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Haw Par: Undervalued Singapore-Based Family-Controlled Conglomerate

January 13, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Equities, Ideas

William Thomson of Massif Capital presented his in-depth investment thesis on Haw Par (Singapore: H02) at Best Ideas 2018.

Haw Par is a deeply undervalued, Singapore-based family-controlled conglomerate with interests in consumer healthcare, real estate, and a substantial equity portfolio. The primary operating business of the company is the century-old Tiger Balm brand, which is both capital-light and FCF-positive. The company has a fortress-like balance sheet, with a portfolio of investments, real estate, and net cash, collectively valued at more than the recent market capitalization of the entire company. The shares recently traded at a ~40% discount to intrinsic value of S$18-20 per share, presenting investors a potential opportunity to generate an annualized return of 11-14% over an assumed four-year investment period.

Read Will’s article on hunting for value in Singapore.

About the instructor:

Will Thomson is currently a Managing Partner at Massif Capital, a value-oriented investor partnership focused on global opportunities in the small and mid cap space, with special attention given to industrial and commodity-related businesses. He has previous energy and mining related work experience in private equity, credit analysis, insurance and government policy. Massif Capital combines a fundamentals based approach to individual company assessment with in-depth capital cycle analysis to find compelling investment opportunities.

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Sinclair: Large U.S. Broadcast TV Player Acquiring Tribune Media

January 13, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Equities, Ideas

Keith Weissman of Sibilla Capital Management presented his in-depth investment thesis on Sinclair Broadcast Group (Nasdaq: SBGI) at Best Ideas 2018.

Sinclair Broadcast Group (Nasdaq: SBGI) is one of the largest broadcast TV operators in the U.S.

The company is in the process of acquiring Tribune Media, which will bring total station count to 233 stations covering 108 markets, not accounting for possible divestitures. The acquisition will diversify the company and add stations in major markets in which the company lacks a presence. The increased scale will provide additional leverage with advertisers and cable companies in addition to cost efficiency in producing content.

The regulatory environment under Donald Trump made the pending acquisition of Tribune possible and provides the company with a fertile environment for growth over the next few years. The FCC has relaxed several rules, which favors Sinclair. Keith believes the benefits of the Tribune acquisition and beyond are not captured in the recent stock price.

About the instructor:

Keith Weissman is a Senior Analyst and Director of Research at Sibilla Capital. Keith is also the co-Founder of Quadrant 1, an advanced finance training company. He has more than 15 years of experience in equity research and principle investment. His approach to fundamental analysis has been developed over his career having looked at investment opportunities across a variety of sectors from both the perspective of a market-oriented and private equity investor. Prior to joining Sibilla, Mr. Weissman served as a research analyst at CLSA Asia-Pacific Markets covering companies in the aerospace sector. During his time at CLSA, he developed a comprehensive framework for analyzing investment opportunities which serves as the basis for fundamental research performed at Sibilla. Before transitioning to CLSA, he closed over $1 billion in principle investments. In doing so, Mr. Weissman developed deep due diligence and valuation skills that formed the foundation of his approach to investment research.Mr. Weissman holds a Master’s in Business Administration from Columbia Business School and a Bachelor of Science degree in Economics from the Wharton School of the University of Pennsylvania. In addition, he is a CFA charter holder, a CPA license holder and is an adjunct professor in the Gabelli School of Business at Fordham University, the Zicklin School of Business at Baruch College, and the Lubin School of Business at Pace University. He has lectured on topics such as corporate valuation, investment analysis, portfolio management, banking and central bank policy, the securities industry, and risk management.

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IES Holdings: Well-Managed, Owner-Operated Rollup in Electrical Wiring Services

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, Ideas, Jockey Stocks, North America, Small Cap, Special Situations

Mike Kruger of MPK Partners presented his in-depth investment thesis on IES Holdings (Nasdaq: IESC) at Best Ideas 2018.

IES Holdings installs electrical wiring for nearly the entire spectrum of real estate and also makes or repairs equipment for electric motors. A high-flying roll-up in the late 1990s, the company blew up around 2004 and has flown under-the-radar ever since. IES is 58%-owned by chairman and former hedge fund manager Jeffrey Gendell. In May 2015, Gendell began executing the same playbook he used to turn Patrick Industries (PATK) into a home-run for investors. Gendell is rolling up asset-light electrical businesses that are too small to attract bids from private equity. Multiples have averaged ~6.6x EBITDA less capex. With $378 million in NOLs, the deals are highly accretive to FCF. Combined with some secular and cyclical growth, FCF has grown strongly since Gendell took the reins, but FY17 (ended September) results were depressed by two issues that have been solved recently. IES has roughly zero net debt and trades at ~10x Mike’s low-end and 8.5x his base-case FCF for FY18.

About the instructor:

Mike Kruger’s first investment experience was watching his shares of Berkshire Hathaway get cut in half during the tech-mania of the late 1990’s. But he didn’t panic, and today manages a global focused value portfolio of equities and distressed debt in New York City. He previously worked as a former equity and credit analyst at Promethean Asset Management LLC in NYC, and prior to that as a high-yield credit analyst at Liberty Mutual in Boston. He holds a Bachelor’s degree from the College of Arts and Sciences at Cornell University.

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Discovery Communications: Acquisition of Scripps Creates Attractive Entry Point

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, Jockey Stocks, Mid Cap, North America, Special Situations, Wide Moat

Robert King of Baskerville Capital Management presented his in-depth investment thesis on Discovery Communications (Nasdaq: DISCA) at Best Ideas 2018.

Discovery is a media and entertainment company whose channels include the eponymous Discovery Channel, The Learning Channel, Animal Planet, Investigation Discovery, OWN, Science, Velocity, and Eurosport. Discovery is one of few media companies with a truly global presence; it derives roughly half of revenue from domestic subscribers and a little less than half of revenue from international subscribers. The recently announced acquisition of Scripps Networks has created an interesting situation that causes the company to trade at a pro forma FCF yield of 16% despite pro forma run-rate ROIC of ~26%. Domestically, Discovery should benefit defensively from the acquisition of Scripps as it gives the company more scale when it puts itself in front of distributors and advertisers. Internationally, the Scripps acquisition provides a way for Discovery to continue international revenue growth as the company grows the Scripps channels’ miniscule international revenue. Rob believes that, in a few years, the company will be worth multiples of the recent price, benefiting from earnings growth and multiple expansion.

About the instructor:

Robert King is the founder and chief investment officer of Baskerville Capital Management, a private investment manager that focuses on a concentrated portfolio of investments. Baskerville relies on fundamental analysis to find mispriced companies within misunderstood industries that are currently undergoing a structural change. This approach gives Baskerville the best chance of finding wonderful companies selling at a reasonable price. Prior to founding Baskerville Capital Management, Robert was a lawyer at a law firm working on corporate and restructuring matters. Robert holds a BA in Mathematics and a BS in Neurobiology from The University of Texas at Austin, a JD from Georgetown University, and an MBA from Yale University.

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BlueLinx: Price-Indiscriminate Selling by Legacy Owner Offers Entry Opportunity

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, Micro Cap, North America

Eric DeLamarter of Half Moon Capital presented his in-depth investment thesis on BlueLinx (NYSE: BXC) at Best Ideas 2018.

BlueLinx is a home-building products distributor with a footprint in the Eastern and Central U.S. October’s price-indiscriminate selling of 53% of the company’s shares by legacy private equity owner Cerberus Capital (insignificant last position in its 2004 vintage fund) pushed BXC’s share price down 30+% and created a timely and unique opportunity to buy a sound business with a solid management team at a discount to intrinsic and asset value. The removal of this overhang opens up the float, improves liquidity, expands the potential shareholder base, and enables the company to use stock as a currency for acquisitions. As the selling pressure from the recent offering dissipates, and now that event-driven traders have likely moved on, the stock price appears poised to move higher. Several catalysts could create material upside, with downside protection derived from the company’s large asset base.

About the instructor:

Eric DeLamarter is the PM of Half Moon Capital— a research intensive, deep value-oriented, long/ short partnership which invests across various sectors and markets with a focus on small-mid cap companies and special situations. Prior to founding Half Moon, Eric was at Stelliam Investment Management, a value-oriented hedge fund in New York, an associate at Lineage Capital, LLC, a middle-market private equity fund and an investment banking analyst at RBC Capital Markets. Eric holds an MBA from The Heilbrunn Center for Graham & Dodd Investing at Columbia Business School, with a concentration in applied value investing and a BA from the University of Michigan.

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Zooplus: High-ROIC, Leading Online Retailer of Pet Food in Europe

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Consumer Staples, Equities, Europe, GARP, Ideas, Small Cap

Fred Liu of Hayden Capital presented his in-depth investment thesis on Zooplus (Germany: ZO1) at Best Ideas 2018.

Zooplus is a leading online retailer of pet food and supplies in Europe. Fred’s analysis indicates the company’s upcoming investments in new features and customer experience should yield high incremental ROIC and, as a result, attractive returns for investors.

About the instructor:

Fred Liu is the Founder and Portfolio Manager at Hayden Capital. Fred holds a B.S. in finance and international business from the Leonard N. Stern School of Business at New York University. Prior to founding Hayden Capital, Fred was a research analyst at New Street Research responsible for covering the cable and satellite industries. Before this, he was the industrials analyst on J.P. Morgan’s Small Cap Equity fund, a five-star Morningstar ranked strategy that invested in securities under $2BN in market cap. Fred purchased his first stock at the age of 11, and has been an avid value investor ever since. He currently resides in New York City.

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Saigon Cargo Services: Vietnamese Air Cargo Terminal Operator with Growth “Runway”

January 12, 2018 in Asia, Audio, Best Ideas 2018, Best Ideas Conference, Communication Services, Equities, GARP, Ideas, Micro Cap, Small Cap, Transportation, Wide Moat

Clement Loh of Lion Rock Partners presented his in-depth investment thesis on Saigon Cargo Services (Vietnam: SCS) at Best Ideas 2018.

Saigon Cargo Services is one of two air cargo terminal operators located in the Tan Son Nhat Airport, which serves Ho Chi Minh City and southern Vietnam. SCS benefits from a strong moat based on its privileged location and earns 40% return on equity as a result. The only competitor, Tan Son Nhat Cargo Services, is at capacity and has no available land for expansion. SCS is running at 70% of phase one capacity of 200,000 tons and can easily increase capacity to 350,000 tons. Revenue is expected to compound at 15% for at least the next six to seven years from cargo traffic growth and pricing power. Clement expects almost all of the incremental revenue to turn into free cash flow as the business has significant operating leverage and low maintenance capex needs. Management has adopted a transparent culture and intelligent capital allocation policy, with a majority of cash flow returned as dividends. The business also has potential options for further revenue streams by developing unused real estate at their prime site next to the airport. The major risk (and opportunity) for SCS lies in the development of a new airport expected to start operations in 2025. As the major shareholders in SCS are the military and the airport authority, it is likely SCS will play a major role in the new airport, but details will not emerge for another few years. SCS shares were recently valued at 17x 2018 earnings or 5x peak cash flow (when capacity is reached in 2023). Clement believes a business with such a strong moat and reinvestment opportunities should have a higher valuation and provides a good margin of safety for the long-term investor.

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About the instructor:

Clement Loh is the Investment Manager of Lion Rock Partners, a private family fund based in Hong Kong. The fund applies the principles of value investing to seek out companies with competitive advantages selling at a reasonable price with a focus on emerging Asian markets and smaller companies. Clement holds a master’s degree in business administration from the University of Toronto and a degree in pharmacy. Prior to entering the investment profession, Clement worked in the pharmaceutical industry and is a non-practicing pharmacist. His interests include economics, strategy, science, education and history.

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Diamond Hill Investment Group: Well-Run, Value-Oriented Asset Manager

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas 2018 Featured, Best Ideas Conference, Equities, Financials, GARP, Ideas, North America, Small Cap

Chris Crawford of Crawford Fund Management presented his in-depth investment thesis on Diamond Hill Investment Group (Nasdaq: DHIL) at Best Ideas 2018.

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About the instructor:

Chris Crawford is the Managing Partner and Chief Investment Officer of Crawford Fund Management, LLC, a Boston-based Registered Investment Advisor. The firm manages a long/short fund that invests in equities and options with an emphasis on underfollowed public companies. Prior to co-founding Crawford Fund Management in 2009, Chris was Managing Director, Portfolio Manager and head of the Boston office with Stark Investments, a $10B multi-strategy global hedge fund. At Stark, Chris built the firm’s equity long/short team and managed $1.5B in equity long/short assets as well as a $200M short-biased portfolio. From 2003-2006, Chris was Senior Vice President and Portfolio Manager with Putnam Investments, and co-Portfolio Manager of the $3B Putnam International Capital Opportunities Fund and related client accounts. From 2000 to 2003, Chris was a Partner and Senior Analyst with ABRY Partners on a team managing a $400M TMT-focused hedge fund. From 1996 to 2000, Chris was with Wellington Management Company, where he served as a Global Industry Analyst covering the media industry and as a Portfolio Manager for $600M in client sector-fund and institutional assets. Chris holds an MBA from The Wharton School of Business and graduated magna cum laude from University of Pennsylvania with a BA in Physics, BS in Economics, BAS in Systems Engineering and an MA in International Relations.

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Farmer Brothers: Corporate Restructuring to Drive EBITDA Improvement

January 12, 2018 in Audio, Best Ideas 2018, Best Ideas Conference, Consumer Staples, Equities, GARP, Ideas, North America, Small Cap

Kaushal Majmudar and Sam Namiri of Ridgewood Investments presented their in-depth investment thesis on Farmer Brothers (Nasdaq: FARM) at Best Ideas 2018.

Farmer Brothers is a national coffee roaster and distributor of coffee, tea, and culinary products established more than a century ago. The company has a strong presence in the direct-store-delivery segment of the coffee market and sells to thousands of customers, from small independent restaurants to large customers such as McDonald’s and Target. The company has grown sales volumes over the last five years, in part due to the established trend of increased coffee consumption in the U.S., with specialty coffee segments growing faster than the overall coffee market. FARM is in the midst of a corporate restructuring that should help increase EBITDA by 50+% over the next eighteen months. One of the key near-term catalysts that will drive value is the company’s recent relocation of its main manufacturing facility and headquarters from higher-cost Torrance, California to its growing facility in Northlake, TX. Other positives include recent tuck-in acquisitions that are expected to be accretive to EBITDA, and other operational improvements. Ken and Sam’s thesis is that once the new plant in Texas is fully operational and running closer to capacity, FARM could reap cost synergies that will drive cash flow growth and price appreciation over the next 18-24 months.

About the instructors:

Kaushal “Ken” Majmudar, CFA founded Ridgewood Investments in 2002 and serves as its Chief Investment Officer focusing on managing long-term Value Investing based strategies. Ken’s high level experience and work with clients has been recognized and cited on multiple occasions. He is a noted value investor who has written and spoken extensively on the subject of value investing and intelligent investing. Prior to founding Ridgewood Investments in late 2002, Ken worked for seven years on Wall Street as an investment banker at Merrill Lynch and Lehman Brothers where he has extensive experience working on initial public offerings, mergers and acquisitions transactions and other corporate finance advisory work for Fortune 1000 companies. He has been a member of the Value Investors Club – an online members-only group for skilled value investors founded by Joel Greenblatt – where he posted a buy recommendation on Nvidia in 2002 – possibly one of the best long-term investment ideas ever posted on VIC. He has also been a member of SumZero – an online community for professional investors, and written for SeekingAlpha – among others. Ken graduated with honors from the Harvard Law School in 1994 after being an honors graduate of Columbia University in 1991 with a bachelor’s degree in Computer Science. He is admitted to the Bar in NY and NJ, though retired from the practice of law, as well as a member of the CFA Institute and EO (Entrepreneurs Organization).

Sam Namiri recently joined Ridgewood to help build its Small and Microcap investments and will be co-managing the Ridgewood Select Value Fund with Ken. Prior to Ridgewood, Sam spent five years as an associate at Grand Slam Asset Management, a small cap value based Hedge Fund. Sam graduated with a bachelor’s in Industrial Engineering and Operations Research from UC Berkeley in 2005 and an MBA from Columbia Business School in 2012.

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