MOI Global - unknown
The discussion highlights an investment setup that combines the advantages of private equity and public markets. The company in focus is backed by private equity, offering control and growth potential, while its stock price is dislocated in the public market, providing a buying opportunity. The company was identified through a tax screen in 2023, and a significant position was taken in 2024. The stock trades at $15-$16 with a base case target of $30, suggesting a potential doubling in value over two years. The company is compared to Valvoline, known for its Quick Lube business, and is expanding rapidly with its Take Five brand, which is the fastest-growing in the U.S. The business model includes a mix of franchise and company-owned stores, with significant growth in the Quick Lube and AutoGlass sectors. Challenges include a struggling car wash segment, but improvements are underway with a growing subscription base. The company is expected to double its stock value by 2026, aligning with street estimates, despite investor preference for simpler stories like Valvoline.
Key Points:
- Investment opportunity in a private equity-backed company with a dislocated stock price.
- Potential for stock value to double from $15-$16 to $30 over two years.
- Company's growth driven by Quick Lube and AutoGlass sectors, with Take Five as a key brand.
- Challenges in the car wash segment being addressed with a growing subscription model.
- Expected alignment with street estimates by 2026, despite investor preference for simpler investments.
Details:
1. 📈 Exploring Unique Public Market Opportunities
- Adopting a private equity approach in public markets provides one of the best setups available, offering strategic advantages.
- Investors can capitalize on unique opportunities by entering into public companies backed by private equity, which can lead to significant returns.
- This approach allows for leveraging private equity strategies, such as operational improvements and strategic guidance, to enhance the value of public companies.
- Examples of successful private equity-backed public companies include XYZ Corp, which saw a 50% increase in value after implementing operational efficiencies.
- This strategy is particularly effective in markets with undervalued public companies, where private equity can unlock hidden value.
2. 🔍 Strategic Investment and Business Analysis
- The dislocated stock price provides an opportunity for strategic investments, as the public market price may not reflect the true private market value.
- This situation offers the best of both private equity and public market advantages: control and growth mindset from private equity, and price dislocation benefits from public markets.
- Investors can leverage the dislocation in stock prices to gain value, as these prices are not indicative of the transaction prices in private markets.
3. 💼 Comprehensive Company Overview and Market Position
- The company initially appeared on a tax L screen in 2023, strategically timing its market entry to increase its position by spring-summer 2024, highlighting effective market positioning.
- The stock currently trades between $15 and $16, with a base case projection of $30, indicating a potential doubling of value over two years, showcasing strong growth potential.
- The company's strategy centers on a straightforward approach, focusing on a deep understanding of business fundamentals and identifying growth catalysts to drive progress.
- Involvement from a reputable private equity firm based in Atlanta enhances the company's credibility and prospects, suggesting strategic backing and potential for accelerated growth.
4. 👍 Analyzing the Good Co, Bad Co Strategy
- The company's EBITDA shows 90% performing well, while 10% struggled significantly in 2023, affecting overall performance.
- Plans are in place to either sell or fix the underperforming 10% within a month, with expectations of recovery in 2024.
- The strategy involves actively managing the struggling segment despite the strong performance of the rest of the business, emphasizing targeted recovery plans.
- Background on the Good Co, Bad Co strategy: It involves separating well-performing operations from underperforming ones to improve overall efficiency.
5. 🚗 The Success of Quick Lube Business
- Valvoline is a leading brand in the Quick Lube business, known for its efficient oil change services.
- The Quick Lube business model involves customers receiving fast oil changes, emphasizing time efficiency and proper oil disposal.
- Both Valvoline and the Take Five brand are experiencing dramatic growth, with Take Five being the fastest growing brand in the U.S.
- The business model includes both franchise and company-owned locations, expanding state by state across the United States.
- Operational strategies focus on optimizing service time and ensuring environmental compliance, particularly in oil disposal.
- Market challenges include maintaining service quality while expanding rapidly and differentiating from competitors.
- Competitive strategies involve leveraging brand reputation and customer loyalty, along with innovation in service delivery to stay ahead in the market.
6. 🔧 Diversified Business Ventures and Their Growth
- The Take 5 franchise is a significant growth driver, contributing to nearly 50% of the company's expansion, with an impressive annual growth rate of 150 units. This is supported by strong unit economics as shown in franchise disclosure documents.
- The business's paint, collision, and glass services represent 20% of operations, with a notable focus on franchise activities in the collision and paint sectors.
- AutoGlass Now ranks as the second largest player in the global autoglass market, trailing only SafeLite, and is a key growth area for the company.
- The paint and collision sector, while characterized by steady and low growth, yields extremely high free cash flow, underpinning its strategic value.
7. 🚿 Addressing Challenges in Car Wash Operations
- The decline in stock price from $30 to $11 was primarily due to issues in the US Car Wash segment, which is wholly owned by the company.
- Private equity broadly over-invested in car wash operations leading to diminished returns.
- The subscription program for the car wash now has a million members, with consistent monthly growth in 2024 leading up to November.
- The international car wash business, which operates independently similar to a franchise model, lacks synergies with the core operations and is a candidate for divestiture.
- To address the challenges in the US segment, the company is focusing on optimizing operational efficiency and exploring innovative customer engagement strategies to boost profitability.
- Consideration for divestiture of international operations is based on their lack of alignment with the core business strategy and potential to generate capital for reinvestment in high-performing areas.