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Emerald Expositions Events ($EEX)

Concept: High quality trade show operator has pandemic insurance, implying minimal impact to cash flows despite ~80% share price drop.  

Business: Emerald Expositions is a leading B2B trade show operator. Their industry-specific shows connect fragmented groups of attendees and exhibitors. Their shows are “must-attend” events because they enable fulfillment of procurement needs, sourcing new suppliers, reconnecting with existing suppliers, identifying industry trends, learning about new products and networking with industry peers. You “have to be there” if you’re a “real” industry participant; the network effects are real which supports the company’s pricing power.

Key Points: Emerald’s stock is down ~80% this year because many of their trade shows have and will be canceled due to CVID-19. The stock is interesting because Emerald maintains event cancellation insurance that includes coverage for communicable diseases (see p.7 2019 10K for specifics). This policy could cover the company’s budgeted EBITDA through 2021, at which point industry conditions will likely have normalized.

Valuation: EEX shares returning to pre-virus levels implies ~4x upside from current prices. The company’s closest peer, Informa (aka UBM, EEX CEO’s prior employer) is valued ~9X EBITDA, which would support ~$8 of equity value at EEX.

Other Notables: Onex (large PE sponsor, 65% stake) could easily buy in the minorities at current levels (hypothetical ~$100M equity check @ ~$4), recycling capital from the company’s IPO at $17 in 2017. WCM and Select Equity, both known for investing in high-quality franchises are Page 1 holders of the stock. Lastly, balance sheet risk is low given the company’s 150M of cash & liquidity (pre-insurance, see 4/6/20 8K), no debt maturities until May 2022, and an extremely asset light model (capex is <1% of sales).

Disclosure: The writings above are for entertainment purposes only and are not investment advice. Do your own homework.