market folly

We're posting up notes from the Capitalize For Kids Sohn Canada conference that just took place.  Next up is Frank Brosens of Taconic Capital who pitched a long of Men's Wearhouse (MW).


Frank Brosens' Sohn Canada Presentation

Runs a multi-strategy firm, with a focus on event driven ideas.

Pitched LONG The Men’s Wearhouse. Mentioned short term oriented traders flooded the stock during the merger battle with Jos. A. Bank Clothiers and has caused significant opportunities. The stock has sold off hard over last 2 weeks and they think it looks interesting again. The company can earn $5.50/share two years out with some catalysts to mention.

New CEO was appointed in 2011, but has just recently started implementing new plans and changes since chairman retired last year. Estimates the synergies of $100m by 2017. Men’s Wearhouse merger has a few unique opportunities; such as tuxedos, slimfit. Mentioned MW does $400M in tux rentals and Jos. A. Bank Clothiers only does $30M in tuxedo rentals.

Incremental margins are very strong, approximately 0.55 EPS accretion for every $50m incremental revenue gain for JOSB in tuxedos. Both JOSB and MW are well below peak margins due to heavy advertising spend. If MW can de-lever to ~2.5x Net Debt/EBITDA. They estimate MW can de-lever to 2.5x by 2018 and adjusting for 1x integration costs, FCF should exceed net income. Base case price target of $63 (~40% upside); upside and downside of +71% and -3%.

Be sure to check out the rest of the presentations from Capitalize For Kids Sohn Canada here.