All the ingredients for an unpopular spin-off are here. In addition to its strange name, Kyndryl - in this case, the largest data center service provider in its category - is operating in a shrinking business and losing money.

This hasn't dampened the spirits of its chairman Martin Schroeter, an IBM veteran who has come out of retirement to take over the management of the group. In fact, he and other members of his team were buyers of the stock when it was trading between $9 and $17.

The underlying investment thesis here lies in the potential for margin expansion. In the past, IBM offered the services of its Kyndryl subsidiary free of charge; as this was used as bait to sell higher-margin services, the sacrifice was painless.

Now independent and standalone, Kyndryl aims to charge its customers 20% gross margin. And the recipe seems to be working: the said gross margin has already improved significantly over the two financial years, and this dynamic should continue as contracts expire and are renegotiated.

We're not yet at breakeven, but we're getting close. Some analysts even see a cash profit - or "free cash flow" - per share of $3 or $4 within three years, thanks in part to forthcoming contract renegotiations and the sale of new consulting services.

At a multiple of fifteen times this potential free cash flow per share, we'd be looking at a valuation of around $45-$60 per share, representing a significant potential gain on the current share price.

The situation will be fairly easy to follow, with potential investors keeping a close eye on gross margin trends.