Opinions
John Zechner
Onex Corp
ONEX-T
COMMENT
May 25, 2015
Stock price when the opinion was issued
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Shares plunged in 2022 and part of this year, but have nearly recovered. Gerry Schwartz is no longer CEO. They've bought and sold many businesses. Onex's intrinsic value is $130-140, but shares trade at $90, so there's a big disconnect by the market. Onex keeps buying back shares and are ramping up acquisitions.
(Analysts’ price target is $112.33)Will continue to hold. Business performing well. Earnings continue to rise. Strong management team with sharp capital allocation skills. Current share price is cheap. Market not recognizing value in business. $145/share in capital, with a share price below $100/share.
Premium contentONEX has over $49 billion in assets under management including WestJet - with over $8 billion of its own assets invested. It trades under book value. Recently reported earnings showed a 27% increase in quarterly EPS. We recommend setting a stop-loss at $77, looking to achieve $119 -- upside potential of 28%. Yield 0.3%
(Analysts’ price target is $119.00)Premium contentWe reiterate ONEX, a Canadian private equity firm with WestJet in its portfolio, as a TOP PICK. It trades at 7x trailing earnings and under book value. The company is prudently using some cash reserves to draw down debt and buy back shares. We recommend trailing up the stop (from $77) to $89, looking to achieve $121 -- upside potential of 19%. Yield 0.3%
(Analysts’ price target is $121.33)Premium contentWe reiterate ONEX as a TOP PICK. Recently reported earnings showed growth again in cash reserves as the company bought back shares. Its structured credit business closed on 23 transactions, raising over $5 billion in new fee generating business. It trades at 9x earnings and under book value. We recommend trailing up the stop (from $89) to $108, looking to achieve $145 -- upside potential of 27%. Yield 0.2%
(Analysts’ price target is $1450.00)Premium contentOur PAST TOP PICK with ONEX has triggered its stop at $108. To remain disciplined, we recommend covering the position at this time. When combined with our previous guidance, this will result in a net investment gain of 6%.
This has generally been a good buyer of businesses which they run for a while. What he has noticed over the last couple of years is that the discount to the net asset value has really narrowed. They used to trade at about 50% of their NAV, and as they have continued to do accretive deals that has narrowed somewhat. He doesn’t find it that attractive on a valuation basis.