Juan Huerta de Soto Huarte of Cobas Asset Management presented his thesis on Técnicas Reunidas (Spain: TRE) at European Investing Summit 2019.
Thesis summary:
Técnicas Reunidas is one of the world’s leading oil and gas engineering, procurement and construction Companies. Its historic core business has been focused on refining and petrochemical projects, though lately is has been expanding into upstream (eg. gas processing facilities). Share price has fallen more than 50% since it touched peak in 2015, due to several reasons like the oil price downturn and pessimism regarding the capex cycle of Técnicas’ main clients. We tend to think these are all short-term issues that have been exaggerated by the market and there are clear indications that the overall business is improving. Thanks to the steep decline in share price Técnicas is trading at 6x normalized P/FCF, with close to 15% FCF Yield and it has a solid balance sheet with €250mn net cash position (c.20% of market cap.). Despite operating in a cyclical business Técnicas has an asset light business model, with structural negative working capital that generates a 100% ROCE. Additionally, the founding family holds a 37% stake and is involved in the day to day management of the business.
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About the instructor:
Juan Huerta de Soto Huarte serves as an Investment Analyst at Cobas Asset Management. Having taken a double degree in law and business administration at the Universidad Complutense, he was awarded a master’s degree in Austrian economics by the Universidad Rey Juan Carlos. Juan started his career as an analyst at Bestinver, which he later continued at azValor. This young Madrid native, born in 1989, enjoys swimming, running and golf. He is a film buff, and a voracious reader of books on economics and investment.
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