MTW: Adding Manitowoc to Investing Ideas

Takeaway: We are adding Manitowoc to Investing Ideas.

We are adding MTW to Investing Ideas today.

 

MTW: Adding Manitowoc to Investing Ideas - m1

 

Below is a note written by Hedgeye CEO Keith McCullough.

 

With both equity and treasury beta (SPY and TLT) signaling immediate-term TRADE oversold, I'm getting more buy signals here obviously than sells.

 

Manitowoc remains one of the misunderstood sum-of-the-parts names on our Institutional Best Ideas list. Jay Van Sciver is our Industrials analyst and recently wrote the following summary:

 

Breaking-Up Is Good…:  Manitowoc is splitting the business into two companies, along the lines sought by activist investors and presented in our recent Black Book.  The move also puts the assets in play, with adequate time for acquirers to take a look.  Given the valuation differential between the sum-of-the-parts and the current enterprise value of the company, the break-up should be a substantial positive.  

 

How much of a positive? The low-end of our sum of the parts valuation is $26 vs. the $19 close, and the low-end is not based on a MIDD comp (not that there is anything wrong with a MIDD comp).  In theory, spin-offs and break-ups unlock shareholder value while increasing operating potential of the formerly smothered units. 

 

There are all sorts of narratives that support this separation: complexity breeds a discount, conglomerates trade at a discount, or people mistakenly treat MTW as a ‘deep cyclical’ instead of the half cyclical, half a potential 'growth company like MIDD' that it actually is.  In this sense, perhaps Goldman is doing “God’s work” by advising the split.

 

Buy red, sell green.

KM


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