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The Globe and Mail By Reuters



© Reuters. FILE PHOTO: The logos of Amazon, Apple, Facebook and Google


(Reuters) – Canadian gold miner Kinross Gold Corp (TO:) is considering moving its primary stock listing to London and selling its North and South American gold mines, The Globe and Mail reported on Friday, citing three sources familiar with the discussions.

The miner is also considering doubling down on its portfolio of assets in Russia and West Africa, the report said

Kinross Gold believes selling its mines and redomiciling its Russian and African business to London would make the remaining parts of the company more valuable than if the assets were kept inside one business unit, the report added, citing sources.

Kinross Gold officials were not immediately available to comment on the report.

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This SPAC Found the Right Fit in CarID By




© Reuters.

By Christiana Sciaudone — This auto parts company has nary a warehouse in sight, and that’s the plan. 

Onyx Enterprises connects customers — mostly comprised of gearheads, for now — to parts distributors via, an e-commerce company it owns and operates. Onyx is poised to go public in a merger with a special purpose acquisition company Legacy Acquisition Corp., which will change its name to PARTS iD, and move from specialty accessories and parts into repair and collision, a market 10-times the size of the one CARiD currently serves.

“There is a lot of competition in the market,” said Nino Ciappina, interim general manager at Onyx, in a video interview. “What makes us different is the tech infrastructure, which we purpose-built over the past 10 years.”

Here’s what CARiD says sets it apart: The technology to source 17 million SKUs — or stock keeping units, aka, individual products — and growing. Compare that to rival Carparts.Com Inc (NASDAQ:), which has about 830,000 SKUs, according to its most recent quarterly report. The rival also boasts more than 840,000-square-feet of warehouse space, and growing.

CARiD’s model does not require significant investments in distribution centers or inventory.

There are millions of parts and accessories given how many different models of cars are made each year — this is known as fitment — making servicing the market as a whole a challenge. 

“It creates an incredible amount of friction in this particular industry,” Ciappina said. E-commerce solutions that exist aren’t built for this kind of multidimensional industry. “We wanted to control the accuracy of the data.”

After the reverse merger, CARiD will have up to $55.5 million of cash on the balance sheet to fund future growth and potential acquisitions. The implied pro forma enterprise value is $331.1 million.

CARiD, which estimates it will bring in $401 million in revenue this year, has more than 800 partners and 2,800 shipping locations in the U.S. 

“We can offer a wide selection and get goods to consumers relatively quickly, regardless of what you’re ordering,” Ciappina said. “Our business model is completely unique.”

That was exactly what Legacy Acquisition was looking for. 

Legacy is led by a couple dozen former corporate executives and entrepreneurs, largely African-Americans, with years of experience at places like Procter & Gamble Company (NYSE:), Coty (NYSE:) and Maytag.

Legacy Chief Executive Officer Edwin Rigaud said he has made it a point to get underrepresented groups involved in capitalism.  

“The more talent we can bring to Wall Street, the better off we all are,” Rigaud said in the same interview. “There is African-American talent that’s been sitting there waiting to do things, and not knowing exactly how to do it. This is my legacy.”

Legacy went public in November 2017, raising about $300 million. 

“We have 25-plus experts who know how to look at an opportunity like this and really determine in depth to determine whether it’s the right fit for the right company and whether it has growth potential,” Rigaud said. “There aren’t other Spac teams that are comparable with the expertise that we have.”        

CARiD’s market specialty equipment and accessories — think, custom rims —  still represents the center of the business, but the focus is on building out product lines like repair that have a higher purchase frequency. After all, how often does one need new chrome rims?

“Our core objective is to win the automotive space, we know that’s the much bigger opportunity,” Ciappina said. “That is the quickest path to $1 billion in revenue.” 

CARiD sees a specialty equipment market of about $46 billion compared to more than $400 billion for the broader industry. That’s a lot of a warehouse space — if you need it.



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Volkswagen: Significant Upside From Closing The EV Gap (OTCMKTS:VLKAF)




Volkswagen (OTCPK:VLKAF) is the leading global auto manufacturer, with strong, longer-term prospects on the back of its broad core product offerings, scale, and improved cost management. It comes as no surprise to me that Volkswagen has been resilient through COVID-19. However, an underappreciated aspect of VW is the fact that it is also the leading legacy auto manufacturer in the electric vehicle (EV) space.

A review of the EV Virtual Tour event strengthens my belief that the potential for VW’s EV volumes and contribution to ramp up is currently being ignored by the market. Valuing VW’s projected EBITDA contribution from EVs at a Tesla-like (NASDAQ:TSLA) multiple would yield upside of over 40% from current levels.

Closing the Product Gap

VW ambitiously highlighted its plan to reach a c. 3-4% EV share by 2020 and c. 6-8% by 2021 (up from the sub-1% level in 2019) at its EV Virtual Tour event. The target is underpinned by the following core products – VW ID.3, ID.4, Skoda Enyaq, CUPRA el-Born, and the Audi Q4 e-tron.

Source: VW Virtual Investors Meeting Slide (E-Mobility)

Interestingly, the ID.3 performs well against peers – according to an ADAC study (cited by VW as seen below), the ID.3 total cost of ownership over a five-year period is c. 12% below that of a Nissan Leaf (OTCPK:NSANY) and c. 21% below that of a Tesla Model 3. Meanwhile, the ID.4 is also expected to price at a c. 16% discount to the Tesla Model Y.

Source: VW Virtual Investors Meeting Slides (ID Sales)

Importantly, VW’s first EV (the ID.3) to be built off its MEB platform represents the first of at least six MEB-based models to be launched in the upcoming year. It also means VW’s EV product cycle is without precedent and will grant VW the broadest portfolio of BEVs on the market. In other words, competition is coming for Tesla.

Targeting 1 million EVs by 2022/23 and c. 3 million EVs by 2025

In 2022, the goals get even more ambitious – VW is launching the Q5 e-tron, the electric Porsche Macan, and the VW Buzz, which will drive c. 1 million units by 2022 (or 2023 at the latest). If achieved, VW will likely have narrowed (or even closed) the volume gap relative to Tesla.

Looking further ahead to 2025, the company expects to sell up to 3 million EVs/year, which would make it the market leader by far. To achieve this target, VW will require over 150 GWh of batteries in Europe and North America and a similar capacity in Asia. In aggregate, c. 75-80% of EV sales will be contributed by Europe and Mainland China, with Europe set to be the main market at an over 50% share.

Tesla’s growth prospects can’t be ignored either, but by 2025, VW stands a solid chance of becoming a strong competitor to Tesla. The major strategic difference lies in their focus – Tesla is dependent on the North American market (car and pickup trucks), while VW is focused on selling in China and Europe.

Source: VW Virtual Investors Meeting Slides (Group Sales)

Optimizing the Production Footprint

VW stands to gain from the production side as well – EV production represents an opportunity to streamline the production footprint and move towards multi-brand production plants. By optimizing its production footprint, VW stands to gain from economies of scale. Assuming execution proceeds as planned, VW’s Mosel plant could prove to be a major breakthrough in terms of scale, producing Audi, Seat, and VW electrics cars, and highlighting the flexibility in its MEB platform-based production strategy.

Source: VW Virtual Investors Meeting Slide (E-Mobility)

EVs Could be EPS Accretive

Also notable was VW’s confirmation that contribution margins on its EV products are already positive and on par with comparable internal combustion engine (ICE) vehicles. However, operating margins remain subdued due to the high fixed costs and relatively low volumes at present. This should change as VW scales – the ID.4 is expected to match ICE Golf profitability levels, while the Skoda Enyaq should match Octavia profitability, which translates into a c. 3-4% margin for the ID.3 and c. 5-6% for the Enyaq.

While the initial OP margin expectations are modest, I believe EVs can be EPS accretive as VW scales and gains market share going forward. Details are fuzzy at this point, but VW plans to confirm its long-term 2025 group profitability targets with the upcoming planning round. These numbers are crucial – while the quarterly disclosure of EV sales is a step in the right direction, further transparency is key in convincing the market to assign due credit to VW’s EV efforts.

Next Step – Closing the Valuation Gap

Like most other legacy auto manufacturers, VW shares are trading at a depressed c. 6x EBITDA multiple, which largely ignores its EV leadership. However, improved transparency and strong execution should eventually drive a re-rating. The opportunity is significant – if we were to value VW’s implied EBITDA contribution from the EV lineup at a Tesla-like multiple, for instance, VW shares could be worth upwards of €200/share (over 40% upside to current levels).

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Gulfport Energy Heads Towards Restructuring (NASDAQ:GPOR)




Gulfport Energy (NASDAQ:GPOR) looks quite likely to head towards restructuring after entering into the 30-day grace period for its October 15 interest payments. This is typically a precursor to a restructuring support agreement being worked out by mid-November.

This report looks at Gulfport’s potential post-restructuring values using various natural gas prices and multiples, and what impact that has on its common shares and unsecured notes.

EBITDAX At $3.00 Natural Gas

At $3.00 NYMEX gas and 2020 production levels, Gulfport would be able to deliver approximately $912 million in revenues without hedges. This assumes a negative $0.70 natural gas differential and $42 WTI oil.

Type Units $/Unit $ Million
Natural Gas (MCF) 343,917,600 $2.30 $791
NGLs (Barrels) 4,302,133 $14.00 $60
Oil (Barrels) 1,644,933 $37.00 $61
Total Revenue $912

This would result in a projection of $538 million EBITDAX for Gulfport at $3.00 NYMEX natural gas.

Revenues $912
Less: Gathering and Processing $215
Less: LOE $57
Less: Production Taxes $36
Less: G&A $66

EBITDAX At Various Gas Prices

At $2.50 NYMEX gas instead, Gulfport would deliver $372 million EBITDAX, and at $2.75 NYMEX gas, it would deliver $455 million EBITDAX. Basically Gulfport’s EBITDAX would change by approximately $83 million for every $0.25 change in natural gas prices.

NYMEX Gas $2.50 $2.75 $3.00
EBITDAX ($ Million) $372 $455 $538

Gulfport’s exposure to oil prices is relatively low. Every $5 in WTI oil prices would change its EBITDAX by approximately $15 million, including the associated impact on NGL prices.

Notes On Valuation

Here’s a look at how Gulfport would be valued at various gas prices and EV/EBITDAX multiples. At $2.50 NYMEX natural gas and a 3.0x EV/EBITDAX multiple, Gulfport would be valued at $1.116 billion. At $3.00 NYMEX natural gas and a 4.0x EV/EBITDAX multiple, the company would be valued at $2.152 billion.

EV Multiple/NYMEX Gas $2.50 $2.75 $3.00
3.0x $1,116 $1,365 $1,614
3.5x $1,302 $1,593 $1,883
4.0x $1,488 $1,820 $2,152

I’ve assumed that Gulfport ends up with $220 million in credit facility and construction loan debt at the end of 2020. This assumes that it generates some positive cash flow during the second half of 2020, but also largely pays off its significant working capital deficit.

This would leave $896 million in value for Gulfport’s new equity at $2.50 NYMEX gas and a 3.0x EV/EBITDAX multiple and $1.932 billion in value for its new equity at $3.00 NYMEX gas and a 4.0x EV/EBITDAX multiple.

EV Multiple/NYMEX Gas $2.50 $2.75 $3.00
3.0x $896 $1,145 $1,394
3.5x $1,082 $1,373 $1,663
4.0x $1,268 $1,600 $1,932

I’ve generally used a 3.5x EV/EBITDAX multiple to value Gulfport. This is close to what it was trading at in early-to-mid 2019 before its unsecured notes started becoming highly distressed.

I’ve also assumed that Gulfport doesn’t need to do a rights offering to pay down its credit facility further. Its credit facility debt is projected to end up at a relatively low level ($200 million) even with the reduction of its working capital deficit.

Recovery Levels

Assuming a 3.5x EV/EBITDAX multiple, the unsecured notes would have a recovery of 58% based on $2.50 natural gas if they received 95% of the new equity. This recovery would increase to 93% using $3.00 natural gas and 100% of the new equity.

While the natural gas strip is above $3.00 for 2021 currently, the strip is around $2.50 to $2.75 in the years beyond that, so I’d consider those prices to be better to use for valuation purposes.

Unsecured % Of New Equity/NYMEX Gas $2.50 $2.75 $3.00
95% 58% 73% 88%
96% 58% 74% 89%
97% 59% 75% 90%
100% 61% 77% 93%

For the common shares, getting 3% of the new equity would result in a value of $0.20 per current share at $2.50 natural gas, while at 5% of new equity, the value would increase to $0.52 per share at $3.00 natural gas.

Common % Of New Equity/NYMEX Gas $2.50 $2.75 $3.00
0% $0.00 $0.00 $0.00
3% $0.20 $0.26 $0.31
4% $0.27 $0.34 $0.42
5% $0.34 $0.43 $0.52


Gulfport appears likely (95+% chance) to restructure now that it has entered into the 30-day grace period on its October 15 interest payment. Based on historical valuation multiples, the unsecured notes appear to be reasonably priced (at close to 60 cents on the dollar) for $2.50 longer-term natural gas prices. The percentage of new equity for the unsecured notes doesn’t have that much effect on recovery levels, at least not compared to the assumed natural gas prices.

The value of the common shares will depend heavily on what percentage of new equity they receive. Currently the shares are priced for 4% of new equity at $2.50 natural gas or 3% of new equity at $2.75 natural gas.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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