As talked about in my STEF write-up, US Chilly Storage firm Lineage went public a number of days in the past and was ready to take action fairly efficiently.
As IPO prospectuses usually comprise some fairly attention-grabbing info, I needed to rapidly look by means of and extract what I discover attention-grabbing. Particularly on a scorching day like as we speak, studying quite a bit about chilly storage is kind of comforting 😉
Valuation
Let’s have a look at the brand new worth level we acquired by means of the IPO. Sadly, Lineage Chilly Storage is just not but accessible in TIKR, so let’s hae a fast have a look at comps “by hand”:
Bloomberg offers 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 (web earnings is detrimental). This ends in an EV/EBITDA a number of of at present (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 definitely because of the larger proportion of trucking gross sales in STEF’s P/L, however Lineage units a brand new excessive level for valuation. Being a comparatively giant US inventory clearly helps, however I suppose the main 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 buyers appear to demand capital prices which are important decrease than “regular” corporates.
I used to be not in a position to examine Returns on capital or property, As Lineage makes use of a metric (Internet Working Revenue Yield) that excludes the (important) Administrative prices. They appear to focus on 9/11% on that metric, the “true” ROIC could be 2-3% decrease.
In abstract, I might not contemplate Lineage as an funding. The inventory seems to be very costly for a Chilly Storage Company (which for my part it ultimatley is). Nonetheless, they cleverly managed to place themselves as an actual property firm and actual property buyers appear to be very pleased with low returns. Congratulations. However as soon as once more it helps my view that STEF, though in a roundabout way comparable, is massively undervalued. We are going to 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 improve curiosity within the inventory. Or STEF sooner or later 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:
Based on STEF’s annual report, STEF has 11,6 mn Cubic meters of storage which interprets to 11,6*35= 0,41 bn Cubic toes and would make STEF globally the quantity 3 or 4 on this desk.
I’m not positive why they didn’t embody STEF however for those who do a comparability of listed friends one one peer is valued a lot decrease, some buyers would possibly reasonably purchase a budget one. That’s clearly hypothesis from my aspect, however I don’t assume 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 seems to be fairly attention-grabbing. Some markets overlap with STEF (UK, Benelux), however total it seems to be much less like an actual community than a set of regional companies.
Energy prices:
That’s attention-grabbing info. 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 latest one:
As a relaticely new firm (based in 2008) that is perhaps not an enormous shock. Undecided what meaning in apply.
Limitations to entry:
No shock right here, Chilly Retailer Warehouses are very costly to construct.
Development drivers:
Some attention-grabbing facets right here:
I didn’t have Urbanization on my Scorecard. Nonetheless, as this can be a persevering with development even in grime poor Europe, I fortunately take it up.
Cap Charges
A Cap Charge in Actual Property means the “anticipated Internet Working Revenue” that investor require for an actual property funding. The possible offers an attention-grabbing perception on the uS market:
Some attention-grabbing KPIs:
That is an attention-grabbing “per pallet” desk from the prospectus. Attention-grabbing to see that in whole, storage and dealing with prices ~300 USD per pallet annualized. That’s quite a bit.
Debt
This desk reveals that together with lease liabilities, debt is even at 10,7 bn pre IPO:
Sort of Warehous Matrix:
Typical Expense Cut up:
Worldwide Chilly storage improvement capability:
This chart is attention-grabbing. It reveals that as an illustration France and Italy have comparatively little Chilly storage capability.
