Value Investing Airbnb to Halt All Marketing, Most Hiring as Losses Mount |
- Airbnb to Halt All Marketing, Most Hiring as Losses Mount
- Let's Talk About Simon Property Group (SPG)
- Long Thesis - Whirlpool (WHR)
- Business Development Companies
- Bill Miller On Why Coronavirus Sell-Off Is Buying Opportunity Of Generation
- This Is the Greatest Dislocation in Credit Since 2008: Bruce Richards
| Airbnb to Halt All Marketing, Most Hiring as Losses Mount Posted: 28 Mar 2020 09:39 AM PDT |
| Let's Talk About Simon Property Group (SPG) Posted: 28 Mar 2020 09:51 PM PDT SPG is one of the largest REITs in the world and owns roughly 200 malls, many of which are considered high-quality. Most, but not all, of these commercial properties are based in the US. SPG make money by renting out space in the malls. While some may say retail is dead, SPG has done fairly well, increasing revenue by over 25% and nearly doubling profitability over the past 10 years. SPG is not in a dying industry and likely will continue to generate cash into the far future, assuming they can avoid bankruptcy in the near future. On 10 Feb SPG announced they would acquire an 80% stake in another REIT owning high-quality malls, Taubman Centers (TCO). This will cost them approximately $3.6 billion in cash, leaving $2.4 bn available under their credit facilities. On 18 March SPG closed all of their malls to slow the spread of COVID-19 (Coronavirus). As of 31 Dec 19 SPG had $6.0 billion available under its credit facilities. In the past year, SPG had 5.8 bn in revenues and 2.9 bn in FCF. Assuming a similar level of expenditure while closed, it costs them about 2.9 bn/year or $220 mil per month to remain closed with 0 revenue. SPG will probably allow tenants to defer rent or waive rent entirely in order to avoid ugly evictions. Keeping tenants, even tenants paying 0 rent, is desirable to SPG in order to maintain the network effect that draws customers into their malls. In the very worst case scenario, where SPG keeps all malls closed, reimburses their tenants all rent, consummates the deal with TCO at the full price of $3.6 bn, and is unable to secure any new credit, they will still be able to remain solvent for almost 11 months. The current price of SPG is 58.17, with a market cap of $18 bn. The average of the last 10 years' FCF is around 21 bn, meaning SPG is trading around 9x its average FCF and around 7x last years' FCF. SPG was trading around 20x FCF prior to the recent pandemic. Currently shares can be had for a 2/3 discount. Am I missing anything or is SPG an extremely good bargain at today's prices? [link] [comments]  |
| Posted: 28 Mar 2020 06:58 AM PDT Hey again everyone! I wanted to share my thoughts on another company I made a move on recently - Whirlpool (WHR). In the post below, I want to point anyone who wants to know what impact COVID has on my analysis to my post on Weyerhaeuser (WY), since I chat about it in detail there. DISCLAIMER: I have a long position in $WHR & the stuff below is just my opinion, not actual investing or financial advice. Whirlpool is the home appliance company. It owns brand names that most folks would be familiar with - besides their namesake - like Maytag & KitchenAid. Competition is fierce in the home appliance industry. Names like LG, Samsung, Electrolux, Haier, and Bosch are all key players. Cost is king in terms of determining profitability (just read through the Whirlpool 10-K to get a feel). As you can imagine - economies of scale are vital to achieving that cost advantage. Whirlpool competes across three main market segments in home appliances:
They are definitely the market leader in laundry with ~45% market share and a close leader in refrigerators & freezers with ~22% market share. Combined with strong approx. FCFs of $600M annually - it's no wonder I got interested when it was trading around $4B in market cap a week and a half ago (currently ~$5.2B). Now it's not all rosy - digging into their financials reveals a more gritty picture. Notably - two consecutive years of revenue decline and $4.1B in LT debt. That leads me to the three major risks I see facing Whirlpool (WHR) going forward:
In terms of company decline, I see this as unlikely. The simplistic way to think about this: have people stopped doing laundry, using refrigerators, cooking? No. In fact, I see no structural shift in the market to cause the entire company to spiral over the next few years. Are there any structural problems with the company itself? Well, digging into their geographic segment data - you can see that the revenue declines have come only in international markets. Whirlpool's core North American market is growing. If there was something structurally wrong about the company, I'd expect to see declines across the board and that doesn't seem to be the case here. For now. What's happening in the international segments? I'm not fully sure yet. It could be increased competition from Bosch, Haier, etc. or something related to exchange rates and where production is happening for the different firms. I'm doing more analysis on this in the background, but haven't reached any insightful conclusions yet. In terms of Whirlpool's (WHR) ability to shift to e-commerce...well this one does have me worried. I have no real insight into the company's culture, management, or otherwise that would lead me to believe they'd be bad or good at making this shift. But I will say that switching from a brick & mortar / distributor GTM to an e-commerce GTM is not trivial. However, what does give me solace is that this factor is dependent on how quickly the population moves to e-commerce for major home appliances. I believe this will track slower and in line with population aging / turnover over the coming decade(s) as opposed to the next year or two. Finally, there's the worry that Whirlpool (WHR) defaults on their large debt load in the short-run - making all of this long-run nonsense meaningless. On this point, I believe two factors will help Whirlpool (WHR) survive the short-term COVID shock:
Whirlpool (WHR) is rocking a Baa1 credit rating right now and should be able to tap into Fed funds to refinance. Worst case, they also have $2B in cash that they can tap into to keep the wheels turning while the general economic environment recovers. So yes - there are significant risks associated with Whirlpool (WHR). But my thesis on the macro and firm levels lead me to believe the upside is still attractive on a risk-adjusted basis. EDIT: removed some verbiage that called things 'no-brainer' or 'significant upside' - I'm going to stick to wording that is a bit more neutral going forward. Also I'm going to try my best to respond to you all, but I'm definitely constrained by time. Sorry I'm advance if I can't get to your comment(s) :) [link] [comments]  |
| Business Development Companies Posted: 28 Mar 2020 04:53 PM PDT Can we share our thoughts on BDC buying opportunities? Do BDCs generally specialize in credit for certain sectors (consumer, retail, energy etc)? Any insight is greatly appreciated [link] [comments]  |
| Bill Miller On Why Coronavirus Sell-Off Is Buying Opportunity Of Generation Posted: 28 Mar 2020 01:49 PM PDT |
| This Is the Greatest Dislocation in Credit Since 2008: Bruce Richards Posted: 28 Mar 2020 03:30 PM PDT |
| You are subscribed to email updates from Value Investing. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States | |
No comments:
Post a Comment