Jacob Doft co-founded Highline Capital in 1995 and is responsible for overseeing the investment activities. Prior to forming Highline, Mr. Doft was employed at Gleacher & Co., a New York investment bank, where Jacob Doft gained experience in mergers and acquisitions, corporate restructuring and private equity investments. Jacob Doft spoke today at the Capitalize For Kids Conference in Toronto and presented his favorite idea. Below are some (very) informal notes from Doft who talks Intercontinental Exchange Inc (NYSE:ICE).

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Jacob Doft

Highline Capital

2.5b in AUM

Started the firm when he was 25 years old

Equity long/short

Focus on companies undergoing change

30 team members

Founded in 1995

 

Structural Change/Strategic Change/Financial Change

 

Jacob Doft on Intercontinental Exchange Inc (NYSE:ICE)

40% of revs come from non transaction recurring revenue

16% of revs comes from Interest rates

 

Solid Ceo, Jeff Sprecher

Investment case

All exchanges are leveraged to volumes

LIBOR opportunity

OTC clearing opportunity

Cost cuts

Capital allocation

Selective pricing

 

If volume comes back (which they think it will) it will create huge upside

 

Potential revenue for LIBOR =$240M

Based on the number of linked securities and annual fee of 16,000 (went into effect july 1)

 

Generates a lot of cash, with low CAPEX

Can buy back a significant amount of shares

Think they can spend 3.5b on debt paydown and share buybacks over next several years

 

Consensus 2016 estimates at 13.11 apply a 10% discount in volume, but they think volumes will rise and upside is possible

Macro Catalyst: Fed Raises rates (note-taker comment: the fed will hold rates lower than most think!)

 

He thinks Brent Crude volume will be strong and is more useful than WTI

10% of ICE transaction volume comes from Natural Gas

LNG exports from North America

 

Volume and volatility are highly correlated

Upside case

EPS cases

flat volume — 13.89

up 30% –16.26

up 50% — 17.85

 

Valuation 2016 P/E

ICE consensus 15.2x

Recovery assumption case 11.2x

Capitalize for Kids Jacob Doft