Thor Industries: Dominant Global RV Player at Discount to Tangible Book

Brian Hennessey of Alpine Woods Capital presented his in-depth investment thesis on Thor Industries (US: THO) at Best Ideas 2019.

Thesis summary:

Thor Industries is the largest manufacturer of recreational vehicles in the U.S., with 48% market share. Thor will soon be the only truly global player, driven by the acquisition of German private RV maker Erwyn Hymer, which has the largest share of the European RV market at 29%.

Thor has a long history of financial and operational prudence, with a nearly forty-year history of uninterrupted profitability and 25 consecutive years of positive FCF in a cyclical industry.

As the acquisition (expected to close in January 2019) will leverage the balance sheet (2.4x net debt to 2018 pro forma EBITDA) at what is feared to be the top of the cycle, Thor’s stock has been cut by nearly 70% from a peak in January 2018 and recently traded at a pro forma P/E of 7.0x and a price-to-book value multiple of 0.7x. The acquisition immediately adds at $2.25+ per share to earnings and is a catalyst as investors do their diligence on the target’s growth trajectory.

A 10x multiple would place the stock at $70+ per share, or ~40% upside. If the downcycle is milder than feared, which seems plausible as dealer inventories approach tight levels, the upside may be even greater.

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About the instructor:

Brian Hennessey began his career in high yield fixed income research at Putnam Investments, then climbed the quality spectrum to investment grade fixed income at Partner Re Asset Management, then whet his appetite in event driven, arbitrage and distressed hedge fund strategies at Tribeca Global Management (unit of Citi Alternative Investments) and Litespeed Partners. For the last ten years he has been at Westchester-based asset manager Alpine Woods Capital Investors LLC, currently as a manager of several long/short hedge funds focused on real assets as well as “deep moat” companies.