Sectors > Top Reports > Algeco Memo 100120

Algeco Memo 100120

IPO & CDS Orphaning? Or More Roll-Ups First? Either Way, Solid Business, Resilient Financials & Ends With IPO. Buy
PUBLISHED: 10 January 2020
PAGES: 141
SUBMARKET: Algeco, Top Reports, Top Reports,


Why Read?

  • Understand TDR Capital’s strategy in and likely exit options from the modular leasing and remote accommodation sector
  • Understand TDR’s investments in the sector since 2004 and its IRR across Algeco, William Scotsman and Target to date
  • Understand how Algeco has been transformed via disposals of William Scotsman and Target 
  • Understand the business divisions and revenue streams of a full-service modular space leasing company
  • Understand Algeco’s end-use markets served
  • Understand the modular space leasing market and its growth prospects within Europe and APAC by country
  • Understand Algeco’s competitive advantages vis-a-vis smaller, regional players
  • Understand Algeco’s fleet utilisation, average rental rate and VAPS per unit trends by geography
  • Understand the lifecycle of a modular unit and average cash flows generated over its lifetime
  • Understand the change in accounting policies, consolidation perimeter and early adoption of IFRS 16; and the related differences between Adj EBITDA generated from 2017 onwards and prior years

What’s New?

  • Assessment of TDR’s strategy in modular leasing and remote accommodation, its IRR to date and prospects for an IPO of Algeco (and attendant CDS orphaning) vs continuation of the roll-up strategy 
  • Stressing Algeco for shocks to utilisation, average rental rates, VAPS per unit, gross margin and other key variables
  • Valuing Algeco’s equity – base and stress DCF valuations and listed and transactional comparable multiples

Questions Answered

  • Can Algeco turn around it operations to generate positive FCF after interest payment?
  • What is Algeco’s equity value – multiples and DCF approaches?
  • What is the impact of recently announced acquisitions on liquidity and FCF?
  • Is Algeco’s highly touted VAPS business transferable to the fleets and customers of the acquired entities?
  • What is the EBITDA impact of restating financials from 2017 onwards under IFRS 16?
  • What has been the financial impact of the disposals of William Scotsman and Target?
  • What is a sustainable level of maintenance capex that Algeco can operate with?
  • How has the leverage been affected by disposals in the past 2 years and how will it be impacted by recently announced acquisitions?
  • What is the impact, if any, of Brexit on the Elliott business in the UK?
  • Will APAC operations turn around after a dismal period owing to the Australian mining downturn?
  • Does Algeco’s liquidity break under stressed conditions? Would further equity contributions be needed from TDR?
  • What recovery rate would be likely on the senior secured notes, ABL facility and senior notes?

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