Author Topic: TDG - Transdigm  (Read 134436 times)

cmlber

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Re: TDG - Transdigm
« Reply #230 on: July 05, 2016, 06:25:59 PM »
I know the bull case and I am almost certain that I will get flamed here for saying this, but i am tempted to go short here. A few put options out there that are reasonably priced; I wish they were longer-dated, though.
Preliminary rationale.

1. I am struggling to work out what is the normalized level of free cash flow (levered or unlevered) that this business would generate if it suddenly stopped doing acquisitions.

2. I also think that at some point the economic rent that TDG is extracting via its high margins will start to flow back to its customers.

3. At this point in the economic cycle, I'd rather bet against things that are net-levered 6x.

4. Some of the other actors in the value chain are struggling.

Good luck with that...

Why would you short something just because you struggle to understand steady state free cash flow?  Wouldn't you short something because you don't struggle to understand steady state free cash flow and the business is expensive based on your analysis?


Oreo

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Re: TDG - Transdigm
« Reply #231 on: July 05, 2016, 06:45:47 PM »
I have learned the hard way not to short on valuation.

Larry

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Re: TDG - Transdigm
« Reply #232 on: August 09, 2016, 10:23:02 AM »
Quote
CLEVELAND, Aug. 9, 2016 /PRNewswire/ -- TransDigm Group Incorporated (NYSE: TDG), a leading global designer, producer and supplier of highly engineered aircraft components, today reported results for the third quarter ended July 2, 2016.

Highlights for the third quarter include:

    Net sales of $797.7 million, up 15.4% from $691.4 million;
    Net income of $140.6 million, up 41.9% from $99.1 million;
    Earnings per share of $2.52, up 44.0% from $1.75;
    EBITDA As Defined of $383.9 million, up 22.7% from $312.9 million;
    Adjusted earnings per share of $3.09, up 36.7% from $2.26; and
    Upward revision to fiscal 2016 financial guidance.

Net sales for the quarter rose 15.4%, or $106.3 million, to $797.7 million from $691.4 million in the comparable quarter a year ago. Organic net sales growth was 8.3%.
         

Looks good.

"EBITDA As Defined as a percentage of net sales for the quarter was 48.1%."

Very strong margins considering all the acquisitions they've done during the past 18 months or so. Stock also at ATH.

LongTermView

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Re: TDG - Transdigm
« Reply #233 on: August 24, 2016, 09:52:56 PM »
Just finished going through this thread.

http://whalewisdom.com/filer/altarock-partners-llc

Funny to see the composition of that portfolio.  I feel like some of the posters on COBF have very similar top holdings to that fund manager.

Looks like AltaRock sold around 39% of their TDG position in the quarter ending June 30th.

Liberty

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Re: TDG - Transdigm
« Reply #234 on: September 06, 2016, 03:07:31 PM »
New acquisition :

TransDigm to Acquire Young & Franklin Inc. and Tactair Fluid Controls Inc

http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=2199889

How early to the web did Young & Franklin have to be to get the domain YF.com ?  ???

Price is apparently $260m:

http://www.reuters.com/article/idUSFWN1BI0KM
« Last Edit: September 06, 2016, 04:16:45 PM by Liberty »
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Schwab711

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Re: TDG - Transdigm
« Reply #235 on: September 07, 2016, 11:05:54 AM »
At 10%-15% pre-tax margins this is 24x-35x P/EBT

TDG must have fantastic pricing power

Liberty

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Re: TDG - Transdigm
« Reply #236 on: September 07, 2016, 12:52:03 PM »
At 10%-15% pre-tax margins this is 24x-35x P/EBT

TDG must have fantastic pricing power

Where do you get the 10-15% from?
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Schwab711

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Re: TDG - Transdigm
« Reply #237 on: September 07, 2016, 12:58:25 PM »
At 10%-15% pre-tax margins this is 24x-35x P/EBT

TDG must have fantastic pricing power

Where do you get the 10-15% from?

I should have clarified! It's just a guess based on higher quality manufacturing/aerospace companies of similar size I've seen (BZC had roughly those margins).

http://quotes.morningstar.com/stock/analysis-report?t=XASE:BZC&region=usa&culture=en-US&productcode=MLE&cur=

Liberty

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Re: TDG - Transdigm
« Reply #238 on: October 04, 2016, 07:20:10 AM »
http://www.transdigm.com/phoenix.zhtml?c=196053&p=irol-newsArticle&ID=2209032

Quote
TransDigm Group Incorporated today announced that it is seeking to increase its existing term loan facility by an additional $650 million term loan in connection with considering whether to pay a special dividend.

The Company is considering paying a cash dividend in the range of $1.1 billion to $1.5 billion with the proceeds of the proposed new term loan and cash on hand. [...]

In connection with the proposed additional term loan and related discussions with lenders, the Company is providing an update on its preliminary expectations for certain fiscal 2016 results relative to the guidance provided on August 9, 2016 in its third quarter earnings release.  Based on these preliminary expectations the August 9, 2016 guidance still appears to be materially correct.  Based on currently available information, the Company expects fiscal 2016 EBITDA As Defined to be at or modestly above the midpoint of the previously stated guidance range and net sales to be at or slightly below the low end of the guidance range.  This information is preliminary and based on estimates for the recently completed fiscal year.  The Company plans to announce actual fiscal 2016 results on November 14, 2016.
« Last Edit: October 04, 2016, 07:21:57 AM by Liberty »
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Larry

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Re: TDG - Transdigm
« Reply #239 on: October 04, 2016, 10:21:55 AM »
I guess they had a pretty good m&a pipeline but only Young & Franklin closed so now they're (most likely) paying out this dividend (~$20-$27 per share).

If my math is not totally off, this would take their net debt/EBITDA quite high, around 6.7x (?) post dividend. I quickly put together some numbers,  I just used the midpoint for dividend ($1.3B). Correct me if I'm wrong there. So they are not able to do acquisitions at least for a while after this, probably tells something about the m&a pipeline right now. So management is really keeping leverage high while debt is cheap and rates haven't risen.

Stock is up ~25% YTD, wish I didn't sell down some of my position to buy something else while it was trading at 225 earlier this year.

So quiet lately here, anyone here still owning this and what do you think about the probable special dividend?
« Last Edit: October 04, 2016, 10:44:04 AM by Larry »