Weekly Update (AAF, NLOP, KHC)

Weekly Update (AAF, NLOP, KHC)

July 26, 2025

Before I get into my regular update, I want to remind everyone that my monthly live zoom call will be next Friday, August 1, 2025 at 1pm EST.

You can use this link to join.

https://us06web.zoom.us/j/84543418525

Here’s what I plan to cover:

1. Overview of new idea (I’m hoping to have a new idea published this week)
2. Additional thoughts on GCI Liberty (GLIBK)
3. Review of Airtel Africa’s (AAF) recent results.
4. Update on Brightstar Lottery (BRSL)
5. Recommendation overview
6. Answer your questions.

Alright, now on to my regular update

Weekly Update

If you haven’t already, consider joining our discord channel (included with your paid subscription):

Join Discord Channel (you must create a free discord account to join)

It’s basically a chat room where we discuss what’s going on in the special situation market:

Here are a few things we discussed this week:

1. New odd lot idea from subscriber
2. Airtel Africa’s strong results
3. Vote for the most helpful discord contributor (chance to win free 1 year subscription)

Recently Announced Spin-offs

Kraft Heinz (KHC) is currently evaluating a plan to spin off a significant portion of its grocery business into a new, distinct entity. The WSJ reported that this transaction is likely to occur. The news comes a decade after the infamous merger of two of the biggest names in packaged foods that was orchestrated by

Warren Buffett and Brazilian private equity firm 3G Capital Partners.

This new entity, which can be referred to as “SpinCo,” would encompass many of the traditional Kraft products. The remaining company, or “RemainCo,” would strategically focus its operations on faster-growing segments, specifically sauces, spreads, and condiments.

This “Remain-co” would house flagship brands such as Heinz ketchup, Grey Poupon mustard, and other sauces and spreads. The company has explicitly stated its intention to prioritize these faster-growing offerings, recognizing their better alignment with current consumer preferences compared to processed lunch meats and cheeses.

Kraft’s stock price has been a disaster since the merger.

And the spin-off will formally recognize that the merger was a mistake.

At Heinz’s current valuation, I’m not sure this valuation will unlock much value.

The SpinCo’s peers trade 1.6x sales.

Assuming that valuation multiple, the SpinCo is worth $23.2BN.

RemainCo’s peers trade at 2.9x sales.

Assuming that valuation multiple, RemainCo is worth $33.1BN.

Put it all together, and there is ~10% upside to KHC’s current equity value.

Spin-off Links

Interesting Odd Lot Transaction

• I’m not going to buy yet but will likely participate closer to the August 22 deadline if the odd lot provision remains in place.

Seth Klarman on Finding Value and Maintaining Discipline

• Look forward to watching this.

VIC: Seagate Technologies (STX)

• Investment case for STX is almost identical to the investment case for WDC

Recommendations Updates

1. Airtel Africa

Airtel Africa delivered a robust performance for the first quarter ended June 30, 2025 (Q1 2026), demonstrating accelerating revenue and EBITDA growth. This strong showing was underpinned by effective strategic execution, disciplined operations, and a more stable macroeconomic environment across its diverse African markets, showcasing the resilience of its business model.

The company reported revenues of $1,415 million, reflecting a strong 24.9% growth in constant currency and 22.4% in reported currency. This represented an acceleration from the 23.2% constant currency growth recorded in the previous quarter (Q4 2025). EBITDA grew to $679 million, marking a 32.7% increase in constant currency and 29.8% in reported currency. This strong operational leverage led to a significant expansion of the EBITDA margin to 48.0% in Q1 2026, up from 45.3% in the prior year period (Q1 2025) and a sequential improvement from 47.3% in Q4 2025. Profit after tax improved substantially to $156 million, a notable increase from $31 million in Q1 2025, largely due to a $22 million derivative and foreign exchange gain in the current period, contrasting sharply with a $136 million loss in the prior period. Basic Earnings Per Share (EPS) rose to 3.4 cents from 0.2 cents year-on-year.

What I’ve been waiting for with Airtel Africa is finally happening. Currency devaluations have stabilized and so local currency growth is close to reported currency growth. This screenshot nicely summarizes how strong the company’s fundamentals are:

Despite the strong growth, the company only trades at 14x earnings. Strong growth should continue given the Nigerian price hikes and stable currencies. In 2026, Airtel Mobile Money will IPO and that should be a nice catalyst for a re-rating.

2) Net Lease Office Properties

This week, City Office REIT (CIO) announced that it will be acquired for $7/share. This works out to $193/square foot and a cap rate of 10%.

Assuming NLOP’s remaining unencumbered properties are sold at $131/square foot, there is $645MM ($44/share) of asset value, not counting any cash flow that is generated during the liquidation process.

Assuming the remaining unencumbered properties are sold at a 10.5% weighted average cap rate (inline with sales to date), there is $706MM ($48/share) of asset value, not counting any cash flow that is generated during the liquidation process.

These assumptions could prove to be conservative. NLOP remains a high conviction idea.

No news this week.

Spin-off Calendar

Upcoming Spin-off Calendar | Completed Spin-off Calendar

Current Positioning

(updated once a month)

Hope you had a great week!

Rich

Disclaimer:

Rich Howe, owner of Stock Spin-off Investing (“SSOI”), currently is long IDT, MEDXF, AAF, IAC, UNTC, HGHCF, WDC, MAGN, LION, STRZ, NLOP, BRSL.  All expressions of opinion are subject to change without notice. This email is provided for informational purposes. Please do your own due diligence and consult with an investment adviser before buying any stock mentioned on www.stockspinoffinvesting.com.’