As talked about in my STEF write-up, US Chilly Storage firm Lineage went public a number of days in the past and was in a position to take action fairly efficiently.
As IPO prospectuses usually comprise some fairly attention-grabbing data, I needed to rapidly look via and extract what I discover attention-grabbing. Particularly on a scorching day like right this moment, studying rather a lot about chilly storage is sort of comforting 😉
Valuation
Let’s have a look at the brand new value level we obtained via the IPO. Sadly, Lineage Chilly Storage is just not but obtainable in TIKR, so let’s hae a fast have a look at comps “by hand”:
Bloomberg provides us a Market cap of 19,2 bn USD based mostly on 220 mn shares excellent. Complete income in 2023 was 5,3 bn (thereof 3,9 bn warehousing). Internet debt is 9,2 bn. EBITDA in 2023 was 1,15 bn (internet earnings is unfavorable). This ends in an EV/EBITDA a number of of at the moment (28,4/1,15) = 24,7x EV/EBITDA in comparison with 5,3x for STEF and 19,2x for Americold.
EV Gross sales is 5,4x vs 0,6x for STEF and 4,3x for Americold.
EBITDA margins are 22% for Lineage vs. 8,6% for STEF and 20,1% for Americold.
Internet debt/EBITDA is 8x for Lineage (pre IPO, ex leases), 2,3x for STEF and 6X for Americold.
So we cansee that margins are clearly larger for the 2 US corporations, almost certainly because of the larger share of trucking gross sales in STEF’s P/L, however Lineage units a brand new excessive level for valuation. Being a comparatively massive US inventory clearly helps, however I assume the key issue is positioning Lineage (and Americold) as a Actual Property firm is the “actual trick” , regardless of solely 3/4 of the gross sales are from warehousing. Logistic Actual Property is taken into account a “protected asset” and traders appear to demand capital prices which might be important decrease than “regular” corporates.
I used to be not capable of evaluate Returns on capital or property, As Lineage makes use of a metric (Internet Working Earnings Yield) that excludes the (important) Administrative prices. They appear to focus on Sept. 11% on that metric, the “true” ROIC is likely to be 2-3% decrease.
In abstract, I might not contemplate Lineage as an funding. The inventory appears very costly for a Chilly Storage Company (which in my view it ultimatley is). Nevertheless, they cleverly managed to place themselves as an actual property firm and actual property traders appear to be very pleased with low returns. Congratulations. However as soon as once more it helps my view that STEF, though indirectly comparable, is massively undervalued. We’ll see if and when the valuation hole is closing, however I’ll fortunately look forward to a few years. And perhaps this IPO will additional enhance curiosity within the inventory. Or STEF in some unspecified time in the future in time will get the trace and the place themselves extra as actual property play.
IPO prospectus materials:
Competitors
Apparently, Lineage, regardless of being acitve in Europe, doesn’t even point out STEF as a competitor:
In accordance with STEF’s annual report, STEF has 11,6 mn Cubic meters of storage which interprets to 11,6*35= 0,41 bn Cubic ft and would make STEF globally the quantity 3 or 4 on this desk.
I’m not positive why they didn’t embody STEF however when you do a comparability of listed friends one one peer is valued a lot decrease, some traders would possibly somewhat purchase a budget one. That’s clearly hypothesis from my aspect, however I don’t suppose that they merely “forgot” STEF as they’re energetic in Europe, too.
Regional foot print:
That is their reginonal footprint globally:
There’s a clear Deal with the US. Apparently, Europe, which accounts for 20% of capability appears fairly attention-grabbing. Some markets overlap with STEF (UK, Benelux), however general it appears much less like an actual community than a group of regional companies.
Energy prices:
That’s attention-grabbing data. I’ve not seen energy prices seperated for STEF.
Warehouse age
One attention-grabbing metric that the present is the age of the warehouses. They declare to have a bonus as a result of theirs are the most recent one:
As a relaticely new firm (based in 2008) that is perhaps not a giant shock. Unsure what which means in apply.
Boundaries to entry:
No shock right here, Chilly Retailer Warehouses are very costly to construct.
Progress drivers:
Some attention-grabbing features right here:
I didn’t have Urbanization on my Scorecard. Nevertheless, as this can be a persevering with pattern even in grime poor Europe, I fortunately take it up.
Cap Charges
A Cap Price in Actual Property means the “anticipated Internet Working Earnings” that investor require for an actual property funding. The potential provides an attention-grabbing perception on the uS market:
Some attention-grabbing KPIs:
That is an attention-grabbing “per pallet” desk from the prospectus. Fascinating to see that in whole, storage and dealing with prices ~300 USD per pallet annualized. That’s rather a lot.
Debt
This desk exhibits that together with lease liabilities, debt is even at 10,7 bn pre IPO:
Kind of Warehous Matrix:
Typical Expense Break up:
Worldwide Chilly storage growth capability:
This chart is attention-grabbing. It exhibits that for example France and Italy have comparatively little Chilly storage capability.
