TOD’S: Margins to Improve as Management Refocuses Strategy

Chris Swasbrook of Elevation Capital Management presented his in-depth investment thesis on TOD’S (Italy: TOD) at European Investing Summit 2017.

TOD’S is a leading global players that produces and sells shoes, luxury leather goods and casual wear. It is 61%-owned by Diego Della Valle. Tod’s has underperformed in recent years due to management’s poor execution and a failed change in strategic direction, which sought to increase the fashion component of Tod’s business. We expect margins to improve as management refocuses efforts on creating products that truly reflect Tod’s core proposition: Made in Italy, Italian quality, and Italian lifestyle. Chris believes the stock to be significantly undervalued, either (i) if it remains a standalone company and delivers a turnaround by 2020 that improves EBITDA profitability to the FY12 level of €250 million (intrinsic value estimate of €113.50 per share), or (ii) if Diego Della Valle sells Tod’s (in the price range of 15-17x EV/EBITDA) to a large luxury conglomerate such as LVMH or Kering for family estate planning and succession planning purposes (intrinsic value estimate range of €115.77-130.88 per share, based on successful turnaround efforts to return EBITDA back to the FY12 level of €250 million).

About the instructor:

Christopher Swasbrook is Managing Director and Portfolio Manager of Elevation Capital Management Limited a global investment manager based in Auckland, New Zealand. He was previously a Partner of Goldman Sachs JBWere Pty Limited and Co-Head of Institutional Equities at Goldman Sachs JBWere (NZ) Limited. Chris is a member of the NZX Listing Sub-Committee and a member of the NZ Markets Disciplinary Tribunal. He is also Chairman of NZX listed – Bethunes Investments Limited (BIL.NZX). Chris graduated from The University of Auckland with a BCom (Economics) in 1995. Chris is a highly regarded Value Conferences instructor, his past presentations comprise: Post Holdings at Best Ideas 2014, Adidas at Best Ideas 2015, De La Rue at European Investing Summit 2015, Coach at Best Ideas 2016 and most recently Coty at Best Ideas 2017.

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