Disclaimer: This isn’t funding Recommendation. By no means belief an nameless dude on the web. DO YOUR OWN RESEARCH!!!
As at all times, I’ve hooked up a pdf with the total writeup and solely deal with a couple of sections on this publish. And the Sound Observe after all.
- Elevator pitch:
Ocean-Wilsons, a UK listed, Bermuda domicile HoldCo which owns a 56% stake in a listed Brazilian Port/Maritime firm known as Wilson Sons and an funding portfolio, is buying and selling a a deep low cost (-48%) to its SOTP worth. Now nevertheless it appears very seemingly that the Brazilian Asset can be offered by 12 months finish 2024, which may doubtlessly set off a re-rating of the inventory on high of any premium paid within the sale.
2. Introduction:
Long run readers of my weblog know that along with investing into boring GARP shares, I additionally make investments into Particular Conditions once in a while. A particular scenario is a extra quick time period oriented funding with a transparent set off or catalyst. In earlier instances, I did extra of them, as of late I’ve much less time and solely look into them in the event that they bounce at me however normally with a comparatively small allocation. There are several types of Particular Conditions. This one is of the “Undervalued firm sells main working asset” kind of State of affairs, of which I’ve achieved a couple of prior to now. The final one was Exmar two years in the past with an honest end result.
3. Ocean Wilson: Potential sale of main working asset
Ocean Wilsons is a UK listed. Bermuda domiciled holding firm with a market cap of round 470 mn GBP. It’s fairly an uncommon firm. It reviews in USD, owns a 57% stake in a listed Brazilian Port/Maritime firm and runs a “fund of fund” hedge fund portfolio.
I got here throughout the corporate in the course of the evaluation of each. Logistec and Eurokai, however didn’t make investments to this point.
The Stability Sheet is tough to learn because it combines an funding portfolio and the consolidated Brazilian Port operations.
On the plus aspect, because the subsidiary is listed, it’s fairly straightforward to see that the worth of that participation known as (Wilsons Sons S.A.) is increased than the market cap of the mum or dad firm.
A fast and soiled SOTP evaluation offers us the next Low cost/potential upside:
Previous to the announcement (early June 2023), Ocean Wilsons additionally traded at a 50% low cost, so the low cost to NAV hasn’t narrowed that a lot.
Funnily sufficient, when Alluvial Capital wrote about Ocean Wilson in 2013, the low cost again then was solely 20% (these have been the times….):
8. Calculation of the potential return:
In an effort to calculate a possible return on this particular scenario, we have to make a couple of assumptions:
- What’s the assumed likelihood of a deal vs. no-deal ?
- What’s the timeline ?
- What would be the final buy value for the Brazilian stake ?
- What is going to Ocean Wilson do with the proceeds ?
- How will the share value of Ocean Wilson react, i.e. how would be the low cost to NAV after a deal ?
- What occurs if the deal doesn’t undergo ?
My “intestine feeling” assumptions can be as follows:
- 75% likelihood
- 12 months finish 2024 (for deal announcement, Q1 2025 for NAV low cost tightening)
- Present market value +20%
- Reinvest in Hedge-Funds
- NAV low cost will slim to -35%
- Share value will drop again to mid June Degree 2023
This offers us the next “anticipated” return:
In fact my assumptions may turn into unsuitable
- The acquisition value might be decrease or increased.
- Perhaps the NAV low cost doesn’t slim in any respect (unfavorable).
- Perhaps Ocean Wilson pays a particular dividend and even buys again inventory (optimistic).
- If the deal fails, the share value may go decrease (unfavorable).
- the timeline might be additional prolonged
On stability, I do suppose that my assumptions will not be aggressive and needs to be thought-about a “Base case”. For me, +24% anticipated return for a possible holding interval of ~6 months appears to be like fairly OK.
11. Conclusion & Recreation Plan:
Ocean Wilsons Holdings appears to be like like a doubtlessly attention-grabbing particular scenario. There’s a comparatively clear catalyst with first rate upside and the potential draw back appears to be like restricted.
I due to this fact determined to allocate ~2% of the portfolio into this Particular State of affairs funding at ~13,70 GBP/share.
The attention-grabbing half can be if and after we get additional data on a sale. Equally attention-grabbing can be if Administration then says one thing about what they will do with the proceeds. Within the Exmar case for example, there was a time lag between the announcement of the sale and the announcement of a quite small particular dividend.
It may also be useful to look at what Hansa Funding and Wilson Sons will talk in parallel.
Bonus Soundtrack: Mas que nada
Sergio Mendes feat. Black Eyed Peas – Mas Que Nada
