#21 ValueStream
$ALOT $VLE.to $KCN:AX $BN $QSR $UBER $IWG.l $HR $LW $EEFT $MBGYY | $MBG - $FUJHY | $7270 $AMTM
Disclaimer
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:
AstroNova Inc. - $ALOT - Feb 18, 2025 by Atai Capital Management
Valeura Energy - $VLE.to - Jan 14, 2025 by Focus Capital Management
Kingsgate - $KCN:AX - Jan 29, 2025 by Focus Capital Management
Brookfield Corporation - $BN - Feb 11, 2025 by Pershing Square Holdings
Restaurant Brands International - $QSR - Feb 11, 2025 by Pershing Square Holdings
Uber Technologies - $UBER - Feb 11, 2025 by Pershing Square Holdings
IWG (update) - $IWG.l - Feb 14, 2025 by 1 Main Capital
Healthcare Realty Trust, Inc. - $HR - Jan 13, 2025 by 13D Activist Fund
Lamb Weston Holding Inc. - $LW - Jan 13, 2025 by 13D Activist Fund
Euronet - $EEFT - Feb 19, 2025 by Voss Value Fund
Mercedes Benz Group - $MBGYY - $MBG - Feb 19, 2025 by Voss Value Fund
Subaru - $FUJHY - $7270 - Feb 19, 2025 by Voss Value Fund
Amentum - $AMTM - Feb 19, 2025 by Voss Value Fund
AstroNova Inc. - $ALOT - Feb 18, 2025
AstroNova Inc. designs, manufactures, and supplies specialty printers, data acquisition systems, and test & measurement solutions for aerospace, industrial, and commercial applications.
Core Business Performance: Investment thesis centered on a return to normalized earnings in test & measurement (linked to narrowbody aircraft production) and production identification (facing temporary issues). Performance has met expectations.
MTEX Acquisition Failure: $20M acquisition of MTEX expected to bring high margins, growth, and synergies, but underperformed with operating losses and much lower revenues than projected.
Operational Challenges: Restructuring of MTEX due to inefficient pricing strategies (heavy discounting of ink) has delayed sales and backlog fulfillment.
Management Issues: Lack of due diligence in acquisition; seller may have misrepresented financials. Board and leadership responsible.
New CFO Impact: Appointment of Tom DeByle (former Standex CFO) seen as a positive shift towards better financial oversight and discipline.
Future Potential: Integration of MTEX’s printhead technology could reduce supplier reliance and improve margins. MTEX’s long-term contribution remains uncertain.
Valuation
Market Cap: $88M; Enterprise Value: $137M.
2026 EBITDA Projection: Mid-to-high $20M range, driven by narrowbody aircraft production and cost-cutting.
2027 EBITDA Projection: Exceeding $30M due to the expiration of $4M+ in annual Honeywell royalty expenses.
Undervalued Multiples: Trading at <5.0x 2027 EBITDA and 7.0x 2027 UFCF
SOURCES:
Atai Capital Management
https://www.ataicap.com/
https://static1.squarespace.com/static/635cafa2259a125cc55eae33/t/67b4b3f3bf5e24251a1c076b/1739895795794/Atai+Capital+-+Q4-2024+Letter.pdf
https://x.com/AtaiCapital
Feb 18, 2025
Q4 2024
Valeura Energy - $VLE.to - Jan 14, 2025
Largest Independent Oil Producer in Gulf of Thailand (second only to state-owned company).
Debt-free, strong capital allocation strategy focused on high-value acquisitions.
Break-even oil price in mid-$40s
Two transformative acquisitions:
Wassana Field: Bought for $12.3M, now producing 5,000 bpd, plus $5M annual royalty from Rasasin. Included a $397M tax shield.
Mubadala Acquisition: Paid $10.4M, received $105M cash, acquired fields producing 21,000 bpd, generating $15M monthly cash flow.
High Reserve Replacement Rates:
Nong Yao: Initially 3M barrels, now produced 26M+ barrels.
Jasmine: Initially 7M barrels, now produced 92M+ barrels.
Operational excellence: Below-budget execution, crude pricing optimization, production growth.
Aggressive expansion plans: Targeting 100,000 bpd via acquisitions in Thailand, Malaysia, Indonesia.
Free option on Turkey gas asset, seeking partners.
Active share buyback program, balanced capital allocation strategy.
Historical Reserve Replacement > 100%
Valuation
Stock Price (Jan 13, 2025): $7.93 CAD.
Market Cap: $610M USD | Cash: $259M USD | Zero Debt.
Enterprise Value: $351M USD.
Free Cash Flow (FCF):
$102M at $70 oil | $158M at $80 oil | $45M at $60 oil.
EV/FCF Multiple: 2.2x to 3.4x (deep discount vs. peers).
NPV10 (2P Reserves) + Tax Shield + Cash: $768M USD, implying a 26% upside ($9.98 CAD per share).
Undervalued given strong cash flow, reserve replacement, and financial position.
SOURCES:
Focus Capital Management
https://focuscapitaladvisers.com/home
https://focuscapitaladvisers.com/downloads/Valeura_Presentation.pdf
Jan 14, 2025
Kingsgate - $KCN:AX - Jan 29, 2025
Owns the Chatree gold mine in Thailand, now fully operational after years of closure.
Moving from low-grade stockpile processing to high-grade ore mining.
Production Targets:
FY 2025: 80,000-90,000 ounces of gold.
FY 2026+: 95,000-120,000 ounces annually.
Cost Efficiency: Increased production expected to lower costs per ounce.
Valuation
Revenue Projection: $250M–$325M per year at full capacity.
Profitability:
Net income: $75M–$110M (minimum $50M under conservative estimates).
Cash flow: $95M–$130M.
Undervaluation:
Market cap slightly over $200M
P/E 1.81x to 4x
SOURCES:
Focus Capital Management
https://focuscapitaladvisers.com/home
https://focuscapitaladvisers.com/downloads/2024_Portfolio_Update.pdf
Jan 29, 2025
Q4 2024
Brookfield Corporation - $BN - Feb 11, 2025
Leading alternative asset manager with expertise in infrastructure and renewables.
Owns 73% of Brookfield Asset Management (BAM), benefiting from $540B in fee-paying capital.
Strong returns driven by digitization (AI infrastructure), decarbonization, and deglobalization.
Targeting ~$10 EPS by 2029 (~25% CAGR).
Expected to generate >$30B in excess cash flows for capital return.
Valuation
Trades at ~15x earnings, a discount to intrinsic value and peers (KKR, APO).
SOURCES:
Pershing Square Holdings
https://pershingsquareholdings.com/
https://assets.pershingsquareholdings.com/2025/02/11095543/2025-Annual-Investor-Presentation.pdf
https://twitter.com/BillAckman
Feb 11, 2025
Q4 2024
Restaurant Brands International - $QSR - Feb 11, 2025
Strong long-term growth potential.
Tim Hortons (5% sales growth) and international business (3% sales growth) outperform peers.
Burger King U.S. turnaround succeeding: franchisee profitability exceeding targets, $1B Carrols acquisition accelerating remodels and refranchising.
Management committed to 8% operating profit growth in 2024, expecting acceleration as headwinds subside.
Valuation:
Trades at 18x NTM P/E, over 30% discount to peers (YUM: 24x, MCD: 25x, DPZ: 27x).
SOURCES:
Pershing Square Holdings
https://pershingsquareholdings.com/
https://assets.pershingsquareholdings.com/2025/02/11095543/2025-Annual-Investor-Presentation.pdf
https://twitter.com/BillAckman
Feb 11, 2025
Q4 2024
Uber Technologies - $UBER - Feb 11, 2025
Market Leader: Dominant in global rideshare and delivery with strong network effects.
Large Ecosystem: 170M monthly users, 8M drivers in 70 countries.
Revenue Base: ~$160B gross bookings, with over 50% from international markets.
Management Strength: Led by Dara Khosrowshahi, improving operations and capital allocation.
High Growth Potential: +30% annual EPS growth driven by revenue expansion, margin gains, and share buybacks.
AV Risk Mitigation: Partnerships in AV sector; large-scale AV rideshare introduction unlikely in near term.
Strong Operating Leverage: Profitability and cash flow growth expected to continue.
Valuation
Current Valuation: Trades at 29x P/E, reflecting AV disruption concerns.
Upside Potential: Stock could more than double in the next 3-4 years.
SOURCES:
Pershing Square Holdings
https://pershingsquareholdings.com/
https://assets.pershingsquareholdings.com/2025/02/11095543/2025-Annual-Investor-Presentation.pdf
https://twitter.com/BillAckman
Feb 11, 2025
Q4 2024
IWG (update) - $IWG.l - Feb 14, 2025
Largest global provider of flexible office space, operating 4,000+ locations in 120+ countries.
CEO Mark Dixon, who founded the company in 1989, holds a 25% stake.
Moving from owning/leasing locations to a managed & franchised (M&F) model, where landlords fund new locations, and IWG collects a 15% management fee.
Growth in M&F: Currently 15% of system sales, expected to reach nearly 50% by the end of the decade. Expected $500M EBITDA
Owned/leased locations and Worka generate significant free cash flow.
Transitioning to GAAP accounting in 2025, improving financial clarity.
Share Buybacks: Expected as leverage improves, enhancing shareholder value.
Undervalued Stock: Shares have barely appreciated despite strong financial growth.
Attractive Setup: Trading at a near all-time low valuation despite strong fundamentals, upcoming GAAP transition, and buyback potential.
Valuation
High FCF Generation: Non-M&F businesses expected to generate ~$300M FCF in 2025, justifying a valuation 2x the current share price.
M&F Upside: If it scales as expected, M&F alone could be worth multiple times the current market cap.
SOURCES:
1 Main Capital
https://www.1maincapital.com/
https://static1.squarespace.com/static/5e03bb9dcc191357f10902ad/t/67af4d4ce1509e3cc2ef8811/1739541836487/Q4%2724+letter.pdf
https://twitter.com/1MainCapital
Feb 14, 2025
Q4 2024
More detail of the thesis:
Healthcare Realty Trust, Inc. - $HR - Jan 13, 2025
HR is a REIT specializing in medical outpatient buildings, mainly near hospital campuses.
Merged with Healthcare Trust of America (HTA) in a ~$18B deal (July 2022), which was dilutive to HR shareholders due to a low cap rate.
Expected cost synergies and operational efficiencies did not materialize—expenses rose from 31% to 37%, exceeding peers.
CEO Todd Meredith stepped down in November 2024 after years of underperformance.
Two paths forward:
Standalone turnaround: New CEO appointment and board refresh needed, with cost-cutting measures to align with peers. Starboard expected to push for operational improvements.
Sale of the company: Strong acquisition interest from larger REITs (e.g., Welltower, Healthpeak, Ventas) with lower cap rates and cost of capital.
Starboard, a leading activist investor, has secured three board seats and will influence the strategy, similar to its successful activist campaign at Forest City Realty Trust.
Valuation
FFO Yield: 9% (peers: 5%-6%).
Cap Rate: 7% (compared to 4.85% blended cap rate in the merger).
Past Acquisition Interest: Welltower previously offered $31.75/share (current price: $17.58/share).
SOURCES:
13D Activist Fund
https://www.13dactivistfund.com/
https://www.13dactivistfund.com/Content/Docs/13D%20Activist%20Fund%20Investor%20Letter%20-%20Q4.2024.pdf
Jan 13, 2025
Q4 2024
Lamb Weston Holding Inc. - $LW - Jan 13, 2025
Largest frozen potato supplier in North America, second globally, operating in an oligopolistic market.
Activist History: Originally part of ConAgra, spun off in 2016 after JANA Partners' push.
Post-spin, net sales and EBITDA grew at ~10% CAGR, reaching $115/share by mid-2023.
Recent Issues: Stock down 30% YTD (vs. S&P 500 +20%); mismanaged ERP rollout, lost customers, wasted ~$100M in inventory.
Capital Allocation Concerns: Heavy CapEx (~14% of sales in 2023) with unclear necessity; rising SG&A costs despite revenue doubling.
Management & Governance Problems: Incentives tied to revenue/EBITDA growth rather than cash flow; JANA pushing for board/CEO changes.
Turnaround Plan: JANA aims to improve efficiency, cost control, and customer relations while considering strategic options.
Valuation
Potential Takeout Price: Could exceed $100/share based on past failed deal with Post Holdings and EBITDA growth.
Significant Underperformance: Stock down 30%, despite industry tailwinds.
Revaluation Opportunity: If JANA’s turnaround succeeds, improved free cash flow and governance could drive upside.
SOURCES:
13D Activist Fund
https://www.13dactivistfund.com/
https://www.13dactivistfund.com/Content/Docs/13D%20Activist%20Fund%20Investor%20Letter%20-%20Q4.2024.pdf
Jan 13, 2025
Q4 2024
Euronet - $EEFT - Feb 19, 2025
Is a global financial technology company providing electronic payment, money transfer, and ATM network services.
Undervalued due to misplaced fears: Stock declined on U.S. immigration policy concerns affecting Ria, but business is more tied to economic growth than immigration trends.
ATM business turnaround: Regulatory changes post-antitrust lawsuit settlement may allow fee increases, reversing a decade of compression.
Shifting business mix: ATMs now just 19% of revenue, 35% of EBITDA (down from >60% in 2019), while high-growth businesses (Merchant Services, REN, Dandelion, digital Ria) expand.
Management’s bullish guidance: Raised EPS growth target from 10-15% to 12-16% for 2025.
Valuation
Trades at 5.4x 2026 EBITDA and 9x 2026 EPS despite solid execution and expected reacceleration.
Base Case valuation: 9x EV/EBITDA, 13x 2026 EPS
Bull Case scenario: If high-growth segments gain traction, valuation could return to 15-20x NTM earnings, implying a price target of $170-$227. 116% potential upside
SOURCES:
Voss Value Fund
https://www.vosscap.com/
https://static1.squarespace.com/static/601ae5e60b044d0313307aca/t/67b75aa48007a44f36a6465d/1740069541053/2024+Q4_+Voss+Value+Funds+Letter+to+Partners.pdf
https://twitter.com/CapitalVoss
Feb 19, 2025
Q3 2024
Mercedes Benz Group - $MBGYY - $MBG - Feb 19, 2025
Global luxury automotive leader with strong free cash flow generation.
Focused on high-margin luxury vehicles, avoiding mass-market price competition.
First automaker (besides Waymo) with Level 3 autonomous vehicles on U.S. roads.
Concerns over China growth and European production inefficiencies remain.
100% of industrial free cash flow returned to shareholders:
40% dividends (~8% yield)
60% share repurchases (~7% annual reduction in shares)
Valuation
Trades at ~6x 2025 earnings and <2x EV/2025E earnings and 15% TSR.
Base case valuation at 6.8x industrial FCF with non-operating assets valued at €42B.
Potential base case 66%.
SOURCES:
Voss Value Fund
https://www.vosscap.com/
https://static1.squarespace.com/static/601ae5e60b044d0313307aca/t/67b75aa48007a44f36a6465d/1740069541053/2024+Q4_+Voss+Value+Funds+Letter+to+Partners.pdf
https://twitter.com/CapitalVoss
Feb 19, 2025
Q3 2024
Subaru - $FUJHY - $7270 - Feb 19, 2025
Profitable & Cash-Generating: Positive free cash flow every year since 2009.
Cautious EV Strategy: Avoided aggressive EV expansion, benefiting as EV market share declines.
21% owned by Toyota, collaborating on hybrid and EV development.
Acquisition Potential: Could be a logical buyout target for Toyota.
Capital Return Policy: Committed to returning at least 40% of earnings, with strong cash reserves.
Valuation
Over $10 billion in net cash, near-zero enterprise value.
Trades at just 6x 2026 estimated earnings.
Upside Potential: Stock has ~60% upside.
SOURCES:
Voss Value Fund
https://www.vosscap.com/
https://static1.squarespace.com/static/601ae5e60b044d0313307aca/t/67b75aa48007a44f36a6465d/1740069541053/2024+Q4_+Voss+Value+Funds+Letter+to+Partners.pdf
https://twitter.com/CapitalVoss
Feb 19, 2025
Q3 2024
Amentum - $AMTM - Feb 19, 2025
Formed via RMT merger with Jacobs' CMS division, now the second-largest public government services provider by revenue.
Operates in Defense (46%), Civil (17%), Environmental (15%), Space (11%), and Intelligence (11%), benefiting from geopolitical tensions and modernization trends.
Strong Backlog: $45 billion backlog (3.2x annual revenue) provides long-term stability.
Resilient Revenue Model: 65% of revenue from cost-plus contracts, insulating against inflation.
Deleveraging Strategy: Targeting a net leverage ratio reduction from 4.0x to below 3x by FY26.
Discount compared to trading peers, driven by spin-off dynamics and short-term selling pressure.
Temporary Selling Pressure: Jacobs' 8% stake and private equity exits creating short-term stock pressure, expected to clear by mid-2025.
Growth Potential: Post-merger integration and synergy realization to enhance revenue and operational efficiencies.
Valuation
Trades at <10x FCF with expected annual FCF >$500M.
Upside Potential: At 10.5x 2026E EBITDA, AMTM could re-rate to peer levels.
Price Target: Estimated 80% upside, targeting $34 per share.
SOURCES:
Voss Value Fund
https://www.vosscap.com/
https://static1.squarespace.com/static/601ae5e60b044d0313307aca/t/67b75aa48007a44f36a6465d/1740069541053/2024+Q4_+Voss+Value+Funds+Letter+to+Partners.pdf
https://twitter.com/CapitalVoss
Feb 19, 2025
Q3 2024
Babe, wake up - a new value stream just dropped. 🙏 great work