Up to date Ideas After Promote Off

March 17, 2023

What a wild week in markets. I am discovering loads of new concepts, sadly do not have sufficient dry powder to throw at all of them. As an alternative, I will re-highlight PFSweb (PFSW) ($87MM market cap) as a boring enterprise that should not be impacted by financial institution or market stress buying and selling at an especially low a number of whereas additionally pursuing a sale. PFSW is a third-party logistics firm primarily offering on-line order success providers for 100+ retail manufacturers. In 2021, PFSW got here on my radar after they bought a big enterprise unit and have been persevering with to pursue strategic options for the remaining 3PL enterprise. M&A markets have slowed since then however they’re nonetheless guiding to wrap up the method someday in 2023. To be honest they might find yourself remaining public and pursuing a go-it-alone technique however their posture has been a sale. In PFSW’s just lately up to date investor deck (entire factor is value a glance in case you’re within the thought), they lay out the next choices:

#2 scares me a bit because it feels like what ADES did, however PFSW already distributed most of their money to shareholders in a particular dividend final yr, they do not have an enormous money steadiness burning a gap of their pocket.

Offering 3PL providers to the retail trade, you’d anticipate PFSW to be within the midst of a covid hangover much like UPS/FDX or Amazon, however the firm has continued to develop on prime of their covid beneficial properties and are equally guiding to 5-10% income development and 6-8% standalone EBITDA margin in 2023 (on their current convention name, 2023 is off to an “very robust begin” and later a “phenomenal begin”). Additionally they present their estimate of public firm prices of two% of income that could possibly be eradicated by both a strategic acquirer or if the corporate was taken non-public. Following the 2021 asset sale and particular dividend, PFSW has a clear steadiness sheet with $30MM in web money.

The above is utilizing the standalone EBITDA steering (full company overhead), if we use the ex-public firm price steering it naturally seems even cheaper.

A well-liked 3PL is GXO, a current spin of XPO Logistics, GXO is a a lot bigger, extra scaled and diversified enterprise, but it surely trades at 13x 2023 EBITDA steering ranges, properly above PFSW that’s beneath 4x EBITDA.

PFSW reported earnings on the 14th, its down about 30% since then regardless of no damaging information popping out of the earnings report or the convention name. My guess is both somebody is getting liquidated, this can be a comparatively illiquid inventory, or the income steering is getting picked up by knowledge aggregators as a major lower. PFSW had a unusual contract the place their GAAP income was distorted greater, however that ran off final yr, their GAAP income will now match their beforehand reported “service charge income”.

The sale course of has dragged on longer than anticipated, they needed to decorate up the corporate on the market and by the point the makeover was achieved, the markets have modified only a bit. There ought to consumers for this enterprise, dozens of personal 3PL suppliers would make strategic sense and loads of center market PE retailers that is also .

Disclosure: I personal shares of PFSW and calls