Eric Boroian presented his in-depth investment thesis on Elis (Paris: ELIS) at Wide-Moat Investing Summit 2015.
Elis is the European leader in business support services and facility management. It operates mainly in Flat Linen, Workwear, and Hygiene/Well-being appliances. The company employs a simple model: it owns linens and uniforms, and rents them while also providing maintenance services. Elis requires a more substantial asset base than do most service companies (processing, distribution etc). This results in much higher operating margins (mid teens) than most service businesses. The business benefits from an attractive industry structure (strong barriers to entry, moderate buyer power, low supplier power). The company holds a dominant position in key markets (France, Switzerland, Brazil), very high renewal rate (94%). Elis was a private equity-led IPO in early 2015 with very little coverage. Eric views it as one of France’s widest moat businesses, yet it has started trading at discount to comparable peers. Management has the ability to deleverage/refinance, thus improving the EPS profile. It also has the ability to use the balance sheet to further consolidate markets and enter new markets. The company has multiple long term sales growth and margin drivers (new markets, new products etc). The shares trade at a P/E of 16x and EV/EBIT of 13x.
About the instructor:
Eric Boroian is a Portfolio Manager with Focus Asset Managers based in Paris. 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. 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.
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