REV - Revlon

[fareastwarriors]

https://www.bloomberg.com/features/2017-counterfeit-makeup/

[kab60]

FY results out. 410m adj. proforma Ebitda, now expecting 190m synergies from EA vs 140m before.

[tombgrt]

In a previous post I assumed $56m in extra synergies was aggressive and would result in half the current market cap in additional equity value so I'm very pleased it is +$50m.  I know lots of acquisitions end in tears but this is a strong signal imo. We'll see whether they can deliver.

[Homestead31]

also worth mentioning that in the press release they started to hit at the possibility of revenue synergies, which is a first.  of course, mass cosmetics sales have also been facing some pressure.  Time will tell if that is fleeting or structural, but 190M in synergies leaves a lot of room for top line pressure while still significantly expanding normalized free cash flow.  continue to this this has asymetric risk/reward.

[Sunrider]

I recall reading here or somewhere else that the incentives for Garcia get base lined in March - but I can't seem to find the reference. If someone has more information, could you please post it or provide the link to the relevant filing?

Thank you very much

C

[kab60]

28th of March according to Laughing Water Capital; https://www.google.dk/url?sa=t&source=web&rct=j&url=http://laughingwatercapital.com/wp-content/uploads/2014/01/Laughing-Water-Capital-Q2-2016.pdf&ved=0ahUKEwjAuMuasMbSAhVI2CwKHcWABUMQFggaMAA&usg=AFQjCNEjLLzaKqKti2wdQ9B0XQXLf5ozsQ&sig2=TwiossjH_gFPfhFC3-G4ZA

[kab60]

Not sure if this has been posted (don't think it has). Revlon submitted at Lattice Work Best Ideas 2017: http://laughingwatercapital.com/wp-content/uploads/2014/01/LWC-Revlon-Lattice-Work.pdf

[eclecticvalue]

How is the debt reduction coming along? Last time I looked at it the long term debt has stayed the same over the years.

[Homestead31]

Laughing Water was close, but made an error.  The actual date is April 15, 2017.  Happy tax day.

 

https://www.sec.gov/Archives/edgar/data/887921/000115752316004995/a51308053.htm

 

" On March 27, 2016, the Board of Directors of Revlon, Inc. ("Revlon" and together with its subsidiaries, including, without limitation, Revlon Consumer Products Corporation ("RCPC"), the "Company"), elected Fabian T. Garcia as the Company's President and Chief Executive Officer, effective April 15, 2016."

 

"On the first anniversary of the Effective Date (the "Grant Date"), Revlon will grant to Mr. Garcia restricted shares of Revlon Class A Common Stock, with the number of shares being in an amount equal to $10 million divided by the NYSE closing price of Revlon Class A Common Stock on the Effective Date (the "Restricted Stock Grant"). "

[whistlerbumps]

FYI, mgmt equity comp was priced in 2016, not 2017 as everyone seems to think.  From the 10k

 

Pursuant to the Company’s employment agreement with Mr. Fabian Garcia, the Company’s President and Chief Executive Officer, on April 15, 2017 (the “Garcia Grant Date”), Revlon will grant to Mr. Garcia 270,489 restricted shares of Revlon Class A Common Stock (the "Garcia Restricted Stock Grant"), being the number of shares equal to $10 million divided by the $36.97 NYSE closing price of Revlon Class A Common Stock on the April 15, 2016 commencement date of his employment (the “Garcia Effective Date”). 

 

To me, REV is a bet on whether new mgmt can organically grow REV/RDEN.  If they can, this will work out great because of its levered equity stub nature.  If not, there is definitely real downside.  Q4 results were not promising for the thesis which is why the stock got hammered.  We will see if it was just a ST stumble.

[Homestead31]

the stock has obviously struggled lately as cosmetics sales in traditional channels have been under pressure, but if you are comfortable that longer term this is just a bump in the road, it is worth pointing out that the Perelman has once again opened up his check book in the form of a new COO-Operations. The press release does not go into detail, but this appears to be a new position, with former COO Gianni Pieraccioni becoming COO-Markets.

 

Again, the business is admittedly under some pressure, but that is industry wide, and on a relative value basis i continue to believe the discount to comps is not warranted as Perelman is showing multiple signs that he is focused on improving the business.

[odin]

Pretty disastrous quarter, but I'm not very familiar with the story.  Updated thoughts?

[tombgrt]

Pretty disastrous quarter, but I'm not very familiar with the story.  Updated thoughts?

 

Yes. Fucked.

[Patmo]

Surprise surprise...

[ScottHall]

Yuck. Glad I didn't buy this one!

[kab60]

Pretty disastrous quarter, but I'm not very familiar with the story.  Updated thoughts?

 

Yes. Fucked.

I concur. Can't spin this in a positive way. Operating leverage plus financial leverage working in the wrong direction. Awful quarter.

[Spekulatius]

I would be worried if I held REV. The equity could become a zero easily. If there is a valid investment case for this POS, I 'd like to see it.

It will be interesting to see how City is doing in the same space.

[Grox]

Agree it's ugly. 

 

Investment case:

 

1. 45% of revenue is international and that is growing mid-to-high single digits

2. Stabilize US biz (wishful thinking?)

[Homestead31]

not pretty, that's for sure.

 

of note however, RDEN continues to perform better than anyone expected, and the growth opportunity remains in the international markets.

 

in the US, if there is any small comfort, i would say that inventory de-stocking should be cyclical, not secular, and the company seems to be doing the right things in terms of developing their e-commerce presence. they are obviously late to the game (as are all of the big players), but should be able to re-capture some lost ground in the coming quarters..

 

for option value only it is also worth noting that if the business is truly secularly challenged, then Perelman is more likely to try to sell.  On a relative basis, REV remains extremely cheap, and COTY just added a new board member that is an M&A specialist with 3G experience.  Seems very likely COTY is not done trying to roll up the industry.

 

lastly, in terms of volatility, based on who was advertising trading volume today it seems clear that the selling was almost all retail based.  the institutional owners seem to be happy holders... at least for now.

[Foreign Tuffett]

I have a very simplistic question for the Revlon bulls which I can't get out of my head.  I keep asking myself how it is possible for a "good" consumer non-cyclical business to have gone nowhere for 30 years?  And for that business to be under the control of the same person for 30 years and ever be considered investable let alone a good investment. 

 

I look favorably at the filings and listen to calls and check over the market share data and read the positive articles and note the Mittleman position etc etc I even like the leverage at today's low rates, and I thought the EA acquisition was smart and cheap.  BUT I just can't shake this feeling of WTF! I don't think I know of a SINGLE worthwhile consumer non cyclical that goes nowhere for three decades.  And yes, I know that Perelman stuck on too much debt to get it done, and had to sell some valuable properties.  But I'm sorry I don't think that is good enough - we're talking about 3 lost decades.

 

I just wanted to quote this for asking what, to me, seem to be all the right questions.

 

I just finished working up a really rough REV model. Revenues in the two core segments were down to flat (mostly down) Y/Y in 2015 and 2016. They may just be getting outcompeted and/or their brands are slowly becoming less relevant. 

[Homestead31]

your point is well taken, and the recent revenue declines are very real, but I would push back on 2015 and 2016 noting that it is appropriate to adjust for FX.

[xtreeq]

For what it's worth Perelman bought some shares

http://openinsider.com/REV

[Foreign Tuffett]

For what it's worth Perelman bought some shares

http://openinsider.com/REV

 

He continued buying through the end of May and now owns approximately 80% of Revlon. I think it's easy to see this as a very good sign, but Perelman historically hasn't been particularly friendly to outside shareholders.

[whistlerbumps]

Yeah... I view his increased ownership as a mixed blessing...

 

On the one hand, he has put meaningful money to work at $20 per share.

 

On the other hand, the more he owns, the easier it will be for him to take this out at an unfair price... Given the potential downside if this doesn't work, I think REV shareholders need to have a shot at the $60 scenario to make the risk-reward attractive and I worry that RP will front run them in advance of any improvement.  If he offered 30 today, he could probably get it done but he's probably only doing that when he has a sight line to $60+.

 

 

[rkluwer]

Ron P keeps on buying last week and now holds almost 82%. Been buying almost every day arround 80-140.000 stocks for a few weeks.

 

Smells like a buy-out at somepoint, cause he keeps taking out float..... all depends on how much he is gonna offer, but hopefully the "big" Investment funds still left in this, will make him pay an okay Price. I doubt it, but 30-35 usd, will Work for me, if it happens within the NeXT few months.

 

http://phx.corporate-ir.net/phoenix.zhtml?c=81595&p=irol-sec