Simon Property Group, Inc (SPG), Vodafone Group Plc (ADR) (VOD): What’s Einhorn Buying?

In the recent Sohn Conference, David Einhorn showed his bullish attitude towards oil & gas solutions provider Oil States International, Inc. (NYSE:OIS). David Einhorn stated that he accumulated shares in this company in the first quarter of 2013 at an average price of $77.16 per share. He believes that Oil States International, Inc. (NYSE:OIS) is cheap at its current trading price. Let’s take a closer look at the company and another of his investments.

Oil States should be worth $155 per share

Oil States’ share price has been sluggish over the past two and half years. From the beginning of 2011 to the middle of 2013, Oil States’ share price has fluctuated in the range of $50.90 per share to $85 per share. Oil States operates in four main business segments: Well Site Services, Offshore Products, Tubular Services, and Accommodations. According to Einhorn, Oil States is undervalued compared to the sum-of-its-parts. Right after Einhorn’s presentation, Oil States rallied more than 4% in one day to more than $99 per share, and it reached nearly $101 per share at the time of writing. At $101 per share, Oil States is valued at only 7.35 times EV/EBITDA.

In his letter to shareholders, Einhorn stated that a current multiple was typical for the lower multiple businesses. Most of its 2012 profit, $364.6 million, was generated from the Accommodations segment, while Well Sites Services ranked second with $156.8 million in operating income in 2012. Einhorn also pointed out that the Accommodations segment brought the majority of Oil States’ profits. This segment enjoyed high growth and high return on capital, thus, should deserve a much higher valuation.

Einhorn believes that the company should be valued at 8.6 times its 2013 EBITDA, or $120 per share. Interestingly, Einhorn believed that by converting the Accommodations segment into a REIT, Oil States’ share price should be around $155.

Interestingly, it was the same suggestion that JANA Partners wrote in its recent 13D filing when it reported a 9.1% stake in Oil States. JANA mentioned that in order to unlock the hidden value in the company, Oil States should separate the “Well Site Services segment from the Accommodations segment and the formation of a REIT for Accommodations.”

Simon Property Group, Inc (NYSE:SPG) is quite expensively valued

The Accommodations segment had around 64 million square feet of real estate, which is equivalent to 26.4% of the total real estate size of the largest mall REIT in the world, Simon Property Group, Inc (NYSE:SPG). Oil States International, Inc. (NYSE:OIS)is currently operating around 325 retail real estate properties, with a total size of about 242 million square feet. Oil States International, Inc. (NYSE:OIS) is trading at around $179 per share with a total market cap of nearly $55.6 billion.