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

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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