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If you could take private any business with mkt cap under 1B...


Liberty
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...what would it be?

 

Some context:

 

I realize there are many ways to look at this. I mean it as a light-hearted way to find out more about what small caps people here think are high quality and have bright prospects. I'm not looking for someone saying they'd buy some net-net and then liquidate and keep the cash, or for people to find the most undervalued company close to 1B mkt cap regardless of operational quality in the long run. This isn't so much about the market valuation as the business itself.

 

Rather, think of it as waking up one morning and magically wholly owning said businesses, and then operating it for years, with your future wealth tied to that business.

 

...

 

I think my pick would be EBIX.

 

Some reasons: Toll road/picks & shovels in a slow-changing industry that isn't going away (insurance, and now some financials and health), high operating margins that should be sustainable, high FCF, low capex, low debt, benefits from Metcalfe's law (network effect moat), highly diversified customer base (no customer more than a couple %), highly recurring revenue streams, doesn't sell its IP but rather licenses it, geographical diversification, small fish in big pond, provide real value and efficiency gains to its customers (most are still using inefficient paper processes or old fragmented software systems) and thus has a product that should sell in both good and bad times, has decent pricing power, early player in a land-grab scenario, tight cost controls, good capital allocator at the helm, old NOLs should keep US taxes minimal for a few years, and IP is made in low tax jurisdictions (india/singapore - not some gimmicky loophole either, they've had real operations there for a decade), proven relationship acquisition & cross-selling strategy, etc.

 

So what about you? What would you like to own?

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Excuse the pun, but I don't this company gets enough play - Live Nation. These guys are 5-10x the size of their biggest competitor in their 2 markets: artists and venues. Keeping talent negotiations out of the public eye would be a great benefit and here you have a consumer sector that is growing. Their attach rate to their mkt is incredibly high(renewal rates over 100% according to them) and I just don't see what out there stops live music, where they control the relationships with the artist + venues and ticket technology where those two end customer bases meet. Now I am not sure on the growth rate of the industry but topline has been growing. For now, their margin flow through has been slow  but with Liberty running mgmt I think they are overburdening their income statement with acquisitions(Electronic music acquisitions, venue deals, global promoter companies and festival launches)  and technology initiatives(AMZN, FB & GRPN were the latest plus moving Ticketmaster into the 21st century) they expense.

 

LYV trades at 5.4x ebitda. Media trades 2-3 points higher ebitda in a much more crowded albeit wider mkt save DIS.

 

 

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