|Shares Out. (in M):||24||P/E||-||-|
|Market Cap (in $M):||32||P/FCF||-||-|
|Net Debt (in $M):||15||EBIT||12||20|
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Primo Water (“PRMW” / www.primowater.com) is a severely broken IPO that is now so largely mispriced as to present an unusually compelling opportunity to compound one’s investment quickly as the dust settles and the attractiveness of the business, current business/new customer momentum and investment situation become clear. At its present trading price of $1.36/share, PRMW has a market cap of $32mm and TEV of $47mm, down from $246mm and $269mm, respectively, on the day of its IPO (11/5/2010). Presently, PRMW trades at 0.79x its TBV of $1.73/share, 0.22x its BV of $6.18/share and 3.9x the mid-point of management’s recently reiterated 2012 EBITDA guidance. These metrics would indicate that the company is in decline or that debt default is imminent, although in reality the company is growing quickly, adding new customers (certain of which have not yet been publicly identified) and has recently refinanced its debt to provide substantial runway for growth. Aggressive recent insider purchases of both shares and last-out piece of a new term loan by the Founder/CEO, CFO and directors support the thesis and closely align insiders with shareholders. Finally, PRMW has a high and rising short interest, making squeeze potential quite high.
Note: While PRMW is a micro-cap name, it has reasonable liquidity with 390,000 shares/day of volume over the last 3 months.
Why Now / Why Does Opportunity Exist:
Capital Structure & Valuation:
|(MMs, except per share data)|
|Market Cap||$ 32.26|
|Plus: Revolver||-||$20mm facility, $7.5mm borrowing base|
|Plus: Term Loan||15.20|
|2012 EBITDA Guidance||x EBITDA|
|(@ $4.75mm capex)||x EBITDA|
|Tangible Book Value||$ 41.00|
|Book Value||$ 146.60|
|EBITDA||$ 12.00||$ 12.00||$ 12.00|
|TEV||$ 72.00||$ 96.00||$ 120.00|
|Cash||0.38||4.06||4.06||includes warrant exercise|
|Price/Share||$ 2.25||$ 3.14||$ 4.02|
Disclaimer: The author of this idea presently has a long position in securities of this issuer and may trade in and out of these positions without notice.
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