TCG:GBR - Valens Credit Report - 2019 01 25
Credit markets are grossly overstating TCG's credit risk, with a CDS of 1,129bps and a cash bond YTW of 12.45% relative to an Intrinsic CDS of 726bps and an Intrinsic YTW of 6.85%. Furthermore, Moody's is materially overstating the firm's fundamental credit risk, with their highly speculative, high-yield B2 credit rating six notches lower than Valens' IG4 (Baa2) credit ratingIncentives Dictate Behaviorâ„¢ analysis highlights that members of management do not receive change-in-control compensation, which decreases event risk as management is not incentivized to seek or accept a change-in-control
TCG currently trades below recent averages with a 23.1x Uniform P/E (Fwd V/E'). At these levels, the market is pricing in expectations for Uniform ROA to increase from 16% in 2018 to 24% levels through 2023, accompanied by 1% Uniform Asset growth going forward
Thomas Cook Group is a travel company. Co.'s segments include: Group Tour Operator, which includes tour operations and associated activities within Co.'s 17 source markets; and Group Airline, which provides airline-related services, including both scheduled and charter services, and associated activities within Co.'s four airlines.
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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