Author Topic: SVU - SuperValu Inc.  (Read 48017 times)

kab60

  • Hero Member
  • *****
  • Posts: 704
Re: SVU - SuperValu Inc.
« Reply #150 on: February 08, 2018, 12:45:39 AM »
I don't like these guys. Seems to me that management are doing the right things, but transforming the company from a struggling grocery chain to a mostly wholesale business takes time. They're talking about dividends and share buybacks, while I'm uncomfortable with debt levels. Sale-leasebacks would probably make sense for some of their assets to pay down debt, but they're already exploring that option and have hired advisor, and I highly doubt Blackwell is right in their view that the RE is almost worth the entire EV of the Company. At least I'd like to see some documentation. Either way, selling their RE isn't just pure upside. There are negatives as well.


kab60

  • Hero Member
  • *****
  • Posts: 704
Re: SVU - SuperValu Inc.
« Reply #151 on: February 08, 2018, 05:15:53 AM »
Just to make sure, I'm also a bit frustrated with the stock price but mostly because I failed to fully realize that they'll need at least a major part of their retail operations for the foreseeable future. But that was bad analysis on my part and I can't really fault management for that. It seems pretty clear management are doing whatever it can to move towards wholesale, but wholesale is still dependent on their own retail stores. That might change, and if it does I'm pretty sure management will take advantage, but complaining about short term issues (like the stock price) when the business is going through a long term transformation seems silly. I underestimated how many things that needs to go right here (successful integration of wholesalers, continued growth in wholesale, successful sale/leasebacks, turning around/selling retail). I'm still holding, valuation isn't exactly demanding, but I don't think I got the odds right initially, and I'm still unsure whether or not I couldn't get better odds by bumping my new stake in Townsquare or something else, which seems a lot more simple.
« Last Edit: February 08, 2018, 06:22:51 AM by kab60 »

compoundvalue

  • Newbie
  • *
  • Posts: 17
Re: SVU - SuperValu Inc.
« Reply #152 on: February 08, 2018, 06:01:26 AM »
I basically agree that the Blackwell letter is no good. A dividend is really the last thing this company needs right now and downsizing retail will take time and can't be done instantaneously. It is definitely complicated and not a total cinch but I think that management has made significant progress and the direction is right. I think that they should be laser focused on reducing debt and properly integrating Unified Grocers and AG Florida.

If they can do just that and downsize retail a bit, it should work out okay. If they can also grow wholesale/improve margins/execute accretive sale-leaseback transactions - even better



kab60

  • Hero Member
  • *****
  • Posts: 704
Re: SVU - SuperValu Inc.
« Reply #155 on: April 25, 2018, 02:04:03 AM »
Wow, that was a whole bunch of news. All in all, decent results, like what they're doing. Higher than expected proceeds from sale/leaseback will be used to pay down debt, they're getting rid of more retail stores, synergy target for Unified Grocers lifted, and they're expecting low-mid digit organic growth in wholesale. There's a lot of put and takes as well as noise with the winding down of the TSA, discontinued ops, pension deficit etc, but it seems there's still quiet a lot of cost to take out while they become a more focused wholesale company. If they get leverage down to 3xebitda this year, and they hit 400m, it's around 4,4 EV/Ebitda (though their adj. Ebitda is now without stock comp, so add that back). I'd like a better handle on how it'll look like post TSA as well as when they shed the retail stores they just announced are for sale, but it seems quiet attractive. I like the sale/leaseback deal as they retain some flexibility while paying down debt and the cap rate around 6,6 pct. seems pretty good.