Cannae Holdings Inc.

CNNE Details

Cannae Holdings Inc. (NYSE: CNNE) is engaged in managing a group of investments in companies and executing majority and minority equity investments in businesses to maximize the value of these assets. The company’s primary investments include the minority ownerships in Dun & Bradstreet Holdings, Inc.; Ceridian HCM Holding, Inc.; Paysafe Limited; Optimal Blue Holdco, LLC; Amerilife Group, LLC; QOMPLX, Inc.; and majority ownership in O'Charley's Holdings, LLC; and 99 Restaurants Holdings, LLC and various other equity and debt investments. As of May 10^th, 2021, the company’s market capitalization stood at USD 3.38 billion.

USD 500 million investment in Paysafe with Foley Trasimene: On March 30^th, 2021, the company announced the completion of a USD 500 million investment in Paysafe Group Holdings Limited’s business combination with Foley Trasimene Acquisition Corp. II, a special purpose acquisition company. The combined entity now operates as Paysafe Limited (NYSE: PSFE). The company got 54,294,395 common shares and 8,134,067 warrants of Paysafe at the cost per share of USD 9.11.

Share Repurchase Program: On March 1^st, 2021, the company announced its three-year stock repurchase program, under which it may repurchase up to 10 million shares of its common stock, effective from February 26^th, 2021. The company’s chairman, William P. Foley, II, stated that key investors believe that the company’s stock is undervalued and is trading below the book value despite their recent terrific investments in the business.

CNNE Intrinsic Share Value Components (Company Estimates, Source: FY20 annual report)

Q1FY21 Results: The company reported a slight decline of 0.63% in total operating revenue to USD 171.90 million in Q1FY21 (ending March 31, 2021) as compared to USD 173 million in Q1FY20 (ending March 31, 2020). Total restaurant revenue contributed 97.32% of the total operating revenues in Q1FY21. The company reported negative earnings of USD 233.80 million in Q1FY21. Its cash flow from operations stood at USD 6.00 million in Q1FY21 as compared to a cash outflow of USD 34.30 million in Q1FY20.

Key Risks: The Covid-19 pandemic disrupted the restaurant and hospitality industry. Commensurately, the company had to close its restaurants, modify its working hours, and implement cost-saving measures throughout its restaurant group operations. The Covid-19 pandemic has negatively impacted the financial situation of the company, and any prolonging of the same is likely to dent the financials further.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CNNE Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Stock Recommendation: CNNE has already declined by 9.41% in the past three months and is currently leaning towards the mid-point of the 52-week range of USD 29.88 to USD 46.57. The stock is currently trading below the 200 DMA level. We have valued the stock using the EV/Sales based relative valuation methodology and arrived at a target price of USD 41.47. Considering the decline in the stock price in the past three months, the company’s share repurchase program, its recent robust investments, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 36.94, down by 2.99% as of May 10^th, 2021. 

CURO Group Holdings Corp.

CURO Details