Author Topic: JEF - Jefferies Group  (Read 594824 times)

rogermunibond

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 785
Re: JEF - Jefferies Group
« Reply #880 on: September 03, 2014, 10:52:41 AM »
Interesting how they've labeled all those operating companies that LUK holds as merchant banking.

I don't like that characterization of it, despite maybe it's accuracy.

Cummings & Steinberg had always just had a mish-mash of companies they bought cheap and then sold dear or liquidated.  To put it under the merchant banking moniker sounds like LUK will now be measured as a financial services company kind of like Lazard.



ajc

  • Guest

BG2008

  • Hero Member
  • *****
  • Posts: 1021
Re: JEF - Jefferies Group
« Reply #882 on: September 03, 2014, 04:33:50 PM »
Anyone else notice that Homefed trades at a $494mm valuation for its 64% stake but is only carried on the books at $227mm? Are there other examples such as this?

Wabash02

  • Newbie
  • *
  • Posts: 24
Re: JEF - Jefferies Group
« Reply #883 on: September 03, 2014, 07:14:06 PM »
Anyone else notice that Homefed trades at a $494mm valuation for its 64% stake but is only carried on the books at $227mm? Are there other examples such as this?

Berkadia has roughly a 150mm pretax income run rate, yet is carried for 203mm. 

Vitesse Energy is very interesting.  Bob Gerrity souded very legit and mentioned that payback periods for the wells are under one year!  He also said of the most recent deal, they were not the high bid but with LUK backing they won it because they could close the deal in a month.  They own the wells and let other operators run it, the business model seems amazing.  Would not be surprised to see the value of that much higher in 1-3 yrs.

Linkem is in a unique position and if what the CEO said is anywhere close to correct they are worth quite a bit more than book value. (Basically Italy has a large legacy copper infrastructure wholly owned by Telecom Italia, and Linkem is both faster and cheaper--gets great customer reviews and good subscriber growth.)

Obviously the big horse in the stable is Jefferies and they have an investor day Oct 9th, but I came away from the call quite bullish and happy with my position.


thepupil

  • Hero Member
  • *****
  • Posts: 1207
Re: JEF - Jefferies Group
« Reply #884 on: September 03, 2014, 07:15:51 PM »
 thoughts on book value in relation to IV for various parts of LUK


Berkadia is undervalued on the balance sheet, marked at 2.6X annualized 1H2014 Pretax earnings, a mortgage banker's earnings are incredibly lumpy, but Walker Dunlop is a good comp and trades at much higher multiples.
 
Berkadia 50% interest book value: $203MM
Berkadia Pre-tax earnings(2011-2013): $35MM $105MM $135MM, $79MM YTD
"Our share of pre-tax earnings for the first half of the year was $38.4 million and we received $19.4 million in distributions"

Garcadia is undervalued on the balance sheet

Garcadia book value: $140MM , approximately 65% interest in company + land and real estate rented to dealerships, the ownership structure isn't as clean here since LUK owns a varying % of dealerships but I don't think it's worth $140MM given they've received $80MM of distributions over the past 3 years and their ROE is in 20's and 30's

Consolidated (not just LUK's share) revenue           2011-2013: $790MM, $1.1B, $1.5B
Consolidated (not just LUK's share) pretax income  2011-2013: $22MM, $37MM, $47MM
Distributions to LUK: $16MM, $30MM, $40MM
Pre-tax ROE on LUK's interest: 26%, 33%, 32%

National Beef may be overvalued at $775MM, tough to tell if the challenges there are just cyclical, they had a good yer or two where they generated like 15% of LUK's basis in cash and then the business just went to shit.

The energy projects have no book value, so that's big source of potential growth and optionality

The way I look at LUK is

I pay $9.3B

I get $2.2B of liquid assets;  (net cash, asset management business<--am i the only one that loves the Folger Hill seed??? big scalable multi-manager HF's are fee machines , harbinger + homefed stock at market)

I get the next $3.5B or so of pre tax earnings tax free

So the remaining $7.1B grows with JEF pre-tax income of 5 or 6 hundo (7-8.5% of the ex-liquid assets book) and with earnings from all the other crap, plus the optionality from stuff like Energy marked at 0)

It's definitely not a 50 cent dollar, but perhaps a growing 75 or 80 cent one, with ample liquidity, a bigass tax asset and lots of connections for possibly lucrative investments.

« Last Edit: September 03, 2014, 08:28:36 PM by thepupil »

scorpioncapital

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1739
    • scorpion capital
Re: JEF - Jefferies Group
« Reply #885 on: September 03, 2014, 08:40:35 PM »
"National Beef may be overvalued at $775MM,"

The CEO was asked the normal net profit margin over the cycle and he said 2.5-4%. That implies around $120mm at 3% on 4 billion in revenues or 15% return on investment.

Kiltacular

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 514
Re: JEF - Jefferies Group
« Reply #886 on: September 03, 2014, 08:41:25 PM »
thoughts on book value in relation to IV for various parts of LUK


Berkadia is undervalued on the balance sheet, marked at 2.6X annualized 1H2014 Pretax earnings, a mortgage banker's earnings are incredibly lumpy, but Walker Dunlop is a good comp and trades at much higher multiples.
 
Berkadia 50% interest book value: $203MM
Berkadia Pre-tax earnings(2011-2013): $35MM $105MM $135MM, $79MM YTD
"Our share of pre-tax earnings for the first half of the year was $38.4 million and we received $19.4 million in distributions"

Garcadia is undervalued on the balance sheet

Garcadia book value: $140MM , approximately 65% interest in company + land and real estate rented to dealerships, the ownership structure isn't as clean here since LUK owns a varying % of dealerships but I don't think it's worth $140MM given they've received $80MM of distributions over the past 3 years and their ROE is in 20's and 30's

Consolidated (not just LUK's share) revenue           2011-2013: $790MM, $1.1B, $1.5B
Consolidated (not just LUK's share) pretax income  2011-2013: $22MM, $37MM, $47MM
Distributions to LUK: $16MM, $30MM, $40MM
Pre-tax ROE on LUK's interest: 26%, 33%, 32%

National Beef may be overvalued at $775MM, tough to tell if the challenges there are just cyclical, they had a good yer or two where they generated like 15% of LUK's basis in cash and then the business just went to shit.

The energy projects have no book value, so that's big source of potential growth and optionality

The way I look at LUK is

I pay $9.3B

I get $2.2B of liquid assets;  (net cash, asset management business<--am i the only one that loves the Folger Hill seed??? big scalable multi-manager HF's are fee machines , harbinger + homefed stock at market)

I get the next $3.5B or so of pre tax earnings tax free

So the remaining $7.1B grows with JEF pre-tax income of 5 or 6 hundo (7-8.5% of the ex-liquid assets book) and with earnings from all the other crap, plus the optionality from stuff like Energy marked at 0)

It's definitely not a 50 cent dollar, but perhaps a growing 75 or 80 cent one, with ample liquidity, a bigass tax asset and lots of connections for possibly lucrative investments.

I think this is a good analysis, though I do share some of rogermunibond's concerns (though perhaps that's what the market thinks too and why this might be cheapish).  If it was a 50% dollar, I'd be back to a very large position.

I did like that the new team immediately shut Sangart.

This company is priced just wrong...not quite cheap enough given the unproven team (aside from their Jefferies experience) but just cheap enough to possibly turn out to be a superb investment from these prices.

If they can execute on the energy deal in Louisiana that Cummings and Steinberg referenced in their final letter, that would be nice.

Excerpt from their last letter, 2012:

A Major Future Opportunity

After a 10-year effort led by the indomitable and indefatigable Tom Mara, our Louisiana
gasification project is now poised to move into the construction phase. The gasification facility
located in Lake Charles, Louisiana has major off-take agreements in place as well as all
necessary permits. It recently entered into a Memorandum of Understanding with SKE&C USA,
Inc., SK Engineering & Construction Co. Ltd. and Technip USA Inc. pursuant to which they
will provide an industry standard lump sum turnkey construction contract.
Funding for this project will be covered in part by $1.561 billion of tax exempt bonds, a $230
million federal grant for carbon capture and sequestration, and a $128 million federal investment
tax credit. The project will require equity of $400 to $600 million.

WhoIsWarren

  • Sr. Member
  • ****
  • Posts: 288
Re: JEF - Jefferies Group
« Reply #887 on: September 04, 2014, 03:01:04 AM »
I came away from the call quite bullish and happy with my position.

Darn it -- I missed the call.  Anyone know where I can get a transcript?  Bloomberg doesn't have it.....and as for the LUK website, sheesh! ::)

maxthetrade

  • Jr. Member
  • **
  • Posts: 99
Re: JEF - Jefferies Group
« Reply #888 on: September 04, 2014, 08:51:52 AM »
I came away from the call quite bullish and happy with my position.

Darn it -- I missed the call.  Anyone know where I can get a transcript?  Bloomberg doesn't have it.....and as for the LUK website, sheesh! ::)

Unfortunately there is no replay or transcript available.

jay21

  • Hero Member
  • *****
  • Posts: 1217
Re: JEF - Jefferies Group
« Reply #889 on: September 07, 2014, 08:29:26 AM »
Someone post a few notes on Yahoo. Nothing too helpful imo.  Thought this was interesting:

"Very interesting -- either Handler or Friedman (or someone) mentioned that they expect to convert the $1.3 billion DTA into cash within the next 3-5 years. If so, that would be astonishing income generation during that period."

And I liked his note on asset managers:

"They are expanding the asset management business by investing in managers (and management companies), rather than doing M&A deals that would create goodwill -- they believe everything is highly or fairly valued. "

I.E. - if they were to get out and buy a GP/asset manager business they would have to pay more than the way they are currently structuring their deals.

http://finance.yahoo.com/mbview/threadview/?&bn=19ae4497-92fa-3786-aa7d-551fc38c08ed&tid=1409783681041-ab10dd5f-d556-41c6-af9f-496945789870&tls=la%2Cd%2C0%2C3
@jay_21_