European Event-Driven Analyst

Jesus Rodriguez Aguilar

Jesús is an Insight Provider (Event-driven) on the Smartkarma network, where he looks across sectors at opportunities arising from securities mispricing (both credit and equity), share classes, bid announcements, prospective bids, and special situations. He has served as Economic and Business Advisor at the Spanish Congress in Madrid. Prior to that, he has worked in the City of London: as a Credit Analyst at Bloomberg; Event-driven associate at former boutique European Research; and doubled as Special Situations and Equity-linked VP (convertible bonds) at Merrill Lynch. Jesús has an MBA from the London Business School, a BA (Hons.) degree in Economics from the Complutense University in Madrid, and a BA (Hons.) in Law from U.N.E.D., also in Madrid.

Event-Driven

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<p>On 4 February, Daimler announced the spin-off of the truck division. It will list Daimler Trucks before the end of 2021 and distribute a majority stake to Daimler shareholders. From that moment on, Daimler will be renamed Mercedes-Benz.</p>
<p>This operation had been the subject of much speculation in the past, considering that segmenting both the passenger and the commercial vehicle business would offer a higher valuation of each of them. However, Daimler had been reluctant. This move makes sense, in my view.</p>
<p>It will enable Mercedes-Benz's strategy to focus on electrification and self-driving, areas in which other competitors (BMW, for example) are more advanced. Daimler Trucks will focus on improving margins and profitability while focusing on the development of other technologies (hydrogen fuel cell) as an alternative to the traditional combustion engine.</p>
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<p>Taking into account the multiples of other competitors, the valuation of Daimler Trucks could reach around €30 bn - €35 bn, according to consensus.</p>
<p>I value Daimler as a SOTP and obtain a <strong>value per share of €71.86</strong>.</p>
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<li>Considering the multiples of Volvo and Traton, the valuation of Daimler Trucks could reach up to €38.7 bn before debt, although it would need to significantly improve its returns to achieve that valuation.</li>
<li>The conglomerate discount of Daimler should reduce as the spin-off gets closer.</li>
<li>Corporate restructuring will be a catalyst for the stock price, in my view.</li>
<li>Moreover, a spin-off is shareholder friendly as a minority IPO (say the plans of Repsol Renewables) usually represent a limited valuation upside for the parent.</li>
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<p>Recommendation is <strong>Long DAI GR</strong>, <strong>TP €71.86</strong>.</p>
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<div>The reorganisation announcement triggered the price of Daimler, which rose 8.9%, to reach a market cap of €67.6 bn.</div>
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On 4 February, Daimler announced the spin-off of the truck division. It will list Daimler Trucks before the end of 2021 and distribute a majority stake to Daimler shareholders. From that moment on, Daimler will be renamed Mercedes-Benz.
This operation had been the subject of much speculation in the past, considering that segmenting both the passenger and the commercial vehicle business would offer a higher valuation of each of them. However, Daimler had been reluctant. This move makes sense, in my view.
It will enable Mercedes-Benz's strategy to focus on electrification and self-driving, areas in which other competitors (BMW, for example) are more advanced. Daimler Trucks will focus on improving margins and profitability while focusing on the development of other technologies (hydrogen fuel cell) as an alternative to the traditional combustion engine.

Taking into account the multiples of other competitors, the valuation of Daimler Trucks could reach around €30 bn - €35 bn, according to consensus.
I value Daimler as a SOTP and obtain a value per share of €71.86.

Considering the multiples of Volvo and Traton, the valuation of Daimler Trucks could reach up to €38.7 bn before debt, although it would need to significantly improve its returns to achieve that valuation.
The conglomerate discount of Daimler should reduce as the spin-off gets closer.
Corporate restructuring will be a catalyst for the stock price, in my view.
Moreover, a spin-off is shareholder friendly as a minority IPO (say the plans of Repsol Renewables) usually represent a limited valuation upside for the parent.


Recommendation is Long DAI GR, TP €71.86.

The reorganisation announcement triggered the price of Daimler, which rose 8.9%, to reach a market cap of €67.6 bn.








  

Mercedes-Benz Group

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