ONEX

[StubbleJumper]

Letter to shareholder from Gerry S.

 

https://ml.globenewswire.com/Resource/Download/4bdb91ff-7bb5-4f32-b5fb-f82d4a1e2de5

 

 

Not a single word about Westjet in that letter.  I must confess that I am not familiar with Westjet's ownership structure, so perhaps it's one of Onex's funds that is exposed and not the actual parent company?

 

 

SJ

[longlake95]

WestJet is held in Onex Capital Partners V, along with a new insurance company. Onex put $261M into the WJ deal. The LP's put up the rest - it was a $5B deal. Onex has a track record of sticking with their investments. Onex has cash to weather the storm and a long-term view of their assets. OCP V has an 8% CAGR hurdle. I think that's easy over time, and LP's make a satisfactory return.

 

 

[StubbleJumper]

That makes sense. The investment in WJ isn't really material for Onex if they only have $261m at stake.  If WJ puts out a cash-call, presumably all partners would end up ponying up cash or diluting their position.  With a ~5% stake in WJ, a cash call wouldn't be the end of the world for Onex.

 

 

SJ

[longlake95]

prior to going private WJ had $1.2B in cash. So, some breathing room. 85 Days to be exact. More when expenses are slashed. I think Onex would add cash if needed, as they too, are responsible to the LP's to make this whole thing work. WJ's revenues are not going to zero, they will be operating some flights - yes, that can change for the worse or maybe even for the better.

[no_free_lunch]

Onex almost closed the gap to book earlier this year but has taken a dive with the market and is now at $68 vs $115 last reported book (March 31).  BV is going to be lower with the market drop, but probably still in the $100 range.  This seems to be a good entry point and we are being offered 50% upside to 52 week high.  The franchise has performed well, they have consistently grown bvps, either through net asset growth or share repurchases.   Over 10% was repurchased during the COVID crisis and they are likely buying as we speak.   Clearly some risks around the ability of PE to perform exits with a weaker market / higher interest rates but it has made it through the GFC and the 2002 tech crash, so I feel it will push through this as well. 

 

See the KKR thread for additional context around the industry at large.

 

This is a medium position for myself.

Edited July 29, 2022 by no_free_lunch

[formthirteen]

Thanks for the reminder. I have a small position in this as well and will buy more next week.

[no_free_lunch]

Onex Q3 numbers came out about a month ago.  Small loss in Q3 with NAV now at $124 vs share price of $64.  NAV should be higher now too as the NAV was as of Sept 30 and higher equity prices since then.

 

Large scale share repurchases are ongoing.  with around 4% of shares repurchased in the last 4 months.  This equates to a 12% annualized share repurchase rate.  At 50% of NAV these are very lucrative use of capital.  The average repurchase price is $66, above current price.

 

As for the underlying business fundamentals, not sure entirely.  Perhaps higher interest rates will keep them down?   I don't know but I continue to hold and will probably add if it stays depressed.

 

https://www.onex.com/static-files/62dddfa6-5176-4090-90bf-fd46093c5235

[Spekulatius]

Onex looks more like a 10% annual grower than a 15% grower (which is their stated target), but that’s still cheap at ~50% NAV. They can add a few percent of growth just buying back shares below NAV.

 

I don’t think this business is as good as those US alternative asset managers or even BAM nor does it need to be at this valuation.

[Xerxes]

You guys do know there is an ONEX thread in the investment Idea.

Perhaps, @Parsad can do some magic and merge this unwanted offshoot with the main thread

 

 

 

[no_free_lunch]

Agreed.  This was the thread that came up when I searched, didn't realize there was another one in the proper section.

Edited December 12, 2022 by no_free_lunch