If you’ve been with me for a while, you know I’m always looking for special situations plays, like spin-offs, for one. These events are where a company divides a piece or pieces of its business up into separate companies. These kinds of reorganizations often come along with management decisions designed to increase revenues and profits.
That’s why they always attract my attention – they can mean big profits for shareholders who decide to buy into the new company.
One recent spin-off has my full attention right now, and I want to make sure you’re up to speed, too, because we’re looking at massive long-term gains potential here, and we’ve got a beautiful entry point.
Here’s what you need to know…
This New Infrastructure Firm Is Poised to Skyrocket
Fortress Transportation and Infrastructure LLC (NASDAQ: FTAI) was already an interesting collection of assets before they closed last week’s transaction. They owned a bunch of energy infrastructure assets and had a business that leases aircraft and aircraft engines.
As of last week, the company was split into two pieces. The infrastructure assets are one company, FTAI Infrastructure Inc. (NASDAQ: FIP), and their aviation business will continue as a stand-alone operation.
I’m a huge fan of infrastructure assets in general, but right now, I’m even more enthusiastic about them than normal, because of the huge role infrastructure is going to play in the near future as we work out supply chain issues for the goods that the world needs most.
So, I did a little digging over the weekend, and looked into what all this new infrastructure company would own, and I think it may very well be a sleeper hit.
Why? It’s simple: the value of the assets the company owns are collectively worth more than the current stock price.
Truth be told, FTAI Infrastructure got off to a rocky start. The first few days of trading were a bit of a roller coaster with the stock trading as high as $4.20 and as low as $2.41. (As of this writing it’s trading around $2.80.)
But the asset portfolio has some real gems in it that they’re planning to leverage for more income that should make shareholders very happy.
Here’s What FTAI Brings to the Table
The Jefferson Terminal located in Beaumont, Texas is home to one of the largest collections of refineries in the United States. The terminal is located on approximately 250 acres of land at the Port of Beaumont, Texas, a deep-water port near the mouth of the Neches River. Fortress Infrastructure is the sole handler of liquid hydrocarbons at the facility.
The Jefferson Terminal currently consists of 4.3 million barrels of storage, 25 miles of rail track, a ship dock, and a barge dock. An expansion to 6.3 million barrels of storage is expected to be complete in 2023.
There is pipeline access from Cushing, Oklahoma, and some of the nation’s largest oil and gas refineries. There are 3 major railroads offering service to pretty much anywhere in North America connected to the terminal as well.
Given that we’re trying to ease our energy dependence on countries like Russia, I expect that assets like this are going to see extended use soon.
Then there’s the Repauno port, a 1,630-acre deep-water seaport and logistics hub located along the Delaware River in Greenwich Township, New Jersey. Repauno has underground granite storage cavern infrastructure, a new multipurpose dock, and convenient truck access to two major interstate highways.
In early 2021, Repauno finished its new state-of-the-art rail-to-ship transloading system that allows the port to load liquified natural gas ships. This should become a major business as LNG exports to Europe are expected to help reduce the Old World’s dependence on Russia for its energy needs.
Before the split, Fortress Infrastructure also entered the railroad business by purchasing five short line and regional railroads for U.S. Steel. As part of the deal, they will provide rail service to U.S. Steel for an initial term of 15 years with minimum volume commitments for the first five years.
Fortress Management believes the lines are underutilized and can produce higher cash flows serving other businesses in the area. Their lines connect to tracks operated by the seven major railroad operators in the United States, so the likelihood of them succeeding at expanding their business here is high.
And finally, the cherry on top that cements my confidence – insider purchasing. The CEO of the new company, Kenneth Nicholson, made an open market purchase of 300,000 shares at a cost of about $880,000. The CFO, Christopher Scott, made a small buy of 7,500 shares and two directors also made small purchases of the stock.
— Tim Melvin
Source: Money Morning