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Friday, March 29, 2024

Top Trades for Fri, 08 Mar 2019 12:12 – THO

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Top Trades for Fri, 08 Mar 2019 12:12 – THO
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THO/Idi – Yes, we played them a few years ago down around $50 but they popped to $100 so we lost interest and cashed out.  Getting back to $50 again was missed and $63.40 is $3.5Bn against a bit less than $300M in sales but business has steady slow growth so not a bad one to play here.  Also, they paid $202M in taxes on $633 in income – unlike most companies – they are paying too much in taxes!  

Year End 31st Jul 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
Revenue $m 3,242 3,525 4,007 4,582 7,247 8,329 7,172 7,996 9,678 +20.8%
Operating Profit $m 222 252.8 292.9 383.3 556.4 633 338.3     +23.3%
Net Profit $m 152.9 179 199.4 256.5 374.3 430.2 230.5 284.3 368.5 +23.0%
EPS Reported $ 2.86 3.29 3.79 4.91 7.09 8.63 4.45     +24.8%
EPS Normalised $ 2.88 3.30 3.79 5.02 7.09 8.63 5.44 6.24 7.67 +24.5%
EPS Growth % +39.4 +14.5 +15.0 +32.5 +41.2 +21.7 -37.5 -27.7 +22.9  
PE Ratio x           7.33 11.6 10.1 8.25  
PEG x           n/a n/a 0.44 0.41
Profitability

I'd go for the net $50 entry selling 5 of the THO 2021 $60 puts for $12 (net $48, $6,000) and then pick up 10 2021 $50 ($20)/$75 ($9.50) bull call spreads at $10.50 ($10,500) and then you are in for net $4,500 on the $25,000 spread that's $13,000 in the money to start.  Upside potential is $20,500 (455%) and the margin requirement looks like $4,690 – so it's a nice, efficient trade as well.

ARR/Tangled – They are diluting to raise capital but I'd rather have them do that than borrow money.  You have to want to ride it out for the long haul and yes, the dividends are 0.19 12 times a year ($2.28) against a $19.47 stock and you can buy it and sell the Oct $17.50 calls for $2.20 (not now but on a move up) and the $20 puts for $2 and that drops your net to $15.27 for the first 8 months and then you just sell more while you are collecting $2.28 a year so, 24 months from now, you should have up to $4.20 x 3 ($12.60) off the price of the stock from puts and calls sold and another $4.56 in dividends so as much as $17.16 off in the first two year would be amazing but, of course, things will go wrong along the way but they don't have to go very right for this to be a huge winner.