Wolfe Research's Senior Auto & Auto Retail Analyst, Chris Bottiglieri, hosted a webcast with Chief Investment Strategist Chris Senyek covering the KAR spin-off of IAA. Topics covered included historical trading dynamics, the valuation disconnect, and an examination of investor reactions.
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We wanted to flag a few highlights in today's (06/12/19) Wolfe Research Auto Daily....
Recent indicators support our overall view on Uber and Lyft
We highlight 3 key datapoints relevant to UBER and LYFT, including NYC ridership trends (which indicated a sharp slowdown for Lyft), AMZN’s recent exit from US food delivery, and news of Uber integrating Eats into its main app.
NIO – Launch of NIO Pilot is important
NIO Pilot (Level 2+ semi-autonomous system) is ready to launch. This is an opportunity for NIO to raise its profile with consumers through advanced technology.
KAR – Tackling the key issues into the spin
We are hosting a KAR webinar today at 10 30AM (and are joined by Wolfe’s Chief Investment Strategist – Chris Senyek) to discuss the key issues into the spin. Click here to sign up and to download the slides.
Canalys 1Q19 ADAS penetration data reflects strong growth ... and room for more
We analyzed 1Q19 ADAS penetration data for the US and Europe… which reflects the expansion of lower level ADAS into non-luxury offerings and rapid growth of higher level features in the luxury segment. Our key takeaways are detailed within.
Deep dive tackling key issues on KAR into the spin. We address spin trading dynamics, valuation, ADESA Online Risk, margin expansion opportunities at both KAR and IAA, investor concerns and positioning.
We’ve tweaked our IAA est. to account for the roll-off of intangible amort over the next few years from $44M in 2018 to $24M in 2020. To better match expected reported figures we also stripped shared service costs out of IAA numbers in 1H. We also used some of our cash build for debt pay down and a share repurchases. This affected our EPS, but not our EBITDA, and makes the implied cash adj. P/E multiple (23x not 26x) in our target valuation using 16x EBITDA. Reported 2019 EPS will be fuzzy post spin as we believe shared service costs and interest costs will all stay with KAR before being realized by IAA in 2H19. We recommend looking at 2020 numbers or NTM post Q2 as a cleaner picture of annual estimates.
KAR hosted a sell-side only analyst day this morning, with presentations from the CEOs and CFOs of both Remain Co and Spin Co. Remain Co’s 2019 EBITDA guidance of $530-$550m, which beat our $517M, was unfathomably bullish as it implies 6% annual growth despite declining 5% in Q1.
KAR hosted a sell-side only analyst day this morning, with presentations from the CEOs and CFOs of both Remain Co and Spin Co. Remain Co’s 2019 EBITDA guidance of $530-$550m, which beat our $517M, was unfathomably bullish as it implies 6% annual growth despite declining 5% in Q1. EPS guide was light due to taxes/spin nuances with interest expense. IAA mgt. came off as calculated/measured rather than brash, and while short on details, we expect more to emerge on margins/int’l strategy during an early 2020 analyst day that it is planning.
We wanted to flag a few highlights in today's (06/05/19) Wolfe Research Auto Daily....
KAR is on track for a late-June spin of IAA. KAR and IAA mgmt. teams are hosting a sell-side analyst day June 5th and are on the road with investors over the next few weeks. Valuation still looks compelling to us. Most investors we speak with cite 15-16x EV/EBITDA for IAA, which implies a 30% discount to CPRT on a lease-adj. basis. 16x on IAA implies Remain Co. is trading at 6.1x (or 4.4x if TradeRev is valued at ACV’s Dec. VC mark).
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