Liberty Posted June 3, 2015 Share Posted June 3, 2015 The Radiant Logistics thread probably wasn't the best place to discuss this company, so I'm creating this separate one. Link to comment Share on other sites More sharing options...
yadayada Posted June 3, 2015 Share Posted June 3, 2015 Seems like most of it is priced in already? Could have been a good one to ride up from 12$. Business model looks really interesting. Annual revenue would be 2.8bn$ now. If you assume CHRW is roughly the same business (profit margins etc) then saying they grow to 7bn$ revenue (almost 200% more then now) with similar 4% profit margins gets you 280m$ in profit. That is a 5.6bn market cap with a 20x multiple. Or only 44% upside. And it will take years to get there with some risk, and a lot of capital needed. Unless they can do much better profit margins then CHRW, it does not look that attractive at current prices. If you think they will grow more then that, even with 12 bn$ in revenue and similar matured profit margins as CHRW, that is only a double. And that will probably take at the very least like 6-7 years. So that is like 10-12% IRR if everything goes perfect. Does not look like the risk/reward is really there. They invested 1.2bn$ to gain like 2bn$ in revenue in 2013 and 2014. So there is risk of integrating these things. There is risk that smaller companies will start asking higher multiples as things heat up. And to get to like 7-8bn$, they would either have to seriously dillute shareholders or take on serious debt, also jacking up risk. Even if they managed that, it would hurt your upside, as you get dilluted or get a lower multiple with mountains of debt. one for the watch list. Link to comment Share on other sites More sharing options...
rpadebet Posted June 3, 2015 Share Posted June 3, 2015 The Radiant Logistics thread probably wasn't the best place to discuss this company, so I'm creating this separate one. Don't mind this being discussed there also. These are very similar companies with minor differences. If there was a place to discuss all the players in the industry and find the best one, that would be a good to have Link to comment Share on other sites More sharing options...
Zorrofan Posted June 3, 2015 Share Posted June 3, 2015 The Radiant Logistics thread probably wasn't the best place to discuss this company, so I'm creating this separate one. Don't mind this being discussed there also. These are very similar companies with minor differences. If there was a place to discuss all the players in the industry and find the best one, that would be a good to have Why couldn't you start a thread in General discussions and title it something like "Logistics - Looking for the Industry Best"? This could be done for any industry or group of companies where we wanted to discuss a particular sector.....just a thought cheers Zorro Link to comment Share on other sites More sharing options...
Liberty Posted June 3, 2015 Author Share Posted June 3, 2015 If you think they will grow more then that, even with 12 bn$ in revenue and similar matured profit margins as CHRW, that is only a double. And that will probably take at the very least like 6-7 years. So that is like 10-12% IRR if everything goes perfect. Does not look like the risk/reward is really there. So you just eyeballed it in 5 minutes, eh? When the Norbert Dentressengle acquisition closes in a few months they'll be at close to 9bn in revenue, and they're guiding to 625m in EBITDA for 2015 (but profitability will look bad as long as they keep investing this heavily in cold starts and the IT/HR platform, but once that's done, these fixed assets will be able to support a much bigger company, so they should get nice leverage out of it going forward). I don't think it'll take 6-7 years to get to 12bn. Wouldn't be surprised if they reached that in 2016 (they just raised more for new acquisitions). A lot of the newly acquired revenue is in contract logistics, which has a better margin profile and higher barriers to entry. Anyway, it's an interesting one. Link to comment Share on other sites More sharing options...
Liberty Posted June 3, 2015 Author Share Posted June 3, 2015 The Radiant Logistics thread probably wasn't the best place to discuss this company, so I'm creating this separate one. Don't mind this being discussed there also. These are very similar companies with minor differences. If there was a place to discuss all the players in the industry and find the best one, that would be a good to have Why couldn't you start a thread in General discussions and title it something like "Logistics - Looking for the Industry Best"? This could be done for any industry or group of companies where we wanted to discuss a particular sector.....just a thought cheers Zorro I think that's probably best, because the Radiant thread could get quite messy as soon as we get into the specifics of each company.. Link to comment Share on other sites More sharing options...
rpadebet Posted June 3, 2015 Share Posted June 3, 2015 If you think they will grow more then that, even with 12 bn$ in revenue and similar matured profit margins as CHRW, that is only a double. And that will probably take at the very least like 6-7 years. So that is like 10-12% IRR if everything goes perfect. Does not look like the risk/reward is really there. So you just eyeballed it in 5 minutes, eh? When the Norbert Dentressengle acquisition closes in a few months they'll be at close to 9bn in revenue, and they're guiding to 625m in EBITDA for 2015 (but profitability will look bad as long as they keep investing this heavily in cold starts and the IT/HR platform, but once that's done, these fixed assets will be able to support a much bigger company, so they should get nice leverage out of it going forward). I don't think it'll take 6-7 years to get to 12bn. Wouldn't be surprised if they reached that in 2016 (they just raised more for new acquisitions). A lot of the newly acquired revenue is in contract logistics, which has a better margin profile and higher barriers to entry. Anyway, it's an interesting one. this is correct. So EBITDA margins are at 7% as per guidance. Diluted share count after recent equity injection is 135mill approximately, so Mcap at 50$ is $6.75bill. Add the 2bill debt to finance the deal and you have about 8.75bill EV. It trades at Future EBITDA multiple of about 14X, higher than CHRW at 12.5x with 14b in revenues. Given potential growth in XPO relative to CHRW, premium might be reasonable but there are integration risks to worry about. For above average growth, what remaining levers is management left with here? It needs bigger targets to move the revenue needle and also needs to buy them at decent multiples. This is one reason I think they made the last transaction overseas. In NA there is a big gap between a few big guys and a whole lot of small guys. Very few targets in between. Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted June 3, 2015 Share Posted June 3, 2015 I bought in this in the teens in the 16-17 range back in 2013; sold off 20% of my holdings in the low 20s and half of the remaining holdings in the high 30s. My basis is negative now. I actually found the stock due to this board (despite not appearing to be a value stock). I found it searching 13F-HR's of Arlington Value (mentioned on this board in this thread: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-400-man!) I have never been able to justify the price from a traditional valuation perspective and might have been embarrassed as a "value" investor to admit I was buying it at the time. However, it had a jockey with previous success and a strategy that I liked that involved (1) highly acquisitive (though dilutive) model to get scale and (2) investments in technology. I read management's presentations and decided it was worth opening a position. Link to comment Share on other sites More sharing options...
abitofvalue Posted June 3, 2015 Share Posted June 3, 2015 This might be of interest to those interested in the stock - (from Bluegrass Cap on twitter) http://www.sec.gov/Archives/edgar/data/1166003/000095012311069724/k50546dadefa14a.htm Btw - anyone know why XPO didn't get involved with Jacobson or Neovia last year? were they involved and overbid? Would be odd to buy a company that you thought overbid for an asset.. but maybe they weren't involved. any thoughts on Ryder ®? Link to comment Share on other sites More sharing options...
Liberty Posted June 3, 2015 Author Share Posted June 3, 2015 Btw - anyone know why XPO didn't get involved with Jacobson or Neovia last year? were they involved and overbid? Would be odd to buy a company that you thought overbid for an asset.. but maybe they weren't involved. They tried to buy Jacobson but Norbert Dentressengle got it. This made them study Norbert, and this eventually led them to buy the whole thing (getting Jacobson in the end). They bought Norbert for 9.1x 2015 EBITDA, and seem to think that they can keep growing it and use some of their IT over there to improve efficiency (it's all about reducing empty loads, optimizing pricing, saying no less often for lack of capacity, predicting patterns so you can have the right supply, increasing cross-selling, etc). Link to comment Share on other sites More sharing options...
txlaw Posted June 4, 2015 Share Posted June 4, 2015 I bought in this in the teens in the 16-17 range back in 2013; sold off 20% of my holdings in the low 20s and half of the remaining holdings in the high 30s. My basis is negative now. I actually found the stock due to this board (despite not appearing to be a value stock). I found it searching 13F-HR's of Arlington Value (mentioned on this board in this thread: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-400-man!) I have never been able to justify the price from a traditional valuation perspective and might have been embarrassed as a "value" investor to admit I was buying it at the time. However, it had a jockey with previous success and a strategy that I liked that involved (1) highly acquisitive (though dilutive) model to get scale and (2) investments in technology. I read management's presentations and decided it was worth opening a position. Ah, yes. I remember talking about XPO on the board at some point: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-400-man!/msg105236/#msg105236 I never did get around to looking into it in depth. Damn. Note to self: If you see Peter Lynch getting involved in a name, you better damn well do some in depth research on it! Link to comment Share on other sites More sharing options...
txlaw Posted June 4, 2015 Share Posted June 4, 2015 Singaporean sovereign wealth fund and Montreal pension funds just bought a bunch of stock, btw. Related to the equity injection discussed above. Link to comment Share on other sites More sharing options...
HJ Posted June 4, 2015 Share Posted June 4, 2015 Does anybody have an industry primer for the 3PL industry? How does one think about articles like this? http://www.citylab.com/tech/2015/01/the-trucking-of-tomorrow-is-here-and-its-a-huge-win-for-city-traffic/384672/ The Uber of commercial trucking? Link to comment Share on other sites More sharing options...
yadayada Posted June 4, 2015 Share Posted June 4, 2015 If you think they will grow more then that, even with 12 bn$ in revenue and similar matured profit margins as CHRW, that is only a double. And that will probably take at the very least like 6-7 years. So that is like 10-12% IRR if everything goes perfect. Does not look like the risk/reward is really there. So you just eyeballed it in 5 minutes, eh? When the Norbert Dentressengle acquisition closes in a few months they'll be at close to 9bn in revenue, and they're guiding to 625m in EBITDA for 2015 (but profitability will look bad as long as they keep investing this heavily in cold starts and the IT/HR platform, but once that's done, these fixed assets will be able to support a much bigger company, so they should get nice leverage out of it going forward). I don't think it'll take 6-7 years to get to 12bn. Wouldn't be surprised if they reached that in 2016 (they just raised more for new acquisitions). A lot of the newly acquired revenue is in contract logistics, which has a better margin profile and higher barriers to entry. Anyway, it's an interesting one. yeah i did, that obviously changes things :) Possibly there are some set backs on their guidance, and the price could come down quite a bit, like with that ZINC stock. Link to comment Share on other sites More sharing options...
yadayada Posted August 28, 2015 Share Posted August 28, 2015 Updates? At 12bn$ 4% profit margins like CHRW, that is 480m$ net profit. put a 16x multiple on that and there is well over 100% upside. Current marketcap after drop is 3.3bn$. If there is potential beyond 12bn$ revenue it looks cheap. I have a feeling it might get cheaper at some point though. A big if here is that 4% profit margin. I wonder how self driving cars affect a company like this? Anyone has any ideas on that? Since it does not seem crazy to assume that a sizable % of traffic on the road could be self driving 5-10 years from now, that seems like something to consider here. If cost of trucking goes down, you could say that is good for companies like this? Link to comment Share on other sites More sharing options...
ratiman Posted August 28, 2015 Share Posted August 28, 2015 Updates? At 12bn$ 4% profit margins like CHRW, that is 480m$ net profit. put a 16x multiple on that and there is well over 100% upside. Current marketcap after drop is 3.3bn$. If there is potential beyond 12bn$ revenue it looks cheap. I have a feeling it might get cheaper at some point though. A big if here is that 4% profit margin. I wonder how self driving cars affect a company like this? Anyone has any ideas on that? Since it does not seem crazy to assume that a sizable % of traffic on the road could be self driving 5-10 years from now, that seems like something to consider here. If cost of trucking goes down, you could say that is good for companies like this? Somebody up thread said there were 135M fully diluted shares. Why do people believe that the integration risks here aren't huge? Are we really supposed to believe that Jacobs can go in and take billion dollar companies in disparate segments - last mile, intermodal, brokerage, contract logistics, forwarding, etc etc - and make it all more efficient? What does intermodal have to do with last mile? The last mile segment actually helps people install their television sets. Does that have anything to do with the railroad business? This company only makes the numbers, I suspect, because the numbers are made up. Look at Jacobs history. His companies (United Rental and the trash hauling company, I think it was United Waste Systems) ultimately run into accounting and control problems. The odds of that happening with XPO are very high. Radiant looks like a better opportunity. Crain actually has a plan and he's done a pretty good job of carrying it out. Jacobs looks like a guy who just acquires the biggest company that's currently for sale. Link to comment Share on other sites More sharing options...
rpadebet Posted August 28, 2015 Share Posted August 28, 2015 Radiant looks like a better opportunity. Crain actually has a plan and he's done a pretty good job of carrying it out. Jacobs looks like a guy who just acquires the biggest company that's currently for sale. +1 I feel so much better now that you said that... XPO acquisitions are aggressively debt fueled unlike RLGT. That comes with a risk of its own forget that... XPO already has acquired a mid-size scale, they need bigger acquisitions from here to challenge someone like CHRW. RLGT is still closer to the bottom where there are lot of small opportunities for consolidation. If the bet is on margin expansion from scale, again RLGT margins are lower. Much more room to expand here. Link to comment Share on other sites More sharing options...
BraveChieftain Posted September 9, 2015 Share Posted September 9, 2015 It is crazy how rapidly these guys are moving with acquisitions. I have it on my list of businesses to do work on, but am a little confused as they keep branching out away from the core business. The purchase of Conway will for sure be accretive given it's debt financed, but now they are big in the LTL space which has significantly higher re-investment needs and is more cyclical than the logistics business. Does anyone have any view on what they're up to? Link to comment Share on other sites More sharing options...
ratiman Posted September 9, 2015 Share Posted September 9, 2015 It is crazy how rapidly these guys are moving with acquisitions. I have it on my list of businesses to do work on, but am a little confused as they keep branching out away from the core business. The purchase of Conway will for sure be accretive given it's debt financed, but now they are big in the LTL space which has significantly higher re-investment needs and is more cyclical than the logistics business. Does anyone have any view on what they're up to? Con-way had nearly $300M in capex last year. So much for the original plan. There is no plan. Did you know that Jacobs is a big proponent of cognitive behavioral therapy? He is, and he's going to really need it once this all falls apart. Link to comment Share on other sites More sharing options...
Scudbucket Posted September 10, 2015 Share Posted September 10, 2015 I wonder about the integration issues. At some point, it has to be too much too fast. People can only do so much at a time. These are large businesses across different geographies and business lines. I get that it's a numbers game for a lot of investors, but the real world still comes down to everyday business. Right now I'm skeptical but am willing to bite at the right price (don't know what that is yet). Link to comment Share on other sites More sharing options...
magno111 Posted September 10, 2015 Share Posted September 10, 2015 Radiant looks like a better opportunity. Crain actually has a plan and he's done a pretty good job of carrying it out. Jacobs looks like a guy who just acquires the biggest company that's currently for sale. +1 I feel so much better now that you said that... XPO acquisitions are aggressively debt fueled unlike RLGT. That comes with a risk of its own forget that... XPO already has acquired a mid-size scale, they need bigger acquisitions from here to challenge someone like CHRW. RLGT is still closer to the bottom where there are lot of small opportunities for consolidation. If the bet is on margin expansion from scale, again RLGT margins are lower. Much more room to expand here. Be careful with RLGT and Crain, he was the CFO at stonepath 10 years ago ( also a roll-up in the 3PL's) they committed accounting fraud and they went brankrupt... Link to comment Share on other sites More sharing options...
ratiman Posted September 10, 2015 Share Posted September 10, 2015 Radiant looks like a better opportunity. Crain actually has a plan and he's done a pretty good job of carrying it out. Jacobs looks like a guy who just acquires the biggest company that's currently for sale. +1 I feel so much better now that you said that... XPO acquisitions are aggressively debt fueled unlike RLGT. That comes with a risk of its own forget that... XPO already has acquired a mid-size scale, they need bigger acquisitions from here to challenge someone like CHRW. RLGT is still closer to the bottom where there are lot of small opportunities for consolidation. If the bet is on margin expansion from scale, again RLGT margins are lower. Much more room to expand here. Be careful with RLGT and Crain, he was the CFO at stonepath 10 years ago ( also a roll-up in the 3PL's) they committed accounting fraud and they went brankrupt... Radiant's acquisitions have been deliberately paced and Crain has been very conservative with debt. Every acquisition is moved onto the same ERP and TMS systems. Crain is pretty clear about his strategy and he's followed that strategy pretty closely. There is no comparison between the manic buying binge at XPO and Radiant's sensible roll-up strategy. Link to comment Share on other sites More sharing options...
kab60 Posted September 10, 2015 Share Posted September 10, 2015 Stock market doesn't like it. Leverage gets to >4,5 ebitda, revenue around 15b and EBITDA around 1-1,1b. But Conway is asset heavy so looking at EBITDA will make the acquisition seem "cheaper" than it is. Still, I don't think they overpaid. Allan Mecham held the stock for 7 years but dumped it when they announced 2017 targets last autumn. Back then they guided for around 9b revenue and 525m ebitda, so they need to update those targets... Talked with some analysts today and they highlighted the risk that the debt pile creates. They really need to get these acquisitions to work. Link to comment Share on other sites More sharing options...
accutronman Posted September 29, 2015 Share Posted September 29, 2015 Good value play at this juncture selling for less than BV. Price has gotten pummeled from Con-Way acquisition and concerns about company moving to "asset-heavy" orientation. Link to comment Share on other sites More sharing options...
ccplz Posted September 29, 2015 Share Posted September 29, 2015 Why is it good value? And don't we already have a thread for XPO? Link to comment Share on other sites More sharing options...
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