Christopher Rossbach presented his in-depth investment thesis on Sika (Swiss: SIK) at European Investing Summit 2016.
Sika is a Swiss-based global leader in sealing, bonding, reinforcing and protecting. The construction division accounts for 79% of sales, the industry division accounts for 21% of sales. In 2015 sales were CHF 5.5 billion and EBIT was CHF 633 million. The market cap is CHF 9 billion. The company has no debt. Sika has several revenue growth opportunities ahead: The company is likely to benefit from accelerating growth in non-residential construction in the U.S. over the next five years. In emerging markets, Sika’s business will be driven by ongoing investment in construction and infrastructure. In China and elsewhere, Sika will be one of the key beneficiaries of the investment boom that has taken place since 2000. Sika’s products are critical for sophisticated construction or refurbishment, including buildings, tunnels, bridges, highways and other infrastructure. It can grow sales at 5-10% a year over the long-term and its earnings at a higher rate. Critically, 80% of the business in Sika’s construction division are related to refurbishment. Its growth potential from the refurbishment of concrete structures in China and elsewhere is enormous. Sika’s share price increased from 800 to 4200 since the early 2000s. The company has significant value generation potential from here. Given its small size relative to its addressable market it could double over the next five to ten years. The company is subject to a hostile takeover of the founding family’s 16% economic/51% voting stake by St. Gobain. The outcome will significantly impact the prospects and value of the company. Long-term shareholders are actively involved in seeking to preserve shareholder value. However, investors must be aware of the significant risks attached to the situation.
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About the instructor:
Chris Rossbach is Managing Partner of the London-based family office, J. Stern & Co. Established to provide investments for the Stern family, it is devoted to long-term investments for families with a multi-generational approach. J. Stern & Co. builds on the Stern family’s 200 year old banking tradition with a conservative approach and institutional-level analysis and resources. It manages bespoke concentrated global equities portfolios following a strict value approach, based on its own proprietary analysis, with a long-term investment horizon. Prior to co-founding J. Stern & Co., Chris had senior investment roles at Merian Capital, Magnetar Capital, Lansdowne Partners and Perry Capital. Chris holds a BA from Yale University and a MBA from Harvard Business School.
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