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Moving the discussion from the "What are you buying today?" thread..

 

Topicus

 

Although it’s likely going lower in the short term seems like a pretty good deal.

 

I am interested in TOI, but wonder if you notice this section in page 14 of the prospectus which mentions a EUR$200M drawdown of the credit facility prior to the completion of spin-off?  Maybe I understood it wrong, but that would make the EV even higher than implied in the 2020Q3 financials.  38x EV/LTM FCF @$59 share price.

 

I did not notice that.  What is your FCF number at LTM? 

 

I think their Dec 2019 quarter FCF is relatively anemic, I get around 32x FCF after adjusting for the debt and doing LTM (net debt, preferred, and the dividend you mentioned).  The number I get is 27x when I do 9 months CF annualized.  But maybe I did something wrong.

 

From the prospectus, I get 2020Q3 LTM FCF of EUR$138M or CAD$212M.  My definition of FCF is "cash flow from operations" minus "property and equipment purchased".  At C$60 PPS, 130M O/S and my estimated C$350M net debt, I am seeing a EV/FCF of 38x.

 

For FY2019, TOI also seem to have benefitted from paying almost no tax, as seen in the CF statement.

 

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Why did CSU spin this out? They have hundreds of businesses within them, so why not this one.

 

The sellers of Topicus wanted this structure. Technically, it was a spin-out of TSS from CSU and then a merger with Topicus.

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Moving the discussion from the "What are you buying today?" thread..

 

Topicus

 

Although it’s likely going lower in the short term seems like a pretty good deal.

 

I am interested in TOI, but wonder if you notice this section in page 14 of the prospectus which mentions a EUR$200M drawdown of the credit facility prior to the completion of spin-off?  Maybe I understood it wrong, but that would make the EV even higher than implied in the 2020Q3 financials.  38x EV/LTM FCF @$59 share price.

 

I did not notice that.  What is your FCF number at LTM? 

 

I think their Dec 2019 quarter FCF is relatively anemic, I get around 32x FCF after adjusting for the debt and doing LTM (net debt, preferred, and the dividend you mentioned).  The number I get is 27x when I do 9 months CF annualized.  But maybe I did something wrong.

 

From the prospectus, I get 2020Q3 LTM FCF of EUR$138M or CAD$212M.  My definition of FCF is "cash flow from operations" minus "property and equipment purchased".  At C$60 PPS, 130M O/S and my estimated C$350M net debt, I am seeing a EV/FCF of 38x.

 

For FY2019, TOI also seem to have benefitted from paying almost no tax, as seen in the CF statement.

 

Thanks for posting it here, I should have done that.  Yea my FCF numbers was 150ish 9 mo annualized.  130ish LTM (expensing leases).  Yea I did the preferred shares incorrectly.  For some reason I saw par value of 20 euros and overlooked the multiple places where it was 5% of the market value.  Thanks! 

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Why did CSU spin this out? They have hundreds of businesses within them, so why not this one.

 

The sellers of Topicus wanted this structure. Technically, it was a spin-out of TSS from CSU and then a merger with Topicus.

Thanks! So the sellers wanted to keep ownership and didn’t want just cash, or CSU shares which are a very diversified business. Why? Maybe they wanted to retain a meaningful stake in the future growth. Or was it to retain control. Or possibly they considered CSU stock overvalued. Any ideas? Do they have voting control?

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I've never had a company I've owned before do a spinoff, looking for a little help here please.

 

The Spin-Out Shares will constitute a dividend for Canadian federal income tax purposes equal to the fair market value at the time of

the Spin-Out of the Spin-Out Shares so distributed.

 

The above is from the final prospectus.

 

Speaking as a taxable CDN investor:

 

1)  What is the total $ value of dividend received per TOI share?

 

2)  What is my cost basis for TOI?

 

Appreciate any insights,

-CM

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I've never had a company I've owned before do a spinoff, looking for a little help here please.

 

The Spin-Out Shares will constitute a dividend for Canadian federal income tax purposes equal to the fair market value at the time of

the Spin-Out of the Spin-Out Shares so distributed.

 

The above is from the final prospectus.

 

Speaking as a taxable CDN investor:

 

1)  What is the total $ value of dividend received per TOI share?

 

2)  What is my cost basis for TOI?

 

Appreciate any insights,

-CM

 

They structured this so the dividend is ~zero and cost basis is ~$0. At least for Canadians.

 

My broker is showing my cost basis as $0.0002 per share. My wife's broker is showing $0.01 for all her shares. So I think it is safe to use $0 as your cost basis.

 

Explanation: TOI gave CSU preferred shares that exactly match the FMV of the spin-out. So the net value of the spin-out is $0. How these shares worth $0 are now trading at $60, I don't know.

 

NOTE: Not tax advice. This is how I interpreted the prospectus and matches what I am seeing at the broker. But I don't understand it. Most spin-offs I've owned have been tax-free, but usually the company posts a FAQ detailing (their interpretation) of the taxable dividend and cost basis. I am not seeing that for TOI.

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I've never had a company I've owned before do a spinoff, looking for a little help here please.

 

The Spin-Out Shares will constitute a dividend for Canadian federal income tax purposes equal to the fair market value at the time of

the Spin-Out of the Spin-Out Shares so distributed.

 

The above is from the final prospectus.

 

Speaking as a taxable CDN investor:

 

1)  What is the total $ value of dividend received per TOI share?

 

2)  What is my cost basis for TOI?

 

Appreciate any insights,

-CM

 

They structured this so the dividend is ~zero and cost basis is ~$0. At least for Canadians.

 

My broker is showing my cost basis as $0.0002 per share. My wife's broker is showing $0.01 for all her shares. So I think it is safe to use $0 as your cost basis.

 

Explanation: TOI gave CSU preferred shares that exactly match the FMV of the spin-out. So the net value of the spin-out is $0. How these shares worth $0 are now trading at $60, I don't know.

 

NOTE: Not tax advice. This is how I interpreted the prospectus and matches what I am seeing at the broker. But I don't understand it. Most spin-offs I've owned have been tax-free, but usually the company posts a FAQ detailing (their interpretation) of the taxable dividend and cost basis. I am not seeing that for TOI.

 

Thanks very much KCLarkin!  Some magical accounting at work here haha.  Hopefully there is something official on the CSU website soon.. but its about as fancy as Berkshire's!

 

Cheers,

CM

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On 4/23/2021 at 1:25 PM, shamelesscloner said:

Chuck Akre bought 3% of the shares outstanding

Where did you get that information?  

Don't you talk about the shares he received because he is a shareholder of CSU?

Edited by ECCO
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