Weekly Update (BRSL, SUNN, CON)
August 23, 2025
Before I get into my regular update, I wanted to share one chart that caught my eye this week.
While US markets seem quite frothy to me, I try not to “fight the tape.”
As always, I’m looking for attractive, bottom-up ideas, and luckily, I’m still finding plenty.
This week, I had a chance to talk with Magnera IR.
You can read the update here.
Alright, now on to my regular update
Weekly Update
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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:
- Discussion of BRSL’s Accelerated Share Repurchase
- NLOP went ex for $3.10 dividend. Tax treatment guidance will have to wait until year end. I expect it to be return of capital.
- Discussion of strong results from Sunrise
Upcoming Spin-offs
In December 2024, Continental’s (XTRA: CON) Executive Board approved spinning off the Automotive group sector by end of 2025, with preparations wrapping up by Q3 2025
The new Automotive company (“Aumovio”) which generates ~€20BN in sales, will begin regular way trading in September.
The automative business has struggled, but management has plans in place to improve margins over time.
AUMOVIO’s comps trade at 0.4x NTM Sales and 8.2x NTM EBIT.
Assuming AUMOVIO deserves to trade in line with its peers, its worth between €11.50 and €19.80 per share (shareholders will receive 2 shares of the spin-off for each share of CON).
When the automative spin-off was originally announced, Contitech was going to be included in RemainCo.
But the plans have changed and Continental now plans to sell ContiTech in 2026. I think this is a great move as it will simplify RemainCo’s story.
ContiTech is Continental’s industrial solutions division, focused on developing and supplying rubber and plastic-based technologies and systems that serve a wide range of non-automotive and automotive applications.
It manufactures and sells:
- Industrial conveyor belts (used in mining, agriculture, construction)
- Fluid handling systems (hoses for air, oil, water, and chemicals)
- Vibration control and noise-reduction products
- Elastomer coatings, sealing systems, and specialty films
- Air springs and suspension components
While some of these products are used in cars, the majority serve industrial sectors like mining, oil & gas, railways, agriculture, and manufacturing, positioning ContiTech as Continental’s bridge to more diversified end markets.
I estimate ContiTech is worth €2.6BN to €5.1BN.
What is RemainCo worth? After ContiTech is sold, RemainCo will be a pureplay tire company. Tire peers trade between 1.0x and at 1.4x NTM sales.
As such, Continental’s tire business is likely worth €13.5BN to €20.3BN on an enterprise value basis.
What is the entire company worth on a sum-of-the-parts basis?
I see ~22% upside.
Spin-off Links
Honeywell Spin-off (Advanced Materials) Files its Form 10
- Transaction is expected to take place in the 4th quarter
Alibaba to spin off its Banma autonomous driving business via an IPO on Hong Kong exchange
- An IPO (rather than a spin-off) but I will be watching this one.
Recommendations Updates
(1) Sunrise Communications
Sunrise reported results this week, and the stock reacted well.
Results: Revenue CHF 732M (–0.8% y/y) stabilized; Adj. EBITDAaL +1.9% y/y to CHF 254M (34.7% margin). Net loss narrowed to CHF 54M (vs –74M LY).
Free Cash Flow: Q2 Adj. FCF CHF 153M (–11% y/y), rebounding from Q1’s seasonal outflow. H1 FCF CHF 37M, tracking below run-rate but full-year CHF 370–390M guidance reaffirmed.
Subscribers & ARPU: +18k mobile postpaid adds; broadband flat. Softer growth due to reduced promos after price hikes. Mobile ARPU –1.6% y/y (improving vs Q1), fixed ARPU –4.5% y/y. FMC ratio 58.5% (+1.4ppt y/y).
Guidance: FY25 guidance reiterated – broadly stable revenue, EBITDAaL flat to low-single-digit growth, CAPEX 15–16% of revenue, FCF CHF 370–390M. Dividend +2.7% to CHF 3.42/share (FY25, payable 2026).
Analyst Q&A: Mgmt emphasized value over volume; ARPU trending up. Cost savings from UPC integration and leases continuing. 5G SA rollout advancing (~300k active users). Share-based comp spike tied to employee share plan.
Bottom Line: Solid quarter – margins and FCF improving; strategic trade-off of lower subs for higher ARPU and cash flow is working. Outlook intact, dividend secure. Management has committed to 3.42 CHF dividend next year. As such, the stock is trading at a 6.1% dividend yield. I think a 6% dividend yield is more reasonable which would imply a $71 stock price.
(2) Brightstar Lottery
Brightstar filed a 6-k this week to disclose that it entered into an accelerated share repurchase agreement with an investment bank.
Under the ASR agreement (entered on July 29, 2025 with Banco Santander), the company paid $250 million upfront and received an initial delivery of 13,573,035 ordinary shares on August 6, 2025.
This initial tranche was effectively priced at approximately $18.42 per share, as indicated by the 6-K filing (the maximum and minimum price paid for those shares was $18.42). The repurchased shares are being held in treasury, immediately reducing the public float.
To put the buyback’s scale in context, $250 million is roughly 7.2% of Brightstar’s ~$3.5 billion market capitalization and ~12% of its public float (De Agostini family owns 87MM shares and is not participating in the ACR).
One other positive catalyst for Brightstar is the growing Powerball (up to $700MM now). BRSL continues to look attractive here with: 1. Cheap valuation 2. Accelerated share repurchase 3. Potential near term earnings upside from Powerball.
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 and TSE: 3134. 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.’
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