A Healthy Cash-Machine for 4.5x FCF

Also trades at TBV and includes an 8% dividend yield...

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I found a way to access a Bloomberg-level terminal for 90% less. Here’s how →

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As I search through the sewers of the global stock market, I find all sorts of weird little scenarios.

Most of the time it’s just a healthy business being mispriced because the market can’t tolerate uncertainty.

Sometimes it’s some kind of special situation that offers downside protection and massive upside potential.

Today’s set-up is in this camp.

This type of situation is definitely not for everyone, but I do enjoy researching them, and the upside here is immense.

Here are the valuation ratios:

TBV = 1

EV/FCF = 4.5

P/FCF = 5.5

What this tells us is that we have considerable downside protection from the asset base, while the FCF yield is very high.

One of my favourite parts of this idea is that the management team are very keen to return those cash-flows back to the owners.

Last year, for example, the dividend yield (after SBC) was over 8%.

TTM it’s 6%, but there is a very specific and temporary reason for that.

So, if you enjoy businesses with a bit of hair on them, gather round, and let’s take a closer look…