Value Investing Coinbase’s offering docs have just dropped [S1 link in comments] |
- Coinbase’s offering docs have just dropped [S1 link in comments]
- Telecom Firms Spent $81 Billion on 5G Spectrum. Here's What They Bought.
- TPG picks up AT&T’s linear video business for... $8 billion
- 21Vianet - A Turnaround Story at the Heart of China's Cloud
- Trading in Atoms for Bits
- CVR Partners Update (NYSE:UAN - $26.80)
- ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting?
- Bioceres (NYSE-BIOX) Financial Statement Analysis
| Coinbase’s offering docs have just dropped [S1 link in comments] Posted: 25 Feb 2021 12:29 PM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Telecom Firms Spent $81 Billion on 5G Spectrum. Here's What They Bought. Posted: 25 Feb 2021 06:58 AM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TPG picks up AT&T’s linear video business for... $8 billion Posted: 26 Feb 2021 03:59 AM PST Unpaywalled coverage https://www.cnbc.com/2021/02/25/att-to-spin-off-directv-att-tv-now-and-u-verse-into-new-company.html 8K: https://www.sec.gov/ix?doc=/Archives/edgar/data/732717/000119312521056922/d544248d8k.htm Not much to pull apart here, but I will, because I love a good TPG faceplant. So, the valuation which is, apparently more than DISH? All of dish. Including Sling and 5G assets. I've been thinking dish is undervalued, myself. But maybe I have more faith in Charlie's 5G than everyone else. So my first thought is that TPG is TPG-ing again. I can't possibly imagine how they came up with that number. AT&T also gets 4.25 billion of Jr preferred units with a 6.5% PIK. Not a PIK toggle. TPG's contribution is 1.8bil which has them levered less than 5:1 by my back of the napkin math. Is this a good business? Because that's what you would commit to a good business, not a dying one. Am I missing something about linear TV? I think this is good for AT&T in terms of spectrum auction financing and just... getting rid of the business unit, albeit slowly. They need cash for the 5G auctions. Without splitting out revenue for DTV, but given that it's losing subscribers like they're fleeing the Titanic, I'm going to assume it's not doing especially well. And it really shouldn't be, because it's a bad service, in my subjective opinion (as someone who has cancelled it). Maybe losing just a tiny bit of money? I'm sure the new entity will report up. But I think this is a step in the right direction for T, and I'm glad they found a buyer. Nevertheless if TPG wants your assets, you can assume your assets are crap. I'm sure there's more analysis to come, but as someone who has been hoping for a debt reduction at AT&T, I'm happy. And as I said I love a good TPG faceplant. [link] [comments]  | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 21Vianet - A Turnaround Story at the Heart of China's Cloud Posted: 25 Feb 2021 07:53 PM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 25 Feb 2021 11:54 PM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CVR Partners Update (NYSE:UAN - $26.80) Posted: 25 Feb 2021 08:25 AM PST For those who are interested, I thought it would be more efficient to post an updated article instead of answering DMs. Some of the information from my previous post has been rehashed but updated so you don't need to read the previous article to get the thesis. CVR Partners (NYSE:UAN - $26.80)
Business Description CVR Partners is a variable distribution master limited partnership that makes and sells nitrogen fertilizers in the United States. They are the only pure play publicly listed North American nitrogen fertilizer manufacturer. They operate two facilities located in Coffeyville, Kansas, and East Dubuque, Illinois. CVR Partners' primary product is UAN, a value-added nitrogen-based fertilizer. UAN is a seasonal product with the primary application taking place in the spring planting season. The proximity of the manufacturing facilities to end markets gives them a $15-$25/t freight advantage vs. imports (UAN NOLA). Opportunity Production of UAN is a high fixed cost business. The operating leverage allows for outsized profits in a favorable commodity market. The price of nitrogen fertilizers tends to slightly lag crop prices - primarily corn and beans. When the price of corn is high, the incremental yield from fertilizing generates more revenue than the cost of the fertilizer. This incentivizes farmers to use more fertilizer. In December 2020, the price of corn rose to a 7-year high and is ~$5.50 per bushel. Corn futures are forecast to stay above $5.00 per bushel through the summer. Q1 UAN NOLA prices followed in January 2021 rising from $150/t to ~$240/t. CVR Partners' breakeven UAN gate price (the point at which there are zero annual distributions to unitholders) is $169/t UAN. Note that this implies a UAN NOLA (Futures Price) of $144-154/t when you factor in their freight advantage. This analysis does not include an in-depth forecast of commodity markets. For simplicity, it's assumed current commodity future prices remain constant. Use the sensitivity table at the end for returns at your own assumed UAN price. Forecast Q4/20 was terrible. CVR Partners gate price was about $139/t UAN. The partnership lost $10MM in OCF. Not good, but Q4/20 is in the rearview mirror now. What makes CVR Partners compelling is when we look at how the market has evolved for 2021. The 2021 forecast assumes pricing that is consistent with current CME Globex futures. The average UAN NOLA is $236/t for H1 and $187/t for H2. Assuming this pricing for end products, UAN will generate $109MM in EBITDA in H1. Were it not for the scheduled turnaround (plant maintenance) at Coffeyville in Q3, there would be another $60MM EBITDA in H2. However, a conservative 28-day turnaround leaves us with an additional $48MM EBITDA in H2. If CVR Partners meets their operating targets, current commodity prices support 2021 EBITDA of $157MM. Using a historical multiple of 8.0x EV / EBITDA implies a share price of ~$60.00 per share.
This valuation approach is more conservative than the CAFD I used previously. The valuation used previously (10x CAFD) implies a 9x EV/EBITDA multiple. I've moved away from the CAFD because I expect that there will be a lot of noise in the 2021 CAFD which skews the underlying performance. The noise will be driven by: 1 – buybacks have reduced CAFD ($10M in 2020 and another $10M expected in Q1/21). 2 – Reserves for debt refinance fees and potential reduction in principle outstanding. 3 – Transaction/structuring fees to monetize the tax credits. See below for more details on these. I've provided calculation summaries and sensitivities on each driver so that you can easily use your own assumptions and come up with your own view on value. A Gift From The Government In January 2021, the US government approved Section 45Q. Section 45Q provides tax credits for carbon capture. CVR Partners sequesters about 1 million metric tons of carbon per year. They indicated on their Q4/20 call and in the 2020 10-K that they are exploring options to monetize these tax credits. The form of this structure is still unknown, but it seems they will try to time this with the refinancing of their debt in June 2021. If they can monetize these credits, the estimated value of the credits from 2021-25 (the period the current regs cover) is $103MM @ 10% discount rate. If they can claim credits for previous sequestration from 2018-2020, this is an additional $53MM. The total value of these on a per share basis is between $9 and $14 per share.
9.25% Callable Notes CVR Partners has $645M principle 9.25% coupon senior secured notes due in 2023. The notes were issued to fund the acquisition of the East Dubuque plant. These notes are callable in June 2021 without a penalty. The current market yield for single B issuers is ~5%. If CVR Partners can refinance the 9.25% senior secured notes with a high yield issue at 5%, this will save them $27M per year in interest. On previous conference calls, management have indicated their intention to refinance these notes in June 2021. With a simple dividend discount model and a 10% cost of equity capital, the incremental value from refinancing the debt is worth the current share price. This forms a compelling value floor for the shares.
Risks CVR Partners operate in a commodity driven business. Results will be heavily impacted by the prices realized for end products (UAN, Urea, Ammonia) and, to a lesser extent, input costs (natural gas, pet coke). Demand for fertilizer in the spring will be impacted by corn and bean prices, acres planted, and weather conditions. Volumes of imports will also impact UAN prices in CVR Partners' local markets. CVR Partners' may also suffer from operational issues at its plants. Conclusion In the 3 years prior to the pandemic, CVR Partners traded in a range of $25 - $42 per unit with UAN prices sub-$200t/t. On the back of rising crop prices, 2021 fertilizer forecasts are looking strong going into the spring planting season. CVR Partners offers pure play exposure to North American nitrogen fertilizer and is positioned well to benefit from current prices. Regardless of the commodity forecast, there are several uncorrelated catalysts that generate substantial value independent of fertilizer prices. They are summarized below:
Potential Strategies Common Units An investment at the equity at the current share price could result in up to 4x return on investment using the base assumptions. If macro trends persist - these trends tend to be multi-year on capital intensive, cyclical industries - this has great short and mid (1-3 year) potential with limited downside if you believe that just the Debt Refinance is possible. Options Management has indicated that they intend to refinance the debt as soon as the bonds are callable at par (June 2021). They also plan to monetize the carbon capture credits at the same time and potentially use the proceeds to reduce debt. This creates a unique situation where all 3 major catalysts will be known by the time Q2 results are released in the 1st or 2nd week of August 2021. Purchasing options with Aug 20, 2021 expiry is an efficient way to gain leverage on these defined catalysts. You can use the sensitivities provided and the Value Driver table to come up a value using your own assumptions. Even if only part of the value is realized here, there is potential for massive gains. Model Sensitivities 2021 EBITDA (US$M)
Current Operations Valuation (US$/common sh)
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| ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting? Posted: 25 Feb 2021 11:23 AM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bioceres (NYSE-BIOX) Financial Statement Analysis Posted: 25 Feb 2021 12:51 PM PST |
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