|Shares Out. (in M):||433||P/E||10.7x||10.3x|
|Market Cap (in $M):||2,674||P/FCF||n/m||n/m|
|Net Debt (in $M):||10,478||EBIT||0||0|
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Quick Thesis: Element Fleet Management is a Canadian-listed vehicle fleet management company (#1 market share in N. America) that has >50% upside in roughly 12 months based on a 13x forward P/E ratio. This is a high quality business with strong organic growth because of a sticky product, long-term outsourcing trends, and growing demand for asset-light data-based services, with massive scale benefits vs. competitors and in-house solutions. This opportunity exists because of an overhang caused by a non-core business that great new management is exiting and merger integration failures. The new CEO has recently completed a strategic review, announcing a large cost cut program along with an equity offering necessitated by the implosion of that non-core asset. Pro forma for the offering, the stock is trading for 7.9x – 8.3x 2020 target run-rate Adj. EPS, vs. 9.8x for its closest comp, ALD. Unlike EFN, ALD carries residual value risk in its business and has historically high risk now due to European diesel exposure caused by the emissions scandals that have plagued European OEMs. EFN should trade for 13x+ 2020 target run-rate Adj. EPS by end of 2019 given it is a superior business with great new management and HSD long-term EPS growth.
How does EFN CN make money?
Strategic review & cost cutting program:
Valuation Discount & Catalyst:
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