Pitch:
– Microcap licensor of high-end apparel and home goods brands.
– 70% interestest in one of the brands was recently sold for $46m net cash compared to the company’s pre-sale EV of $62m.
– Investors are essentially getting the rest of the business for free after accounting for the value of the remaining 30% stake in the brand.
– After the deal management still expects to generate positive 2022 EBITDA.
– Track record of successfully building up brands.
– Checkered operating history, but positive FCF for 7 years in a row pre-covid (c. $4m/year).
Valuation:
– For 2021 company generated $38m in revenues and -$2.5m in EBITDA loss.
– The brand with a 70/5 stake sold accounted for $14.5m in revenues and $9.3m in operating profit.
– Management expects to quickly replace earnings from the sold brand and be EBITDA positive for 2022.
Exp. gain: +70% to $2.5/share.
Full XELB write-up (free guest account required):
https://www.valueinvestorsclub.com/idea/XCEL_BRANDS_INC/5819620586