February 24, 2015 - 12:53pm EST by
2015 2016
Price: 101.41 EPS 3.35 0
Shares Out. (in M): 44 P/E 33.46 0
Market Cap (in $M): 4,501 P/FCF 104.6 0
Net Debt (in $M): 45 EBIT 350 0
TEV (in $M): 5,515 TEV/EBIT 15.8 0

Sign up for free guest access to view investment idea with a 45 days delay.

  • Auto software
  • Divestitures
  • Asset Sale
  • Industry Tailwinds
  • Cyclical
  • Potential Buybacks
  • Auto Supplier


HVCC transaction
VC owned a 70% stake in HVCC which it will be selling to Hahn & Co. and Hankook Tire at an attractive $3.6B valuation; it has hedged all FX exposure to the deal. Below is VC’s estimate for after-tax proceeds net to Visteon at around $3.1B, with a potential additional $100MM in tax savings not factored in.

VC valuation post-transaction
VC’s current EV is $5.5B, of which $785MM is attributable to minority interest of HVCC; adjusting for the HVCC transaction which will also add $3.1B of cash at mid-point, the new VC will have EV of $1.6B.
Management is guiding to 2015 EBITDA of $240MM which I believe errs on the conservative side given low oil prices, healthy auto sale trends, and generally better guidance discipline after the 2008-2009 near-death experience. This guidance seems to exclude the $40-$70MM in synergies they have identified and expect to deliver by year-end 2016 via the Johnson Controls (JCI) integration.
“On track to deliver $40-70 million in annual Electronics synergies by end of 2016.” –DB Global Auto Industry Conference, January 2015
So at the end of the day, you are looking at a #3 pure-play in global vehicle electronics, an industry with favorable tailwinds, valued at close to 5x unlevered EV/EBITDA ($1.6B + $100MM potential additional tax savings divided by $300MM run-rate EBITDA). The key uncertainty for me going forward is how management delivers the cash proceeds from HVCC to shareholders in a tax-efficient manner.
The usual cyclical risks with the auto industry apply with potentially higher oil prices on geopolitical unrest, a slowdown in the global economy, etc. The biggest execution risk is how capital via the HVCC windfall is returned to shareholders in a tax-efficient manner, with management having hinted at share buybacks as a preferred method.
Note: the formula financials not discussed in the body of this report are taken from Bloomberg and some are not adjusted for the HVCC transaction.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Earnings release on 02/26/14 which could address additional value creation strategies; completion of HVCC divestiture and subsequent capital returns to shareholders; ex-JCI integration synergies; strong global auto sales trends.

    show   sort by    
      Back to top