DINO - Valens Credit Report - 2023 11 16
Credit markets are overstating DINO's credit risk with a YTW of 7.024% relative to an Intrinsic YTW of 5.924% and an Intrinsic CDS of 127bps. Furthermore, Moody's is overstating the firm's fundamental credit risk, with its Baa3 credit rating two notches lower than Valens' IG4+ (Baa1) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management's compensation framework should drive them to focus on all three value drivers: margins, asset efficiency, and growth, which should lead to Uniform ROA improvement and increased cash flows for servicing obligations. Additionally, most members of management have low change-in-control compensation relative to their annual compensation, indicating they may not be sufficiently incentivized to pursue a takeover or sale of the company, decreasing event risk for creditors.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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