Alta Fox Issues Letter to Daseke's Board of Directors Outlining the Rationale for a Significant Share Repurchase

Rhea-AI Summary

Alta Fox Capital Management, representing approximately 4.0% of Daseke's shares, has urged the company's Board to initiate a $60 million stock buyback, capitalizing on a 30% drop in Daseke's stock over the past month. Alta Fox highlights Daseke's lack of exposure to declining dry van rates, contrasting it with its positive performance in the flatbed sector. The firm estimates Daseke's EPS could grow by 15% annually, projecting a future stock price of over $20 per share, emphasizing the urgency for the Board to act on the undervalued stock.

Positive

• Stock buyback proposal of $60 million could enhance shareholder value.
• Projected EPS growth of approximately 15% annually suggests strong potential.
• Current valuation below 7x forward EPS indicates a bargain for investors.

Negative

• Daseke's stock has fallen nearly 30% in the past month, raising investor concerns.
• Limited sell-side coverage may affect investor awareness and perception.

DALLAS--(BUSINESS WIRE)-- Alta Fox Capital Management, LLC (together with its affiliates, “Alta Fox” or “we”), the beneficial owner of approximately 4.0% of the outstanding shares of Daseke, Inc. (NASDAQ: DSKE) (“Daseke” or the “Company”), today announced that it has sent the below letter to Daseke’s Board of Directors.

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April 21, 2022

Members of the Board of Directors,

Alta Fox Capital Management, LLC (together with its affiliates, “Alta Fox” or “we”) is one of the largest shareholders of Daseke, Inc. (NASDAQ: DSKE) ("Daseke" or the "Company"), beneficially owning approximately 4.0% of total outstanding shares. We are writing today to urge you to take advantage of the steep sell-off in Daseke’s stock price and buy back $60 million of the Company's stock near current prices.

The Company’s shares have fallen almost 30% over the last month – a far more pronounced decline than other trucking stocks. We believe that the initial sell-off was catalyzed by a recent FreightWaves article, which highlighted significant near-term weakness in dry van rates. As the Company articulated to the media on April 14, Daseke has zero exposure to dry van rates and is continuing to see rate increases in its flatbed business.

Weakness in trucking stocks, % of revenue derived from dry van in FY21

Company Name (Ticker)	% of Revenue from Dry Van	Sell-Off % Since Article
Heartland (HTLD)	~100%	-7%
Covenant (CVLG)	~80%	-17%
Werner (WERN)	~55%	-8%
Knight-Swift (KNX)	~50%	-11%
Daseke (DSKE)	0%	-27%
Source: Bloomberg, Company Filings, Alta Fox estimates

Given the Company’s limited sell-side coverage and investor awareness, the market has failed to distinguish Daseke’s flatbed and specialized exposure versus the more commoditized dry van exposure of the other publicly listed trucking companies. As a result, Daseke is currently trading at less than 7x our forward estimate of earnings per share ("EPS") and a 20% normalized free cash flow to equity yield despite strength in its end markets. This seems to us like an incredible bargain for a business that we estimate will organically grow EPS ~15% per year for the foreseeable future, driven mostly by self-help margin initiatives. We believe this is an unsustainably low valuation and contend that the Board should immediately authorize a $60 million buyback program (~10%+ of Daseke's market capitalization) to take advantage of this seemingly irrational sell-off. We firmly believe that Daseke is on track to earn $2.00+ in EPS by FY25, which should warrant a stock price well in excess of $20 per share (12x+ FY25 PE).

At these valuation levels, Daseke's management team and the Board have a tremendous opportunity to prove to investors that they are excellent capital allocators, are willing and able to make bold moves to increase long-term value per share and that the Company is worthy of an industry premium – not a discount. Once Daseke has earned a sustainable premium to peers, we believe that the time will be ripe for management to begin considering tuck-in M&A transactions. However, at this valuation, in our view there is no reason to even consider M&A. Even creditors have expressed concern about Daseke pursuing further M&A in the current economic climate, which is part of the reason Moody’s did not raise Daseke’s credit rating in April.¹ We have heard similar concerns form both the sell-side and buy-side communities. We urge the Company to put these concerns to rest by authorizing an immediate share buyback at current prices. We strongly believe that Daseke’s highest return, lowest risk and best use of cash currently is buying back its own shares.

We have shared additional views of our Daseke thesis at https://www.altafoxcapital.com/research.

Sincerely,

Connor Haley

Disclaimer

Alta Fox Capital Management, LLC (“Alta Fox”) is an investment adviser to funds that are in the business of buying and selling securities and other financial instruments. This information is provided for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in a private fund or any other security. An offer or solicitation of an investment in a private fund will only be made to accredited investors pursuant to a private placement memorandum and associated documents.

Alta Fox may change its views about or its investment positions in any of the securities mentioned in this document at any time, for any reason or no reason. Alta Fox may buy, sell, or otherwise change the form or substance of any of its investments. Alta Fox disclaims any obligation to notify the market of any such changes.

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¹ FreightWaves article dated April 14, 2022: https://www.freightwaves.com/news/daseke-responding-to-moodys-report-says-rates-steady-to-rising.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220421005413/en/

Longacre Square Partners

Bela Kirpalani, 646-386-0091

bkirpalani@longacresquare.com

Source: Alta Fox Capital Management, LLC

FAQ

What is the reason behind Alta Fox's request for a $60 million buyback for Daseke (DSKE)?

Alta Fox believes Daseke's stock is undervalued after a notable decline and sees a buyback as a way to enhance shareholder value.

How much has Daseke's stock price fallen recently?

Daseke's stock has experienced a nearly 30% decline in the past month.

What growth rate does Alta Fox estimate for Daseke's earnings per share (EPS)?

Alta Fox projects Daseke's EPS will grow approximately 15% annually.

What valuation does Alta Fox attribute to Daseke (DSKE) based on earnings estimates?

Daseke is currently trading at less than 7x the forward earnings estimate, indicating a low valuation.

What does Alta Fox predict for Daseke's stock price by FY25?

Alta Fox anticipates that Daseke could earn over $2.00 in EPS by FY25, leading to a projected stock price well above $20.