Some of these cyclical valuations are getting downright absurd. Today's example: Kloeckner $KCO.DE
This is not a particularly great biz (mild understatement) but let the numbers speak for themselves. 1.6bn EV (pre-2Q nos), currently doing 200-250mm EBITDA per QUARTER 🤪🤪
This is not a particularly great biz (mild understatement) but let the numbers speak for themselves. 1.6bn EV (pre-2Q nos), currently doing 200-250mm EBITDA per QUARTER 🤪🤪
EV post-2Q will be ~1.5bn (they'll generate a bunch of cash), and prob 1.3-1.4bn post 3Q. Post 3Q - almost in the bank - they'll basically be <1x net levered (vs 4-5x a yr ago).
Like many other biz in this space, one good yr has completely fixed the B/S...
Like many other biz in this space, one good yr has completely fixed the B/S...
Again what's interesting here is what the mkt seems to imply will happen. This biz is run-rating 800mm+ EBITDA - so is on <2x EV/EBITDA currently - and there's no sign the environment is rolling over...
But who cares if it does? The biz did 200mm EBITDA pre-COVID in a good year
But who cares if it does? The biz did 200mm EBITDA pre-COVID in a good year
And 100mm EBITDA in a bad year. Apparently they're taking 100mm in costs out of the biz permanently ('Surtsey project') as they move a ton of the sales function online. Who knows.
Call it 200mm post-crash normalized EBITDA - you're paying maybe 6x that....
Call it 200mm post-crash normalized EBITDA - you're paying maybe 6x that....
AND you're assuming we go straight from the heyday of $1800/t steel prices back to pre-COVID levels...with no intermediate period.
And every quarter that something like the current environment sustains you get 10% of the mkt cap back in cash (probs)...
And every quarter that something like the current environment sustains you get 10% of the mkt cap back in cash (probs)...
One additional kicker I like here - Apollo approached the biz in late 2020 looking to take it out (but walked away). the absolute price of a deal now is a good deal higher but the multiple, and trajectory, of the biz is a lot better...
kloeckner.com/en/investors/l…
kloeckner.com/en/investors/l…
this (steel distribution) is a v fragmented market and there should be strong scope for a consolidator (esp delevered, in this environment). that's prob what Apollo was thinking of building. i dunno. nice optionality to have...
in the meantime the numbers just have to keep going a lot higher - and div will get reinstated too.
not the cheapest of all these cyclical names but an interesting one, i guess. I have a small position, doing more work.
Earnings Aug 10th (but pre-announced). GLTA, DYODD
not the cheapest of all these cyclical names but an interesting one, i guess. I have a small position, doing more work.
Earnings Aug 10th (but pre-announced). GLTA, DYODD
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