dbm

I did take a look at AHC a couple of months ago, but decided to pass because I have no idea what the sustainable run rate of fcf will be. The problem is not only what will be its sustainable revenues (50% less revenues as in your worst case seems too conservative), but its sustainable gross margin. I agree that the new, but old, management was already doing a good turnaround job before covid. But at the end of 2019, they were having 20% to 25% gross margins, compared to 40% to 50% currently. If you consider this level of before covid margins in your model, your worst case scenario could be much worse. Hard to imagine a private label business being able to sustain 50% GM. Reality may be somewhere in between. Given its scale seems far larger than its competitors, with low level of maintenance capex and negligible tax expenses, a low multiple (5x?) of recurring EBITDA may be a good entry point. Unfortunately that recurring EBITDA is a mystery to me (and probably even to its CEO). ?

ODET bought 900k shares of Vivendi on March 4. I am not sure, but I think it may have a tax advantage against the rest of the market at the spinoff/dividend due to the larger than 5% stake. But don’t ask me why buying through ODET instead of BOL :P

That should be only UMG: for Bolloré, something like 80% * €30bn * 29% stake / 1.35bn effective shares, or ~€ 5.15 / share. I may be a little wrong on Bolloré stake in Vivendi after all the buybacks, or the effective shares, but probably not by much. That´s right, you still have 29% of €10bn+ of Vivendi RemainCo plus the wholly-owned businesses. Less net debt and whatever holding/tax friction/governance discount you may want to apply.

It is turning out far more shareholder-friendly than feared. I was expecting - at best - an IPO with Vivendi retaining 50%+ of shares. I was definitely not expecting VB to relinquish formal control. After the distribution Bolloré will have something like 24% of votes. After adjusting the # of shares for the cross-shareholding, at a €30bn valuation of UMG, Bolloré's stake will be worth north of €5/share (vs a market price of €3.60/share), and Odet's indirect stake will be worth more than €1400/share (vs a market price of €800/share). Sure, there is debt, holding discount, etc... but the remaining assets should at least have a positive value. Besides, if such a move respects minority shareholders downstream, maybe the fear of being significantly ripped off upstream (as Odet shareholder) is overemphasized.

Young companies with a short track record are usually not my thing, but it looks like an interesting business at a good price. Thanks for bringing this up. Now, the PIPE deal... the issuance of shares (a small amount, to be fair) at half the price of an IPO that ocurred less than a year ago, to a company awash with cash... seems suspicious. Can you figure a good reason (not the official one) to do that? I don't know how one of the write-ups can paint positively. I will follow this one though ;)

Never thought I would be back to it (I was a shareholder for a brief period em 2015/16), but at this level it makes total sense to me. Thanks for bringing this up. At the operating level, what really matters is TNMT. The remaining brands are not enough to make the company break even. On one hand, Playmates Toys doesn't have control over the management of the IP. If Viacom decides to not invest in this brand for let's say a decade, there is nothing Playmates can do about it. On the other hand, major costs to develop the brand are not on their shoulders either. I think that is the main reason its cost structure is so variable, in addition to the outsourced production. There are multiple sources (just google ninja turtles seth rogen) mentioning a reimagination of TNMT on the works, to be led by Seth Rogen, so we might have news soon enough. If it works poorly, well, you still have the pile of cash as a margin of safety. If not by some extreme necessity, I don't see them bringing it to HK and paying such large taxes though. However, if it works... in the last rebirth of TNMT (2013-2017), the company generated more than HKD 1,500mm in cash, having distributed almost HKD 700mm in dividends. The cash generated in these five years was more than 5x current market cap alone. I like this kind of optionality. You may get robbed at some level by the management in the meanwhile, for sure. Curiously, Seth Klarman's Baupost was a shareholder for some time during the nineties. From the 1995 letter to shareholders: "Our Playmates Toys position declined on the heels of disappointing first half 1995 results. We believe this decline will be more than fully reversed in the future based on improved business performance. At the current level, the shares trade at a price approximately equal to net current assets; the company is involved in a number of projects that could very positively impact results in the second half of 1995 and beyond."

Just to highlight that over the past week or so, VB bought ~25k shares, through Bolloré Participations (where the controlling family has 100%). That's quite relevant for the liquidity of the stock. More than 4% of the free float.

mjohn707, I don't think there is much to be said about the management. The chairman has been with the company or other municipalities holdings for a couple of decades now, but at the end of the day they probably just follow municipal government guidelines. Foreign Tuffett, I 100% agree with you that optimizing shareholder value is not the primary objective of this company. In fact, I believe that is true for most SOE companies: you can pick any Russian one to serve as an example. However, that does not mean they are worthless for minority shareholders. While value stuck in such a non-friendly structure may take a long time to cristalize, it is still there - plus or minus whatever management does with the assets. In this case, probably minus... but to say minus 100% is a stretch. It may not be its most important KPI, but even a municipality government prefers to have as much cash in hand as possible. And while you wait, the main portion of the company is run by well-incentivized Otis management, and is probably a growing pie. As for the trend in dividends, Otis China's profit was in a downtrend from 2014 to 2018, as explained at their investor day. In 2015 for example, Tianjin Dev received HKD 500mm in dividends from Otis China, compared to HKD 260mm last year. Otis did mention that the trend is improving for the sector in China. Given the amount of debt they are stuck with because of the recent IPO, I don't see it distributing less than 100% of profits. Of course it deserves a discount. I am just saying that 75% discount makes little sense to me.

TIANJIN DEVELOPMENT HOLDINGS (0882) Price: HKD 1.45 per share Mkt cap: HKD 1,556mm Net debt, adjusted*: -HKD 2,059mm EV: -HKD 504mm I have been following this forum for a few years but this is my first post. I guess I am tired of suffering alone with this small cap. It is now trading close to its all time low. This is one of the most undervalued situations I have seen in my career. It can be a three-bagger and remain cheap. Tianjin Dev is essentially a holding of businesses / stakes in businesses of the municipality of Tianjin, a city close to Beijing with 15mm people. I has a market cap of less than HKD 1,600mm. I believe it is worth multiples of it. It consists of a pile of cash, a pharma co, a port, utilities (water / heat / electricity), a hotel in HK, a loss-making machinery co and, most importantly, a 16.5% stake in Otis China. The bulk of my analysis is based on "you don't have to know a man's exact weight to know that he is fat". Therefore, I don't lose much time with smaller subsidiaries or stakes in listed companies, which I just consider at market value. But its obesity is crystal clear. The stake in Otis China alone is worth at least double its market cap, and that is where I prefer to focus. Consolidated IFRS results are quite complicated, because of a mix of subsidiaries being consolidated, equity-accounted or fair value measured. In any case, the segment disclosure is very satisfactory to understand it as SOTP. Let's start with the most important part: its 16.5% stake in Otis China. I am sure most of you are familiar with the qualities of the elevator business: razor / razor blade design, when a sale of a new equipment (at a profit!) assures you a decade of recurrent maintenance revenues at a high margin, a high ROIC business, strong moat, high visibility, and so on. Listed companies in this sector (Kone, Schindler, Zardoya Otis) usually trades at 25-30x earnings. Thyssenkrupp just sold its elevator subsidiary, which delivered EBIT of less than EUR 1bn, for EUR 17.2bn. The recent spin-off of Otis from UTX adds a lot of visibility to the case. For anyone interested, Otis investor day presentation is really educational. However, the elevator business in China is not as good a business as in US / Europe. Service market is very fragmented and the conversion ratio is much lower - ~30% instead of 90%+ in developed markets -, harming the razor / razor-blade construct. According to management, this is a key point they intend to focus on, and there are significant opportunities for improvement (focus on top developers where the conversion ratio is closer to developed markets). As expected, the market in China is huge: more than 6mm units in operation (out of 16mm globally), of which Otis serves only 210k units. More than 500k units are added each year. Worse business from one point of view, opportunities from another. Tianjin Dev has been Otis partner in China for 36 years. It was the first JV established by Otis in China, and the chosen one to consolidate all others during the last decade or so. One of Otis' major R&D centers is in China. This is a strong indicative that it is not another Chinese swindle. Look-through earnings (and dividends received) from Otis China were more than HKD 200mm in every single year over the last decade. While it might not deserve a 25-30x multiple, it is worth what... 15-20x? I assume 18x, which at HKD 220mm of profits, values it at HKD 3,960mm. Listed stakes: Tianjin Lisheng Pharma, listed in Shenzen (ticker: 002393). I don't have a view on whatever the difference might be between its intrinsic value and its market cap, but its stake (34.4%) at market value is worth HKD 1,671mm. That alone is more than Tianjin Dev market cap. Tianjin Port, listed in HK (ticker: 3382). Its stake (21%) at market value is worth HKD 640mm. Pile of cash: after excluding cash & equivalents of Tianjin Lisheng Pharma (although its effective interest is only 34.4%, it is controlled by a double layer of holding companies, and therefore consolidated), it has HKD 1,395 in net cash. Other businesses: All other businesses combined are probably worth something close to Tianjin Dev market cap - they do deliver more than HKD 100mm in combined profits after you exclude impairments at the mechanical division, which is up for sale. Marriott HK was already impacted by protests in HK, and now, of course, will be severely impacted by covid-19. The utilities business serving TEDA, the Technological Development Area, seems more interesting. Most of the Tianjin Dev's cash is kept at these subsidiaries, so for the sake of simplicity, at these prices we can even disregard them. So, summing it all up: Otis China stake, HKD 3,960mm, or HKD 3.69 per share Tianjin Lisheng Pharma stake, HKD 1,672mm, or HKD 1.56 per share Tianjin Port stake, HKD 621mm, or HKD 0.60 per share Cash ex-Tianjin Lisheng Pharma, HKD 1,395mm, or HKD 1.30 per share Other businesses: ? SOTP: HKD 7,667mm, or 7.15 per share. That's more than 380% above current stock price. We can be as conservative as you want... the pile of cash is worth nothing to the minority shareholders (only as a margin of safety) since it never leaves the house? Fine.On top of that, let's add a fat 25% holding discount? That is still HKD 4.38 per share, or about 200% upside. Otis China at 10x earnings and nothing else? That alone is 40% more than current market cap, even considering everything else is worthless. Value is there, not matter how you slice it. A more realistic risk here is governance. If a shrewd capital allocator controlled a holding company trading at such a huge discount and with such liquidity, they would be buying back stock hand over fist, boosting intrinsic value per share. In contrast, management interest in company's shares is nonexistent. Its share option scheme expired last year, with zero shares exercised - exercise price was multiples of current price. Maybe if it is reinstated we can get a better alignment, who knows. At HKD 0.08 per share, current dividend yield is a little less than 5.5%. It sounds ok, but that represents less than 40% of what the company receives as dividend from Otis China. As is usually the case with SOE companies in emerging markets, possibilities of harming minority shareholders abound: destruction of shareholder value by misallocation of funds, conflicts of interest with another businesses owned by the municipality, fraud in subsidiaries... I am not saying any of that will happen, but it is something to keep in mind. In any case, it would have to be an incredible amount of harm to justify such a discount. Does it make sense, or I am going nuts? Catalyst: Improved visibility of Otis China after spinoff of Otis Worldwide Huge value discrepancy Disclosure: I am long Tianjin Dev. * Adjusted by the proportionate ownership of Tianjin Lisheng Pharma' cash