Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul><li>The Middleby Corporation, during their Second Quarter 2024 earnings call, presented a mixed scenario reflecting both strengths in strategic growth areas and the overarching pressure from macroeconomic conditions.</li><li>The discussion, led by CEO Timothy FitzGerald and supported by executives including CFO Bryan Mittelman and Chief Technology and Operations Officer James Pool, provided insights into various segments of the company's operations.</li><li>Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.</li></ul>

The Middleby Corporation, during their Second Quarter 2024 earnings call, presented a mixed scenario reflecting both strengths in strategic growth areas and the overarching pressure from macroeconomic conditions.The discussion, led by CEO Timothy FitzGerald and supported by executives including CFO Bryan Mittelman and Chief Technology and Operations Officer James Pool, provided insights into various segments of the company's operations.Baptista Research looks to evaluate the different factors that could influence the company's price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

The Middleby Corporation: Initiation Of Coverage - Strengthened Dealer Channel Relationships & Other Major Drivers

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

As of 5 July Ali Group submitted a definitive $24/share proposal to the Board of Directors of <a href="https://www.smartkarma.com/entities/welbilt-inc" target="_blank" data-smartkarma-citation="entities:27147:1" rel="noopener">Welbilt Inc (WBT US)</a> to acquire all outstanding shares. Ali Group has substantial cash on hand and has received a Highly Confident Letter from Goldman Sachs International for new financing to fund the proposed transaction. This represents 53.6% Premium to Welbilt’s Unaffected Share Price and 11.4% Premium to the implied value of the <a href="https://www.smartkarma.com/entities/middleby-corp" target="_blank" data-smartkarma-citation="entities:18143:1" rel="noopener">Middleby Corp (MIDD US)</a> transaction as of 2 July.
Welbilt has notified Middleby that it intends to terminate their 20 April agreement and enter into a definitive merger agreement with Ali Group, subject to Middleby’s right to negotiate amendments to the merger agreement for five business days and the Welbilt Board’s further determination as to whether any such amendments would cause the Ali Group proposal to no longer constitute a “Company Superior Proposal.”
A DCF valuation, gives a fair value on a standalone basis of $23.09/share (WACC 9%, tax rate 25%, EV/EBITDA exit of 14.5x in line with that of Middleby). Using Middleby's input, I conservatively estimate that synergies may be worth $1.79/share. By estimating that Welbilt shareholders capture 60% of those synergies, therefore my TP is $24.16. Therefore the offer from Ali looks fair, in my view.
Middleby can still sweeten its 0.1240 MIDD US x 1 WBT US offer, up to 12 July. A higher exchange ratio would be dilutive for its own shareholders but probably would be compensated by higher synergies.
A sweetened offer from Middleby could come at 0.15 MIDD US x 1 WBT US. This implies $26.1 per Welbilt share. On these basis I would be long WBT US, risk is that Middleby gets cold feet.
On 8 July Welbilt closed at $24.7, 2.9% above Ali's offer.

As of 5 July Ali Group submitted a definitive $24/share proposal to the Board of Directors of Welbilt Inc (WBT US) to acquire all outstanding shares. Ali Group has substantial cash on hand and has received a Highly Confident Letter from Goldman Sachs International for new financing to fund the proposed transaction. This represents 53.6% Premium to Welbilt’s Unaffected Share Price and 11.4% Premium to the implied value of the Middleby Corp (MIDD US) transaction as of 2 July.
Welbilt has notified Middleby that it intends to terminate their 20 April agreement and enter into a definitive merger agreement with Ali Group, subject to Middleby’s right to negotiate amendments to the merger agreement for five business days and the Welbilt Board’s further determination as to whether any such amendments would cause the Ali Group proposal to no longer constitute a “Company Superior Proposal.”
A DCF valuation, gives a fair value on a standalone basis of $23.09/share (WACC 9%, tax rate 25%, EV/EBITDA exit of 14.5x in line with that of Middleby). Using Middleby's input, I conservatively estimate that synergies may be worth $1.79/share. By estimating that Welbilt shareholders capture 60% of those synergies, therefore my TP is $24.16. Therefore the offer from Ali looks fair, in my view.
Middleby can still sweeten its 0.1240 MIDD US x 1 WBT US offer, up to 12 July. A higher exchange ratio would be dilutive for its own shareholders but probably would be compensated by higher synergies.
A sweetened offer from Middleby could come at 0.15 MIDD US x 1 WBT US. This implies $26.1 per Welbilt share. On these basis I would be long WBT US, risk is that Middleby gets cold feet.
On 8 July Welbilt closed at $24.7, 2.9% above Ali's offer.

We aggregate key quotes from earnings, The Transcript

The Transcript

We aggregate key quotes from earnings

Aggregate Key Quotes from Earnings

Thematic (Sector/Industry)

The economy is booming and everyone should enjoy it. The American economy is benefitting from tremendous amounts of pent-up demand and in some of the hardest-hit industries' activity is beginning to tick back up above 2019 levels. Along with that boom, there are clear signs of inflation and concerns about overheating. Even Janet Yellen seemed concerned for a few hours last week.

The economy is booming and everyone should enjoy it. The American economy is benefitting from tremendous amounts of pent-up demand and in some of the hardest-hit industries' activity is beginning to tick back up above 2019 levels. Along with that boom, there are clear signs of inflation and concerns about overheating. Even Janet Yellen seemed concerned for a few hours last week.

Transport Sector, China and Asia-focused Research

Charles De Trenck

In this piece I look at the failure of HK to meet its challenges, especially since 1997, while contrasting in less depth the different approach Singapore has maintained.HK is stuffed on several levels – until prices have a significant correction.I think we could write a few tales on Singapore vs Hong Kong:1) SMRT vs HK MTRC… (see <a href="https://www.smartkarma.com/insights/mtr-66-hk-conviction-sell-thesis" target="_blank" data-smartkarma-citation="insights:7982">MTR (66 HK): Conviction Sell Thesis</a>) and other recent points on the MTRC)2) PSA vs HIT/Hutch and HK Ports…3) Singapore vs HK middle classes, and the oppression of high prices

In this piece I look at the failure of HK to meet its challenges, especially since 1997, while contrasting in less depth the different approach Singapore has maintained.HK is stuffed on several levels – until prices have a significant correction.I think we could write a few tales on Singapore vs Hong Kong:1) SMRT vs HK MTRC… (see MTR (66 HK): Conviction Sell Thesis) and other recent points on the MTRC)2) PSA vs HIT/Hutch and HK Ports…3) Singapore vs HK middle classes, and the oppression of high prices

The Decline of the Entrepôt Economy, HK's Fall from Grace...The Socio-Political & Economic Drivers

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Shares of diversified industrials have traded up in the aftermath of the U.S. presidential election, frothy with anticipation as a Republican-controlled Congress offers the possibility of business-friendly policymaking meant to revitalize a U.S. manufacturing landscape affected by globalization. This sentiment rang loud and clear at the 2017 annual outlook meetings of four U.S.-based wide-moat industrial titans representing over half a trillion dollars of market capitalization: <a href="https://www.smartkarma.com/entities/3-m-co" target="_blank" data-smartkarma-citation="entities:14866:1">3 M Co (MMM US)</a> , <a href="https://www.smartkarma.com/entities/782" target="_blank" data-smartkarma-citation="entities:782:1">General Electric Co (GE US)</a> , <a href="https://www.smartkarma.com/entities/12750" target="_blank" data-smartkarma-citation="entities:12750:1">United Technologies Corp (UTX US)</a> , and <a href="https://www.smartkarma.com/entities/16765" target="_blank" data-smartkarma-citation="entities:16765:1">Honeywell International Inc (HON US)</a> .While management teams enthusiastically highlighted corporate tax reform, capital mobility, and infrastructure spending as potential near-term earnings tailwinds, all stopped short of explicitly incorporating these favorable outcomes into 2017 expectations. We agree that it's too early to include Trump's America in the base-case assumptions that fuel our discounted cash flow analyses. However, if Trump's target corporate tax rates and modest top-line growth materialize, our bull-case scenarios look realistic, which would offer investors returns of 46.6% from today's market price for shares of United Technologies, 32.3% for GE, 30.9% for Honeywell, and 17.5% for 3M. Given the cone of uncertainty surrounding the timing and feasibility of the new administration's plans, we recommend that investors wait until greater margins of safety emerge to build positions in 3M, GE, and Honeywell, which all look slightly overvalued according to our base-case scenarios; however, we continue to like United Technologies, which is trading at a 9% discount.Analyst: Barbara Noverini

Shares of diversified industrials have traded up in the aftermath of the U.S. presidential election, frothy with anticipation as a Republican-controlled Congress offers the possibility of business-friendly policymaking meant to revitalize a U.S. manufacturing landscape affected by globalization. This sentiment rang loud and clear at the 2017 annual outlook meetings of four U.S.-based wide-moat industrial titans representing over half a trillion dollars of market capitalization: 3 M Co (MMM US) , General Electric Co (GE US) , United Technologies Corp (UTX US) , and Honeywell International Inc (HON US) .While management teams enthusiastically highlighted corporate tax reform, capital mobility, and infrastructure spending as potential near-term earnings tailwinds, all stopped short of explicitly incorporating these favorable outcomes into 2017 expectations. We agree that it's too early to include Trump's America in the base-case assumptions that fuel our discounted cash flow analyses. However, if Trump's target corporate tax rates and modest top-line growth materialize, our bull-case scenarios look realistic, which would offer investors returns of 46.6% from today's market price for shares of United Technologies, 32.3% for GE, 30.9% for Honeywell, and 17.5% for 3M. Given the cone of uncertainty surrounding the timing and feasibility of the new administration's plans, we recommend that investors wait until greater margins of safety emerge to build positions in 3M, GE, and Honeywell, which all look slightly overvalued according to our base-case scenarios; however, we continue to like United Technologies, which is trading at a 9% discount.Analyst: Barbara Noverini 

Tax Reform Top of Mind for Wide-Moat U.S. Industrial Firms

United States

The Middleby Corporation designs, manufactures, markets, and services a broad line of equipment for use in cooking and preparing food.  The Company's products are used in commercial and institutional kitchens and restaurants throughout the world.  Middleby's brand names include Marshall, Southbend, and Toastmaster.

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Middleby Corp (MIDD US)

The Middleby Corporation: Initiation Of Coverage - Strengthened Dealer Channel Relationships & Other Major Drivers

The Middleby Corporation, during their Second Quarter 2024 earnings call, presented a mixed scenario reflecting both strengths in strategic growth...

Baptista Research

Kitchen Nightmares

Ali's offer looks fair. Middleby can still sweeten its offer, up to 12 July. It could come at 0.15 MIDD US x 1 WBT US, or $26.1 per Welbilt share....

Jesus Rodriguez Aguilar

The Transcript 05.10.21: Pent-up Demand

The economy is booming and everyone should enjoy it. The American economy is benefitting from tremendous amounts of pent-up demand and in some of...

The Transcript

The Decline of the Entrepôt Economy, HK's Fall from Grace...The Socio-Political & Economic Drivers

In this piece I look at the failure of HK to meet its challenges, especially since 1997, while contrasting in less depth the different approach...

Charles De Trenck

Tax Reform Top of Mind for Wide-Moat U.S. Industrial Firms

Shares of diversified industrials have traded up in the aftermath of the U.S. presidential election, frothy with anticipation as a...

Morningstar, Inc.

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