What are you buying today?

[gfp]

7 minutes ago, SharperDingaan said:

Think more along the lines of RFP shareholders dumping their CVRs immediately upon receipt, for whatever they can get, while they can get it; the CVR gets bought into the TFSA at close to zero. 9 months later the 'story' changes, and it is slowly bled out of the TFSA at 3-4x what was paid for it. TFSA capital rises, it doesn't fall.

 

The underlying assumption is receipt of a single terminal payment at some unknown future date. Most would expect that it would actually just be Domtar paying back redirected duties (from use of the prepayment) - and only after Domtar has exhausted its own tax shields. 25% for the 'if/when' risk is conservative!

 

Not for everyone.

 

SD

 

I really think you are missing the point of these being non transferrable non trade-able with no market.

[StubbleJumper]

54 minutes ago, gfp said:

 

I really think you are missing the point of these being non transferrable non trade-able with no market.

 

Yes, that seems to be the blockage.  People do not seem to understand that a shareholder will be "stuck" with the CVRs, possibly for years.  For clarity, this is from RFP's 8-K filing:

 

Quote

Contingent Value Rights

 

Each Contingent Value Right is a direct obligation of Parent and entitles the holder thereof to receive its pro rata portion of all amounts received by the Company or any of its subsidiaries (or, after the Effective Time, Parent or any of its subsidiaries) or by any permitted assignee of the right to receive such amounts (each an “Applicable Recipient”) at any time after the date of the Merger Agreement, in respect of cash deposits made by the Company or its subsidiaries with the U.S. Treasury in respect of estimated countervailing and antidumping duties on entries of Canadian-origin softwood lumber products exported to the United States (the “Deposits on Estimated Duties”) made by the Company or any of its subsidiaries on or prior to June 30, 2022, including interest paid by an applicable governmental authority in respect thereof (the “Applicable Refund Payments”), as reduced (without duplication) by (i) the amount of reasonable and documented, out-of-pocket expenses (including the fees and disbursements of the CVR Agent (as defined below) and the CVR Representative (as defined below), but excluding, for the avoidance of doubt, taxes) incurred after the Effective Time and as of the time of any applicable distribution of Net Applicable Refund Payments, by Parent or its subsidiaries in the administration of the Contingent Value Rights and not previously applied to reduce Net Applicable Refund Payments and (ii) certain incremental cash taxes arising from the receipt of such Applicable Refund Payments (the “Net Applicable Refund Payments”).

 

The Contingent Value Rights will not represent any equity or ownership interest in the Surviving Corporation, Parent or any affiliate thereof (or any other person) and will not be represented by any certificates or other instruments. The Contingent Value Rights will not have any voting or dividend rights, and no interest will accrue on any amounts payable on the Contingent Value Rights to any holder thereof.

 

The Contingent Value Rights may not be sold, assigned, transferred, pledged or encumbered in any manner, other than transfers by will or intestacy, by inter vivos or testamentary trust where the Contingent Value Right is to be passed to the beneficiaries upon the death of the trustee, pursuant to a court order, by operation of law, or in connection with the dissolution, liquidation or termination of a corporation or other entity which is the holder thereof.

 

[rkbabang]

Picked up a few more SI 2025 $12.5 calls and a few more 2025 OSTK $25 calls.

 

[bizaro86]

Also, it isn't obvious to me these will be qualified investments for a TFSA/RRSP. 

 

I've paid penalty tax on holding CVRs in my RRSP in the past. If they put it in your account as a security and it doesn't trade on an exchange, it isn't an allowable investment. If that happens, I recommend not ignoring the situation (which is what I did) and transferring the CVR to a non-reg account at some deemed value (which is what I did eventually).

[SharperDingaan]

Agreed, as the CVR currently stands, the value is essentially zero. While technically the CVR could be transferred into a trust, and rights to that trust sold - it is very unlikely. Similarly without a standing bid to make a market, it isn't going to qualify for a regulated account.

 

SD

[maplevalue]

Two adds to existing positions recently:

 

Morguard NA Residential REIT - one of cheapest REITs out there who are buying back shares for first time since 2016

Scottish Mortgage Trust - a small 'we are past peak inflation' position

[Jaygo]

are you talking about MRG.un

[maplevalue]

Yes

[Dave86ch]

Yesterday added to BTC and added and staked to ETH

[dealraker]

Posting on JOE this morning I couldn't help but think that may now we've gotten to the point of indexing the US ain't gunna cut it any longer, that getting returns is going to be quite the challenge.   To me things like payments and media have attracted such interest for so long, how much more?

 

Bitcoin's going to be a Tesla on self-drive whose technology has been corrupted, the ride will be wildass superb entertainment.  

 

Old dealraker, that's me, posted here that he'd bought GE and Boeing a while back; then there is Berkshire, JOE and such things.  I think we are in a world of slow grind, that the returns will get difficult.  Maybe GOOG and META notch up just on valuation?  And banks, yea for whatever it is worth I thiink whatever the yield curve is we just got too down on banks.  But the upside?  Not much.

 

But anyway, COBF is going to be a good place to get an idea or two.  My personal portfolio probably doesn't have a snowball's chance in living hell of doing any better than low single digits for some time.   I do own a bit of Fairfax...for a long time.

 

Bought Baxter a few times lately.  

[StevieV]

23 minutes ago, dealraker said:

Posting on JOE this morning I couldn't help but think that may now we've gotten to the point of indexing the US ain't gunna cut it any longer, that getting returns is going to be quite the challenge.

 

I don't know.  I feel like this could have been and probably has been said lots of times over the last couple decades.  Look at SPY's top holdings today.  Apple, Microsoft, Amazon, Facebook, Google, BRK, TSLA, NVDA, JPM in the top 10.  TSLA's in a tough spot valuation-wise, but overall I think those things provide a return.

[dealraker]

1 hour ago, StevieV said:

 

I don't know.  I feel like this could have been and probably has been said lots of times over the last couple decades.  Look at SPY's top holdings today.  Apple, Microsoft, Amazon, Facebook, Google, BRK, TSLA, NVDA, JPM in the top 10.  TSLA's in a tough spot valuation-wise, but overall I think those things provide a return.

StevieV keep the post for a couple of years as I'm thinking quite a bit differently.  Last 2 decades is not where I come from though so that's an issue.  

[Dinar]

Added to my position in Tel Aviv stock exchange.  Now a 10% position.

[Cod Liver Oil]

It's not Joe and it's not Nintendo but Campari appeals to my weakness for European family controlled owner/operators in moaty sinful businesses. I love those 100 year old fiefdoms. I bought some for my kids today. Thanks, @Dinar.

Edited January 24, 2023 by Cod Liver Oil

[Spekulatius]

@dealraker - if you never sell anything basically, where do the funds for new purchases come from? Dividends?

 

BAX chart does not bombed out, but they do carry a lot of debt.

[Saluki]

Bought a decent starter position in VTS. I may add more on the dips, but I see it a $0.50 dollar, not a multiyear compounder so I don't want to chase it.  Started a small position in TV and SWBI. I'm fully deployed so unless I sell something, everything will be small positions.  

[Castanza]

Added a little PCYO today and yesterday

[dealraker]

4 hours ago, Spekulatius said:

@dealraker - if you never sell anything basically, where do the funds for new purchases come from? Dividends?

 

BAX chart does not bombed out, but they do carry a lot of debt.

Spek I tend to buy a bunch of this seemingly garbage stuff, but generally I let the stock flounder longer- sometimes years- before committing.   Kind of the Boeing and GE thing.  But then there is Teva.  About two years ago I began nibbling at Teva, my threshold is (and this threshold is totally irrational I think) $8.50 per share.  I've now got a slug of Teva and... (the story ain't anywhere close to done!)

 

 

[Spekulatius]

26 minutes ago, dealraker said:

Spek I tend to buy a bunch of this seemingly garbage stuff, but generally I let the stock flounder longer- sometimes years- before committing.   Kind of the Boeing and GE thing.  But then there is Teva.  About two years ago I began nibbling at Teva, my threshold is (and this threshold is totally irrational I think) $8.50 per share.  I've now got a slug of Teva and... (the story ain't anywhere close to done!)

 

 

I owned the closely related $VTRS but sold out of the stock. It's a tough business and there is a ton of debt to be serviced. I think they are a better bet than TEVA, if you think the generics business will improve.

 

Maybe I have given up too early on $VTRS but the disappointments did keep coming. VTRS at least pays a decent dividend.

[StevieV]

10 hours ago, StevieV said:

 

I don't know.  I feel like this could have been and probably has been said lots of times over the last couple decades.  Look at SPY's top holdings today.  Apple, Microsoft, Amazon, Facebook, Google, BRK, TSLA, NVDA, JPM in the top 10.  TSLA's in a tough spot valuation-wise, but overall I think those things provide a return.

 

8 hours ago, dealraker said:

StevieV keep the post for a couple of years as I'm thinking quite a bit differently.  Last 2 decades is not where I come from though so that's an issue.  

 

dealraker - can you expand on this?  Is it that you think most of these won't do well from today's level?  A few will drag things down?  Some of each?

 

MSFT at 25x still too expensive to do great?  I think that's a fair thought.

[changegonnacome]

8 hours ago, Dinar said:

Added to my position in Tel Aviv stock exchange.  Now a 10% position.

 

Is there a thread on this or write up you could point me too? Came across it mentioned enough times now to trigger my interest. Cheers

[Dinar]

18 minutes ago, changegonnacome said:

 

Is there a thread on this or write up you could point me too? Came across it mentioned enough times now to trigger my interest. Cheers

not my write-up, but see below

 

Tel Aviv Stock Exchange (TASE IT) Investment Overview

October 2021

A Brief History

▪Tel Aviv Stock Exchange (“TASE,” or “the company”) began operations in 1953 when a consortium of Israeli banks and investment houses joined together to establish the exchange.

▪Over the next ~50 years, TASE established a clearing house, enabled electronic trading, launched options trading, and created the first exchange traded note.

▪In 2000, the Knesset (the unicameral national legislature of Israel) approved an amendment to Israeli securities law enabling dual listing in Tel Aviv for shares that were listed in the United States.

▪Subsequently, the company expanded upon this arrangement, allowing dual listing of securities trading on the London Stock Exchange and Nasdaq.

▪In 2018, Hong Kong, Singapore, and Toronto were also added for dual-listing.
▪In 2017, the Knesset ratified an amendment enabling changes to TASE's ownership structure. Additionally, the Israeli District Court

ratified the TASE demutualization arrangement.

▪The privatization paved the way for TASE’s for-profit evolution, reducing conflicts of interest and increasing TASE’s freedom to operate as an independent, standalone entity.

▪In August 2017, Itai Ben-Zeev was appointed as CEO.
▪In July 2019, TASE became a publicly traded company when it floated 31.7% of its shares to foreign and Israeli institutional investors

and to the public at large.
▪The shares trade under the Bloomberg ticker symbol “TASE IT”.

2

Source: company filings and presentations.

Business Description ▪TASE is a monopoly financial infrastructure asset that plays a central role in Israel’s capital markets and overall economy.

▪The company is unique among global exchanges in that it spans the gamut of Israel’s entire capital markets infrastructure, offering products and services that include (a) listing, (b) trading in equities, fixed income, and derivatives, (c) clearing and settlement, (d) securities lending, (e) IT/co-location, (f) market data, and (g) indices.

▪To our knowledge, no other exchange has all these products and services under one roof.
▪TASE’s revenue streams are diverse, with non-transactional revenue (e.g., clearing, market data) growing as a percentage of the

3

overall mix

1H21 Revenue by Source

1H21 Revenue by Type

  

16% 20%

21%

40%

40%

Trading and clearing commissions Clearing house services
Other

Securities registration
Distribution of trading and other data

Transactional

Non-transactional

Source: company filings and presentations.

60%

Investment Thesis

A recent demutualization and IPO, TASE is a monopoly financial infrastructure asset that we believe is capable of compounding intrinsic value at ~35%+ annually in the coming years. Historically, TASE operated as a member-owned, not-for-profit entity run primarily for the benefit of Israeli banks. Strategic and financial decisions were made on behalf of the company’s members. TASE’s recent demutualization reduces conflicts of interest and increases its freedom to operate as an independent, standalone entity.

We believe that TASE has significant opportunities to launch new products and services, optimize pricing, and drive efficiency gains. We expect significant value creation to result from accelerating revenue growth and margin expansion. In addition, there are several sources of value which we expect management to realize over time that, in aggregate, can be worth more than half of the company’s current market capitalization. We believe management is highly incentivized to create value and is taking appropriate steps in this direction. Finally, we believe that TASE could be an acquisition target for a larger global exchange.

We note the following:

• ▪  TASE’s revenue growth is accelerating and can grow sustainably in the high-single / low-double digits.

• ▪  The company’s margins can double or more as they approach peer levels over time.

• ▪  TASE owns its corporate headquarters building, which alone is worth ~30% of the current enterprise value and can be monetized.

• ▪  An unusual arrangement with pre-demutualization shareholders could result in cash proceeds to TASE equivalent to ~14% of the current enterprise value (without additional dilution).

• ▪  Net cash currently on the balance sheet (~7% of the market cap) and future free cash flow generation (we estimate ~30% of its current market cap over the next ~5 years) provide management with significant firepower for organic and inorganic investments.

• ▪  TASE’s CEO, Ittai Ben-Zeev owns options on 4.25 million shares, providing a strong incentive to create value.

• ▪  Given significant consolidation activity in the exchange space over the years, we think TASE could be acquired by a larger global exchange for a significant premium.

4

Thesis Point #3: Owned Real Estate a Sizable “Hidden Asset”

▪ TASE owns its corporate headquarters building at 2 Ahuzat Bayit Street in downtown Tel Aviv. ▪ The building is state of the art, less than ten years old, and in a prime location.
▪ We believe the company can crystallize the value of this asset over time.

▪ Management believes it would cost ~2% of the building value annually to rent the space the company requires.
▪ A 6.0% cap rate (which we understand to be the approximate market level for premier Tel Aviv office properties), implies

significant value creation in a sale or sale-leaseback transaction.
▪ Using conservative assumptions around rent / sqm and Tel Aviv office cap rates, we believe the building is worth ~500 million ILS,

or ~30% of the current enterprise value:

7

 

Source: company presentations, CBRE Tel Aviv Market Survey (Q320).

Thesis Point #4: Unusual Pre-IPO Arrangement another “Hidden Asset”

▪ As part of the TASE privatization, pre-demutualization shareholders received shares in the new company that entitled them to a maximum of 508 ILs per share in value upon a sale, with the proceeds in excess of that cap going to TASE.

▪ In H2-19, the banks sold a bit over 10% of their shares at ~1,000 ILs on average.

▪ This resulted in proceeds to the banks of ~14.3 million ILS and proceeds to TASE of ~13.8 million ILS. ▪ Currently these shareholders own ~19.5 million shares (~19% of shares outstanding).

▪ If all these shares were sold at the current price, TASE would receive more than ILS 222 million of net proceeds.

▪ This value is equivalent to ~14% of the current enterprise value.

▪ On February 10, 2021, TASE announced that its board of directors is exploring a structure that enables the buyback and allotment of shares to pre-IPO shareholders with the goal of incentivizing them to sell their “Arrangement Shares.” While discussions have broken off for the time being, it is encouraging that management and the board are exploring ways to crystallize value and increase liquidity.

8

TASE IT - Pre-Restructuring IPO Proceeds

Shares Held by Pre-Restructuring Shareholders (at 12/31/2019) Maximum Value per Share to Pre-Restructuring Shareholders Total Proceeds to Pre-Restructuring Shareholders

Current TASE IT Share Price
Maximum Value per Share to Pre-Restructuring Shareholders Value per Share to TASE (at current share price)

Shares Held by Pre-Restructuring Shareholders (at 12/31/2019)

19.5 5.1 ILS 99.1

16.8 5.1 11.7

19.5

    

Source: company filings and presentations.

Total Proceeds to TASE IT (at current share price) ILS 228.2 % of Current Enterprise Value 14%

Extremely Attractive Pro Forma Valuation ▪ Multiple sources of current and future value have the impact of reducing our effective purchase price to a low single digit multiple of

estimated 2026 EBITDA. These include: ▪ Current cash on the balance sheet;

▪ Future free cash flow generation;
▪ Net proceeds from share sales by pre-restructuring shareholders; ▪ Monetization of headquarters building.

▪ We believe that management could add further value through share buybacks or M&A, but we don’t give them explicit credit for that in this analysis.

TASE’s global exchange peers currently trade at mid-teens enterprise value / EBITDA multiples (see Appendix II) Source: company filings and presentations.

9

  

Extremely Attractive Long-Term Compounding Potential

• ▪  We believe the combination of accelerating revenue growth, margin expansion and several other levers for value creation can combine to drive intrinsic value growth of 35%+ annually.

• ▪  Should management allocate the ample firepower it will have at its disposal towards value-creating M&A or accelerated share repurchases, we believe upside can exceed 40% annually.

• ▪  While we’re not underwriting a takeout, we believe TASE is a logical acquisition candidate for a larger global exchange. Historically, such transactions have occurred at sizable premiums due to significant synergy potential.

Framing the Base Case Return Opportunity

(amounts in millions of ILS or ILs per share, unless otherwise specified)

Core Business: Estimated 2026 EPS Exit Multiple

Core Business Value per Share at Year-End 2025

Additional Sources of Estimated Value:
Net Cash per Share at Year-End 2025 Cumulative Dividends
Owned Real Estate Value (net of taxes) Pre-IPO Shareholder Sale Proceeds to TASE

Total Additional Sources of Value

1.85 26.0x 4,814

Total Per Value Share 434 407 260 244 494 463 228 214 1,416 1,328

10

   

Total Value at Year-End 2025 Current Price
% IRR

6,142 1,678 36%

Source: company filings and presentations.

Risk Factors

▪ Potentially adverse regulation.

• ▪  Given TASE’s relatively recent privatization, the regulatory environment in Israel is not yet well defined, which can create

  scope for surprises.

• ▪  All indications thus far are that Anat Guetta, Chairwoman of the Israeli Securities Authority, is pro-market and has goals of increasing capital markets participation and opening the Israeli market to foreign investors and other market participants.

  ▪ Geopolitical risk.
  ▪ Particularly in the Middle East, this can be difficult to handicap.

  ▪ Timeliness of management execution.
  ▪ The pace of revenue growth and margin expansion could take longer than anticipated.

  ▪ Limited liquidity in TASE common stock.

• ▪  The company’s common stock has relatively low daily trading activity, which could limit our ability to purchase and sell

  shares easily and may increase short-term volatility in the stock price.

• ▪  We believe that liquidity will likely improve over time as TASE moves past its demutualization and relatively recent IPO and develops a track record with investors, but this could take longer than anticipated or not materialize at all.

11

Appendix II – Comparable Company Analysis

13

Capitalization

Valuation

Profitability

TASE IT Comps Company

Tel Aviv Stock Exchange

Global Exchange Peers

B3 SA - Brasil Bolsa Balcao
ASX Ltd
Cboe Global Markets Inc
Bolsa Mexicana de Valores SAB de CV CME Group Inc

Deutsche Boerse AG TMX Group Ltd Euronext NV Nasdaq Inc

Average Median

Market Cap

533

13,624 11,364 12,975

1,117 71,368 31,554

5,898 12,324 32,545

21,419 12,975

Enterprise Value

429

11,533 7,509 13,851 985 74,258 35,792 6,429 14,925 38,072

22,595 13,851

EV / Revenue

EV / EBITDA

P/E Ratio

Dividend Yield

1.08%

1 23% 3 97% 1 58% 5 19% 1 81% 2 09% 2 30% 1 48% 1 11%

2.31% 1.81%

EBITDA Margin

Growth

Proj'd Cur Yr+1 Growth Revenue EBITDA EPS

    

Ticker

TASE IT

B3SA3 BZ ASX AU CBOE BOLSAA MM CME DB1 GY
X CN ENX FP NDAQ

Price

1,678.00

12 22

80 48 121 69 38 91 198 72 143 75 132 45 99 60 194 64

Cur Yr

4.2x

68x 10 4x 96x 51x 15 4x 89x 83x 10 1x 11 2x

9.5x 9.6x

Cur Yr+1

3.7x

64x 99x 93x 48x

14 4x 83x 79x 87x 10 7x

8.9x 8.7x

Cur Yr

13.4x

84x 14 2x 14 8x

85x 23 4x 15 5x 13 7x 17 0x 20 2x

15.1x 14.8x

Cur Yr+1

10.9x

83x 13 6x 14 6x

78x 21 3x 14 3x 13 3x 14 2x 19 6x

14.1x 14.2x

Cur Yr

39.6x

14 6x 31 4x 21 5x 15 3x 29 9x 22 0x 18 8x 19 4x 26 4x

22.1x 21.5x

Cur Yr+1

31.3x

13 8x 30 2x 20 8x 13 9x 27 2x 20 2x 18 5x 18 4x 25 3x

20.9x 20.2x

Cur Yr

31.6%

Cur Yr+1

33.6%

15.0%

22.3% 26.8%

          

80 7% 72 9% 64 7% 60 0% 66 0% 57 5% 60 7% 59 3% 55 4%

78 1% 72 9% 63 6% 61 0% 67 8% 58 2% 59 3% 61 2% 54 7%

54% 49% 30% 66% 69% 72% 48%

16 1% 4 3%

20% 50% 12% 85% 97% 85% 24%

19 8% 30%

57% 40% 30% 98%

10 2% 89% 15% 55% 41%

 

64.1% 60.7%

64.1% 61.2%

6.6% 5.4%

6.7% 5.8% 5.0% 5.5%

Despite faster revenue growth, significant margin upside, and substantial “hidden” assets, TASE trades in-line with its global exchange peers on an EV/EBITDA basis

Note: all market cap and enterprise values shown in U.S. dollars. Valuation metrics are based on consensus estimates from Bloomberg. Source: company filings and presentations.

[changegonnacome]

@Dinar nice one, thanks....very interesting

[dealraker]

12 hours ago, StevieV said:

 

 

dealraker - can you expand on this?  Is it that you think most of these won't do well from today's level?  A few will drag things down?  Some of each?

 

MSFT at 25x still too expensive to do great?  I think that's a fair thought.

Yea, the cloud thing.  Got the entire world's aggressive male bunch obsessed...salivating...spittin' out endless facts and data that mandate years of upside.  

[Gregmal]

Starter in HIW.