AchilliesValue Posted October 25, 2013 Share Posted October 25, 2013 Upcoming spinoff from United Online (UNTD) currently trading when issued under FTDDV. I like this one a lot as I think it is an opportunity to buy a very good business with an inefficient capital structure at an "ok" price. United Online is a internet business with high growth potential in the dial up access space with great brands like NetZero and Juno (sarcasm). Seriously though most people look the company description, see the 115X P/E and stop reading. Embedded in this company though is FTD a flower delivery services company. They make money two ways, taking orders from consumers through the internet and charging florists to be a part of their "network" for flower delivery. They don't hold any inventory aside from 3 test stores they inherited from a UK firm they bought, and the structure of the business allows them to have negative working capital. Essentially they control a toll bridge and take a clip on both ends and it just so happens that they control the most popular bridge, having the largest market share. Form 10: http://www.sec.gov/Archives/edgar/data/1575360/000104746913009397/a2216714zex-99_1.htm At $33 the company is trading at Adj LTM EV / EBITDA of 10.5, EV / FCF of 15.3 and P / FCFE of 12.5 factoring in an extra 5 million pretax for corporate overhead, the recent refinancing interest rate savings, and not taking into account any working capital (its a negative working capital business). By year end excluding 1 time expenses for the spin the company should be yielding 10% cash earnings to the market cap which is very attractive for a business with huge CROIC(company has minimal or negative invested capital depending on what you use) that I figure will continue to grow at mid single digit rates. I think in a conservative absolute sense a business such as this deserves a 15X multiple of P / FCFE which implies 50% upside but the cash flow of the company can easily support more leverage and the CEO is a former PE guy so hopefully they'll lever up the balanced sheet. Relatively 1800-Flowers trades at 16.5X TTM FCFE and has guided for no FCF growth due to additional CapEx. 33% is low for my margin of safety, normally I look for opportunities in excess of 50% but given the cash pile I'm sitting on, the spin-off event driven dynamic, how good this business is, and higher upside given the right structure, I'm willing to make the investment. Key Risks -Amazon is the 800 pound gorilla in anything online related. They quietly launched an online flowers delivery website when the launched groceries recently. http://allthingsd.com/20130910/amazon-has-quietly-launched-its-own-online-flower-shop/ Frankly this terrifies me I know Amazon gets bashed a lot on this board, but I think its one of the best businesses in the world (no position). But, they aren't pushing it at all. Googling flowers, flower delivery, etc. does to show Amazon even on the first page. You really have to go hunt to find their website but it exists. Pushing it for them is pretty much hitting a light switch overnight so I'm very concerned about this development and keeping an eye on it. -CEO doesn't have public company experience from what I can tell. He has a PE background but I'm not familiar with the firm. Sounds good from some googling but don't they all. -Smaller competitors. There are a hand full with one controlled by Malone's Liberty Media which I'm intrigued by. Link to comment Share on other sites More sharing options...
siddharth18 Posted October 26, 2013 Share Posted October 26, 2013 Here's an excellent article I read a while ago. It discusses valuation, management, competitive pressures (peers) and much more: http://oraclefromomaha.wordpress.com/2013/09/11/untd-imminent-spin-off-should-unlock-ftd-hidden-value/ Link to comment Share on other sites More sharing options...
krazeenyc Posted October 26, 2013 Share Posted October 26, 2013 I remember reading a writeup on VIC. UNTD seemed so compelling to me.... http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001142701&type=&dateb=&owner=only&count=40 http://www.sec.gov/Archives/edgar/data/1092377/000112760213024940/xslF345X03/form4.xml Then I noticed that in early August many of the insiders sold HUGE chunks of stock. The guy who will be running FTD ended up selling over 50%. Spooked me. If these guys were selling at this pace, I wanted no part of it. Link to comment Share on other sites More sharing options...
AchilliesValue Posted October 27, 2013 Author Share Posted October 27, 2013 Thanks Siddharth I haven't seen that write up I'll have to add that to my RSS feed. Kraze I noticed that as well and agree its a bit odd but I tend to try to follow the adage that there are many reasons to sell but only one to buy. Link to comment Share on other sites More sharing options...
mcliu Posted October 28, 2013 Share Posted October 28, 2013 Does it not raise a flag that so many insiders are selling so much stock. I mean if it's evident to us on the outside that the spin-off will unlock value, shouldn't it be much more obvious to these guys on the inside? Link to comment Share on other sites More sharing options...
west Posted October 28, 2013 Share Posted October 28, 2013 I started looking at this a while ago, but I ran into that whole "there's only so much time in a given day" thing. Two questions that maybe you can provide the answer to: - So there's expected to be about $18.6m shares outstanding for FTD, post-spinoff. So that means that FTD is currently trading at a $613 market cap, with $200m of long term debt. So a $813 EV company for a company that's only had $50m-$70m in EBIT in a given year? Seems kind of stiff/fairly valued to me, despite its ROIC. Fwiw, my calculations, when I was looking at FTD, had this company trading at $120m market cap. Obviously I got something wrong. - And, don't everyone rush in at once here... I have to have time to investigate and take a position myself, potentially, but didn't the spinoff already happen? And the parent company is still trading at $770m? Either that's going to change significantly in the future (read: down big time). Or am I missing something? Link to comment Share on other sites More sharing options...
mcliu Posted October 28, 2013 Share Posted October 28, 2013 I think people are looking at FLWS as a comp, so they believe in a spin-off, FTD should trade up to FLWS multiples. FCF will be around $50M to $60M as a result of the refi savings. More attractive on that basis, but market still believes it should trade at FLWS levels. http://investor.untd.com/phoenix.zhtml?c=130212&p=irol-newsArticle_Print&ID=1860434&highlight= Link to comment Share on other sites More sharing options...
west Posted October 28, 2013 Share Posted October 28, 2013 CLEARS THROAT VERY, VERY LOUDLY UNTD still has rights to FTD in it. UNTDV is ex-rights. Am I missing something? http://finance.yahoo.com/q?s=UNTDV&ql=1 (Market cap: $1.19b, according to yahoo) http://finance.yahoo.com/q?s=UNTD&ql=1 (Market cap: $770m) Is yahoo reporting UNTDV's market cap right? Link to comment Share on other sites More sharing options...
lu_hawk Posted October 28, 2013 Share Posted October 28, 2013 CLEARS THROAT VERY, VERY LOUDLY UNTD still has rights to FTD in it. UNTDV is ex-rights. Am I missing something? http://finance.yahoo.com/q?s=UNTDV&ql=1 (Market cap: $1.19b, according to yahoo) http://finance.yahoo.com/q?s=UNTD&ql=1 (Market cap: $770m) Is yahoo reporting UNTDV's market cap right? UNTD is doing a 1:7 reverse split in conjunction with the spin. The price of UNTDV reflects that reverse split. Yahoo is giving the wrong market cap, using the pre-reverse split sharecount. There are really about 13.2mm UNTDV shares out, and the market cap is $165mm. Link to comment Share on other sites More sharing options...
west Posted October 28, 2013 Share Posted October 28, 2013 UNTD is doing a 1:7 reverse split in conjunction with the spin. The price of UNTDV reflects that reverse split. Yahoo is giving the wrong market cap, using the pre-reverse split sharecount. There are really about 13.2mm UNTDV shares out, and the market cap is $165mm. Ah, ok. That makes much more sense. Thanks for the clarification. Link to comment Share on other sites More sharing options...
One Idea Posted November 21, 2013 Share Posted November 21, 2013 I was also concerned about the Amazon threat. But then I checked out the Amazon site. FTD and Proflowers are selling their flower arrangements right along side the Amazon arrangments! Go take a look. It looks like Amazon isn't planning to make their store exclusive. And the prices of the FTD arrangements look competitive with the Amazon arrangements. So maybe Amazon's plan is to create an exchange where they make money on their own flowers AND by charging their competitors a service fee. So the challenge for FTD will be how to communicate the value they offer to the customer when everything might look rather commonitized to the shopper? Will their florist network still give them a competitive advantage over everyone else? Link to comment Share on other sites More sharing options...
siddharth18 Posted July 30, 2014 Share Posted July 30, 2014 Enter John Malone... http://seekingalpha.com/pr/10612045-ftd-companies-inc-and-provide-commerce-to-combine-businesses-creating-a-floral-and-gifting-company-with-annual-revenue-of-over-1-billion "We are excited to become the largest shareholder in the complementary businesses of Provide Commerce and FTD" said Gregory B. Maffei, President and CEO of Liberty. Liberty will own approximately 35 percent of FTD at closing, reflecting Liberty's commitment and belief in FTD. ------------- I think it's safe to assume we'll see good capital allocation at FTD going forward, now that Liberty (the master of capital allocation) is the largest shareholder. ------------- And good job ValueVenture, who (correctly) predicted: http://i.imgur.com/1muOaNQ.png Link to comment Share on other sites More sharing options...
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