Kyle Mowery of GrizzlyRock Capital presented his in-depth investment thesis on IPL Plastics (Canada: IPLP) at Best Ideas 2020.

Thesis summary:

IPL Plastics is a leading plastic packaging manufacturer that sells specialty products used in the food, consumer, agricultural, logistics, and environmental end-markets. IPL has no exposure to single use plastics and serves markets that should secularly grow over time.

The company IPO’d in 2018 and has since encountered a series of setbacks such as raw material inflation and declining volumes due to temporary end market challenges. These issues have sent the stock price down nearly 60%, and the shares recently traded at 6.0x 2020E EV/EBITDA with a 17% free cash flow to equity yield.

Kyle believes the issues are behind IPL, and 2020 is setting up to be an inflection year for the business. A large multi-year growth capital expenditure plan was finished in 2019 which will lead to strong cash generation and considerable de-leveraging from 3.0x to roughly 2.1x in 2020, increasing penetration of end markets will help the top line return to ~5% growth, and optimization initiatives will lead to stable margin performance going forward.

As the company executes, Kyle believes the shares will re-rate and close the large valuation gap between publicly traded competitors. At a conservative 8.0x EV/EBITDA and 9.5% free cash flow yield on 2020E numbers, IPL would be worth $14 CAD per share and 75% upside to recent prices.

The full session is available exclusively to members of MOI Global.

Members, log in below to access the full session.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

About the instructor:

Kyle Mowery is the founder and managing partner of GrizzlyRock Capital. Kyle holds an MBA from the University of Chicago Booth School of Business and a BA in Economics from UCLA. GrizzlyRock Capital is an alternative asset management firm seeking to deliver risk-managed returns to investors via opportunities across equity markets. The firm takes a value-investing approach to security selection, relying on rigorous fundamental analysis to identify dramatically mispriced corporate securities from the entire capital spectrum. GrizzlyRock Capital is headquartered in Chicago, Illinois.