Listen up smooth brains, I know youre sick of these crazy premiums, and are looking for the next sleeper pick to jump in on, so here it is.
Tomorrow (8/27/20) at 9am a $CCH shareholder vote will be held to merge blank check/spac company Collier Creek Holdings, with Utz Quality Foods snack giant. And im about to tell you why you should put your chips in (no pun intended). If the vote goes through, the ticker will change to $UTZ. This is the same SPAC merger structure that Draftkings (DKNG) and Nikola Motors (NKLA) and Virgin Galactic (SPCE)
“Why would I bet on a snack company IPO paulbo? That’s not EVs, gambling, or space travel”
Well, my friend, semiconductor chips aren’t the only kind of chips you can make money on in the stock market, and ill tell you why. But first, for those who aren’t aware of UTZ, ill give you a little introduction.
Here is the investor Presentation from august 11th for starters: http://www.colliercreekholdings.com/Cache/IRCache/0de3378d-b2e4-a7dc-9aea-98e51998e5c5.PDF?O=PDF&T=&Y=&D=&FID=0de3378d-b2e4-a7dc-9aea-98e51998e5c5&iid=11139662
What is UTZ Quality Foods?
Utz Quality Foods, Inc., more commonly known as Utz, is the largest independent, privately held snack food brand in the United States. Based in Hanover, Pennsylvania, the company produces a wide variety of potato chips, pretzels, and other snacks, with most distribution being limited to the eastern United States.
They are a Manufacturer, marketer, and distributor of branded snacks in the U.S., including potato chips, pretzels, cheese snacks, pork skins, pub/party mixes, and veggie snacks Strong portfolio of national and regional brands, including Utz, Good Health, Boulder Canyon, Zapp’s, and Golden Flake. If you are familiar with any of these absolutely fire snacks, your probably already buying calls and shares. If not, keep reading.
Utz is 99-year-old family company with over 40 years of consecutive Comparable Sales Growth. It’s the #1 largest privately owned snack company up until now, Its #2 salty snack company in its Core geographies; #4 nationally. 2020E Pro Forma Net Sales of $932 million and Projected Further Adj. EBITDA of $124 million. Yes, almost a billion dollars in sales. This is no start up, this is a blue chip, established company that you have the chance to get in on the ground floor, pre-merger.
UTZ is being valued at $1.56 billion. They had a billion in sales. Furthermore, If you happened to catch Jim Cramers bit on it, youll have heard him mention how cheap this valuation is. They came to this valuation at an 11.6x multiple of their EBITDA. Competitors like Pepsico (frito lays) are valued at 14.7x.
As you can see, this valuation is very conservative. Especially when you realize how much growth opportunity UTZ has in comparison to its competitors. It has by far the most growth potential.
It’s a growth stock: Growth Potential
Look at this. Impressive right? If you live in the east coast youll see this growth first hand. In recent years, UTZ products are in every wawa and Costco.
“But paulbo, I want to see consecutive years of growth, not just this past year” okay fine then check out this chart.
As you can see here, the growth in the past 20 years has been flawless. Even in recession, it has grown right on cue. Not only is it a growth stock and undervalued, it is also RECESSION PROOF. And it even has a dividend for those boomers out there. Now you can begin to see why this is such a good play.
There is tons of room to grow at an exponential rate.
Utz right now is primarily sold in the north east, but they are going public, so that they can go NATIONAL. Imagine buying a future frito lays when it was worth a couple billion.
“Okay fine Paulbo, it’s a great company, but does it have any real hype driving retail buying?”
Surprisingly it does. This is Boomer King Jim Cramers favorite snack company as hes from PA. Hes mentioned this multiple times now on his show. He even had the Executives on in July to talk to him, briefly driving the stock price up to 16$ after hours.
Warren Buffet even mentioned that UTZ is his favorite snack company, and thought about buying it back in 2015. https://fortune.com/2015/03/04/warren-buffett-utz/ If Berkshire buys into UTZ, this thing is going to the moon.
Don’t underestimate boomer hype. They have the most buying power of all of retail, and going into the uncertainty of the current world situation with the virus and election season they are going to be looking for a solid blue chip dividend play.
WHALE MONEY IS BUYING THE SPAC ALREADY
Institutions like Bamco and Goldman Sachs and cch itslef are currently owning 77% of the public float. That is a higher institutional ownership than any spac ive seen so far. They are making big bets on this company, and most big institutions wont even buy spacs until their mergers are complete. The smart money is going to pile on.
On top of all of these great aspects of UTZ, the most important is that their Pretzels are fucking fire. That fact alone makes this play worth it.
Final valuation and price targets.
At ticker change, according to the investor presentation, there will be 110 million shares outstanding. Half of them will be owned by the founding family. The other half will be public float. Of that 55 million, 77% will be owned by the current CCH insiders, and the institutions. That leaves a float for the rest of us, at around 13 million shares. That is actually very very small float, so it will only need a little bit of retail hype to really moon.
Utz is being valued at 1.5 billion. Undervalued af
If Utz is valued at 15x pro forma 2021 Ebitda of 134m, rather than 11.6x, the market cap would be $2 Billion(still even conservative). That would calculate to $18.12 at ticker change
As I am writing this, the stock is up to $16 dollars, with a few days before ticker change. This is after trading in the 13.50-14.00 range since they announced the merger earlier this summer. The hype is starting to build, but if youre in under $20 YOU ARE STILL VERY EARLY. This will be fairly valued at $20 within a week maybe two, and itll be at $25 eoy.
Sept and Oct $15, $17.5, $20 calls
Jan $17.5, $20, $25 calls for a longer play.
TL:DR Utz Quality foods snack giant is merging with a spac and is undervalued by like 30-50%. This company is one of the largest and fastest growing snack companys in the country. The boomers, jim cramer, warren buffet, dividend ETFS and fat people from the north east are going to be loving this stock. Super low risk and a possible high reward with warrants or calls. Premiums are still low on calls, and there is a ton of upside. The company also makes fire pretzels and cheeseballs.