Santiago Domingo Cebrian of Solventis SGIIC SA presented his in-depth investment thesis on Akka Technologies (France: AKA) at European Investing Summit 2018.

Thesis Summary:

Akka Technologies is an engineering and technology consulting company that provides services to automakers, aircraft manufacturers, and other companies.

The industry grows ~12% annually and is fragmented, generating M&A opportunities. Talent is key due to a lack of qualified engineers. Akka’s strategy is based on getting the most innovative contracts in order to attract young engineers.

After completing its latest strategic plan, Akka disclosed a new plan with targets for the year 2022. The targets include doubling sales to €2.5 billion, achieving an EBIT margin of 10% (as compared to 7% recently), and FCF of €150 million. A review of those projections suggests they are viable because of management’s track record, the success of the last strategic plan, and the feasibility of the targets set by management.

Applying a multiple of 15x to adjusted FCF of €140 million suggests fair value of €2.1 billion, as compared to a recent market cap of €1.3 billion.

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About the instructor:

Santiago Domingo is a portfolio manager at Solventis Asset Management. He is the co-investment manager of Solventis EOS fund since February 2017. Solventis EOS is a long only European equity fund founded in 2006, and focused on investing in companies with sustainable competitive advantages and that are undervalued by the market. Prior to Solventis, Santiago worked as an analyst for a start-up called OralSurgeryTube and in the Endesa´s financial department. Santiago holds a Bachelor´s degree in Finance and Accounting from University of Zaragoza and a Master´s degree in Institutions and Financial Markets from CUNEF.