External reports (aggregated public sources), Value Investors Club

Value Investors Club

External reports (aggregated public sources)

Equity Bottom-Up

<ul><li>Pendragon sells UK car dealer and leasing businesses to Lithia Motors, leaving behind dealer management software segment Pinewood Technologies</li><li>Dividend payout from sale proceeds leaves Pinewood with around 20 million GBP of net cash</li><li>With Lithia Motors owning shares and potential for growth through software rollout, there is significant upside potential in Pinewood's valuation at a low multiple of 8x TTM EBITDA</li></ul>This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Pendragon sells UK car dealer and leasing businesses to Lithia Motors, leaving behind dealer management software segment Pinewood TechnologiesDividend payout from sale proceeds leaves Pinewood with around 20 million GBP of net cashWith Lithia Motors owning shares and potential for growth through software rollout, there is significant upside potential in Pinewood's valuation at a low multiple of 8x TTM EBITDAThis content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Pendragon Plc (PDG LN) - Wednesday, Jan 3, 2024

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>On 17 October, <a href="https://www.smartkarma.com/entities/autonation-inc" target="_blank" data-smartkarma-citation="entities:16548:1" rel="noopener">Autonation Inc (AN US)</a> also withdrew its proposal for <a href="https://www.smartkarma.com/entities/pendragon-plc" target="_blank" data-smartkarma-citation="entities:22080:1" rel="noopener">Pendragon PLC (PDG LN)</a>. Lithia's deal is likely to obtain shareholder's approval, for lack of a better offer.</li>
<li>Holding on would mean receiving 24.5p and staying in a small cap SaaS, whose shares are implicitly valued at 6.5p, instead of the 10.9p that Pendragon claims it is worth.</li>
<li>Readacross: Hedin, AutoNation, or someone else, could take a closer look at <a href="https://www.smartkarma.com/entities/vertu-motors-plc" target="_blank" data-smartkarma-citation="entities:23247:1" rel="noopener">Vertu Motors (VTU LN)</a>.</li>
</ul>


On 17 October, Autonation Inc (AN US) also withdrew its proposal for Pendragon PLC (PDG LN). Lithia's deal is likely to obtain shareholder's approval, for lack of a better offer.
Holding on would mean receiving 24.5p and staying in a small cap SaaS, whose shares are implicitly valued at 6.5p, instead of the 10.9p that Pendragon claims it is worth.
Readacross: Hedin, AutoNation, or someone else, could take a closer look at Vertu Motors (VTU LN).


<ul>
<li>The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). <a href="https://www.smartkarma.com/entities/pendragon-plc" target="_blank" data-smartkarma-citation="entities:22080:1" rel="noopener">Pendragon PLC (PDG LN)</a>'s shares are trading just below, at 35.2p.</li>
<li>It is now the turn of either Hedin or AutoNation to raise their offers. 32p/share seems a fair value for the standalone business. Synergies could be worth up to 10.54p/share.</li>
<li>Assuming a bidder distributes 60% of synergies to Pendragon shareholders, a potential offer price of 38.3p/share, in cash, 8% above Lithia's offer, could still be value enhancing.</li>
</ul>


The game is on with the sweetened offer from Lithia, valued at 35.4p/share (24.5p divi + stake in Pinewood). Pendragon PLC (PDG LN)'s shares are trading just below, at 35.2p.
It is now the turn of either Hedin or AutoNation to raise their offers. 32p/share seems a fair value for the standalone business. Synergies could be worth up to 10.54p/share.
Assuming a bidder distributes 60% of synergies to Pendragon shareholders, a potential offer price of 38.3p/share, in cash, 8% above Lithia's offer, could still be value enhancing.


<ul>
<li>My comparables derived valuation of <a href="https://www.smartkarma.com/entities/pendragon-plc" target="_blank" data-smartkarma-citation="entities:22080:1" rel="noopener">Pendragon PLC (PDG LN)</a> is 32p/share, above the value of Lithia's "package" and spot-on Hedin's unsolicited &amp; preliminary revised offer (well above its initial lowball offer).</li>
<li>The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.</li>
<li>The revised Hedin's offer is 17% above Lithia's, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board's recommendation. Gross spread, 5.6%. Long.</li>
</ul>


My comparables derived valuation of Pendragon PLC (PDG LN) is 32p/share, above the value of Lithia's "package" and spot-on Hedin's unsolicited &amp; preliminary revised offer (well above its initial lowball offer).
The market seems skeptical about the future prospects of Pinewood. Putting it on a 13.3x multiple, the value of the business would still be c. 11p/share, hardly a game-changer.
The revised Hedin's offer is 17% above Lithia's, with no execution risk (Hedin backing off again seems less likely), and probably enough to win Board's recommendation. Gross spread, 5.6%. Long.


Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Shinko Electric Industries / Event-Driven

<ul>
<li>If <a href="https://www.smartkarma.com/entities/descente-ltd" target="_blank" data-smartkarma-citation="entities:8225:1" rel="noopener">Descente Ltd (8114 JP)</a> earnings disappoints, buy the dip. <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" data-smartkarma-citation="entities:18448:1" rel="noopener">Itochu Corp (8001 JP)</a> is buying for the long-term.</li>
<li>
<a href="https://www.smartkarma.com/entities/mgm-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:472:1" rel="noopener">MGM China Holdings (2282 HK)</a> has gained market share in mass table market, VIP, and total revenue. Yet MGM's FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.</li>
<li>If you had a J-REIT portfolio, <a href="https://www.smartkarma.com/entities/sankei-real-estate-inc" target="_blank" data-smartkarma-citation="entities:35239:1" rel="noopener">Sankei Real Estate (2972 JP)</a> would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.</li>
</ul>


If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.

MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM's FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.


Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,

United Kingdom

Pendragon PLC sells new and used vehicles and provides contract hiring and after sales services.  The Company operates approximately 150 franchises that sell vehicles including Aston Martin, BMW, Daihatsu, Ferrari, Ford, Honda,Isuzu, Jaguar, Land Rover, Lexus, Mazda, Mercedes-Benz, Nissan, Rolls-Royce, Porsche, Peugeot, Rover, Saab, Toyota, Volkswagen & Audi and Volvo.

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Pendragon PLC (PDG LN)