market folly

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Matt Halbower of Pentwater Capital who pitched Turquoise Hill (TRQ) and VMWare tracking stock (DVMT).


Matt Halbower's Presentation at Invest For Kids Chicago 2016

•    $3.4 billion AUM

•    Long Turquoise Hill (TRQ) 

•    Copper and gold miner with one mine in Mongolia; 51% owned by Rio Tinto

•    Phase II development on underground mine that will increase output 4x; requires spending $5 billion over next five years

•    Balance sheet is attractive: no debt, $1.4 bn cash, $4.1 bn receivable from Rio Tinto

o    Negative $3.1 billion enterprise value

•    At 7x 2021 EBITDA, worth $8 per share, but likely taken private sooner

•    Rio Tinto has a new CEO, and he has made many public comments about his bullishness on copper; Rio Tinto has engaged bankers regarding its stake in TRQ; logical outcome to take private, likely around $6 per share



•    Long DVMT, VM Ware tracker issued by Dell 

•    VM Ware balance sheet is cash rich; stock is 20% cheap to peers; lots of FCF and buybacks

•    Tracker is trading at 35% discount to VM Ware, much wider than typical 10% discount

o    Discount likely due to Dell as non-investment grade issuer, even though Dell is generating a lot of cash and rapidly delivering – will be IG soon

•    Agreement gives Silver Lake ability to IPO its Dell shares under certain conditions at certain points over the next two years; if so, DMVT tracker can be taken out at a premium

•    IPO seems more likely than not, in which case we think the discount closes; if VM Ware also performs as expected opportunity to make 2x on DMVT


Be sure to check out the rest of the presentations from Invest For Kids 2016.