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This content is for informational purposes only and does not constitute financial advice; we recommend always verifying the ideas presented here and conducting your own research, as there may be errors in interpretation and translation.
Today we have compiled the following theses:
Thesis on Lotte Chilsung - #005305 - Dec 15, 2024
Thesis in North American Construction - $NOA - Dec 15, 2024
Thesis on Arrow Electronics - $ARW - Dec 15, 2024
Thesis in Northeast Bank - $NBN - Dec 15, 2024
Thesis on Zegona Communications - ZEG.L - Dec 19, 2024
Thesis on McBride - $MCB.l and MP Evans Group PLC - $MPE.l - Dec 19, 2024
Vivendi RemainCo $VIV.PA - Dec 17, 2024
Canal Plus CAN.LN - Dec 17, 2024
Thesis on Lotte Chilsung - #005305 - Dec 15, 2024
Lotte Chilsung is the largest beverage company in South Korea, producing and distributing alcoholic beverages, soft drinks, and Pepsi products in several Asian markets.
Leader in alcoholic and non-alcoholic beverages in South Korea; distributes Pepsi products in Asia. Controlled by the Shin family.
International growth of 12% annually and new products offset decline in the domestic market.
Revenue projection: +11% annually; operating income will double by 2028; target ROE of 15%. Earnings growth: >15% annually through 2028.
Strategy: Operational improvement and monetization of key assets, such as land in Gangnam.
Better investor relations following 2017 restructuring.
Valuation
Target price: ₩342,214 per share. Common and preferred shares trade with the following discounts: Common shares ₩121,200 (64.6% discount); Preferred shares ₩68,300 (75% discount).
Preferred shares discount: 44% compared to common shares, with higher dividends.
Trading multiples: Common shares at 6x projected 4-year earnings; preferred shares at 3x.
Valuable assets: Gangnam land valued between ₩1.9 and ₩3.8 trillion (considered at 50%).
SOTP business value: ₩3,728 billion (8.2 EBITDA multiple); adjusted sum of parts ₩3,441 billion or ₩342,214 per share.
SOURCES:
https://www.bonhoeffercapital.com/
https://twitter.com/Bonhoeffer_KDS
https://seekingalpha.com/article/4744439-bonhoeffer-capital-management-q3-2024-letter
Thesis in North American Construction - $NOA - Dec 15, 2024
North American Construction specializes in earthmoving services for mining and construction projects, maximizing equipment utilization in harsh climatic environments.
Business Model: Earthmoving services in harsh climatic environments, with higher margins and pricing power.
Value Generation: Based on strategic acquisitions and share buybacks.
Efficiency: Strong cash flows, continuous margin improvement, and returns on capital around 20%.
Valuation:
Target Price: 85 CAD/share.
IRR: 23%.
RoIIC: 15%-20%.
RoE: Projected 29.9% (2024).
Share Buyback: 5% of market capital starting in 2025, once the debt target is reached following the MacKellar acquisition.
SOURCES:
https://www.bonhoeffercapital.com/
https://twitter.com/Bonhoeffer_KDS
https://seekingalpha.com/article/4744439-bonhoeffer-capital-management-q3-2024-letter
Thesis on Arrow Electronics - $ARW - Dec 15, 2024
Arrow Electronics is a global distributor of electronic components and technology solutions.
Cyclical business.
Value generation: Combined earnings growth (5-6% annually) and share buybacks (10% annually).
Benefit from growing demand in AI and IoT.
Capital returns: 5-year average FCF/Equity is 20%, and 4-year RoIIC is 83%.
Projected EPS: $26-$33 in 2028.
Valuation
Target price: $400-$500 by 2028.
Expected IRR: 27%-33%.
Expected P/E multiple expansion from 10x to 15x.
SOURCES:
https://www.bonhoeffercapital.com/
https://twitter.com/Bonhoeffer_KDS
https://seekingalpha.com/article/4744439-bonhoeffer-capital-management-q3-2024-letter
Thesis in Northeast Bank - $NBN - Dec 15, 2024
Northeast Bank (NBN) is a community bank specializing in SBA loans, purchasing "orphaned" loans, and providing financial services to SMEs in the U.S.
Business Model: Focus on "orphaned" loans and SBA loans, markets with high margins and less competition.
Solid Growth: EPS grew 40% annually over 5 years; loans increased 26% annually, thanks to opportunistic purchases of orphaned loans during COVID.
High Efficiency: Operating ratio of 41%, significantly better than the banking average (59%).
Aligned Management: Management owns 15% of the shares, ensuring aligned interests with investors. When they cannot find loans with the required return, they repurchase shares.
Strategic Opportunities: Benefits from bank mergers and bankruptcies; scalability without significant costs.
Average RoE over the last 3 years: 18%.
Valuation
Short-term target price: $145 (+45% from current price), applying a 15x multiple to current EPS.
Long-term potential: $400 per share (32% IRR over 5 years).
Key multiples and metrics: Trades at ~10x EPS; target of 15x EPS.
Significant Discount: Low valuation compared to competitors; attractive revaluation opportunities.
SOURCES:
https://www.bonhoeffercapital.com/
https://twitter.com/Bonhoeffer_KDS
https://seekingalpha.com/article/4744439-bonhoeffer-capital-management-q3-2024-letter
Thesis on Zegona Communications - ZEG.L - Dec 19, 2024
Zegona Communications (ZEG.L) is an investment vehicle specialized in acquisitions and operational improvements in the European telecommunications sector, currently focused on Vodafone Spain.
They are currently applying the LBO playbook to their recent acquisition of Vodafone Spain.
Acquisition Multiple: Acquisition of Vodafone Spain at 3.9x EBITDAaL, one of the lowest in the last decade.
The founders of Zegona have already executed similar operations twice in Spain with great success. This would be their third deal in the same country.
Experienced Management: The management team and CEO have an impressive track record of success in the sector.
Current Capital Structure: Total shares: 759.2m, of which 523.2m are preferred shares (redeemable), with the remainder being common shares.
One of the key aspects of the operation: part of the transaction was financed with preferred shares worth €900m, which currently represent 69% of the total shares. The current market cap is £2.4B, meaning these preferred shares account for £1.67B of the market cap. The key point is that Zegona can repurchase them for £750m (€900m), transferring this value to common shareholders. The challenge is obtaining the necessary cash to do so, starting from a very high debt level.
Strategy:
Asset Monetization: Monetizing key assets (Netcos), such as selling part of their stake in the fiber network.
Operational Improvements:
Optimization Plan: Reduction of workforce (-28%) and projected annual savings of €320M. These savings, capitalized at 5x, could represent a value of ~€1.6B.
Margin Projections: Improvement in EBITDAaL margin from 33% to 41.5%.
Risks: Delays or failure in the monetization of assets.
Valuation:
Current Price: ~3.14 GBP.
Assuming monetization of the fiber network and operational improvements:
Base Case Scenario:
EBITDAaL Multiple: 5x.
Target Price: 9.75 GBP (+200%).
Optimistic Scenario:
EBITDAaL Multiple: 6x.
Target Price: 16.92 GBP (+430%).
Monetization of Netcos: Including a special dividend of up to 1.50 GBP not factored into the scenarios above. If included, total returns would range from +250% to +475%.
SOURCES:
Thesis on McBride - $MCB.l - Dec 19, 2024
McBride is the leading European manufacturer of private label detergents, collaborating with major retailers and offering comprehensive production solutions.
European leader in private label detergents with economies of scale and integrated production.
Strong relationships with major retailers such as Sainsbury's and Tesco.
During the pandemic, it was unable to pass on cost inflation to its clients due to existing contracts.
Its main costs are materials for packaging and chemicals.
Recovery post-pandemic with short-term pricing agreements to protect margins.
Debt reduction could unlock dividends.
Risks: Volatility in raw materials (palm oil) and high debt (£130M).
Valuation
EV: £310M | Market Cap: £180M | Net Debt: £130M
Current EV/EBIT multiple: 4.8x
Record profit projected for FY24 (£64.3M EBIT).
Projection with cost estimate: EBIT of £20M in FY25 with adjusted margins if costs stabilize. The company is very sensitive to input costs, and in this scenario, it would not be cheap. Given its debt level, there would be risks unless it can significantly increase prices.
Proposed hedge: MP Evans Group PLC - $MPE.l
Engaged in the management and operation of palm oil plantations in Indonesia, including production and processing in its own mills.
Trades at a multiple of 9x EV/EBIT (normalized or based on depressed 2023 prices), with positive sensitivity to rising palm oil prices.
SOURCES:
Vivendi RemainCo
SOTP Vivendi RemainCo $VIV.PA: €6911M
Mcap (€2.5 per share): €2480M
Discount = -64%
SOURCES:
https://x.com/SpecSitsCapMgmt/status/1869153014793318893
Canal Plus $CAN.LN
Implicit Canal plus multiple + very low (adj EV/EBITDA = 1.9x )
SOURCES:
https://x.com/SpecSitsCapMgmt/status/1869149115843850625
Canal Plus $CAN.LN
Canal Plus by Bireme Capital CIO Evan Tindell He also believes that Canal Plus is trading at very low multiples "Canal+ Seems like it trades for 4-5x earnings"
SOURCES:
https://x.com/evantindell/status/1869833266049515700