As talked about in my STEF write-up, US Chilly Storage firm Lineage went public a number of days in the past and was in a position to take action fairly efficiently.
As IPO prospectuses typically include some fairly attention-grabbing data, I needed to rapidly look by and extract what I discover attention-grabbing. Particularly on a sizzling day like right now, studying quite a bit about chilly storage is sort of comforting 😉
Valuation
Let’s take a look at the brand new worth level we received by the IPO. Sadly, Lineage Chilly Storage is just not but obtainable in TIKR, so let’s hae a fast take a look at comps “by hand”:
Bloomberg offers us a Market cap of 19,2 bn USD primarily based on 220 mn shares excellent. Complete income in 2023 was 5,3 bn (thereof 3,9 bn warehousing). Internet debt is 9,2 bn. EBITDA in 2023 was 1,15 bn (web earnings is damaging). This ends in an EV/EBITDA a number of of at the moment (28,4/1,15) = 24,7x EV/EBITDA in comparison with 5,3x for STEF and 19,2x for Americold.
EV Gross sales is 5,4x vs 0,6x for STEF and 4,3x for Americold.
EBITDA margins are 22% for Lineage vs. 8,6% for STEF and 20,1% for Americold.
Internet debt/EBITDA is 8x for Lineage (pre IPO, ex leases), 2,3x for STEF and 6X for Americold.
So we cansee that margins are clearly greater for the 2 US firms, most definitely because of the greater proportion of trucking gross sales in STEF’s P/L, however Lineage units a brand new excessive level for valuation. Being a comparatively massive US inventory clearly helps, however I suppose the key issue is positioning Lineage (and Americold) as a Actual Property firm is the “actual trick” , regardless of solely 3/4 of the gross sales are from warehousing. Logistic Actual Property is taken into account a “protected asset” and traders appear to demand capital prices which can be vital decrease than “regular” corporates.
I used to be not capable of evaluate Returns on capital or property, As Lineage makes use of a metric (Internet Working Revenue Yield) that excludes the (vital) Administrative prices. They appear to focus on Sept. 11% on that metric, the “true” ROIC is perhaps 2-3% decrease.
In abstract, I’d not take into account Lineage as an funding. The inventory seems to be very costly for a Chilly Storage Company (which for my part it ultimatley is). Nonetheless, they cleverly managed to place themselves as an actual property firm and actual property traders appear to be very pleased with low returns. Congratulations. However as soon as once more it helps my view that STEF, though indirectly comparable, is massively undervalued. We’ll see if and when the valuation hole is closing, however I’ll fortunately await a few years. And perhaps this IPO will additional improve curiosity within the inventory. Or STEF sooner or later in time will get the trace and the place themselves extra as actual property play.
IPO prospectus materials:
Competitors
Apparently, Lineage, regardless of being acitve in Europe, doesn’t even point out STEF as a competitor:
In line with STEF’s annual report, STEF has 11,6 mn Cubic meters of storage which interprets to 11,6*35= 0,41 bn Cubic ft and would make STEF globally the quantity 3 or 4 on this desk.
I’m not positive why they didn’t embrace STEF however if you happen to do a comparability of listed friends one one peer is valued a lot decrease, some traders may somewhat purchase a budget one. That’s clearly hypothesis from my aspect, however I don’t assume that they merely “forgot” STEF as they’re energetic in Europe, too.
Regional foot print:
That is their reginonal footprint globally:
There’s a clear Deal with the US. Apparently, Europe, which accounts for 20% of capability seems to be fairly attention-grabbing. Some markets overlap with STEF (UK, Benelux), however total it seems to be much less like an actual community than a group of regional companies.
Energy prices:
That’s attention-grabbing data. I’ve not seen energy prices seperated for STEF.
Warehouse age
One attention-grabbing metric that the present is the age of the warehouses. They declare to have a bonus as a result of theirs are the most recent one:
As a relaticely new firm (based in 2008) that is perhaps not a giant shock. Undecided what which means in observe.
Limitations to entry:
No shock right here, Chilly Retailer Warehouses are very costly to construct.
Development drivers:
Some attention-grabbing points right here:
I didn’t have Urbanization on my Scorecard. Nonetheless, as it is a persevering with pattern even in dust poor Europe, I fortunately take it up.
Cap Charges
A Cap Fee in Actual Property means the “anticipated Internet Working Revenue” that investor require for an actual property funding. The potential offers an attention-grabbing perception on the uS market:
Some attention-grabbing KPIs:
That is an attention-grabbing “per pallet” desk from the prospectus. Fascinating to see that in complete, storage and dealing with prices ~300 USD per pallet annualized. That’s rather a lot.
Debt
This desk reveals that together with lease liabilities, debt is even at 10,7 bn pre IPO:
Sort of Warehous Matrix:
Typical Expense Break up:
Worldwide Chilly storage growth capability:
This chart is attention-grabbing. It reveals that for example France and Italy have comparatively little Chilly storage capability.
