Matthias Riechert presented his in-depth investment thesis on The Gym Group (London: GYM) at Wide-Moat Investing Summit 2017.
The Gym Group is rolling out low-cost, no-frills gyms in the UK. Similar to Ryanair and Easyjet in their early days, The Gym is applying a low-cost disruptive innovation playbook. It offers a cheaper, more convenient and simpler-to-use product, which appeals to a new segment and to a large segment of less demanding customers. Customers who switch to low cost rarely move back up. Traditional incumbents cannot compete on cost and typically move further upward, or close. The Gym recently traded on 12x owner earnings. Free cash flows are reinvested in the rollout of new gyms at a pretax ROCE of 30%. Matthias sees land-grabbing potential of great locations for the next four to six years, which should allow for strong compounding of intrinsic value per share. Matthias’ estimate of value is 50% above the recent stock price.
Matthias Riechert is co-founder and portfolio manager at Polleit & Riechert Investment Management, an investment firm dedicated to significantly increasing the wealth of its clients, adjusted for inflation. Prior to co-founding the firm in 2012, Matthias worked at Citigroup, including as head of investment products Germany, from 2001 to 2010. Previously, he was an equity and options trader at Van der Moolen. Matthias holds an MBA from Columbia Business School and London Business School.
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