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Mohegan Sun 12-07 04:10 GMT  
(Report with Analyst's Data Sheet) 
Mohegan Gaming & Entertainment (MGE)'s casinos recovered nicely this year from the closures and restrictions during the COVID-19 pandemic. The company had...
Futures Bet by Kim Noland
MTN Group Ltd. 12-07 03:31 GMT  
(Report with Analyst's Data Sheet) 
MTN Group Ltd. (MTNSJ) has made further progress on its portfolio simplification / reduction strategy. Last week, the company raised $150 million from the...
Simple Is Better by Alexandre Dray
Fifth Third Bancorp 12-07 02:30 GMT  
(Report with Analyst's Data Sheet) 
Fifth Third Bancorp (FITB) is among a growing number of issuers which have tapped the Green Bond market. Recently, the company priced a $500 million...
Green Issuer by Kathleen Shanley, CFA
Kohl's 12-07 01:08 GMT
(Comment)
Kohl's shares rose as much as 10% today after activist shareholders Engine Capital made public a letter...
Shareholder Pressure by Carol Levenson, CFA
Kohl's shares rose as much as 10% today after activist shareholders Engine Capital made public a letter to the board demanding the company consider, on parallel paths, separating its e-commerce business (which it values conservatively at $12.4 billion, 40% higher than the enterprise value of the current business) and selling the entire company to private equity for a 50% premium. It was less than a year ago that Kohl's reached an agreement with another group of activist shareholders, giving them board representation. That group held a 9.5% stake--Engine Capital owns only 1%. Nevertheless, the stock market reaction implies the company will need to take these suggestions seriously, perhaps by hiring an outside consultant to look at them, as Macy's did recently in response to similar activist ideas. There are so many bad ideas here we scarcely know where to begin. Needless to say, either route would be severely negative for the company's credit profile, although bondholders might be somewhat protected by change of control put options and ratings-driven interest rate adjustments, assuming these cannot be circumvented. Recall the sale-leaseback plan proposed by the previous group of activists would have been prevented by the company's bond indentures, according to management. Retailing LBOs have a dismal history in the best of times, and these are far from the best of times, frequently ending in bankruptcy. Furthermore, if a private equity firm wanted to pay a 50% premium for Kohl's, we imagine the board would already have considered it, especially now that there is activist representation on the board. Separating the e-commerce business (about 29% of total sales currently) would undo all the integration accomplished over the past several years in the pursuit of omnichannel selling, eliminating all the synergies. Engine Capital believes the company is underleveraged and should operate with more debt. This would likely increase, not decrease, its cost of capital, as it would likely become a weak junk credit on an unsecured basis. We are somewhat amused by the persistent notion that the stock market is so blind to KSS's virtues that it is ignoring billions of dollars in hidden value in its real estate and its e-commerce business. But just because these are bad ideas does not mean that activists will not get some or all of what they want. We reiterate our "underperform" (2031 notes seen trading today at T+160).
ArcelorMittal 12-06 04:57 GMT  
(Report with Analyst's Data Sheet) 
ArcelorMittal's (MT) third quarter adjusted EBITDA was substantially higher year over year (and up meaningfully from the second quarter) as the lagged...
Positive Pricing Outlook by Evan Mann, CFA
Evergrande Real Estate Group Ltd 12-06 04:52 GMT  
(Report with Analyst's Data Sheet) 
Last Friday, Evergrande Real Estate Group (EVERRE) filed a notice with the Hong Kong Stock Exchange to announce that "there is no...
Heading For A Restructuring by Cedric Rimaud, CFA
Dell Technologies Inc. 11-30 13:53 GMT
(Comment)
We noted in our full-length report today that HP Inc. posted a very impressive 9.3%...
Earnings by Dave Novosel, CFA
We noted in our full-length report today that HP Inc. posted a very impressive 9.3% increase in revenue for its recently completed fiscal fourth quarter. Dell recorded an even better performance for its fiscal third quarter that ended October 29th. Revenue soared 21% in Q4, including a 35% gain in Client Solutions, with robust growth in both commercial and consumer. Management attributed the success to its focus on commercial PCs, premium consumer products, gaming, and professional workstations. Infrastructure Solutions revenue rose 5%, with server and networking revenue rising 9% and storage revenue up 1%. Dell continues to take market share in both segments. However, while Dell's revenue figures were substantially better than those of HP, it posted a decline in overall operating margins. Operating margins in Infrastructure Solutions were down 40 basis points, while Client Solutions' margins dropped 130 bps. The margin erosion reflected higher component costs, particularly integrated circuits, and a shift in mix, as well as increases in sales compensation and bonus and higher investments in the business. Margins will be pressured even further in the near term since Dell just spun off VMWare, by far its highest margin business. Meanwhile component costs continue to rise. Core leverage at the end of Q3 was 2.7x. However, the dividend from the VMWare spin-off just after the quarter closed was used to slash debt by $9.4 billion. Therefore, core leverage is now only 1.7x. However, that includes the VMWare EBITDA from the first 3 quarters. Adjusting for that, core leverage is just under 2x. Management indicated that it may reduce debt further next year, but we assume any cuts would be minor. Instead the focus is likely to be on share repurchases and dividends.
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