Good summary on $dole, agree with your overall assessment. I also read your initial write-up as I researched the name recently.
US investors are notoriously inward-looking and often gave an initial cold shoulder to companies listed overseas, even though Dole is as America as it gets.
I would hesitate to tag 14x as the base case, but I do think 8-10x would be a very reasonable range, which offers decent upside potentials.
All in all an excellent job finding this hidden gem. patience is (fortunately) unfortunately very much needed in this case. Cheers
Essentra is an interesting opportunity - took a hard look at this one back in Sept / Oct and spoke to one of their bankers about breaking up the company...was surprised to see their announcement just a few short weeks later. In my view, current management has done a good job at streamlining and improving the quality of businesses over past few years. On consensus numbers, this one trades much cheaper - around 7x, due to expectation of improved performance in healthcare packaging segment.
For this one to re-rate, Filters needs to be sold - the marginal institutional UK / European buyer won't touch this due to ESG and the tobacco exposure here. But the growth opp in this segment is compelling, with the premium filter business in China and adoption in EU market of biodegradable filters, as regulations on plastic filters are changing in 2024-25.
Healthcare packaging has been a hot mess in recent years but their acquisition in Sept '20 looks like a great move as they bring on strong operators in North America. So far, they've provided great disclosures on improvements made to this business and even recently remain committed to margin targets, even with cost and labor inflation creeping into this biz, which I doubt they'd do unless super confident about their ability to perform. Currently this is a 4% EBITDA margin business, and management has guided to 8% to 10% improvement next year. Longer-term, this should be a 10% to 12% EBITDA margin business, so the margin expansion opportunity is very real here and will simply come down to shifting out of restructuring mode and getting some operating leverage on the business. Will just take time for performance to flow through the financials and market has been burned before by them, so will take some time to believe margins are sustainable. And this is a highly-fragmented industry with loads of opportunity for consolidation. Always envisioned them growing this to critical mass and then spinning this off from Industrial, but think that would take a few years, which is why the announcement surprised me.
And for industrial distro segment, this one has fantastic margins and seems well-positioned post-Brexit. They'll just need to return this to growth which can be done by bolt-on deals, as they play in a highly-fragmented market. Organic growth has been a weak point, though, I think.
Your initial valuation work is reasonable in terms of the upside opportunity here.
Do other original holders of Total Produce also have problems selling Dole Plc following the merger? According to my broker, Euroclear does not allow to make the converted shares tradeable in the US as they are registered in Ireland.
Good summary on $dole, agree with your overall assessment. I also read your initial write-up as I researched the name recently.
US investors are notoriously inward-looking and often gave an initial cold shoulder to companies listed overseas, even though Dole is as America as it gets.
I would hesitate to tag 14x as the base case, but I do think 8-10x would be a very reasonable range, which offers decent upside potentials.
All in all an excellent job finding this hidden gem. patience is (fortunately) unfortunately very much needed in this case. Cheers
Siyu
Essentra is an interesting opportunity - took a hard look at this one back in Sept / Oct and spoke to one of their bankers about breaking up the company...was surprised to see their announcement just a few short weeks later. In my view, current management has done a good job at streamlining and improving the quality of businesses over past few years. On consensus numbers, this one trades much cheaper - around 7x, due to expectation of improved performance in healthcare packaging segment.
For this one to re-rate, Filters needs to be sold - the marginal institutional UK / European buyer won't touch this due to ESG and the tobacco exposure here. But the growth opp in this segment is compelling, with the premium filter business in China and adoption in EU market of biodegradable filters, as regulations on plastic filters are changing in 2024-25.
Healthcare packaging has been a hot mess in recent years but their acquisition in Sept '20 looks like a great move as they bring on strong operators in North America. So far, they've provided great disclosures on improvements made to this business and even recently remain committed to margin targets, even with cost and labor inflation creeping into this biz, which I doubt they'd do unless super confident about their ability to perform. Currently this is a 4% EBITDA margin business, and management has guided to 8% to 10% improvement next year. Longer-term, this should be a 10% to 12% EBITDA margin business, so the margin expansion opportunity is very real here and will simply come down to shifting out of restructuring mode and getting some operating leverage on the business. Will just take time for performance to flow through the financials and market has been burned before by them, so will take some time to believe margins are sustainable. And this is a highly-fragmented industry with loads of opportunity for consolidation. Always envisioned them growing this to critical mass and then spinning this off from Industrial, but think that would take a few years, which is why the announcement surprised me.
And for industrial distro segment, this one has fantastic margins and seems well-positioned post-Brexit. They'll just need to return this to growth which can be done by bolt-on deals, as they play in a highly-fragmented market. Organic growth has been a weak point, though, I think.
Your initial valuation work is reasonable in terms of the upside opportunity here.
Great article Conor.
Do other original holders of Total Produce also have problems selling Dole Plc following the merger? According to my broker, Euroclear does not allow to make the converted shares tradeable in the US as they are registered in Ireland.
Great update about Dole, Conor. Wouldn't it be a good idea for Dole to initiate a share buyback program at current prices?