Amrest: Owner-Operated, Growing European Fast Food Operator

October 14, 2021 in Audio, Diary, Equities, Europe, European Investing Summit 2021, Ideas

Jean-Pascal Rolandez of The L.T. Funds presented his investment thesis on Amrest Holdings (Poland: EAT) at European Investing Summit 2021.

Thesis summary:

Amrest, as in “American Retail System”, is an extraordinary success, which paradoxically is not a well-known European mid-cap for many reasons. Yet, it is one of its fastest-growing mid-cap companies.

From a strong Central European base, Amrest was derailed by COVID in the race to become one of the leading restaurant operators in Europe. After a near-bankruptcy experience in mid-2020, Amrest is now recovering strongly and is much stronger.

With a market cap of EUR 1.5 billion and a free float of 28%, Amrest should post EUR 2.1 billion in sales in 2022 (higher than in 2019), healthy profitability, a firm financial footing, and fast top-line growth.

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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.

Ubisoft: Founder-Led Turnaround in Attractive Video Gaming Business

October 14, 2021 in Audio, Diary, Discover Great Ideas Podcast, Equities, Europe, European Investing Summit 2021, European Investing Summit 2021 Featured, Ideas, Member Podcasts, Transcripts

Pieter Hundersmarck of Flagship Asset Management presented his thesis on Ubisoft Entertainment (France: UEN) at European Investing Summit 2021.

Thesis summary:

Ubisoft is a founder-led video gaming business founded in France in 1986 by the five Guillemot brothers. Yves Guillemot (CEO) still leads the business.

Ubisoft is facing three major headwinds, which provide a profit-making opportunity. The first is a dramatic change in its game development strategy, with a focus on live games and mobile games, which has resulted in delays to some its largest franchises. The second is inefficiency in its operations, with too little “subscription” or recurring revenue from in-game sales versus one-off game purchase revenue, leading to choppy revenue, as well as a boated cost base from in-sourcing all of its own game development, which holds back profitability. Third, the company is grappling with various allegations of discrimination and harassment across its workplaces.

The investment case for Ubisoft is a turnaround, with limited downside and high potential upside. The company should earn EUR 2.40 per share in March 2022, putting it on 20x earnings, a deep discount to the sector and its own history. On a price-to-sales multiple, the company screens cheaply as a buyout target.

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About the instructor:

Pieter Hundersmarck is the global portfolio manager for Flagship Asset Management, a specialist global investment management boutique based in Cape Town, South Africa. Flagship (est. 2001) is one of South Africa’s most awarded boutique asset managers, with deep experience across asset classes in developed and emerging markets. Pieter has been investing internationally for over 15 years. Prior to Flagship, he worked at Coronation Fund Managers for 10 years, and also co-managed a global equities boutique at Old Mutual Investment Group. Pieter holds a BCom (Economics) from Stellenbosch University and an MSc Finance from Nyenrode Universiteit in the Netherlands.

Read a recent article by Pieter, entitled “Six Reasons Why Boutique Investment Managers Outperform”.

Aalberts: Joining the Ranks of Europe’s High-Quality Industrial Business

October 14, 2021 in Audio, Diary, Discover Great Ideas Podcast, Equities, Europe, European Investing Summit 2021, European Investing Summit 2021 Featured, Ideas, Member Podcasts, Transcripts

Henrik Andersson of Didner & Gerge presented his investment thesis on Aalberts (Netherlands: AALB) at European Investing Summit 2021.

Thesis summary:

Aalberts is a €5 billion market cap Dutch-based corporation involved in a number of attractive end-markets with a strong environmental focus that the company articulates very well. More than 65% of sales can be traced directly to four SDG objectives, which will steadily increase, not the least because of 100% of capex being directed into these products and services. The company is active towards four end markets: eco-friendly buildings, semicon efficiency, sustainable transportation, and industrial niches.

Henrik believes the company has just begun its journey towards quality-industrial type margins and profitability. Furthermore, this is a company that is not very well-known outside of the midcap-crowd in Europe. Management every opportunity to change that during the next mid-term plan, which Henrik expects to be presented in December 2021.

Aalberts was founded in 1975 by Jan Aalberts, with a base in the steel industry that dominated much of the Benelux industrial scene at the time (think Arcelor and its satellite suppliers). Slowly the company branched out into other areas – piping systems for buildings, for instance – and these efforts were multiplied starting in 2012 when current CEO Wim Pelsma succeeded Mr. Aalberts. The management team acts long-term, shows integrity and honesty in its communications, and has installed a system based on decentralization in its ten operational niches. The company has modeled some of its modus operandi on other successful holdco structures, such as Lifco of Sweden. While a success like that is rare to come by, it is Henrik’s belief that Aalberts has the odds in its favor for strong value creation in the next decade and beyond.

The current business plan was presented in 2018. Its most crucial targets were organic growth of >3%, EBITA margins of >14%, and ROCE of >18% before December 2022. The first two have already been met, whereas ROCE most likely will pass the target in 2022. While these numbers are very good in their own right, Henrik believes the company is primed for more given the leading position of its brands and the buoyant end-markets in, especially, eco-friendly buildings (where they supply products spanning “from source to emitter”) and semiconductors (the main customer is ASML). Henrik’s base case is for organic growth of around 5% and ROCE of 20%, which would push Aalberts up the ladder towards Europe’s high-quality industrial businesses. Along these lines; R&D, pricing power and client relationships are also very much improved.

Aalberts recently traded at ~€50 per share, a P/E of 17-18x. The valuation assumes slightly lower returns of capital than today and growth of ~3%. These are highly beatable numbers, in Henrik’s view. Finally, touching on idea sourcing, Henrik first came across the idea in an article announcing “The World’s Greenest Building”, which gave the award to Aalberts’ headquarters.

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About the instructor:

Henrik Andersson has worked within a framework of investing in quality franchises in a concentrated portfolio setting since the early 2000s. After five years as an assistant fund manager and analyst at Handelsbanken Asset Management, in 2003 he launched a discretionary portfolio named European Quality with 15 holdings, inspired by Peter Cundill’s approach of “never shoot into the broom”. That later branched out to a family of funds named the Selective Funds. In 2011 he joined Didner & Gerge, an employee-owned asset management boutique, to launch a Global Equity Fund together with a colleague. D&G Global is now applying these same principles in trying to identify sustainably great companies with an appealing valuation starting point. Over the years, an increased emphasis has been put on corporate leadership with a clear preference for owner-operated companies with a history of outstanding operations.

Nagarro: Owner-Operated, Growing IT Engineering Firm at Discount

October 14, 2021 in Audio, Diary, Discover Great Ideas Podcast, Equities, Europe, European Investing Summit 2021, European Investing Summit 2021 Featured, Ideas, Member Podcasts, Transcripts

Alejandro Estebaranz of True Value presented his investment thesis on Nagarro (Germany: NA9) at European Investing Summit 2021.

Thesis summary:

Nagarro is a leading IT engineering company, with organic growth of 20+% and growth of ~30% if M&A is included. The company has a low-cost operating model. The market is growing quickly and is large at $400 billion in total revenue per year.

Alejandro believes that Nagarro can become a multi-bagger stock, with a long runway of growth. While management owns 40+% of the equity, the shares recently traded at a discount to peers, including Endava, Globant, and EPAM.

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About the instructor:

Alejandro Estebaranz has served as the CIO 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.

Cegedim: Awful Historical Track Record, But Future Looks Brighter

October 14, 2021 in Audio, Equities, Europe, European Investing Summit 2021, Ideas

Jeremie Couix of HC Capital Advisors presented his investment thesis on Cegedim (France: CGM) at European Investing Summit 2021.

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Jeremie Couix is a co-founder and managing director of HC Capital Advisors based in Germany. Prior to co-founding HC Capital, he worked at Discover Capital as an investment analyst and later as co-portfolio advisor of the fund Squad Growth. Previously, he worked at FORUM Family Office, a value-oriented investment manager based in Munich. Jeremie graduated from EM Lyon Business School in France with an MSc in Management.

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.

Neste: Renewable Diesel Player, With Reinvestment Opportunities

October 14, 2021 in Audio, Diary, Equities, Europe, European Investing Summit 2021, Ideas

Antonio Garufi of Decalia Asset Management presented his investment thesis on Neste (Finland: NESTE) at European Investing Summit 2021.

Thesis summary:

Neste is a leader in the renewable diesel business. The company has a dominant market position in a fast-growing market. Renewable diesel is refined from food waste and waste cooking oil and reduces emissions by 80%.

More than seven years ago the company started transitioning from an oil-driven business to a renewables-focused one, with a forward-looking attitude. Today, the underlying market is growing at a CAGR of more than 25%.

The hyper-growth opportunity (~70% CAGR) comes from the sustainable aviation business (SAF). Airplanes will be required to fill their tanks with a fixed and growing percentage of SAF in the next few years.

The company recently sold its oil assets to Chevron and is set to improve its capital allocation policy by increasing buybacks, due to a clean balance sheet. Antonio estimates that the high ROIC of the renewables business (18-20% adjusted) and strong cash generation will allow management to optimize the capital structure by buying back around 12%-15% of outstanding shares.

Antonio sees a compelling growth runway for this market leader, as well as a catalyst following the sale of oil assets. Neste has become a “pure play” in a green business and may enjoy a scarcity premium.

While the recent valuation may seem expensive (2022E P/E of 26x and 2022E EV/EBITDA of 16x), Antonio believes a five-year estimated exit value justifies a high-teens annual investment return over the period.

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About the instructor:

Antonio Garufi is the Fund Manager of the Decalia Circular Economy Fund, based in Geneva since 2017. Previously, he worked eight years with Astor Investment as PM and analyst of a multi-thematic hedge fund. Before that, he spent three years at JPMorgan in London. He holds a master degree in Corporate Finance from Bocconi University, a PhD in Economics, and executive degrees from Columbia and Harvard 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.

British American Tobacco: Growing Leader at Double-Digit FCF Yield

October 14, 2021 in Audio, Diary, Discover Great Ideas Podcast, Equities, Europe, European Investing Summit 2021, European Investing Summit 2021 Featured, Ideas, Member Podcasts, Transcripts

Marta Escribano of Salmon Mundi Capital presented her investment thesis on British American Tobacco (UK: BATS) at European Investing Summit 2021.

Thesis summary:

British American Tobacco is the second-largest global tobacco industry manufacturer, with ~22% market share. The company has a powerful cigarette business, owning six of the thirteen most-sold brands worldwide. BAT leads the tobacco industry in pricing power (+9% in 2019, +7% in 2020), which should allow the company to keep growing profits in the years to come.

Slightly more than one-half of the company’s EBIT comes from the US, an attractive and profitable market, as raising prices in the country is quite easy due to the high affordability by US tobacco consumers.

In Marta’s view, BAT is a defensive stock that offers strong cash flow visibility resulting from the company’s solid market positioning and also due to high entry barriers as well as the oligopolistic structure of the tobacco industry. The recent market valuation of the shares is highly attractive. In addition, the stock offers a ~7.7% dividend yield, one of the highest yields in the FTSE 100 index.

Read a related article by Marta on contrarian investment opportunities.

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About the instructor:

Marta Escribano is partner and principal analyst of Salmón Mundi. She has been working in financial markets for 14 years. She became principal analyst in 2013. Formerly she worked in the Treasury Department of Banco Popular at the FX and fixed income desk. Before that, she had joined the Treasury of Inversis Bank and the international equity desk of Interdin as equity sales trader advising mostly Swiss and Italian clients. Since the beginning of her professional career she has been passionate about financial markets and the Austrian School of Economics. She holds a Bachelor´s Degree in Law from the Universidad Pontificia Comillas (ICADE) and a Master’s Degree in Financial Markets and Alternative Investments (MFIA).

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.

Westwing: Founder-Led, Well-Run Online Retailer of Home Furnishings

October 14, 2021 in Audio, Diary, Discover Great Ideas Podcast, Equities, Europe, European Investing Summit 2021, European Investing Summit 2021 Featured, Ideas, Member Podcasts

Brad Hathaway of Far View Capital Management presented his investment thesis on Westwing (Germany: WEW) at European Investing Summit 2021.

Thesis summary:

Westwing is a European direct-to-consumer home furnishings retailer. WEW currently has a small share of a very large TAM that is just beginning the shift from offline to online.

Due to a content-led marketing strategy, WEW enjoys large organic traffic share, significant weekly customer engagement, high revenue retention, and attractive cohort economics, which should allow the company to grow rapidly at good margins. The company is led by its co-founders who are focused on long-term value creation.

The stock is mispriced as a result of investor concerns about near-term comps while the company laps strong COVID performance as well as current global supply chain issues. However, Brad believes these near-term concerns provide the opportunity to purchase a business with the potential for significant long-term value creation. The downside should be protected by a large net cash position, sticky customer base, and material near-term cash flow.

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About the instructor:

Brad Hathaway is the Managing Partner of Far View Capital Management, an investment firm based in Aspen, Colorado. 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 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.

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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