of EURO 2.7 billion and EURO 17.4 billion, respectively. Accounting for the current net debt of EURO 1.9 billion and 147.5 million shares outstanding, we assign a preliminary, pre-spin, sum-of-the-parts fair value estimate of EURO 124 to shares of SW.

Radar Screen – April 2023

Monthly publication providing ongoing analysis on companies with potential for a value-unlocking event

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Spin-Off Report Calendar – April 2023

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 – April 2023

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

European Spin-Off Compendium – April 2023

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

Bits & Pieces – April 2023

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.

Newest Publications & Updates

UPDATE: Crane Holding Co. (CR)
April 4, 2023

On April 3, 2023, after the market close, Crane Holding Co. (NYSE: CR) competed the spin-off of Crane Co. The spin company now trades on the NYSE under the ticker “CR”. CR shareholders of record as of March 23, 2023, received one share of New CR for every one shares of Crane Holdings Co. owned. Following the separation, the parent company has adopted the corporate moniker Crane NXT Co. and trades on the NYSE under the symbol “CXT”.

On a post-spin basis, we assign a fair value estimate to Crane Co. of $74 per share, and $58 per share to Crane NXT. Given the implied upside to our fair value estimate, combined with our favorable outlook on an eventual re-rating of Crane NXT, we recommend shares of Crane NXT and rate Crane Co. at NEUTRAL.

The European Spin-Off Report – Sodexo SA (SW FP) – FLASH
April 5, 2023

On April 5, 2023, Sodexo SA (SW FP) announced the intention to spin-off its benefits and rewards services businesses (“BRS”) into a standalone, publicly traded company. The transaction, which is scheduled to be completed in 2024, is supported by SW’s founding family’s investment firm, Bellon SA, who expects to remain a long-term shareholder in both post-spin entities. Bellon SA controls 42.8% of the shares and 57.5% of the voting rights. Today, the company, which was founded in 1966 and is headquartered in Issy-les-Moulineaux, France, describes itself as “the global leader in sustainable food and valued experiences at every moment in life: learn, work, heal and play.”

Based on management’s guidance for the group and BRS, along with the assumption that growth moderates in F2024 on less benefits from COVID re-openings, it could be projected that BRS would generate EURO 387 million in EBITDA and OSS would generate EURO 1.66 billion in F2024. Based on peer multiples, this would imply BRS and OSS enterprise values of EURO 2.7 billion and EURO 17.4 billion, respectively. Accounting for the current net debt of EURO 1.9 billion and 147.5 million shares outstanding, we assign a preliminary, pre-spin, sum-of-the-parts fair value estimate of EURO 124 to shares of SW.

COMPREHENSIVE: Madison Square Garden Entertainment Corp. (MSGE)
March 20, 2023

Madison Square Garden Entertainment Corp. (NYSE: MSGE) plans to spin-off its traditional live entertainment business from the MSG Sphere, Tao Group, and Networks businesses. The spin-off will be accomplished via a pro-rata distribution of approximately two-thirds economic interest in the spin company.  Following the transaction, the spin company will retain the MSG Entertainment corporate moniker. The parent company will be renamed MSG Sphere Corp. and will retain a one-third economic interest in the spin company. If completed, it is expected that the spin-off transaction would be tax-free to MSGE shareholders.

Radar Screen – April 2023

Monthly publication providing ongoing analysis on companies with potential for a value-unlocking event

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

Spin-Off Report Calendar – April 2023

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 – April 2023

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

European Spin-Off Compendium – February 2023

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

Bits & Pieces – March 2023

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.

Newest Publications & Updates

UPDATE: Garrett Motion Inc. (GTX)
April 4, 2023

On April 4, before the market open, GTX indicated that it expects fullyear 2023 net income and adj. EBITDA to be at the high end of its initial guidance of $255-$300 million and $555-$615 million, respectively, driven by stronger volumes, solid operational execution and favorable currency fluctuations.

The company expects to report actual 1Q 2023 results as well as formally update its full-year guidance before the market open on Monday, April 24, 2023 (and will hold a conference call that morning at 8:30 a.m.).

Our base case fair value estimate for GTX remains ~$11 per share, reflecting an 8.0x multiple on our 2024E adjusted net income forecast of $420 million and a fully diluted share count of ~320 million.

INITIATION: APi Group Corp. (APG)
March 21, 2023

APi Group Corp. (NYSE: APG) operates two business segments: (1) Safety Services (69.5% of sales and 73% of adj. EBITDA in 2022), which designs, installs, inspects, monitors, repairs and services occupancy systems, including fire safety, electronic security & HVAC systems; and (2) Specialty Services (30.5% of sales and 27% of adj. EBITDA), which provides similar services for critical infrastructure, including electric, gas, water, sewer & telecommunications lines.

APG operates an asset-light, variable cost, recession resistant/statutorily mandated business that possesses mid-to-high single digit organic growth prospects, numerous tuck-in M&A opportunities in a fragmented market and a clear path to ~300 basis points of incremental margin improvement over the next 2-3 years. Moreover, with shares trading at ~9x 2024E EV/EBITDA and a free cash flow yield of ~10% APG trades at a significant discount to publicly traded peers, which trade at EV/EBITDA multiples of nearly 14x and FCF yields of ~3.5%, as well as relevant private market transaction valuations, which have averaged ~16x EV/EBITDA in recent years. In addition to fundamental upside, we also see the potential for APi to separate/monetize its Specialty Services segment, via spin-off or sale. Such a transaction would unlock value and provide APG with incremental capital to either rapidly de-lever, pursue accretive tuck-in M&A and/or be returned to shareholders via share repurchases (while also increasing focus on the higher margin/faster growing Safety Services business). Recent commentary suggests “everything is on the table”, in terms of unlocking value for shareholders.

Based on management guidance and commentary as well as peer and M&A valuations, APG’s Safety Services and Specialty Services businesses could be valued at ~$34 per share, and $7 per share, respectively. Accounting for corporate costs and projected net debt of ~$11 per share yields a base case sum-of-the-parts fair value of $30 per share (with bull and bear cases of ~$36.50 and ~$23.50 per share, respectively).

Radar Screen – April 2023

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

Companies discussed this month:  Alphabet Inc. (GOOG), California Resources Corp. (CRC), Carrier Global Corp. (CARR), Crown Holdings Inc. (CCK), FLEETCOR Technologies, Inc. (FLT), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC), JELD-WEN (JELD), Liberty Broadband Corp. (LBRDK), Matthews International Corp. (MATW), Natura & Co. Holding (NTCO), PAR Technology Corp. (PAR), RCI Hospitality Inc. (RICK), Tiptree Inc. (TIPT), Western Digital Corp. (WDC)

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.

Newest Publications & Updates

INITIATION: APi Group Corp. (APG)
March 21, 2023

APi Group Corp. (NYSE: APG) operates two business segments: (1) Safety Services (69.5% of sales and 73% of adj. EBITDA in 2022), which designs, installs, inspects, monitors, repairs and services occupancy systems, including fire safety, electronic security & HVAC systems; and (2) Specialty Services (30.5% of sales and 27% of adj. EBITDA), which provides similar services for critical infrastructure, including electric, gas, water, sewer & telecommunications lines.

APG operates an asset-light, variable cost, recession resistant/statutorily mandated business that possesses mid-to-high single digit organic growth prospects, numerous tuck-in M&A opportunities in a fragmented market and a clear path to ~300 basis points of incremental margin improvement over the next 2-3 years. Moreover, with shares trading at ~9x 2024E EV/EBITDA and a free cash flow yield of ~10% APG trades at a significant discount to publicly traded peers, which trade at EV/EBITDA multiples of nearly 14x and FCF yields of ~3.5%, as well as relevant
private market transaction valuations, which have averaged ~16x EV/EBITDA in recent years. In addition to fundamental upside, we also see the potential for APi to separate/monetize its Specialty Services segment, via spin-off or sale. Such a transaction would unlock value and provide APG with incremental capital to either rapidly de-lever, pursue accretive tuck-in M&A and/or be returned to shareholders via share repurchases (while also increasing focus on the higher margin/faster growing Safety Services business).  Recent commentary suggests “everything is on the table”, in terms of unlocking value for shareholders.

Based on management guidance and commentary as well as peer and M&A valuations, APG’s Safety Services and Specialty Services businesses could be valued at ~$34 per share, and $7 per share, respectively. Accounting for corporate costs and projected net debt of ~$11 per share yields a base case sum-of-the-parts fair value of $30 per share (with bull and bear cases of ~$36.50 and ~$23.50 per share, respectively).

Radar Screen – March 2023

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

Companies discussed this month:  Alphabet Inc. (GOOG), Amerco (UHAL), California Resources Corp. (CRC), Crown Holdings Inc. (CCK), Griffon Corp. (GFF), Hasbro, Inc. (HAS), IAC Inc. (IAC) JELD-WEN (JELD), Liberty Broadband (LBRDK), Lions Gate (LGF), Matthews (MATW), Natura & Co. Holding (NTCO), Par Technology (PAR), Penn National Gaming (PENN), RCI Hospitality (RICK), Tiptree Inc. (TIPT), Western Digital (WDC)

Product Specialist

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