Cannae Holdings, Inc.

CNNE Details

Cannae Holdings, Inc. (NYSE: CNNE) is a holding company that actively manage and operate a group of firms and investments and make new majority and minority equity portfolio investments in businesses. As of December 31, 2021, the company's primary investments consisted of minority investments in Dun & Bradstreet Holdings, Inc. (D&B), Ceridian HCM Holdings, Inc. (Ceridian), Paysafe Limited (Paysafe), Alight, Inc. (Alight), Optimal Blue Holdco, LLC (Optimal Blue), AmeriLife Group, LLC (AmeriLife), and QOMPLX, Inc. (QOMPLX). CNNE also has a controlling stake in O'Charley's Holdings, LLC (O'Charley's) and 99 Restaurants Holdings, LLC (99 Restaurants) and additional stock and debt investments.

Latest News:

• Sale of Optimal Blue: On February 15, 2022, CNNE had sold its 20% stake in Optimal Blue Holdco, LLC (Optimal Blue) to Black Knight, Inc. for USD 578 million. As per William P. Foley II, Chairman of Cannae, "Optimal Blue had been a tremendous operation and outperformer from day one of investment, resulting in a 2x return on USD 289 million investment made less than 18 months ago.
• Completion of Trebia and System 1 Merger: CNNE reported on January 27, 2022, that System1 and TREB, a special purpose acquisition company founded by organizations linked with William P. Foley II and Frank Martire Jr., had completed their merger. At a special meeting on January 20, 2022, the Business Combination was approved by most Trebia stockholders. System1 and Trebia have merged, and Trebia's name has been changed to "System1, Inc." as of the closure date due to a series of transactions. System1's common stock is expected to begin trading under the ticker symbol "SST" on the New York Stock Exchange (NYSE) from January 28, 2022.

FY21 Results:

• Growth in Topline: The company reported a YoY increase of 26.72% in total operating revenue to USD 742.2 million in FY21 (ended December 31, 2021) from USD 585.7 million in FY20, driven by 25.91% growth in Restaurant revenue.
• Reported Net Losses: However, CNNE reported a net loss of USD 287 million in FY21 compared to a net profit of USD 1.79 billion in FY20.
• Cash and Debt Position: The company had USD 85.80 million in cash and cash equivalents as of December 31, 2021, and total debt of USD 16.40 million.

Key Risk:

• Macro-Economic Risks: Sharp volatility in the global financial market, adverse price movements in equities and bond holdings, FX risks, talent retention, and other macro-economic risks are all threats that the company faces.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

CNNE's stock price has fallen 30.40% in the past nine months and has made a new 52-week low today. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 31.19.

Considering the significant correction in the stock price, significant track record, inorganic growth initiatives, strong balance sheet, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 24.91, down 4.92% as of February 23, 2022.

Three-Year Technical Price Chart (as of February 23, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.