Haven't look too deeply into it. But superficially, a slightly above average business growing low single digits at around 10-11x PE? By 2028 adjusted earnings should be around $2-2.2 billion? So cheapish, but not really cheap enough for me to be interested yet.
They project EPS CAGR of 10-15% after the BERY transaction (vs 5-10% before). I assume this is mostly about the coming years when they realize the synergies of the merger, before EPS slowing down again.
+ dividend (over 5% now)
+ possible rerating to historical multiple (basically old BERY going to an AMCR multiple)
Nothing super exciting, but could be a decent "safe" investment of 15-20% annually with some multiple rerating upside.
But obviously depends on the realisation of the projected synergies.
I took a small position. Stocks like this are usually unlike the rest of my portfolio, so nice to put in there.
Say they then sell another $1bn worth of assets for 8.5x EBITDA, adjusted net income would be $700-750m 1-2 years from now.
If I can sell my spinco shares for 7x EBITDA, then at a 11-14x multiple including about 5% capital returns (buybacks and dividends in 2025) upside by this time next year would be 20-65%. And Debt/EBITDA would be 3.3x by this time next year.
I think best move here is to buy a small position, and add after spinco drop
So post spin, BERY will get $1 billion in cash + 90% of the spin-off. They lose $290 million in EBITDA. But the combined entity will have between $380-455m in EBITDA. And BERY management values spin off entity at a $3.6 billion valuation with $2 billion in debt. BERY holders will own 90% of that and BERY will receive a $1 billion cash distribution.
This means they value the $290m we will lose at 8.5x. ($3.6 - $2) * 0.9 + $1 = $2.44 billion and divided that by $0.29.
Currently BERY trades at 7-8x EV/EBITDA. So about $2-3/share in upside if this plays out + owning a now higher quality lower levered BERY.
A lower margin Glatfelter with more leverage traded at around 9-10x EV/EBITDA before 2024.
Say post spin shares decline 50% from management expected valuation. That means only a 6x EV/EBITDA valuation. This would mean $3-5 in downside if that happens.
The problem is, as spinco declines, BERY might actually increase as it will now have higher growth and higher margin assets.
Yeah I did some more thinking and I think I will also wait. I sold on Friday. Assumed it was neutral to +ev, now I think it is neutral to somewhat -ev to hold through the spin.
How do you feel about buying $AMCR now around $9.10?
Seems like a historically cheap multiple and they expect 3y EPS CAGR of 35% just from BERY synergies (so before any other growth into account)
Haven't look too deeply into it. But superficially, a slightly above average business growing low single digits at around 10-11x PE? By 2028 adjusted earnings should be around $2-2.2 billion? So cheapish, but not really cheap enough for me to be interested yet.
They project EPS CAGR of 10-15% after the BERY transaction (vs 5-10% before). I assume this is mostly about the coming years when they realize the synergies of the merger, before EPS slowing down again.
+ dividend (over 5% now)
+ possible rerating to historical multiple (basically old BERY going to an AMCR multiple)
Nothing super exciting, but could be a decent "safe" investment of 15-20% annually with some multiple rerating upside.
But obviously depends on the realisation of the projected synergies.
I took a small position. Stocks like this are usually unlike the rest of my portfolio, so nice to put in there.
What do you think adjusted EPS will be in 2028?
The spin off still needs to happen, right? What do you think about buying before or after?
Say they then sell another $1bn worth of assets for 8.5x EBITDA, adjusted net income would be $700-750m 1-2 years from now.
If I can sell my spinco shares for 7x EBITDA, then at a 11-14x multiple including about 5% capital returns (buybacks and dividends in 2025) upside by this time next year would be 20-65%. And Debt/EBITDA would be 3.3x by this time next year.
I think best move here is to buy a small position, and add after spinco drop
Ok I deleted last reply, I did make mistakes lol
So post spin, BERY will get $1 billion in cash + 90% of the spin-off. They lose $290 million in EBITDA. But the combined entity will have between $380-455m in EBITDA. And BERY management values spin off entity at a $3.6 billion valuation with $2 billion in debt. BERY holders will own 90% of that and BERY will receive a $1 billion cash distribution.
This means they value the $290m we will lose at 8.5x. ($3.6 - $2) * 0.9 + $1 = $2.44 billion and divided that by $0.29.
Currently BERY trades at 7-8x EV/EBITDA. So about $2-3/share in upside if this plays out + owning a now higher quality lower levered BERY.
A lower margin Glatfelter with more leverage traded at around 9-10x EV/EBITDA before 2024.
Say post spin shares decline 50% from management expected valuation. That means only a 6x EV/EBITDA valuation. This would mean $3-5 in downside if that happens.
The problem is, as spinco declines, BERY might actually increase as it will now have higher growth and higher margin assets.
Let me know if I made any mistakes.
I decided I'll just look at it after the spin ;)
Yeah I did some more thinking and I think I will also wait. I sold on Friday. Assumed it was neutral to +ev, now I think it is neutral to somewhat -ev to hold through the spin.