I'm not sure I would call this a value play to be perfectly honest.
This is a low margin commodity business in a highly competitive market that has regular losses and where I'd normalize the earnings at maybe 100 million per annum.
Paying 1100 million in market cap for 100 million per annum gives you a 9% yield or an 11 PE. That's not super high sure, but certainly not low.
I wouldn't except any growth here since as you mention they are selling off non-performing assets, and in any case this isn't exactly a growth industry and they are already as big as they will get imo.
I can see a "re-rating" happening as a result of the deleveraging and better performance... but what would it re-rate to? The same value as today?
How much would you pay for an inflation adjusted annuity that pays out 100 million a year while being subject to credit risk similar to dole equity?
I think 11 pe is a fairly decent value as is for that IMO, and can't really see myself paying more. so why would someone else?
All fair points, and I think you, by and large, answered your own questions.
as a whole, you agree it is a fairly decent value, and Dole is carefully stripping out the unperforming assets sold at valuations higher than as a whole. That leverage process has been carried out in a very responsible way so far, and continues.
IMO, that alone makes a fairly decent value (in a static view today) a very decent value as deleveraging continues.
Oh yeah, I don't expect you to lose money on it necessarily.
Just looking at the numbers it's probably around fair value (assuming the deleveraging and sales go well).
But is that return really sufficient to justify investing in DOLE vs a simple index? I suppose that's an individual decision, but not one I would take for myself.
I would say 11 PE looks reasonable for something like that.
A low/no growth company really doesn't deserve more than that.
In terms of other companies with similar business... I'm actually about to publish on one OLVAS.HE, which has a similar thing going for it, but has a potential upside from a re-rating of part of the business that is currently valued at 0
What are some examples, as you stated (and I agree), "low margin, low growth, inflation-protected, commodity biz," and by your standard, offer more than a fair value today?
I'm not sure I would call this a value play to be perfectly honest.
This is a low margin commodity business in a highly competitive market that has regular losses and where I'd normalize the earnings at maybe 100 million per annum.
Paying 1100 million in market cap for 100 million per annum gives you a 9% yield or an 11 PE. That's not super high sure, but certainly not low.
I wouldn't except any growth here since as you mention they are selling off non-performing assets, and in any case this isn't exactly a growth industry and they are already as big as they will get imo.
I can see a "re-rating" happening as a result of the deleveraging and better performance... but what would it re-rate to? The same value as today?
How much would you pay for an inflation adjusted annuity that pays out 100 million a year while being subject to credit risk similar to dole equity?
I think 11 pe is a fairly decent value as is for that IMO, and can't really see myself paying more. so why would someone else?
All fair points, and I think you, by and large, answered your own questions.
as a whole, you agree it is a fairly decent value, and Dole is carefully stripping out the unperforming assets sold at valuations higher than as a whole. That leverage process has been carried out in a very responsible way so far, and continues.
IMO, that alone makes a fairly decent value (in a static view today) a very decent value as deleveraging continues.
Oh yeah, I don't expect you to lose money on it necessarily.
Just looking at the numbers it's probably around fair value (assuming the deleveraging and sales go well).
But is that return really sufficient to justify investing in DOLE vs a simple index? I suppose that's an individual decision, but not one I would take for myself.
so if assuming sales go well, proceeds paid debts, all else equal, what's the P/E in your model?
I would say 11 PE looks reasonable for something like that.
A low/no growth company really doesn't deserve more than that.
In terms of other companies with similar business... I'm actually about to publish on one OLVAS.HE, which has a similar thing going for it, but has a potential upside from a re-rating of part of the business that is currently valued at 0
What are some examples, as you stated (and I agree), "low margin, low growth, inflation-protected, commodity biz," and by your standard, offer more than a fair value today?