Ann: Trading Update, page-69

@croasian

im up late and in an analytical mood, so i thought i would flesh out the TK story as i see it

teekay corp currently $851m market cap

owns

31% tk lng - current market cap $1.5bn = $465m attributable ownership
(11.3x p/e) also pays dividend of ~56c pa (3% yield) - ie. $13.81 annual income


35% tk offshore - current market cap - $876m = $306m attributable ownership
na + dividend ~44c pa (7.2% yield) ie $22m annual div income


25.5% tk tankers - current market cap - $347.44m = $88.6M attributable ownership
(3.3x p/e) + dividend ~12c pa (5% yield) - ie $4m annual div income


So TK Corp holding company market cap is 851m vs an underlying attributable value of $859.6m

then on top of this it has current attributable dividend income of $40m per annum

TK Corp is effectively a tax effective funds manager - so its own financials look poor during a period when its asset owning subsidiaries are retaining capital to fund capex.

Its Tankers and Offshore businesses are currently at the very low ebb valuation - so have significant upside to asset value and dividend payments when those sectors normalise

But they could do nothing for years and still Id make the argument TK equity is worth at least $950m -$1.2Bn on the combination of
- $1 for dollar underlying asset value of its share ownerships +
- appropriate p/e on the $40m annual current dividend income less office costs. (ie use a rough guide of a $~10-15m npat at 10-15x)

So in my view
- 11-41% undervalued atm 'as is'- no value for the funds management business at present - just underlying assets

+ upside to asset and income for both Offshore and Tankers businesses possible at some point in future

There is some dilution risk in underlying vehicles as all 3 business continue to optimise to the new environment - but majority of that work is done and most of the finance in place.

On top of all that - there's probably reason to be optimistic that Gulf tanker and deepwater businesses will be one of the main target beneficiaries of Trump's focus on growing this as a US core asset class, job genertor and wealth creator

but i wouldnt hang my hat on that. but does offer some interesting optionality

IMO the reaosn you are seeing TK start to kickup is that ivnestors are now getting confidence that dividend income has now based and risks to TK Corp now recede - so the funds mgt business starts to re-attract a value