Reno de Medici: Strong Number-Two Player with Margin Improvement Potential

Raphael Moreau of Amiral Gestion presented his in-depth investment thesis on Reno De Medici (Italy: RM) at Best Ideas 2018.

Reno de Medici, with a market cap of €200+ million, has a number-two position in the European recycled-fiber cartonboard market. Historically a poor performer in an industry where the leader enjoys both high and stable profitability and valuation, Reno de Medici has been in the process of tackling the reasons for its underperformance. After a long journey of shutting weak mills, the company appointed a new CEO alongside simplifying the group’s structure to make the organization more efficient. The plan is now to make the different parts of the group work together and extract the associated network synergies, and accelerate the sharing of industrial best practices within the group. The purpose is to get close or reach the leader’s operating metrics. To what extent the latter is possible, it is unclear, but Raphael has strong confidence that the current measures are going to generate significant improvements to the company’s performance. The recent stock price prices in essentially no improvement to current results, so risk appears contained. In a best-case scenario in which the company reaches the leader’s profitability, Raphael estimates the upside at close to 100%.

About the instructor:

Raphael Moreau made his first investment in the French stock market in 1998. Rapidly won over by a passion for investing and reading the writings of Warren Buffett, he joined Amiral Gestion in 2008 following the completion of his Master at ESSEC Business School and experiences in sell-side research at UBS and fixed income analysis at CACIB. Nowadays, Raphaël focuses on European small caps. Founded by François Badelon, Amiral is an independent employee-owned asset management firm based in Paris. Amiral’s single goal is sustained performance with minimum risk based on the firm’s value investing approach.

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