Stock Thoughts
An Investment in Knowledge Pays the Best Interest
Benjamin Franklin
Papa Johns Delivers a Slice of Stability in an Uncertain Market
• 5.9% Dividend Yield.
• QSR (quick service restaurants) have historically been resilient in economic downturn, sometimes even seeing volume increases.
• Improved unit-economics for franchisees by waiving certain fees to drive down payback period from 5.5 years to 3.2 years, which we believe will incentivize expansion.
• Papa Dough loyalty program has 17.5 million active members, up 21% since 2023, thanks to the program revamp providing better value and more tailored discounts.
• Pivot to value offerings to boost short-term volumes and ensure market share expansion, making it up over the long term through commissary markup increases over the next 5 years.
Boyd is Betting on High Shareholder Returns and Long Term Growth
• 1.12% Dividend yield, committed to repurchasing at least 7.5% of outstanding shares in 2025.
• Despite some economic uncertainty, Boyd estimates 2025 will be overall flat outside of the online segment, where it still expects 8.6% bottom line growth.
• Boyd has a $317.5 million cash position and currently generates $556.7 million in annual free cash.
• $200-250 million in annual maintenance capex required, with $200 million additional slated for renovation and $100 million for breaking ground on a new Casino in Virginia.
• Fast growing online segment, with online revenue growing 43.6% on top of a 5% equity stake in FanDuel.
Whirlpool’s 8.2% Dividend Powerhouse Spinning Through the Downcycle
• 8.2% Dividend Yield
• Despite current headwinds in North American sales WHR’s high domestic manufacturing footprint (80% of US sales) provides insulation against potential tariff impacts.
• With a debt reduction target from 4.4x to 3.4x by end of 2025 and projected $550 million in free cash flow, WHR appears financially positioned to weather current housing market weakness.
• The stock has declined 27.0% over the trailing twelve months, potentially creating an attractive entry point as worst-case scenarios appear priced in.
Melco is a Discounted Way into Asia-Pacific Gambling Recovery
• Melco’s strategic shift to an asset-light model promises improved capital efficiency while maintaining its strong 15.6% Macau market share.
• Ongoing property renovations across the portfolio to organically attract high-value customers after junket market contraction.
• 2025 Projected capex increase of 70.5% to $415 million, backed by a $1.1 billion cash position.
• Targeted expansion into emerging markets like Sri Lanka and potentially Thailand creates long-term growth avenues beyond the core Macau operations.
• Despite 6.1x net debt to EBITDA ratio, management’s focus on deleveraging and potential Manila asset sale should strengthen the balance sheet.
PVH’s Undervalued Brand Renaissance at 5.6x PE
• Trading at just 5.6x PE following a 38.7% YTD decline.
• PVH’s strategic consolidation of its Tommy Hilfiger and Calvin Klein brands aims to restore pricing power and improve brand control, driving longer-term earnings power.
• Despite operational challenges, PVH maintains robust free cash flow of $715.3 million over the trailing twelve months, and a healthy balance sheet of 2.6x debt to EBITDA.
• While China represents 6% of revenue and 16% of EBT, PVH’s addition to China’s “unreliable entity list” appears to be priced in.
• PVH’s strategic initiatives including organic e-commerce growth and manufacturing consolidation position the company for potential margin improvement toward its long-term 15% operating margin target.
St. Joe has Hidden Value in Discounted Real Estate Portfolio
• 1.25% Yield
• Owns 167,000 acres of land in the Panhandle of Florida, which we believe can be monetized at a current present value of at least $100 per share.
• The major Bay-Walton Sector Plan covering 110,500 acres slated for development through 2064, including 170k residential units and 22 million sqft of commercial space.
• Special zoning status reduces regulatory hurdles for planned residential and commercial development.
• Record-setting year for hospitality segment offset the slowdown in the region’s housing market after a boom in 2021-22.
• The Bay-Walton County area has an annual population growth rate of 3.2%, providing a secular demographic tailwind.
Automotive Drives Solid Revenue Base for HIMX
• 3.0% Yield.
• HIMX’s automotive display-driver sales increase just under 20% year over year, now representing around 50% of global market share.
• Invested in partner FOCI, seeking to accelerate development of CPO (co-packaged optics) to improve efficiency in data transmission within datacenters.
• Continued partnership with “leading AR (augmented reality) partner” in creating new consumer AR wearables device.
• Computer vision partnership with NVDA (Nvidia), allowing HIMX’s technology to be plug-and-play with NVDA software.
LYB Expects 2025 Recovery to Support 6.9% Yield
• 6.9% Yield.
• Despite a high cash payout ratio of 106.3%, LYB intends to increase its dividend in 2025, backed by a $3.4 billion cash position.
• LYB reported growing industrial demand in North America, with high utilization rates and cost advantages from low natural gas prices.
• LYB is reviewing six underperforming assets in Europe, potentially leading to divestitures, closures, or efficiency investments.
• LYB is shutting down its Texas refinery, incurring $345 million in closing costs but freeing up $240 million in working capital.
• LYB’s net debt/EBITDA ratio of 2.1x is below the industry median of 2.4x.
2025 Is ENVX’s Inflection Point With First Commercial Production
• First to market 100% silicon anode lithium-ion battery, with 30% better energy density and faster charging than graphite anode batteries.
• Fab2 Production ramp in Malaysia, expecting first customer samples by mid-2025 and full serialized production by the end of September 2025.
• OEM agreements secured with 2 of the top 8 global smartphone manufacturers, a major IoT company, and 2 wearables customers.
• Automotive potential with a non-binding agreement to co-develop larger-scale battery cells for EV (Electric Vehicle) applications.
• Raised $100M in 2024, has enough funding to operate until at least September 2025.
Ring Energy Eyes Production Expansion Over the Medium Term
• Production increased 11.5% for the first 9 months of 2024, though a lower pricing environment had sales up 8.3% over the same period.
• Targeting leverage ratio of 1.0x debt to adjusted EBITDA, currently 1.59x.
• After REI reaches its target leverage, we expect management to ramp organic production or engage in another acquisition.
• Based on transactions of similar asset profiles, REI could be worth $2.44/share in private market value.
MYTE Looks to Expand Luxury Offering Breadth Through YNAP Acquisition
• MYT Netherlands Parent (MYTE), operating Mytheresa, will acquire Yoox-Net-a-Porter (YNAP) from Richemont and rebrand as LuxExperience.
• The combined entity is expected to reach $3.2 billion in gross merchandise value in 2025, with ambitions to grow into a $4 billion gross merchandise value luxury e-commerce giant by 2030.
• Richemont will provide MYTE with a $106 million working capital facility and YNAP’s $590 million in cash, while MYTE issues 43 million new shares to Richemont.
• The luxury e-commerce market is expected to double to $180 billion by 2030, with the total luxury market growing at 3-7% annually.
• YNAP generates 45% of revenue from North America, offering MYTE an opportunity to accelerate US growth.
Turnaround Looks Likely for B2Gold with Geopolitical Risks Mitigated
• 3.4% Dividend Yield
• Opportunistic repurchase authorization funded with dividend reduction.
• Fekola mine in Mali concerns are resolved, expecting to receive mining authorization in early 2025.
• First commercialization of Goose mine in Canada in September.
• BTG expects 2025 production growth of 27%.
• Strong financial position, selling off royalties and issuing convertible notes to bolster cash position and pay down high-interest revolver.
