Thanks! You extracted the essence.
$TVK I was about to comment on this, not as good as @MarkusEndl did. The funny thing is that they are reporting a net loss on compressed gas. That will change fast. Nobody cares until numbers are good but is getting closer...+data center boom + services boom=11-14x fcf 2027
1/8 $TVK.TO EnTrans filing with the US Dept. of Commerce highlights an exceptional industrial moat. Having united Heil, Polar, Kalyn Siebert, LBT, Advance & Tankcon under one roof, EnTrans supplies ~50% of all tank trailers currently in service in the US.
7/8 US net trailer orders jumped +193% YoY in Aug to 24,200 and soared to 42,700 in Sep (+75% m/m, +311% YoY) driven by pre-orders ahead of tariff price hikes, healthier carrier conditions & pent-up replacement.
Good analysis of $TVK.TO Q3 by @JibbyCap! Points I would add are (1) TVK sold some equity instruments possibly to fund part of the buyback and (2) the weak compressed gas segment should be less dilutive to margins starting 2027 when utilization picks up with defense contracts.
$TVK.TO Q3 thoughts
General:
* No news on the Pellerin situation, so that overhang remains. I think it would have been appropriate to at least acknowledge the situation.
* Financials look (really) good. The bright spots are working capital (esp as this is an inventory building quarter) and cost management.
* Strong growth in the HVAC segment from data center orders (see pic: 61% YoY, 14% QoQ)
* mCapex was quite high compared to last year's Q3. This should be seen in light of the company's increased Service segment assets, where most maintenance work happens in Q3. It's also possible that the newly acquired Service assets were given a more thorough refurb the first time around, resulting in one-time increases.
M&A/Reinvestment:
* Colter was C$39mn worth of assets, quite a bit larger than I had expected (C$35mn paid + C$4mn gain on bargain purchase).
* If I'm not mistaken, they are implying that they did one small acquisition that was not meaningful but also not announced up until now. That acquisition + B&R + Jet Peinture combined was C$28mn in total (purchase cost).
* Post Q they also bought SPV for C$23mn and bought back C$30mn worth of shares. Add C$9mn growth capex, and total capital deployment in the past 4 months was C$125mn -- seems good to me.
* The buybacks were done at C$117/sh right after the insider tipping crash. Interestingly, it seems that they have not purchased any more shares afterward, even though the share price remained at that level for a while. Maybe the automatic purchase plan kicked in when the share price went down, and mgmt later asked to halt it?
Conclusion:
* Good quarter, capital deployment continues, no update on the Pellerin situation.
* It isn't easy to figure out run-rate earnings, as the segments each have their own seasonal/cyclical differences. The constant M&A doesn't help either. Given the low capital intensity and the excellent operational management, I have in the past suggested they could do 8-10% stabilized FCF margins. This obv depends on leverage and honestly I have found the co harder to value over time, but assuming 8% margin for now puts the multiple at 16.5x.
Some other thoughts:
* This whole drama with Pellerin has me reconsidering my position (which is still substantial). The insider tipping allegations were not something that could be predicted and IMO don't matter that much for the company in the long-term. However, by owning something at a premium multiple I was exposing myself to such risks.
* Put differently, when TVK was trading at a <10x multiple, these allegations would not have mattered that much. At >20x the market was pricing in the expectation that mgmt wouldn't screw up. The margin of safety wasn't there anymore.
* For me the thesis changed over time from 'cheap + long runway + excellent mgmt' to just 'long runway + excellent mgmt'. I got too comfortable and stopped being disciplined with regard to valuation.
* For the record, I totally disagree with the "it's just a tank company lol" sentiment I see on here sometimes. For a multitude of reasons their niches are especially suitable for serial acquisition, and D. Haw is spectacular. A premium multiple is warranted, but when it got that multiple it should have been a cue for me to get out. Quoting Klarman:
"Selling, in particular, can be a challenge: many investors are tempted to become more optimistic when a security is performing well. This temptation must be resisted: tax considerations aside, when a security reaches full valuation, there is no longer a reason to own it."
Right now I still don't know what to do with the position. It's arguably cheap again and I haven't found a new idea to which I can allocate the significant % weight I have in TVK. If I do find something or the stock runs up a lot, I might sell.
Markus Endl retweeted
$DBO.TO Worth noting that in addition to Spiderman having the biggest opening in history, it did so without any IMAX screens due to Odyssey exclusivity. Good chance that means D-BOX actually over-indexed during a record period for the industry.
Markus Endl retweeted
OH WOW, I wrote about Sanki Services $6044.JP almost a year ago and back then I suspected a potential acquisition by Shin Maint $6086.JP. Instead they just announced a Merger!!!
Kinda hilarious because I recently asked Founder of Shin Maint about Sanki and he was saying "oh we're just buying because we thought the stock was cheap"
Operationally at least this makes sense to me, the 2 leading maintenance consolidators just became one. - but I still need to go through the numbers.
Out with a new idea for my paid peeps! This time we’re going to talk about a HVAC maintenance biz trading at 10x P/E which can potentially CAGR earnings by 25%+
Often times this is the type of biz investors would jump on, but not in Japan. I was surprised to learn that this industry is highly fragmented, and there are only a handful of players ‘at scale’ and even then they only represent a small share of the market. With the aging demographics, I think the market is ripe for further consolidation and the bigger players to win out in the LT.
It has some hairs for sure. It screens poorly and doesn’t look interesting at first sight. which is exactly why I like the set up. Also noticed that the financial data vendors got the valuation multiples wrong until recently which might mean investors might’ve ‘passed’ because it looked expensive.
In reality the company is currently not priced for much growth despite giving some aggressive targets for the coming years. I think the market is wrong. They’ve recently won a large contract and there’s strong margin opportunity as they improve their contract terms. This includes potential price increases for maintenance contracts which I think investors are underestimating.
Valuation wise, it’s just cheap from several perspectives: 1 ) absolute terms, despite being one of the few which has scale. 2) It trades at a discount to peers despite growing faster. (margin improvements should narrow the gap) 3) Not only that but I see strategic buyers of their shares in the open market, a competitor, which gives credence to the quality of the asset. In short even if they achieve a fraction of what they set out, I think they’ll do ok. Having spoken to the company, I’m encouraged that they are actively trying to improve their IR, which should help appeal to a wider audience.
Happy hunting!!!
Markus Endl retweeted
Most investors think conviction means buying with confidence.
The harder part is what comes after — doing nothing while the market spends 12–18 months disagreeing with you.
$TVK.TO — up ~160% since my initial buy at ~C$50 in early 2024. Built to a top holding as Dustin Haw executed the serial acquirer playbook with discipline. Now grinding below the 200MA for the first time in years. 6–9 months of dead money. Every instinct says do something.
But EnTrans — $TVK.TO’s largest acquisition — is a cyclical business. Tank trailer weakness doesn’t last forever — next two earnings the key test. If the compounding machine underneath is intact, the staircase always resumes.
I believe real conviction lives in the waiting, not the buying.
$SPG.DE Solid Q1 2026. Further debt repayment and net leverage of 1.5x now at the lower end of the target range. The company could use its future free cash flow for buybacks which could boost the stock price meaningfully given the low free float. Disc.: long
Markus Endl retweeted
$DBO.TO
Cinemark's revenue grew 19% YoY to $ 643m. $311 m of that was admissions revenue and DBOX seats grew their share of that 150bps to 5%(!!). Suggests royalties this quarter from just the CNK network alone will be on par with, if not succeed, total royalties YoY. CNK also added 86 DBOX auditoriums in the Q.
I find it notable that CNK is specifically highlighting metrics around DBOX performance in its press releases, while lumping all other PLFs together in a broader category.
$DBO.TO Q1 box office finishing up strong, now comping +23% YoY, and the best Q1 post-COVID. System count up mid-teens from the prior year. So that should translate to ~40% YoY royalty growth for DBOX's fiscal Q4 even after fx headwinds, and assuming no mix shift - i.e. ~$3m of royalties for the period vs $2.2m last year. A very good outcome for what has been the weakest quarter seasonally. 👀
