Juan Huerta de Soto Huarte of Cobas Asset Management presented his thesis on Maire Tecnimont (Italy: MT) at European Investing Summit 2020.

Thesis summary:

Maire Tecnimont is the global technological leader in the hydrocarbon chemical engineering industry, as well as one of the main engineering, procurement and construction (EPC) companies in the petrochemical, fertilizing, and oil & gas refining sectors.

A combination of proprietary technology and deep know-how in the EPC business has enabled the company to be the leader in terms of petrochemical plant installed capacity and a market leader in the licensing of urea technology for fertilizing plants.

For reasons that Juan deems to be temporary – e.g., pessimism in the oil & gas and oil services sectors, doubts about the balance sheet and liquidity, and sparse coverage – Maire Tecnimont shares have fallen ~75% since 2017 and recently traded at a remarkably cheap 2x normalized FCF and what Juan estimates to be a forward FCF yield of 15+%.

The market seems to be especially worried about the company’s net debt position and worsening of working capital over the past twelve months, causing the shares to trade at a distressed valuation. However, Juan’s analysis suggests this is a temporary issue that is being well-managed by the company.

Juan estimates Maire Tecnimont to be worth €7 per share, making the shares a potential five-bagger. Despite operating in a cyclical business, Maire has an asset-light business model with structural negative working capital, with ROCE of ~100%. The founder holds a 51% stake and, together with his son, is deeply involved in the day-to-day operations of the firm.

Listen to this session:

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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 a buy-side analyst at Bestinver, which he later continued at azValor. Currently he serves as an investment analyst at Cobas Asset Management. Juan teaches Economics and Investment in ISBIF and the Executive Programme in Value Investing and Behavioral Finance in ICADE University. 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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