ARMK
Aramark
Consumer, Event Driven/Special Sit
08/05/2019
Presented
| Date | 08/01/2019 |
| Price | $35.74 |
| Market Cap | $8.81B |
| Ent Value | $14.40B |
| P/E Ratio | 17.13x |
| Book Value | $13.13 |
| Div Yield | 1.23% |
| Shares O/S | 246.43M |
| Ave Daily Vol | 3,540,974 |
| Short Int | 4.86% |
Current
| Price | $39.01 |
| Market Cap | $10.28B |
| Aramark engages in the provision of food, facilities, and uniform services. It operates through the following business segments: Food and Support Services United States (FSS United States); Food and Support Services International (FSS International); and Uniform. The FSS United States segment offers food, hospitality and facility services for school districts, colleges and universities, healthcare facilities, businesses, sports, entertainment and recreational venues, conference and convention centers, national and state parks, and correctional institutions. The FSS International segment covers food, refreshment, specialized dietary and support services, including facility maintenance and housekeeping, provided to business, educational and healthcare institutions and in sports, leisure, and other facilities serving the general public. The Uniform segment comprises of rental, sale, cleaning, maintenance, and delivery of personalized uniforms and other textile items on a contract basis, and direct marketing of personalized uniforms, and accessories to clients. The company was founded in 1959 and is headquartered in Philadelphia, PA. |
Publicly traded companies mentioned herein: Aramark (ARMK), Cintas Corp (CTAS), UniFirst Corp/MA (UNF)
Highlights
The presenter is long shares of Aramark (ARMK), which consists of a food catering and labor business (80%) and a uniform cleaning and delivery business (20%). ARMK trades at ~9x EBITDA, a discount to pure play comps on each side of the business that generally trade at 10x – 11x EBITDA. She notes that each turn is ~$7 on share price (~20% at the current ~$36 per share), which means ARMK is trading at a 20% – 40% discount to comparable quality peers; the best peers on each side trade even higher. Therefore, she believes shares are likely undervalued and have a fair value in the mid-$40s. The real opportunity, however, is for ARMK to enter into a Reverse Morris Trust (RMT) transaction with another player in the uniform space, UniFirst (UNF). The two companies are similar sized and, according to the presenter, uniform businesses benefit substantially from economies of scale/route density. The largest player, Cintas (CTAS), is evidence of this dynamic; CTAS has superior margins and trades at ~18x EBITDA. In the event of this RMT and a “fairly conservative” synergy estimate of $150MM, she expects the share price to exceed $50.
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