OL Groupe, AFC Ajax: European Football Ideas with Real Asset Backing

Michael Morosi of MAPFRE AM presented his in-depth investment thesis on OL Groupe (France: OLG) and AFC Ajax (Netherlands: AJAX) at Best Ideas 2020.

Thesis summary:

OL Groupe and AFC Ajax are two listed European football clubs with storied traditions that compete in the first divisions of their respective domestic leagues as well as the pan-European Champions League.

Historical mismanagement and a perception that fundamentals are driven by unpredictable match results have created a bias against investing in football clubs among institutional investors. However, the sector has demonstrated consistent long-term growth and is generally acyclical given the favorable relationship of cost-to-significance for consumers.

Additionally, the sector is benefiting from multiple secular trends such as the growing popularity of European football in key international markets, like the US and China, pricing power with respect to domestic and international television rights, and technology-aided shifts in content distribution. Finally, the level of professional management across all levels of the sport has improved dramatically and “real money” buyers, including international private equity firms, have started deploying capital in the sector.

Michael’s European football thesis is focused on investing in clubs with outstanding management teams, that are net beneficiaries of the inflationary global player transfer market, have clean balance sheets, are domestic leaders with increasingly global brands, and have hidden real asset value, primarily through material ownership of their stadium. Both OLG and AJAX meet these criteria.

With respect to valuation, OLG (€430M EV / 1.3x Sales) and AJAX (€300M EV / 1.5x Sales) trade at a substantial discount to global sports franchises on both an absolute ($2-4B EV for the top 50 US professional sports teams and top 5 European football clubs) and a relative (3-4x Sales) basis. As the business model continues to evolve and the global brand value is better monetized, Michael expects this gap to narrow by at least half in the mid-term.

Listen to this session:

slide presentation audio recording

About the instructor:

Michael Morosi is an Equity Portfolio Manager at MAPFRE AM. He previously worked at Jetstream Capital, a global equity hedge fund, as an Equity Analyst and at Avondale Partners, an investment bank acquired by Hilliard Lyons, as a Senior Equity Research Analyst. Michael holds a Bachelor’s degree in Economics and Business from Kalamazoo College (USA) and an Executive MBA from IE Business School (Spain). Michael’s investment research has been cited in a variety of international media, including CNBC, The Wall Street Journal, Bloomberg, and The Financial Times. He has also served as a professor of finance at IE Business School and ICADE (Spain) and a lecturer on financial markets and renewable energy at Vanderbilt University. In addition to his focus on global public equities, Michael has experience sourcing and executing investments in private equity and venture capital.