Considering CDON’s near-term growth, the shares do not appear to be egregiously priced. It is not unusual for technology companies to attract high valuation multiples. These reflect the anticipated growth expected of these types of businesses. While it may be tempting to treat CDON similarly, we make two general observations. First, although CDON is characterized as an Internet or ecommerce company, we believe that the description “retailer” is more apt. Fundamentally, CDON is no different than Wal-Mart’s online business, other than that the latter company has a much better distribution network
and economy of scale. Second, CDON’s business is presently highly dependent upon the success of the Entertainment division. As the transition from physical medium to downloadable media progresses, CDON should feel the impact, even though the company does participate in the download market. It is due to the competitiveness of the market that
the Entertainment division generates operating margins of only 6%-7%, versus 12% for Sports & Health (but still exceeding the 5% operating margin of Fashion).

Aside from the sale of its own branded sports products and clothing items, the company does not appear to have any clear-cut advantages vis-à-vis its competitors. Should CDON flourish, it is likely to attract more competition. Additionally, the extent of CDON Group’s organic growth is still somewhat unclear, given that its historical sales growth was aided by multiple acquisitions. Since the purchases were completed when CDON was still part of a larger organization, it might not have the same advantages or bargaining power as a freestanding company. In the event that CDON pursues additional acquisitions in the future, they might be made at a greater cost. For these reasons, we would caution against being overly generous in terms of valuation.

To observe the extremes at which valuations may occur, one only need to look to Amazon.com. Although the company has indeed established itself as the de facto ecommerce juggernaut, it is well reflected in its share price. Amazon.com trades at 73x earnings, 12x book value, 39x cash flow and 31x EBITDA. One can infer that the multiples accorded to Amazon.com reflect the geographic growth that is still available to the company – that is, international expansion. CDON Group, on the other hand, appears to be strictly focused on dominating a local region. Clearly, it would be improper to apply Amazon.com’s metrics to CDON.

Nevertheless, a multiple of perhaps 20x earnings would still be within reason for a value oriented investor. As such, fair value would be established at SEK 33.00 – 34.00 per share. As a result, we would conclude that at present the shares are not substantially undervalued to recommend purchase.

On a pre-distribution basis, if Grupo Carso’s trailing twelve month majority net income were conservatively capitalized at 15 times, the fair value estimate would be MXN 48.23 per share, significantly lower than the current price of MXN 80.01.

On a post-distribution basis and at median competitor multiples of run-rate pro forma majority net income, the fair value estimates for Grupo Caro, Inmuebles Carso, and Minera Frisco are MXN 25.39, MXN 3.60, and MXN 14.41, respectively, or MXN 43.39 on a sum-of-the-parts basis. Solely on the basis of the run-rate pro forma financials of post-distribution Grupo Carso, Inmuebles Carso, and Minera Frisco, a sum-of-the-parts analysis is also suggestive of significant overvaluation.

Importantly, other than six months of pro forma financials, the company has provided investors with relatively little fundamental information about the real estate and mining assets themselves (e.g., real estate square footage, mining production potential, etc.).

In consideration of the current valuation of the company’s shares, the lack of a demonstrated record of long-term shareholder value creation (i.e., last ten years under the direction of Mr. Slim Domit), and the absence of detailed information about the spin-off assets themselves, the shares of Grupo Carso are not recommended for purchase at this time.

Should post-distribution Grupo Carso, Inmuebles Carso, and/or Minera Frisco trade below the fair value estimates provided herein, future purchase may be warranted.

The fair value estimate for post-distribution Mvelaphanda Group is ZAR 2.40 per share, which is equivalent to approximately 0.68 times (i.e., the 5-year average intrinsic net asset value multiple) November 19th pro forma intrinsic net asset value.

For Mvelaserve Limited, the fair value estimate is ZAR 12.18 per share, which is equivalent to 10.0 times adjusted 2010 pro forma net income (i.e., ZAR 172 million). While undoubtedly conservative relative to developed market multiples, this seems reasonable given the small size and emerging market nature of the investment; moreover, such conservatism is supported by recent company estimates of the Mvelaserve net asset value.

These valuations are not only reasonably conservative but are also internally consistent.16 In other words, at the current price, unless one assumes higher multiples of intrinsic net asset value and/or earnings, Mvelaphanda Group appears fairly priced on a sum of the parts basis.

Ergo, neither Mvelaphanda Group Limited nor Mvelaserve Limited is recommended for purchase at this time. Should Mvelaserve Limited experience a significant diminution in market capitalization subsequent to the distribution, purchase may be warranted.

Jindal SAW Limited (JSAW IN) is part of the USD 12 billion O.P. Jindal Group, which began operations in 1984 as the first company in India to manufacture pipes using submerged arc welding (i.e., SAW). The SAW process protects the weld from atmospheric contamination, thereby ensuring stronger and more consistent welds.

The company operates two distinct businesses: pipe manufacturing and investments. On November 8, 2010, the Board of Directors of Jindal SAW approved the proposed demerger of the company’s investment arm, whereby Jindal SAW shareholders will receive one share of the spin-off for every five shares held of the parent. The transaction is expected to become effective as of January 1, 2011 upon approval by the Allahabad High Court, with the listing of shares expected to be completed by July 2011.

Within the larger business of pipe manufacturing, the company’s operations are organized across three strategic business units: Large Diameter Pipes, Ductile Iron Pipes, and Seamless Tubes. Moreover, the company’s product portfolio is diversified across a variety of end-user segments, such as energy, water, and sewage transportation, as well as other industrial applications.

The Large Diameter Pipes division produces two types of SAW pipes: longitudinal submerged arc welded (i.e., LSAW) pipes and helical submerged arc welded (i.e., HSAW) pipes. The company’s large diameter pipes are used extensively in the energy and water transportation sectors for cross-country transportation of oil and gas and, to a lesser extent, water and sewage. LSAW pipes are manufactured from plates and are used in high pressure oil and gas transportation, whereas HSAW pipes are manufactured from hot rolled coil and tend to be used in low pressure oil, gas, water, and sewage transportation.

The Ductile Iron Pipes division represents the fastest growing water and sewage transportation segment due to the lower pressure nature of water and sewage transportation. The primary buyers of these products are government bodies and state municipal corporations that operate and maintain public water supply and sewerage systems. The Seamless Tubes division produces tubes without the need for welding, resulting in higher strength tubes that find applications in the oil and gas sectors as components of boilers and hydraulic cylinders, for example.

The company’s investment business is conducted through direct investments in publicly traded securities (e.g., Jindal Steel & Power), financing of group companies, and strategic investments in new ventures concentrated primarily in infrastructure-focused opportunities.

The development of the Indian economy will undoubtedly result in an increasing need for basic infrastructure in the areas of water and waste management. As well, the longer-term evolution of the Indian economy may very well result in a shift from coal to oil and natural gas, resulting in increased demand for high pressure SAW pipes.

The pipes business appears to be positioned to take advantage of India’s rapidly evolving economy, as does the infrastructure-focused investment business; the question of whether the company is valued appropriately will be addressed in a full report in the coming months.

In July 2010, Haldex AB (HLDX SS), which is a Swedish vehicle parts manufacturer, initially announced an intention to disaggregate its three business segments into separately traded companies. At that time, the company began a more comprehensive study of the potential transaction and, on October 21st, announced that it will proceed with a demerger of its businesses. Haldex operates within three subsets of the vehicle parts manufacturing industry, which are Commercial Vehicle Systems, Hydraulic Systems, and Traction Systems.

Haldex experienced a sharp decline in sales during 2008-2009, as the global automobile and heavy vehicle markets were placed under great pressure during the Credit Crisis. Lately, though, the business environment has improved substantially, such that all three of the Haldex businesses have returned to profitability. In response, the company believes that each one of these can now operate as a standalone entity and, presumably, offer current shareholders more value creation possibilities than through the existing diversified structure. This is a somewhat peculiar transaction, though, not in reference to the demerger structure, but in its motive. That is, many of the vehicle parts manufacturing firms that survived the rapid decline in auto sales over the last few years are diversified, both in terms of product offering and geography. Such a policy is believed to provide less earnings variability, and equip these companies with the ability to withstand periods of recessionary global vehicle sales. However, Haldex appears to be adopting quite an opposite strategy. The disaggregation of its company will result in three smaller companies, each focused on more narrow expansion opportunities.

While little transaction information has been released at this point, the current proposal would result in one Haldex share being converted into three new shares – one for each of the separately listed company. More information is expected upon the release of the company’s 2010 year-end report sometime in the first quarter of 2011. If approved by shareholders, the demerger may be completed as early as June 2011.

Should the development of the Frontier and Equinox Project evolve in a manner consistent with the currently proposed timetable, in approximately three years the Frontier and Equinox assets would warrant a valuation consistent with that currently assigned to Fort Hills. If such an outcome were to transpire, an investor in the shares of SilverBirch Energy Corp. could reasonably expect to earn over 30 percent per annum for the next three years.

Ergo, the shares in SilverBirch Energy Corporation are recommended for purchase should they trade at the discounted value currently implied by the price of UTS Energy Corporation.

In addition find our comprehensive of the history of Canadian Oil Sands industry and analysis of UTS Energy Corp.

In November 2009, Las Vegas Sands Corp. completed its Hong Kong Stock Exchange listing of a minority interest in Sands China Ltd. The listing was implemented for the purpose of building additional liquidity at the parent company level of Las Vegas Sands Corp. and resulted in the formation of a pure-play vehicle through which investors can establish exposure to the fast-growing Asian gaming market. From 2004 through 2009, casino revenue in Macau has increased at a compound annual growth rate of approximately 23.6 percent, whereas revenue in Las Vegas and Atlantic City has grown at 0.8 percent and -3.8 percent, respectively.

Sands China currently holds one of six concessions, or subconcessions, permitted by the Macau Government to operate casinos or gaming areas in Macau. The Macanese gaming industry was previously controlled pursuant to a monopoly operated by Stanley Ho of SJM Holdings; however, the monopoly formally ended in 2002 when the Macau Government launched an international tender process and granted three concessions to Galaxy Entertainment Group, SJM Holdings, and Wynn Macau.

The Macau Government subsequently authorized three subconcessions, and in December 2002, Galaxy Entertainment, the Macau Government, and VML, a subsidiary of Sands China, entered into a subconcession contract, which allows Sands China to develop and operate gaming facility projects in Macau independently from Galaxy. The two other subconcessionaires are Melco Crown and MGM Grand Paradise.

Of the five publically traded concessionaires, or subconcessionaires, Sands China is currently the second largest operator in Macau, as measured by 2009 revenue. Importantly, not only is Macau the largest gaming market in the world as measured by casino gaming revenue, but is the only location in China offering legalized casino gaming, a characteristic which bodes well for high future growth rates.

The company’s primary assets include the Sands Macao, The Venetian Macao and The Plaza Macao, all of which are located in the area of Macau known as the Cotai Strip. Opened in May 2004, the Sands Macao was the first Las Vegas-style casino in Macau, and currently contains a mix of gaming areas for mass market, VIP and premium players, and entertainment and dining facilities. In August 2007, Sands China opened Macau’s largest integrated resort, The Venetian Macao, and in August 2008, the company opened The Plaza Macao, a boutique luxury integrated resort featuring a Four Seasons Hotel and the Plaza Casino.

Sands China is also in the process of developing additional integrated resort properties on its remaining sites along the Cotai Strip, with the next phase of expansion expected to develop approximately 6,000 hotel rooms and approximately 1.2 million square feet of retail, entertainment and dining facilities, exhibition space, as well as a multi-purpose theater. The integrated resort will include approximately 300,000 square feet of gaming space, with up to 670 tables and 2,200 slot machines.

In the company’s current configuration, it operates 3 of the 33 casinos operating in Macau, yet commands over a quarter of the gaming tables and slot machines, as well as nearly a quarter of total Macanese gaming revenue.

While the manner in which the company came to market—that is, through the process of an initial public offering, rather than through a pure spin-off—would typically preclude it from inclusion in The Global Spin- Off Report, the unique, high-quality nature of the asset when compared to the relatively limited competition in Macau, as well as the value inherent in the potential for high and sustained growth rates over an extended period of time warrants a more comprehensive study of the company. It is, therefore, a company which this publication plans to highlight further in a more comprehensive report in the coming weeks.

Warren Buffet frequently quotes his mentor Ben Graham, the father of security analysis, who noted “In the short term the stock market behaves like a voting machine, but in the long term it acts like a weighing machine.” The wisdom of this statement is likely to be proven yet again when DuluxGroup commences trading later this month (July).

The proximate cause of this last declaration was the Australian paint industry’s second largest publicly traded player, Wattyl, finally succumbing to the blandishments of Valspar. Terms of that all cash transaction announced on June 24, call for Wattyl stockholders to receive $1.30 Australian per share. Based on Wattyl’s reported results this works out to 0.37 times annual sales, 27.6 times earnings and 1.14 times stated equity per share.

If one were simply to apply similar ratios to DuluxGroup shares when they commence trading you would come up with a range of values from a low of $0.97 per share to a high of $7.25 per share.

Yet it might fairly be argued that Dulux is worth a premium valuation to what Wattyl received, given that it is the leading light in the industry. Not only does it have the highest revenue in the industry, it has the stronger and more far reaching distribution network, possesses more impressive financials, continues to gain share of market and enjoys a far higher brand recognition factor with the consumer.

An analysis of Dulux on a leveraged recapitalization basis, which indicates to what degree Dulux could accretively self-finance a repurchase of its shares, suggests that the shares are meaningfully undervalued relative to its current profitability and capital structure. Any one of these considerations, taken on its own merits, could be utilized to justify a higher valuation of the shares on a comparative basis. Taken in their totality they would appear to make an almost unassailable claim for a significant premium to that obtained by Wattyl.