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Vestas: Top Maker of Wind Turbines, with Growing Service Revenue

October 4, 2019 in Audio, Energy, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Large Cap

Adam Crocker of Logbook Investments presented his in-depth investment thesis on Vestas (Denmark: VWS) at European Investing Summit 2019.

Thesis summary:

Vestas is the world’s largest manufacturer of wind turbines. The company benefits from 1) Scale barriers deterring competitive entrants, 2) Service revenue, expanded from mid-single digits to 18% of total, providing greater predictability and profitability, and 3) Secular industry growth as the world shifts from fossil fuels to renewable energy sources. The company has also dramatically transformed its supply chain since 2012, resulting in a more agile and cash generative enterprise. Through the cycle, management expects to earn EBIT margin >10% , ROIC >20% and positive annual FCF. As investors witness Vestas’ reduced cyclicality based on the above factors, in addition to wind recently becoming the lowest cost unsubsidized source of energy, this growing company is likely to trade above its current 12x FY19E EV/EBIT.

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About the instructor:

Adam Crocker, CFA is Founder and Chief Investment Officer of Logbook Investments, a value fund with core positions based on insights from books. Logbook launched in 2016 and is seeded by his former employer. Prior to Logbook, Adam was a co-manager at Metropolitan Capital Advisors, a long/short equity fund founded in 1992. Before joining Metropolitan, he was an analyst at Morgan Stanley Investment Management conducting research on behalf of growth and value investment teams. He began his career in Leveraged Finance investment banking at JPMorgan. Adam is a 2005 graduate of the Value Investing Program at Columbia Business School and has an undergraduate degree in Economics from Columbia University.

Bigben Interactive: Increasing Presence in Video Game Publishing

October 4, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Information Technology, Micro Cap

Laurent Stöckli of Quaero Capital presented his in-depth investment thesis on Bigben Interactive (France: BEN) at European Investing Summit 2019.

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About the instructor:

Laurent Stöckli is Research Analyst for the small cap team of Quaero Capital. The Quaero Capital team has a strong reputation for applying a value-driven, fundamental stock picking approach to managing money in the small cap sector in Europe.

Together, they manage 3 funds with a focus on small European companies: Quaero Argonaut Fund (ISIN: LU0428315906), Quaero Smaller European Companies Fund (ISIN: LU0661743103) and Quaero Swiss Small and Mid Cap Fund (ISIN: CH0307285178).

Laurent has almost 10 years experience in asset management. He started his career working for a Swiss-based Hedge fund as Research analyst and then Portfolio manager. Several years later, he joined the international family office, Stanhope Capital, with responsibility for the portfolio management in Geneva for Ultra High Net Worth Individual clients. While he was reinforcing his conviction for the value investing approach during his professional and personal experiences, he met Philip Best (co-founder of Quaero) who shared his passion for this approach and convinced Laurent to join the value investing team at Quaero Capital.

Laurent holds a Bachelor in Business Administration from the University of Applied Sciences Western Switzerland.

Viscofan: Leader in Oligopolistic Market for Sausage Casings

October 4, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Mid Cap

Eric Boroian of Focus AM presented his in-depth investment thesis on Viscofan (Spain: VIS) at European Investing Summit 2019.

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About the instructor:

Eric Boroian is a Portfolio Manager with Focus Asset Managers. He graduated from the London School of Economics with a graduate degree in Sociology and Quantitative Research Methods, and from Imperial College London, with an MBA in Finance. He started his career as a business analyst at Vivendi Universal, and then spent time as an equity research analyst at CA Cheuvreux, with a focus on European Consumer Staples. Eric also has investing experience in concentrated portfolios of European and US equities.

Grupo Catalana Occidente: Family-Owned Insurer with Solid Record

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, European Investing Summit 2019 Featured, Financials, Ideas, Mid Cap

Gokul Ponnuraj of Bavaria Industries Group presented his in-depth thesis on Grupo Catalana Occidente (Spain: GCO) at European Investing Summit 2019.

Thesis summary:

Grupo Catalana Occidente: a well-run family owned (65% insider ownership) insurance business with strong track record of organic & inorganic growth since its listing 25 years back. The business has consistently compounded value at 12%+ CAGR through a combination of book value growth and dividends over every five-year trailing period for the last two decades.

The company has a strong market position and durable moats in both the insurance segments it operates in. It gets 46% of profits from credit insurance segment which is a global oligopoly with a strong moat for the 3 primary incumbents. It’s conservative underwriting culture and strong distribution networks has helped it to deliver strong numbers across economic cycles.

The general short tail nature of the book along with strong market position and robust balance sheet (207% solvency with excess capital) would help GCO to continue long term compounding value even in a low interest world with an optionality of strong acquisition pipeline if there is a large market dislocation or economic crisis or sharp reversal of interest rates.

With a 25 year+ track record of growth, durability and healthy shareholder returns, GCO is a compounder that is trading at fairly attractive valuations of 1X book and 9.7X earnings. Even in a repeat of a 2008 kind of economic crisis, I believe that the diversification of GCO between credit insurance and traditional insurance will allow it to still make profits in that year as it did in 2008. Gokul believes that shareholders can expect long-term compounding of 10%+ euro returns in GCO at current market price even without meaningful valuation re-rating.

Disclaimer provided by Gokul: We are biased and invested in the stock. This is not an investment advice and please carry out your research on the business.

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About the instructor:

Gokul Ponnuraj is a value investor with a focus on small- and mid-cap spinoffs and compounders. He has been investing in the Indian markets for more than ten years and in global markets for the last two 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.

Devoteam, Groupe Guillin: Two Well-Run, Small-Cap Bargains in France

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, European Investing Summit 2019 Featured, Ideas, Information Technology, Small Cap

Alejandro Estebaranz of True Value presented his in-depth theses on Devoteam (France: DVT) and Groupe Guillin (France: ALGIL) at European Investing Summit 2019.

Thesis summary:

Devoteam is one of the leading it services companies in France. They operate in high tech sectors like Cloud computing, cybersecurity, analytics and mobile. We expect them to grow organically more than 7% complemented with M&A. They don’t have any debt and management owns 20% of the company. The shares have been falling recently due to 3 factors. Number 1 is the tight labor market in France for IT engineers; we view this as a transitory problem until the sector attracts new talent. Number 2 they lowered the EBIT guidance for the year from 11% to 10% (caused by raising salaries which tend to be 70% of total costs ). And Number 3, the French small cap market is down 30% from the most recent peak in May 2018. This year we expect them to do 85m EBIT which turns out to be around 50m FCF, so the shares are inexpensive at 13x FCF and 7x EV/EBIT ). For the next 3 years until 2022 we expect them to grow up to more than 1B€ in revenues and more than 100m EBIT and 70m FCF. If we value the company like other European competitors like Cancom or S&T we arrive at a fair value of more than 160€ in 3 years ( today is trading at 75€ ).

Groupe Guillin is the leading European plastic company for the food industry. It is a very good niche to operate because it is very stable and they have built the best platform in Europe for this type of business. Packaging companies tend to be local monopolies due to transport costs, Groupe Guillin also has some cost advantage due to their scale in this market. It is family run business, they control 65% of the shares and they have created enormous value for the shareholders in the last 20 years. Insiders have buying shares recently. The shares are down from 42€ to 18€ for 3 reasons. First, plastics costs went up and they have long term contracts with annual revisions so this factor compress margins in the short term ( it has happened before in 2011 and 2007 ), once there’s a price revision margins tend to the historical average ( EBIT margins tend to fluctuate from 6% to 13% ). Second, the French small cap market is down 30% from the most recent peak in May 2018. Third, France introduced a new regulation in the plastic sector where they banned some items like plastic cutlery, straws, plates… ( but it is only 1% of their total revenues and only 37% of the revenue comes from France ), it is very difficult to replace Guillin’s product because there’s no organic substitute to pack fresh food. Even is depressed margin scenario we expect them to do 60m EBIT and 40M net income, shares are very cheap at 3,5x EV/EBITDA and 8x PER. We expect them to grow in the future like they did in the past consolidating their niche. Organic growth is low at 2-3% a year. It is a very stable business in recessions and it has no debt.

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About the instructor:

Alejandro Estebaranz has served as the co-investment advisor of the 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. Prior to True Value, Alejandro worked as an analyst for private investment partnerships. He holds a degree in mechanical engineering and a degree in industrial engineering.

Tobii: Eye-Tracking Tech Leader Nearing Profit Inflection Point

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Information Technology, Small Cap

Brad Hathaway of Far View Capital Management presented his in-depth thesis on Tobii (Sweden: TOBII) at European Investing Summit 2019.

Thesis summary:

Tobii is a Swedish provider of eye-tracking technologies for medical devices (Tobii Dynavox), market research (Tobii Pro) and consumer electronics (Tobii Tech). The company is mispriced because large investments in Tobii Tech have made the company loss-making on a consolidated basis. However, the existing Tobii Dynavox and Tobii Pro business are strongly profitable and have dominant market shares in growing end markets. The consumer electronics division currently generates minimal revenues but is considered the strong market leader in all segments where it participates. As eye tracking begins to be used for uses like e-sports and computer gaming, mainstream PCs, virtual/augmented reality and smartphones, Tobii Tech should generate significant revenue which would lead to a massive inflection in consolidated earnings. Tobii’s downside is protected by the Dynavox and Pro divisions while significant upside potential exists with the growth of Tobii Tech.

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About the instructor:

Brad Hathaway is the Managing Partner of Far View Capital Management. Before founding Far View Capital Management in 2011, Mr. Hathaway worked for four years at J. Goldman & Company, a New York City-based hedge fund. At J. Goldman, Mr. Hathaway worked as an analyst and a portfolio manager on the firm’s value team. His role there included sourcing and analyzing investment opportunities and managing a portfolio comprised of global securities from multiple asset classes with a focus on US publicly-traded equities. Prior to J. Goldman, Mr. Hathaway worked for three years as an analyst at Tocqueville Asset Management where he discovered and researched global long and short equity investments for the International Value mutual fund and the Global Partners hedge fund. Mr. Hathaway graduated with a B.A. in Political Science from Yale University.

IWG: Owner of Original Shared/Temporary Office Company, Regus

October 3, 2019 in Audio, Consumer Discretionary, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Mid Cap

Markus Matuszek of M17 Capital Management presented his thesis on International Workstation Group (UK: IWG) at European Investing Summit 2019.

Thesis summary:

IWG is the largest provider of workspace solutions with over 3,300 locations in 1,100 cities across the globe. In its 30 years, it has already undergone several economic cycles and thus makes sure not to repeat previously made mistakes. Its average unexpired lease term is around 7 years (WeWork at ca 15 years), its (stable) services income represents ca. 27% of total sales (WeWork ca 5%) and most importantly its location mix consists of over 80% of all workstations placed in mature locations, operating for at least 3 years with an average occupancy rate of 74% and generating a 21% contribution margin, enabling IWG to remain profitable while adding new locations, renovating existing ones or closing unprofitable centers. IWG creates value by digitalization of its supply chain and center operations and by moving towards a more asset-light setup in which franchisees are required to shoulder long-term lease obligations or landlords themselves cooperate with IWG in a revenue/profit-sharing arrangement. Management has confirmed to continue this path for several regions (e.g. sales/IPO of assets in the US, Canada and Latam) after the closing of its most recent transaction in Japan. Applying recent transaction multiples as well as IWG’s 10 year price-to-cash flow average of 7.4x, we value IWG currently at GBP 9.40 per share, an upside of 135% from its current price. Given where we are in the economic cycle and acknowledging that the value creation can take up to 2-5 years, an investor can expect an IRR of 13-34% over that period. Its dividend yield of 2% p.a. (excl buybacks) and the fact that IWG has basically concluded its accelerated 2016-2019 renovation plans in key cities should provide EPS stability and hence a floor to the share price.

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About the instructor:

Markus Matuszek is an investor and entrepreneur. He is the founder, Managing Partner and Chief Investment Officer of M17 Capital Management, a market neutral value equity long/short fund, biased towards European ideas (listed securities only). Prior to that he ran asset management and advisory firm Hermes Capital Management as well as he was a managing partner at Gabelli & Partners. He has been investing in listed securities, private companies and real estate over 17 years with a solid track record. Earlier in his career, Markus was a senior advisor / interim manager with extensive advisory and hands-on work in strategy, restructuring, organizational change, corporate finance and risk management, M&A advisory, private equity, real estate and investment management in Western Europe, Eastern Europe and the US. He started his professional career with McKinsey & Company. His education includes a M.A. in finance, accounting and controlling from the University of St. Gallen (Switzerland), a master degree from CEMS and dual MBAs from Columbia Business School and London Business School (with honors). Furthermore, he studied at the Warsaw School of Economics and University of Geneva and received several merit-based fellows and scholarships. He is also a CFA charterholder and a jury member for the CFA Institute’s Research Challenge in Switzerland as well as for EMEA.

Expert System: Micro-Cap Leader in Text Analytics and Semantics

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, European Investing Summit 2019 Featured, Ideas, Information Technology, Micro Cap

Massimo Fuggetta of Bayes Investments presented his in-depth investment thesis on Expert System (Italy: EXSY) at European Investing Summit 2019.

Thesis summary:

Expert System is a world leader in Artificial Intelligence and semantic technology, where its flagship product Cogito delivers text analytics and language understanding that facilitate the unstructured extraction of information from Big Data. Cogito was created some 20 years ago and has been developing and evolving since then. Cogito transforms messy, chaotic, unstructured information into ordered, insightful and actionable knowledge. It does so by combining Machine Learning with Semantic analysis that is able to achieve a complete understanding of a text, as a person would. Based in patented AI algorithms, Cogito mimics the human ability to read and understand any textual concept. Today Expert System is an international public company (free float is around 65%) with branches in US, UK, France, Germany, Spain and Italy with local technical and sales teams, and 230 employees. 2018 revenues almost doubled in the last three years to 29 million. More than half of revenues are generated outside Italy – 33% in Europe and 23% in US. The company has still to reach profitability and financial stability, but we are confident it is on its way there. This has finally been recognised in the market, where the stock price tripled this year from 1.2 euro to 3.6. We think growth is set to continue and accelerate in the coming few years.

Read Massimo’s article about investing in Italy, Don’t You Believe Them.

Replay this LIVE session:

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About the instructor:

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. He was a founding shareholder, a Board member and the CIO of Horatius. 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.

Pfeiffer Vacuum Technology: Structural Growth Case Intact

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, Ideas, Small Cap

Sebastien Lemonnier of INOCAP Gestion presented his thesis on Pfeiffer Vacuum Technology (Germany: PFV) at European Investing Summit 2019.

Thesis summary by Sebastien:

Pfeiffer Vacuum Technology is the world’s second largest vacuum pump producer that held leadership position in high-end product segments. In 2018, its turnover reached €660 million with its products being essential in numerous business areas such as semi-conductor, analytics and coatings. Since Karl Busch investment in its capital by 2016 followed by the hiring of a new CEO, Dr Eric Taberlet, the strategy focuses on implementing an ambitious investment program that should deliver significant improvement in the group fundamentals both in term of competitivity and production efficiency. Thus, driven by self-help initiatives, its medium targets look ambitious aiming to increase its market share up to above 20%, to strengthen its technology differentiation and to increase its EBIT margin above 20% (versus 14.3% in 2018). As of today, we consider PFV strategy reaches an inflexion point with first benefits to be harvested whereas capex should start to normalize. Lastly, PFV recently received the cartel approval to set-up cooperation initiatives with the industrial Busch company to leverage additional synergies that would be added to its ongoing business plan. The last 3 years sacrifices to build the future group success together with a limited sell-side coverage same as the current temporary macro clouds, explained why the stock valuation is overlooked whereas the structural growth case and self-help drivers remain in our opinion intact.

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About the instructor:

Sebastien Lemonnier started his carreer in 2003 as financial analyst at Tocqueville Finance. He was promoted as european fund manager in 2006 running the UCIT fund Tocqueville Value Europe and pursued his carreer for Mansartis, a Paris based multi family-office in 2012. He joined INOCAP Gestion in 2017, managing Quadrige Europe Midcaps. Sebastien holds a Masters Degree in Financial Management from Panthéon-Sorbonne Paris. As a hobby, he played tennis in competition, but now enjoys playing rugby and english boxing.

UK Bargains in Property, Retail, Airlines, Media, Auto Dealers…

October 3, 2019 in Audio, Equities, Europe, European Investing Summit, European Investing Summit 2019, European Investing Summit 2019 Featured, Ideas

Simon Caufield of SIM Limited presented his investment thesis on “six impossible bargains before Brexit” at European Investing Summit 2019.

Simon highlighted bargains in the following segments: property (NewRiver), retail (Dixons Carphone), low-cost airlines (Ryanair), media (ITV), auto dealerships (Vertu Motors, Pendragon, Lookers, Marshall Motor), and homebuilders (Redrow and other large UK homebuilders).

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About the instructor:

Simon Caufield is Managing Director at SIM Limited, a UK-based investment firm. Simon founded the firm in 2007 after selling his stake in Nomis Solutions, a B2B enterprise software company he founded in 2002. Previously, Simon was a management consultant for more than a decade, including at Mercer Management Consulting. He also writes the “True Value” investment newsletter for MoneyWeek, a UK financial magazine. Simon has an MA in Engineering from Cambridge University.

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