AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

AlphaSituations-Event/Catalyst Driven Research

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

<ul>
<li>Splitting GE into 3 independent, unconnected companies makes strategic sense, and barring unforeseen exogenous factors, should unlock meaningful value for its shareholders  </li>
<li>Based on 2023 estimates, our valuation analysis indicates a SOTP value for GE of  $139-$152 for an up to ~50% upside </li>
<li>Despite the extended break-up execution timeline, there is a case to be made for investors to use the current share price lull to jump in and enjoy the catalyst-driven ride.</li>
</ul>


Splitting GE into 3 independent, unconnected companies makes strategic sense, and barring unforeseen exogenous factors, should unlock meaningful value for its shareholders  
Based on 2023 estimates, our valuation analysis indicates a SOTP value for GE of  $139-$152 for an up to ~50% upside 
Despite the extended break-up execution timeline, there is a case to be made for investors to use the current share price lull to jump in and enjoy the catalyst-driven ride.


SpinTalk: Thoughts On GE's Break-Up Strategy And Why We Think The Stock Is Ready To Fly Again

Equity Long-Short Analyst

Pyari Menon

Thematic (Sector/Industry)

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (<a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a> &amp; <a href="https://www.smartkarma.com/entities/safran-sa" target="_blank" data-smartkarma-citation="entities:21540:1" rel="noopener">Safran SA (SAF FP)</a> joint venture),<a href="https://www.smartkarma.com/entities/aerojet-rocketdyne-holdings" target="_blank" data-smartkarma-citation="entities:19120:1" rel="noopener">Aerojet Rocketdyne (AJRD US)</a>, <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/raytheon-company" target="_blank" data-smartkarma-citation="entities:6453:1" rel="noopener">Raytheon Company (RTN US)</a>, &amp; <a href="https://www.smartkarma.com/entities/united-technologies-corp" target="_blank" data-smartkarma-citation="entities:12750:1" rel="noopener">United Technologies (UTX US)</a>. The current top players in space vehicles and equipment are <a href="https://www.smartkarma.com/entities/boeing-co" target="_blank" data-smartkarma-citation="entities:11957:1" rel="noopener">Boeing Co (BA US)</a>, <a href="https://www.smartkarma.com/entities/maxar-technologies-inc" target="_blank" data-smartkarma-citation="entities:28796:1" rel="noopener">Maxar Technologies Inc (MAXR US)</a>, <a href="https://www.smartkarma.com/entities/airbus-group-se" target="_blank" data-smartkarma-citation="entities:21380:1" rel="noopener">Airbus Group SE (AIR FP)</a>, <a href="https://www.smartkarma.com/entities/thales-sa" target="_blank" data-smartkarma-citation="entities:21483:1" rel="noopener">Thales SA (HO FP)</a>, <a href="https://www.smartkarma.com/entities/alphabet-inc-cl-c" target="_blank" data-smartkarma-citation="entities:11369:1" rel="noopener">Alphabet Inc Cl C (GOOG US)</a> &amp; <a href="https://www.smartkarma.com/entities/lockheed-martin-corp" target="_blank" data-smartkarma-citation="entities:20372:1" rel="noopener">Lockheed Martin (LMT US)</a>. 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).<a href="https://www.smartkarma.com/entities/avio-spa" target="_blank" data-smartkarma-citation="entities:34833:1" rel="noopener">Avio SPA (AVIO IM)</a>is a small-cap listed company in the top ten for propulsion

The interest shown by the richest and some of the most influential investors and the success of public-private partnerships in space programs are a reflection of an industry poised for strong growth over the next several years.  The space-tech landscape covers various technologies, but in this note, we focus only on the cosmonautic vehicle and propulsion systems. 
The current top players in propulsion are Ariane Group (Airbus Group SE (AIR FP) &amp; Safran SA (SAF FP) joint venture),Aerojet Rocketdyne (AJRD US), Boeing Co (BA US), Raytheon Company (RTN US), &amp; United Technologies (UTX US). The current top players in space vehicles and equipment are Boeing Co (BA US), Maxar Technologies Inc (MAXR US), Airbus Group SE (AIR FP), Thales SA (HO FP), Alphabet Inc Cl C (GOOG US) &amp; Lockheed Martin (LMT US). 
The two new preeminent private players SpaceX and Blue Origin don't feature in the top five players listed above, we discuss the reasons later in the report. 
Unlike e-commerce or software-driven startups, space vehicles and propulsion are relatively capital intensive. So unless the start-ups are led by founders with deep pockets (like Blue Origin) or founders with the ability to raise innovation capital (like SpaceX) it is best to stick to the established names and hope they evolve their business model to adjust for the democratization and marketization of the space industry. That said two private names that screen well are Redwire (vehicles) and Mountain Aerospace Research (propulsion).Avio SPA (AVIO IM)is a small-cap listed company in the top ten for propulsion

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

On June 14, 2019, we published an insight - <a href="https://www.smartkarma.com/insights/mergertalk-unitedtech-raytheon-it-s-the-utx-share-price-that-needs-adjusting-not-the-terms" target="_blank" rel="noopener">https://www.smartkarma.com/insights/mergertalk-unitedtech-raytheon-it-s-the-utx-share-price-that-needs-adjusting-not-the-terms</a>- on the proposed radical corporate restructuring at <a href="https://www.smartkarma.com/entities/united-technologies-corp" target="_blank" data-smartkarma-citation="entities:12750:1" rel="noopener">United Technologies (UTX US)</a>. Amid the coronavirus inspired market swoon that is currently decimating the global financial markets, the UTX restructuring  involving the spin-off to its shareholders of two significant assets and strong brands in their operating spheres - Carrier and Otis - followed by the merger of the stub (i.e., the aerospace business) with <a href="https://www.smartkarma.com/entities/raytheon-company" target="_blank" data-smartkarma-citation="entities:6453:1" rel="noopener">Raytheon Company (RTN US)</a>, continues as planned. The distribution of Carrier and Otis shares to UTX shareholders will be completed on April 3, 2020, prior to market open when both SpinCos will commence regular-way trade obn the NYSE. The first indication of  how the market values the SpinCos will present itself when when-issued trading for Carrier and Otis start on or around  March 18, 2020 continuing up to and through the distribution date.Below, we provide our detailed valuation theses for both Carrier and Otis, and an updated SOTP assessment of UTX. While it would be reasonable to anticipate continuing share price volatility in the present environment, the current crisis is temporal, not structural. Whether this crisis passes in a few weeks or a few months, we would expect the focus to return to fundamentals within this time frame. Our assessment indicates that a value opportunity in both UTX and RTN shares currently exists for market participants driven by the pending transactions.

On June 14, 2019, we published an insight - https://www.smartkarma.com/insights/mergertalk-unitedtech-raytheon-it-s-the-utx-share-price-that-needs-adjusting-not-the-terms- on the proposed radical corporate restructuring at United Technologies (UTX US). Amid the coronavirus inspired market swoon that is currently decimating the global financial markets, the UTX restructuring  involving the spin-off to its shareholders of two significant assets and strong brands in their operating spheres - Carrier and Otis - followed by the merger of the stub (i.e., the aerospace business) with Raytheon Company (RTN US), continues as planned. The distribution of Carrier and Otis shares to UTX shareholders will be completed on April 3, 2020, prior to market open when both SpinCos will commence regular-way trade obn the NYSE. The first indication of  how the market values the SpinCos will present itself when when-issued trading for Carrier and Otis start on or around  March 18, 2020 continuing up to and through the distribution date.Below, we provide our detailed valuation theses for both Carrier and Otis, and an updated SOTP assessment of UTX. While it would be reasonable to anticipate continuing share price volatility in the present environment, the current crisis is temporal, not structural. Whether this crisis passes in a few weeks or a few months, we would expect the focus to return to fundamentals within this time frame. Our assessment indicates that a value opportunity in both UTX and RTN shares currently exists for market participants driven by the pending transactions.

SpinTalk:  United Tech Restructuring Update:Value Check For UTX, RTN Shareholders Amid Market Swoon

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

In my previous insight, <a href="https://www.smartkarma.com/insights/hexcel-woodward-another-aircraft-supplier-merger" target="_blank" data-smartkarma-citation="insights:35769" rel="noopener">Hexcel-Woodward: Another Aircraft Supplier Merger</a>, I mentioned that some Hexcel shareholders might be unhappy with the weak/non-existent premium offered in the Deal. Although both companies' shares have dropped slightly from post-announcement highs, the spread remains positive implying a low probability of a bump. However, in this insight, we take a closer look at the fundamentals to see if a bump is justified. The Deal which will see US-based aircraft component suppliers <a href="https://www.smartkarma.com/entities/hexcel-corp" target="_blank" data-smartkarma-citation="entities:6699:1" rel="noopener">Hexcel Corp (HXL US)</a> and <a href="https://www.smartkarma.com/entities/woodward-inc" target="_blank" data-smartkarma-citation="entities:11464:1" rel="noopener">Woodward Inc (WWD US)</a> combine in a US$6.4Bn all-stock merger of equals was <a href="https://investors.hexcel.com/investor-news/news-details/2020/Woodward-and-Hexcel-Announce-Merger-of-Equals-to-Create-a-Premier-Integrated-Systems-Provider-Propelling-the-Future-of-Flight-and-Energy-Efficiency/default.aspx" target="_blank" rel="noopener">announced</a> on Sunday 12th January. The transaction is expected to close in the third calendar quarter of 2020 and requires regulatory approvals and shareholder approvals from both companies. The grounding of the Boeing 737 Max has added more pressure to the industry of aircraft component suppliers who were already consolidating in preparation to meet future R&amp;D spending requirements. Despite this rush to consolidate, the Deal feels light considering the magnitude of benefits expected post-completion. So is a bump in terms justified?We think so... for a multiple reasons explained below.

In my previous insight, Hexcel-Woodward: Another Aircraft Supplier Merger, I mentioned that some Hexcel shareholders might be unhappy with the weak/non-existent premium offered in the Deal. Although both companies' shares have dropped slightly from post-announcement highs, the spread remains positive implying a low probability of a bump. However, in this insight, we take a closer look at the fundamentals to see if a bump is justified. The Deal which will see US-based aircraft component suppliers Hexcel Corp (HXL US) and Woodward Inc (WWD US) combine in a US$6.4Bn all-stock merger of equals was announced on Sunday 12th January. The transaction is expected to close in the third calendar quarter of 2020 and requires regulatory approvals and shareholder approvals from both companies. The grounding of the Boeing 737 Max has added more pressure to the industry of aircraft component suppliers who were already consolidating in preparation to meet future R&amp;D spending requirements. Despite this rush to consolidate, the Deal feels light considering the magnitude of benefits expected post-completion. So is a bump in terms justified?We think so... for a multiple reasons explained below.

On Sunday 12th January, US-based aircraft component suppliers Hexcel Corp and Woodward Inc <a href="https://investors.hexcel.com/investor-news/news-details/2020/Woodward-and-Hexcel-Announce-Merger-of-Equals-to-Create-a-Premier-Integrated-Systems-Provider-Propelling-the-Future-of-Flight-and-Energy-Efficiency/default.aspx" target="_blank" rel="noopener">announced</a> they would combine in a US$6.4Bn all-stock merger of equals to form "a premier integrated systems provider serving the aerospace and industrial sectors".Under the terms of this Offer, Hexcel shareholders will receive 0.625 Woodward shares per Hexcel share. On a fully diluted basis, the existing shareholders of Woodward and Hexcel will own 55% and 45%, respectively, of the combined entity. The deal is conditional on the receipt of antitrust clearance and approvals from the shareholders of both Hexcel and Woodward. The transaction is expected to be completed in the third calendar quarter of 2020.At the time of writing, the Deal is trading close to terms with a view to complete. That obviously includes a high likelihood of deal completion as-is, a small probability of dealbreak, and some probability of a deal bump.

On Sunday 12th January, US-based aircraft component suppliers Hexcel Corp and Woodward Inc announced they would combine in a US$6.4Bn all-stock merger of equals to form "a premier integrated systems provider serving the aerospace and industrial sectors".Under the terms of this Offer, Hexcel shareholders will receive 0.625 Woodward shares per Hexcel share. On a fully diluted basis, the existing shareholders of Woodward and Hexcel will own 55% and 45%, respectively, of the combined entity. The deal is conditional on the receipt of antitrust clearance and approvals from the shareholders of both Hexcel and Woodward. The transaction is expected to be completed in the third calendar quarter of 2020.At the time of writing, the Deal is trading close to terms with a view to complete. That obviously includes a high likelihood of deal completion as-is, a small probability of dealbreak, and some probability of a deal bump.

Hexcel-Woodward: Another Aircraft Supplier Merger

United States

United Technologies Corporation provides technology products and support services to customers in the aerospace and building industries worldwide.  The Company's products include aircraft engines, elevators and escalators, heating and air conditioning equipment, helicopters, aerospace systems, fuel cell systems, and fire and safety equipment.

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United Technologies (UTX US)

SpinTalk: Thoughts On GE's Break-Up Strategy And Why We Think The Stock Is Ready To Fly Again

Despite the long timeline restructuring play, there is a good case to be made for investors to use the lull in the share price to jump onto the GE...

Robert Sassoon

Ideas from Data Mining Technical Publications: Space Vehicles and Propulsion Systems

The space economy is seeing much more private sector participation. This sets up the sector for strong growth. In this report, we screen for...

Pyari Menon

SpinTalk: United Tech Restructuring Update:Value Check For UTX, RTN Shareholders Amid Market Swoon

On June 14, 2019, we published an insight -...

Robert Sassoon

Hexcel-Woodward: Is the Offer Fair?

In my previous insight, Hexcel-Woodward: Another Aircraft Supplier Merger, I mentioned that some Hexcel shareholders might be unhappy with the...

Janaghan Jeyakumar, CFA

Hexcel-Woodward: Another Aircraft Supplier Merger

On Sunday 12th January, US-based aircraft component suppliers Hexcel Corp and Woodward Inc announced they would combine in a US$6.4Bn all-stock...

Janaghan Jeyakumar, CFA

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