Kruk: Compounder in European Debt Collection and NPL Markets

Markus Matuszek presented his in-depth investment thesis on Kruk (Poland: KRU) at European Investing Summit 2017.

Kruk is a long-term earnings compounder in the European debt collection and NPL investing market. The company so far has acquired NPL portfolios worth PLN 55+ billion across seven countries at an average of 7% of nominal claim value and able to generate 3.5x on invested capital from its NPL portfolio over the life of these investments so far, allowing Kruk to continuously grow EPS ~15% annually. Since all nominal claims compound at a statutory interest rate of 7.3-11.8% and payment interrupts the statute of limitation, Kruk’s NPL portfolio possesses significant upside optionality which is not considered by the market. Kruk’s debt collection services for third parties and credit bureau activities allow the company to gain early insight into overdue payments of retail and corporate customers, enabling it to leverage that knowledge when considering the purchase of portfolios. In Markus’ view, reinvestment and regulatory risk are addressed by expanding into related activities (e.g., high-interest short term loans) and new countries. Markus’ base case valuation of Kruk is PLN 450, offering upside of >50% from recent levels with an investment horizon of up to two years.

About the instructor:

Markus Matuszek is an investor and entrepreneur. He is the founder and Chief Investment Officer of M17 Capital Management, a to be launched value equity long/short fund, biased towards European ideas (listed securities only). Prior to that he ran asset management and advisory firm Hermes Capital Management, advising entrepreneurs, HNWI and funds on strategic, financial and operational matters as well as investing some of their assets in liquid and illiquid strategies. He has been investing in listed securities, private companies and real estate over 13 years with a solid track record. A firm believer in value investing principles, Markus does apply them across the entire capital structure and asset classes.

Earlier in his career, Markus was a as senior advisor / interim manager with extensive advisory and hands-on work in strategy, restructuring, organizational change, corporate finance and risk management, M&A advisory, private equity, real estate and investment management in Western Europe, Eastern Europe and the US. His education includes a M.A. in finance, accounting and controlling from the University of St. Gallen (Switzerland), a master degree from CEMS and dual MBAs from Columbia Business School and London Business School. Furthermore, he studied at the Warsaw School of Economics and University of Geneva and received several merit-based fellows and scholarships. He is also a CFA charterholder.

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