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thanks for this writeup. a cpl of questions:
- in your remainco valuation you have 11bn of EBIT but only a 55bn valuation in your SoTP (despite putting the note, 10x EBIT) - what is going
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<p>thanks for this writeup. a cpl of questions:</p>
<p>- in your remainco valuation you have 11bn of EBIT but only a 55bn valuation in your SoTP (despite putting the note, 10x EBIT) - what is going on there?</p>
<p>- it looks like the business is experiencing massive contraction in margin despite some ongoing topline growth. is this BenefitONe related or core biz related? if it is core biz related, this may explain the willingness to sell BOne and this would (i guess) increase reinvestment risk considerably?</p>
<p>- how does one hope to extract value here if the insiders are unwilling? Nambu san et al own mid-40s % so its literally just hoping he does the right thing right? 71 is also not old in Japan, he could easily just keep running it for another 10-15 yrs as he sees fit.</p>
<p>thanks</p>
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ok so just to re-up the discussion on failing firm - isn't this clearly in play now? SAVE just burnt $100mm in the qtr, and the newly re-upped GTF issues - up to 40 planes
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<p>ok so just to re-up the discussion on failing firm - isn't this clearly in play now? SAVE just burnt $100mm in the qtr, and the newly re-upped GTF issues - up to 40 planes out at some point during the yr next yr, avg of 26 out - means they will be cutting it very fine indeed. they have $1bn of cash but are burning $150-200mm a qtr at this point and need at least $300-400mm on hand at all times to run the biz; have maybe $500mm in unencumbered aircraft and a multi-hundred-mm claim against P&W (that may take years to be received, who knows); and they need to refi the $1.1bn sen sec 8%s by Sep2024 before they go current (otherwise clear going concern). mgmt didn't hold a CC (weird) and apparently have stopped hiring pilots; obviously they are dialing back growth plans aggressively. seems like they would get v close to running out of cash by late 2024, absent some huge near-term cash compensation from RTX.</p>
<p>it seems to me, then, that in isolation the JBLU trial case is pretty bullet proof: all the arguments the govt was going to make re standalone SAVE - they are a unique grower/disrupter in the market; they had the best plans to continue growing; etc - are out the window because SAVE won't be around if JBLU doesnt do this deal...BUT if you're JBLU why do this deal? They immediately add $5.5bn in net debt for an entity doing increasingly negative EBITDA and burning gobs of cash (even w/ synergies baked in they wont be CF break-even til 2025, it looks like). JBLU will go to something like 10x LTM net levered...</p>
<p>ofc i get that calling a MAC is next-to-nigh impossible but why isnt this MXL/SIMO all over again? here you could at least argue the GTF issues are disproportionate to SAVE; and lengthy enough (over 2023 to at least 2025) to constitute a MAC. why wouldnt you at least give yourself the chance to get out of it?</p>
<p>the trickiest part here is timing...like if JBLU wanted out, how would they go about it given the DoJ trial etc? that part I'm unsure of. would they try to bail pre-trial or just go through the motions at trial, see what happens, then make a call based on the outcome?</p>
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why is 10x EV/EBITDA - an objectively high multiple - right for this business, after everything that has transpired in the last couple of years? at the very least the nature of the Australian market
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<p>why is 10x EV/EBITDA - an objectively high multiple - right for this business, after everything that has transpired in the last couple of years? at the very least the nature of the Australian market - whereby AMA is demonstratively captive to the insurers, whether they should be or not - makes it very different to the North American example. business quality here is simply not very good, or at least nowhere near as good as the original thesis posited. i would argue 10x EV/EBITDA is beyond unrealistic at this point, even on a normalized/post-rectification view.</p>
<p>that does not mean you cant make money from 4.5c but as a valuation framework i thought that specific point was objectively way off.</p>
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