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Maire Tecnimont: Remarkably Cheap Chemical Engineering Leader

October 7, 2020 in Audio, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Ideas, Small Cap, Transcripts

Juan Huerta de Soto Huarte of Cobas Asset Management presented his thesis on Maire Tecnimont (Italy: MT) at European Investing Summit 2020.

Thesis summary:

Maire Tecnimont is the global technological leader in the hydrocarbon chemical engineering industry, as well as one of the main engineering, procurement and construction (EPC) companies in the petrochemical, fertilizing, and oil & gas refining sectors.

A combination of proprietary technology and deep know-how in the EPC business has enabled the company to be the leader in terms of petrochemical plant installed capacity and a market leader in the licensing of urea technology for fertilizing plants.

For reasons that Juan deems to be temporary – e.g., pessimism in the oil & gas and oil services sectors, doubts about the balance sheet and liquidity, and sparse coverage – Maire Tecnimont shares have fallen ~75% since 2017 and recently traded at a remarkably cheap 2x normalized FCF and what Juan estimates to be a forward FCF yield of 15+%.

The market seems to be especially worried about the company’s net debt position and worsening of working capital over the past twelve months, causing the shares to trade at a distressed valuation. However, Juan’s analysis suggests this is a temporary issue that is being well-managed by the company.

Juan estimates Maire Tecnimont to be worth €7 per share, making it a potential five-bagger. Despite operating in a cyclical business, Maire has an asset-light business model with structural negative working capital, with ROCE of ~100%. The founder holds a 51% stake and, together with his son, is deeply involved in day-to-day operations.

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About the instructor:

Juan Huerta de Soto Huarte serves as an Investment Analyst at Cobas Asset Management. Having taken a double degree in Law and Business Administration at the Universidad Complutense, he was awarded a Master’s degree in Austrian Economics by the Universidad Rey Juan Carlos. Juan started his career as a buy-side analyst at Bestinver, which he later continued at azValor. Currently he serves as an investment analyst at Cobas Asset Management. Juan teaches Economics and Investment in ISBIF and the Executive Programme in Value Investing and Behavioral Finance in ICADE University. This young Madrid native, born in 1989, enjoys swimming, running and golf. He is a film buff, and a voracious reader of books on economics and investment.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Three European Companies at a Discount to Fair Value

October 7, 2020 in Audio, Consumer Discretionary, Equities, Europe, European Investing Summit 2020, Ideas, Mid Cap, Transcripts

Deepinder Bhatia of Bayard Asset Management presented his investment theses on GVC Holdings (UK: GVC), Fondul Proprietatea (Romania: FP), and Philip Morris CR (Czech: TABAK) at European Investing Summit 2020.

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About the instructor:

Deepinder Bhatia is Founding Partner and Portfolio Manager of Bayard Asset Management LLC based in Princeton, NJ. Launched in April 2011, BAM manages a concentrated, long-biased, value oriented, global equity fund. Prior to Bayard, Deepinder was an Investment Manager and Partner at Ironbound Capital, a global equity long-short hedge fund. He started in 1994 as an Investment Analyst specializing in Asian equities at Merrill Lynch Investment Managers (now BlackRock). His holds an MSc in Economics from the London School of Economics, MBA from The Wharton School and a BCom from Bombay University. He is a Chartered Accountant and holds the CFA designation.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Avivasa: Well-Run, Capital-Light Franchise with Growth Runway

October 7, 2020 in Audio, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Financials, Ideas, Small Cap, Transcripts

Gokul Ponnuraj of Bavaria Industries Group presented his in-depth investment thesis on Avivasa (Turkey: AVISA) at European Investing Summit 2020.

Thesis summary:

Avivasa is Turkey’s leading pension and insurance firm. While Aviva Plc (40% shareholder) brings its global insurance expertise, the Sabanci Group (40% shareholder), one of Turkey’s largest conglomerates, brings with it the Akbank relationship, which provides Avivasa a huge distribution edge in the marketplace, along with embedded digital capabilities.

Avivasa’s pension business is Turkey’s market share leader (18.2%). The pension business is a capital-light asset management business with no underwriting or balance sheet investment risk. It generates strong, predictable fee income. The firm has grown pension AUM at a CAGR of 26% over the last five years. Avivasa’s insurance business has grown gross written premiums at a CAGR of 42% over the last five years as the firm got strong customer traction on its credit linked insurance and long-term dollar saving products. The firm is well-run, with best-in-class ROEs of 35% and a dividend payout ratio of 50-75%.

Insurance and pension penetration in Turkey is very low, and the firm has a long runway for growth in both business segments. The life insurance segment contributes 57% of the firm’s overall technical profits, while the pension segment accounts for the remaining 47%. Within the life insurance segment, the business mix split is 45% credit-linked insurance, 35% dollar return of premium business, and 25% other (personal accident, health insurance, etc).

The credit-linked insurance segment is a direct play on increasing retail credit penetration in Turkey, as the firm’s banking partner AkBank has one of the best mass-affluent customer franchises in the country. In emerging markets like Turkey that have high interest rates, it is extremely valuable to have a profitable long-tail liability franchise, especially when the only underwriting metric they need to get right is the mortality rate, which is non-volatile and hence no complex underwriting is required for the underlying risks.

The recent market cap to flow earnings (potential lifetime profits from products sold in 2019 alone) is only 5.5x. The shares recently traded at ~1.2x embedded value (crudely analogous to book value), and 10x IFRS earnings. The primary risks to Gokul’s thesis continue to be the worries around Turkey’s macro economy and potential currency depreciation.

Disclaimer provided by Gokul: “We are biased as we hold around 1.2% of the firm. We haven’t bought or sold Avivasa shares in the last 30 days.”

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About the instructor:

Gokulraj Ponnuraj is a value investor with a focus on small and mid-cap spinoffs and compounders with a bias towards emerging markets. He has been investing in the Indian markets for more than ten years and in global markets for the last three years. Gokul manages the public equities portfolio at Bavaria Industries Group. The firm uses its balance sheet assets (permanent capital) to invest in opportunities with an attractive risk-reward tradeoff. Gokul holds a Master in Finance degree from London Business School.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Modern Times: Undervalued Portfolio of Digital Entertainment Assets

October 6, 2020 in Audio, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Ideas, Jockey Stocks, Small Cap, Special Situations, Transcripts

David Marcus of Evermore Global Advisors discussed European special situation opportunities and Modern Times Group (Sweden: MTG-B) at European Investing Summit 2020.

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About the instructor:

David Marcus has more than 20 years of experience in the investment management business. He began his career at Mutual Series Funds, mentored by renowned value investor Michael Price, and rose to manage the Mutual European Fund and co-manage the Mutual Shares and Mutual Discovery Funds. He also served as director of European Investments for Franklin Mutual Advisors, LLC. After leaving Franklin Mutual, David founded Marcstone Capital Management, LP, a long-short Europe-focused equity manager, largely funded by Swedish financier Jan Stenbeck. When Mr. Stenbeck passed away in 2002, David closed Marcstone and then co-founded a family office for the Stenbeck family; as an advisor to the family, he advised on the restructuring of a number of the public and private companies the family controlled. He later founded and served as managing partner of MarCap Investors LP, the investment manager of a European small cap special situations fund, which he managed from 2004 to 2009.

MailUp: Marketing Automation Provider at Discount to Global Peers

October 6, 2020 in Audio, Equities, Europe, European Investing Summit 2020, Ideas, Micro Cap

Massimo Fuggetta of Bayes Investments presented his in-depth investment thesis on MailUp Group (Italy: MAIL) at European Investing Summit 2020.

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Massimo Fuggetta started his career as a portfolio manager in 1988 at JP Morgan Investment Management in London, where he rose to become Head of the Global Balanced Group, with overall responsibility for international balanced portfolios. In 1999 he left JPMIM to become Chief Investment Officer and Director General at Sanpaolo IMI Asset Management in Milan, where in 2000 he became Chief Executive Officer. He left the company in 2001 to start Horatius, which was incorporated in 2004 as an advisory company and in 2007 became an asset management company. In 2012 Massimo left Horatius and went back to London, where in 2014 he founded Bayes Investments. Massimo graduated in Economics at LUISS, Rome and holds a Master’s Degree (M.Phil.) and a Doctorate (D.Phil.) in Economics from the University of Oxford. Massimo also taught Behavioural Finance in the Master in Economics course at Bocconi University in Milan and served in the Editorial Board of the Financial Analyst Journal. In 2012, Massimo started the Bayes blog at www.massimofuggetta.com, which has acquired popularity in the Value Investing community.

Essity: Sweden-Based Kimberly-Clark Comp at Attractive Valuation

October 6, 2020 in Audio, Consumer Staples, Equities, Europe, European Investing Summit 2020, Ideas, Large Cap, Transcripts

Jean-Pascal Rolandez of The L.T. Funds presented his investment thesis on Essity (Sweden: ESSITY-A, ESSITY-B) at European Investing Summit 2020.

Thesis summary:

Essity holds the number one or number two position within at least one product category in approximately 90 countries. Essity is the global market leader in incontinence products with the TENA brand and in professional hygiene with the Tork brand. The Swedish group also holds strong brands and market positions in the markets for baby care (Libero, Lotus, Drypers, Pequenin) feminine care (Bodyform, Nana), medical solutions (Leukoplast, JOBST) and consumer tissue (Lotus, Tempo, Zewa).

Over the last five years sales grew organically 3.4% p.a. and EBITDA per share 11% p.a. Jean-Pascal assumes a 4% sales decline in 2020 not preventing a 4% increase in EBITDA per share (thanks to lower raw material prices) as well as lower capex, allowing for a significant positive free cash flow. In 2009, sales were flat, showing the very defensive nature of Essity’s businesses. Again in 2020, against the pandemic background, Essity is showing resilience.

Jean-Pascal expects sales to grow 17% p.a. by 2024, after the 4% drop in 2020(e) sales. Essity boasts a strong cash generation, with 2019 ROCE (13.7%) significantly exceeding WACC (4.2%). Trading at 11x 2022(e) EBITDA and 1.8x sales, a 10% discount to Kimberly-Clark, its main peer, Jean-Pascal expects the share price to increase by 6% p.a by 2024, in line with EBITDA growth. AB Industrivarden holds 29.2%, Norges 6.8% and Ami Insurance 4.2%.

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About the instructor:

Jean-Pascal Rolandez is the manager of The L.T. Funds, a Geneva-based investment firm focused on a buy and hold strategy based on a limited number of European stocks with a 5+ year investment horizon. Jean-Pascal has more than 25 years of equity investment experience and has founded the first investment club at the leading French business school ESSEC. Prior to establishing The L.T. Funds, Jean-Pascal held various executive positions at BNP Paribas for 22 years, including as Paribas’ French equity strategist.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Rocket Internet: Undervalued, But Minority Holders Expropriated

October 6, 2020 in Audio, Equities, Europe, European Investing Summit 2020, Ideas, Mid Cap

Louis d’Arvieu of Amiral Gestion presented his investment thesis on Rocket Internet (Germany: RKET) at European Investing Summit 2020.

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About the instructor:

Louis d’Arvieu joined Amiral Gestion in 2005 and serves as a fund manager for the Sextant funds. Founded by Francois Badelon, Amiral is an independent asset management firm based in Paris. Amiral’s single goal is sustained performance with minimum risk based on the firm’s fundamental investing approach. Louis graduated from the HEC School of Management in Paris.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Ferrari: Luxury Identity Brand with Enviable Business Model

October 6, 2020 in Audio, Consumer Discretionary, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Ideas, Large Cap, Transcripts

Arif Karim of Ensemble Capital Management presented his in-depth investment thesis on Ferrari (NYSE: RACE) at European Investing Summit 2020.

Thesis summary:

Ferrari is a well-known global brand in Formula 1 racing and among sports car afficionados. What most people may not know is that it is a fantastic business, offering customers a luxury identity brand. Part of this is signaling success and status or passion for racing and driving, and part of this is being a member of an exclusive global club comprised of peers with the same passion for a Ferrari.

Ferrari fosters a community of customers by creating exclusive group events that allow opportunities for members to come together to meet and enjoy the experience of driving their Ferrari. In addition the scarcity of its sought after cars can make it a profitable passion as well. As a result, Ferrari offers an emotional experience that is hard to substitute, which underpins its value and competitive advantage. The company’s ties to Formula 1 racing go back to the sport’s origins, as the desire to own one goes back to customers’ childhood, while fostering connections among its network of members makes it a unique company and business model. By creating a win-win-win relationship, Ferrari has built a rewarding business for all stakeholders.

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About the instructor:

Arif Karim is a senior investment analyst at Ensemble Capital. Before joining Ensemble Capital, he was a senior investment analyst and co-portfolio manager at Kilimanjaro Capital. Positions prior to that included senior equity analyst at Pacific Edge Investment Management and research associate at Robertson Stephens & Co. Arif graduated from the Massachusetts Institute of Technology with a BS in Economics and he is also a CFA charterholder.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Ceska Zbrojovka: Busted IPO of Renowned Czech Firearms Maker

October 5, 2020 in Audio, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Ideas, Transcripts

Daniel Gladiš of Vltava Fund presented his investment thesis on Česká Zbrojovka Group (Czech Republic: CZG) at European Investing Summit 2020.

Thesis summary:

Česká Zbrojovka is a Czech-based renowned producer of small firearms. The company has a long tradition, high-quality products, and a simple and understandable business model. The recent IPO was not well-managed and was priced well below the expected range. This may offer an opportunity to buy into a profitable, growing business at an attractive valuation.

For further information, access the company’s investor relations website.

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About the instructor:

Daniel Gladiš, based in the Czech Republic, has amassed a market-beating track record since starting VLTAVA Fund in 2004. VLTAVA Fund is a value-oriented, research-driven investment fund focused on investing in good companies run by quality management. Previously, Daniel was Director and Chairman of the Board of Directors of ABN AMRO Asset Management (Czech) from 1999–2004. He was also Director and founder of Atlantik finanční trhy, a.s., a member of the Prague Stock Exchange. Daniel is a graduate of VUT Brno and has authored the best-selling books Naučte se investovat (Learn to Invest) and Akciové investice (Stock Investments).

SII SA: Owner-Operated High-Quality Engineering Services Firm

October 5, 2020 in Audio, Equities, Europe, European Investing Summit 2020, Ideas, Information Technology, Small Cap, Transcripts

Alejandro Estebaranz of True Value presented his in-depth investment thesis on SII SA (Société pour l’informatique industrielle) (France: SII) at European Investing Summit 2020.

Thesis summary:

SII SA (Société pour l’informatique industrielle) (France: SII) is an engineering company. It is a high-quality business trading at a cheap valuation. SII has an impressive track record of twenty years of consecutive growth. It is a well-run business, and the management team owns about 50% of the equity. Alejandro expects the top line to grow at an annual rate of 10+% over the next five years. SII has a balance sheet with net cash, while the shares trade at an EV/EBIT multiple of less than 5x.

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About the instructor:

Alejandro Estebaranz has served as CIO of True Value Fund (ISIN: ES0180792006) since its inception. True Value, based in Spain, is a long-only equity fund founded in 2014. It focuses on underfollowed small- and mid-cap public companies, seeking good businesses with good management teams. He holds a degree in mechanical engineering and a degree in industrial engineering.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
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