As a WOW shareholder, my view from the outset was always that I would continue to own this company post de-merger.
Unless it IPO'd at some truly bananas valuation, of course.
But I didn't for one minute expect that to happen.
In fact, I had expected the opposite, i.e., for it to be sold down somewhat indiscriminately by institutions who are not natural owners of Endeavour.
As it happens, it's listed life has indeed started with the market pricing it somewhat below my sense of fair value, based on my $12.3bn to $13.8bn Equity valuation (~$6.90/share to $7.60/share):
In terms of its ultra-high brand relevance, dominant industry positioning, purchasing power and its mile-deep; ten mile-wide commercial moat, this business is akin to a Bunnings, in my view.
So I would not be at all surprised if it is ultimately rated by the market in the high-teens in EV/EBIT terms, even at 20x.
It exited FY2020 on a ~$700m pro forma EBIT run rate which I expect will be closer to $750m for FY2021, so - at 18x EV/EBIT (which, for people who still dwell in EBITDA land, corresponds to ~14x EV/EBITDA) - the Enterprise Value should be $13.6bn.
Based on the IM, EDV is being spun out with around $1.25bn in Net Debt, so a realistic Equity Value of $~12.4bn (works out to $6.90/share).
And, at a not-unrealistic 20x EBIT (15.5x EBITDA), it will have a Market Cap of ~$13.6bn ($7.60/share).
I expect I'll be adding to my holdings in coming days.
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