18. Topicus implied return, CI Financial and Monster Beverage Odd-Lots

Collection of data from my own tracking models for Topicus and some odd lot opportunities I took part in.

This is a short post just to share some of my semi automated tracker of the companies I own, and I hope to allocate additional funds over upcoming years, if the price becomes attractive at some point.

Topicus implied return

I wrote about this value shortcut for Topicus before. It is nothing more than a combination of market value adjusted ROIC+Org% measure Constellation itself uses for internal variable compensation allocation. Only adjustments I make is that I use market value of equity to substitute accounting values defining net invested capital.

Decrease in capital employed is due to special dividend Topicus paid.

Current implied yield is not unreasonable, but there will be probably be better moments to purchase more shares when either business outgrows the price or, price reduces compared to business value. At this level, you are in effect paying a market implied yield, with lower diversification of specific risk. You can find estimates of market implied yields, either on the website of Professor Damodaran, or Yardeni research.

The only change compared to previous periods, I would closely monitor in future, is how persistent goodwill impairments become. Amount of impairment shown below is not significant for Topicus, however it could mean that an average size historical acquisition was in effect liquidated. More likely, these impairments were booked across multiple acquired business. If I had to guess, these would be some of the more recent acquisitions happening during the period of post covid low interest rates, which could have inflated the net present value of goodwill during purchase price allocation.

As far as, what they are paying for their acquisitions, all is as it should be.

Looking at my DCF model, Topicus shows some evidence of undervaluation, and implies higher IRR if growth period of 5 to 7 years is assumed. Changes in EUR CAD parity, might cause a good buying opportunity for Euro investors.

—Updated after comment from Albetross capital, using data from June 24th, 2024.

CI Financial Odd-Lot

Created with TradingView

CI Financial announced yet another tender for share repurchase. Details of the tender offer can be found in the SEDAR filing.

Sedar Ci Financial Circular Eng

1.46MB ∙ PDF file

Download

Download

This time roughly 3.3% of outstanding shares will be repurchased at the price of CAD 15.50. Those who are owners on record at 28th June are also eligible to receive the dividend of CAD 0.2 per share. Tender should finalise at 8th July and settlement is expected within 10 days. Tender offer contains an odd lot provision, this offering you a profit of CAD 0.9 of capital appreciation and CAD 0.2 of dividends.

Amount is small, but coincedently, just enough to finance one of your average substack subscriptions. Standard cancellation clauses exist, but risk of it is small, as CI Financial has executed similar tenders in the past, using same legal wording.

Monster Beverage Odd Lot

This Amendment No. 2 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO originally filed with the Securities and Exchange Commission by Monster Beverage Corporation (the “Company,” “Monster,” “we,” “our,” or “us”) on May 8, 2024, as amended and supplemented on May 16, 2024 (as amended and supplemented, the “Schedule TO”) relating to the offer by Monster to purchase for cash shares of its common stock, $0.005 par value per share, for an aggregate purchase price of up to $3.0 billion, at a purchase price of not less than $53.00 nor greater than $60.00 per share, without interest and subject to any applicable withholding taxes. Monster’s offer was made upon the terms and subject to the conditions set forth in the Offer to Purchase, dated May 8, 2024, a copy of which was filed as Exhibit (a)(1)(A) to the Schedule TO (as it may be amended or supplemented from time to time, the “Offer to Purchase”), and in the related Letter of Transmittal, a copy of which was filed as Exhibit (a)(1)(B) to the Schedule TO (as it may be amended or supplemented from time to time, the “Letter of Transmittal”), which together constitute the tender offer (the “Offer”).

https://www.sec.gov/Archives/edgar/data/865752/000110465924058430/tm2413707-1_sctoi.htm

Created with TradingView

Similar to CI Financial, Monster Beverage is executing a repurchase of shares through modified Dutch auction (shareholders bid in a range of USD 53 to 60, Monster repurchases the declared number of shares at the minimum possible price. What is interesting is that few days ago, one of the cancellation conditions was waived (financing condition).

Odd lot clause is there, as well as the option to tender the shares without bid price. Thus ensuring you a profit of at least USD 1.1 per share, at most USD 8.1, if you tender 99 shares or less.

Disclaimer and kind request

Before you take any actions based on this article, remember, you are trusting an experimental analysis of an anonymous person. However, if you like it, and you think it makes sense, feel free to support my writing which I do in my spare time, while working a full-time job.

If anything you pick up from my substack or Twitter account results in you earning a reasonable profit, keep the karma going. Subscribe, even for a month.

In any case, it does not hurt to subscribe, share this article or comment. It hurts me if you don’t 😇

Or just share your best idea you can quantify with me.

Best of luck to all of us! 🍀