Author Topic: DWDP - Dow DuPont  (Read 30338 times)

BG2008

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Re: DWDP - Dow DuPont
« Reply #50 on: August 06, 2019, 04:03:06 PM »
https://finance.yahoo.com/news/dupont-considers-sale-biosciences-unit-182425104.html

"DuPont Considers Sale of Biosciences Unit That Could Fetch $20 Billion"

A $20 billion sale would equate to a roughly 13.5x EBITDA assuming a 2018 EBITDA of $1,475 ($1,600mm less $125mm) of standalone cost.  This multiple is higher than the current multiple of 10.8x EV/EBITDA.  Chemicals across the board have experienced macro headwinds in the first half of 2019.  Univar, Dupont, MMM


BG2008

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Re: DWDP - Dow DuPont
« Reply #51 on: November 04, 2019, 06:39:47 AM »
I think the DuPont business deserves a closer look and I would love feedback from people who work in the specialty chemical business.  Across the board, all chemical businesses have been hurt by 1-3% declining volume.  MMM is down 30% from its peak.  It's amazing the multiples that the market is willing to pay when they have a up 3-4% volume year with a up 7-8% FCF/year versus a year when earnings falls due.  It's all part of running a business.  It's the same company making the same products.  Quarterly and yearly results really drives prices.   

I think they can get to a 700mm share count by year end next year while paying their 2% dividend. $2.8bn share buyback between now and year end 2020 divided by $70/share equals 40mm shares.   The return on capital (EBIT over net working capital + net PP&E) is about 35% by my estimate.  $13.8bn for the capital and EBIT is $4.8bn to $5.0bn.  I use $5.8 to $6.0bn of EBITDA less $1bn of maintenance cap ex.  The long term return on unlevered capital (Joel Greenblatt's method) is 35-36%.  As they shed some non-core assets over time, this metric will continue to rise. 

So we have a 35% return on capital business that should grow at GDP + 2% into the foreseeable future (not every year, but the norm, not a secular declining company) that has shown the ability to hold or raise prices by 1-3% even when volume declines in 2019 trading for 12.4x 2020 FCF.  MMM is trading for 19-20x.  All the specialty chemical names are in the dog house this year because volume is down 1-3% across the board.  There is also the optionality that they further spinoff or sell some of their division.  The nutritional and bio science division is rumored to be sold.

I think there are 2 reason why this $50bn company is cheap and available.  First, volume is down 1-3% this year.  Second, there is a lot of noise.  There is a lot of D&A that you have to parse out before you get to true FCF.   

Other thoughts welcome.   

rogermunibond

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Re: DWDP - Dow DuPont
« Reply #52 on: November 04, 2019, 07:57:58 AM »
That's a good write up of the bull case.  The nutrition business could fetch $15-20B

Gregmal

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Re: DWDP - Dow DuPont
« Reply #53 on: November 04, 2019, 12:13:42 PM »
Any speculation that this might be the "new and undisclosed" Ackman long? Personally I think it fits. Wish I had done DD on DD a little sooner. Nice bump the past few days.

Spekulatius

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Re: DWDP - Dow DuPont
« Reply #54 on: November 04, 2019, 04:17:31 PM »
Cheap is relative. In the last, you could buy similar companies often for 9x EBITDA. DD has some real great business ( chip manufacturing consumables ). I bought some after the earning release, which was better then expected without thr stock reacting and sold today. Playing for small moves here, but it starts to add up.

One concern I have with Breen is that tends to scrimp on R&D somewhat. Same was the case with one Tyco spin-off I was involved with (Covidien).
Life is too short for cheap beer and wine.

Gregmal

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Re: DWDP - Dow DuPont
« Reply #55 on: November 15, 2019, 03:11:26 PM »
https://finance.yahoo.com/news/dupont-movie-very-damaging-analyst-190338922.html

Well, just as pretty much everything IMO(on a non trading basis, and with the exception of like 2 names) has suddenly become "short term expensive", a holiday gift comes along!

I suppose I may look to begin accumulating a DD position starting 11/21!

Spekulatius

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Re: DWDP - Dow DuPont
« Reply #56 on: November 15, 2019, 05:05:45 PM »
https://finance.yahoo.com/news/dupont-movie-very-damaging-analyst-190338922.html

Well, just as pretty much everything IMO(on a non trading basis, and with the exception of like 2 names) has suddenly become "short term expensive", a holiday gift comes along!

I suppose I may look to begin accumulating a DD position starting 11/21!

Also there are some lawsuits between the DuPont spinoffs, this affects primarily CC, then CTVA and DD. (If CC were unable to pay or unexpectedly win a lawsuit to keep DD and CTVA on the hook)

At least, I know now why CTVA and DD are down ~3.5% today. FWIW, I did buy back some DC shares I sold for $71 and change just a few days ago. The trading in these tin ties with virtually no relevant news makes little sense to me for quite some time, but it does seem easy to take advantage of this. Has DD and CTVA suddenly become a trading sardines for Robinhood Account holders? It almost seems that way.
Life is too short for cheap beer and wine.