market folly

We're posting up notes from the 2018 London Value Investor Conference.  Next up is Jonathan Boyar of Boyar Value Group who presented five long ideas: Axalta Coating Systems (AXTA), Acushnet Holdings (GOLF), Madison Square Garden Networks (MSGN), Franklin Resources (BEN), and Howard Hughes (HHC).


Jonathan Boyar's London Value Investor Conference Presentation

Long: Axalta Coating Systems (AXTA):  Axalta is the world's 5th largest coatings company. Berkshire Hathaway own a large stake. It’s the no. 1 player in refinish (re-painting autos after accidents). Refinish accounts for 50% of their EBITDA and is the crown jewel. They have turned down two takeover offers. The company appears to be for sale, but they are waiting for the right offer. They are buying back shares. They are currently trading ats ubstantially less than an acquirer would pay at EBITDA 10x 2019. This type of company usually gets bought out for 13x to 15x.

Long: Acushnet Holdings (NYSE: GOLF) Acushnet designs, makes and sells golf products. It is a great consumer franchise. It’s not in a major index. It has minimal sell-side coverage. It generates 40% of revenues from consumer products. It’s a potential takeover target. Nike has left the golf product business.

Long: Madison Square Garden Networks (MSGN):  It’s a broadcasting company that was technically the parent from the spin out of Madison Square Garden (MSG). At the time of the spin-out it was carrying a lot of debt (5x levered). They have now reduced that to 3x. Once Disney, Fox and Comcast conclude their M&A activity one of them might be interested in bidding for Madison Square Garden Networks.  The market believes that cable operators might drop the channel. This is unlikely because sports are too important to cable subscribers and advertisers. The shares are cheap at FCF 7x.

Long: Franklin Resources (NYSE: BEN):  Franklin is an Investment management business. They are buying back a lot of stock. The family owns 40% of the company. If the shares get cheap enough the family might buy it outright.

Long: Howard Hughes Corporation (NYSE: HHC).  The real estate is difficult to value and the company is largely ignored by most investors. It is not in a major index. The CEO recently purchased a warrant for $50m that will expire worthless if the stock does not go up.


Be sure to check out the rest of the presentations from the London Value Investor Conference 2018.