Normally I am not a big fan of sum-of-the-parts stories, but this one seems to have such a high margin of safety and a number of potential ways that disconnect might be closed/realized.  Lets start from a high level.  VC emerged from BK a different company than the legacy one that went in.  It has shed all sorts of assets and essentially no longer has manufacuting operations in the US.  Its 2 largest customers - Ford and Hyundai are market share winners.  It has great exposure to emerging markets with 40+% of its sales coming from Asia.  Now that is out of BK, its starting to get new wins on platforms, driving improving margins and will begin the process of reshuffling its portfolio - selling assets where they lack scale and adding where they are leaders.  We can talk about the state of the world and auto production later.  Lets start with the asset value. 

VC owns 70% of a Halla - a publically listed/traded company which trades in Korea and makes/sells primarily HVAC equipment to auto OEMs.  At current values that translates into roughly $30/share per VC share.  In addition VC owns 50% of a very successful and rapidly growing chinese parts supplier called Yanfeng Visteon.  Its run as a separate company and has little synergies/integration with the rest of VC.  It is highly strategic and JCI tried to buy it while VC was in BK - it would be a great fit for them.  Looking at trading comps (not take-out values) it would seem very conservative to value the chinese piece at say 11x-12x earnings...which would translate into roughly $34-37 in value per VC share.  Taken together that is roughly $65 in value per VC share on conservative estimates and a publically traded stock.  VC is itself right now only $45.  That would seem to value the roughly $460 of EBITDA in core VC which might grow towards $600-700as new wins come on, margins expand and assets get rationalized at a highly negative number despite the fact the the company is unlevered.  If you put a reasonable - say 4.0X EBITDA - on core VC ebitda together with its asian assets, it would get you values in the $100-120+ area.

Management of VC does seem aware of the disconnect and sounds focused on a year of corporate action.  While they have not announced anything specific, it sounds like they might be more inclined to buy in the Halla piece and perhaps even sell the Chinese JV.  Certainly they will start combing through the portfolio and trim underperformers that fit better with other companies and look to bulk up where they are strongest.  It also is certainly possible that a company like JCI could look to buy VC at these levels (or even decently higher) to get the asian assets it wants and then sell/spin the assets it doesn't - with a strong likely hood they get what they want for much less on a net basis then they were willing to bid.  Clearly at current levels the company is vulnerable as PE or any strategic buyer can essentially get the core business for free even after paying a significant premium.

It seems there are still some debt holders in the name from the BK that will need to rotate out.  The sellside has not really picked up coverage yet (only a couple of guys) but given the history and importance of the name, that should begin to change.  And institutional guys will need to begin to get some exposure as it is a core supplier name.

Obvioulsy the world is an unhappy place at the moment and auto production has a good chance of disappointing.  These numbers however do not assume any real rebound.  Certainly if the world freezes up again, numbers might come down - but given where we are starting from, not by that much and with the level of cushion in asset value it would seem you are compensated for that risk many times over.  Over a longer time frame - we are constructive on auto production and think ultimately it trends up.  For a long time it was taken as gospel that the SAAR would be between 16-18.  Scrappage in the US runs around 12-13.  At the hight of the panic the Saar briefly hit 10 and then has been creeping up to its current level of around 12.  We have spent the last 3 1/2 years not building enough cars to replace the number of cars scrapped despite a growing population.  The average age of a car on the road is at new all time highs.  The Japanese quake through a bit of a monkey wrench into auto production, but that is now easing.  While auto production does not tend to ramp up in a recession, from here it does not have that far to fall and ultimately we will need to breach the 15 area if we are to return to any sort of normalized environment. 

One point worth making is that it is hard to zero in on core VC EBITDA and so far management has not been helpful.  The Chinese JV is easier to get numbers for.  Halla, however, is fully consolidated.  You can look at Halla's numbers they report as a stand alone company and use that to back out what core EBITDA in VC is...although it is not entirely clear that you are comparing apples to apples as Halla is on Korean GAAP and there might be some adjustment needs to back out how much of VC EBITDA is actually related to Halla.  This might be one of the reasons for the disconnect, although it seems reasonable that they should be close enough to get in the ballpark.  Management has been unhelpful in giving this detail, along with a lot of other detail, as they hae just emerged from BK and seem to be taking a slower approach to investor relations, meeting investors and gettig to full disclosure.  There are so many changes that occurred in BK that management is ultimately going to have to help investors understand how the numbers roll up by products, segments, incremetnal margins, ect.  As they become seasoned that should help the stock as well.

Sellside coverage.  Corporate action.  M&A. More disclosure.