#22 ValueStream
$PD.TSE $ORE.TSX $BUR $IWG $BOF $ALLOG
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:
Precision Drilling - $PD.TSE - Jan 27, 2025 by Aegis Value Fund
Orezone - $ORE.TSX - Jan 27, 2025 by Aegis Value Fund
Burford - $BUR - Feb 28, 2025 by Greenhaven Road Capital
International Workplace Group - $IWG - Feb 28, 2025 by Greenhaven Road Capital
BranchOut Food Inc. - $BOF - Feb 08, 2025 by Fairlight Alpha Fund
Logic Instrument S.A. - $ALLOG - Feb 08, 2025 by Fairlight Alpha Fund
Investment Philosophy by Crossroads Capital
Precision Drilling - $PD.TSE - Jan 27, 2025
Operates 78 rigs in Canada, benefiting from improved pipeline capacity (TMX Pipeline, Shell LNG).
34 rigs in the U.S., with potential rebound in gas drilling; 8 rigs in the Middle East on stable long-term contracts.
Targeting debt below 1x EBITDA by mid-2025.
Allocating 25-30% of free cash flow to share repurchases (~4% of shares bought back); planning 50% of FCF for returns once debt target is met.
Valuation
Purchased at 0.7x tangible book value, well below asset replacement cost.
Trades at <5x 2024 free cash flow, indicating an attractive valuation.
Sources:
Aegis Value Fund
https://www.aegisfunds.com/
https://www.aegisfunds.com/assets/pdfs/AVALX_2024_2nd_Half_Managers_Letter.pdf
Jan 27, 2025
Q4 2024
Orezone - $ORE.TSX - Jan 27, 2025
Gold producer operating in Burkina Faso.
Faced political risks, impacting investor sentiment.
Operations improving; sulfide expansion project on schedule and budget.
Expansion expected to boost production by ~50% by early 2026.
Valuation
Free cash flow yield projected to exceed 30% at current gold prices.
Sources:
Aegis Value Fund
https://www.aegisfunds.com/
https://www.aegisfunds.com/assets/pdfs/AVALX_2024_2nd_Half_Managers_Letter.pdf
Jan 27, 2025
Q4 2024
Burford - $BUR - Feb 28, 2025
Leader in litigation finance with a 27% historical gross IRR and 13% loss rate.
76% of cases settle, with occasional 10X-100X returns on investments.
Management owns 9% (~$200M) and has been a net buyer of shares.
Tangible book value >80% of share price, ensuring strong capitalization.
YPF case: Argentina nationalized YPF without compensation; Burford financed the lawsuit.
Argentina delaying payment, but new government (Milei) is pushing economic reforms, potentially leading to a resolution.
Core litigation finance business remains strong, funding high-value cases.
Valuation
YPF case Legal award: $16B, accruing $1B in interest per year.
Burford’s estimated potential payout: >$6B, or $25+ per share (double the year-end share price).
Market skepticism around timing and enforceability, but >50% probability of settlement within 2 years.
Sources:
Greenhaven Road Capital
https://www.greenhavenroad.com/
https://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/67c1bf97195b81791576e9ad/1740750744090/Greenhaven+Road+-+2024+Q4+FINAL.pdf
https://twitter.com/GreenhavenRoad
Feb 28, 2025
Q4 2024
International Workplace Group - $IWG - Feb 28, 2025
Largest operator of flexible office spaces, shifting to an asset-light partnership model with landlords.
Avoids capital investment and lease liabilities, instead earning management fees and revenue shares.
Full benefits of the model take time to appear due to long setup cycles.
Progressing towards debt reduction, potential stock buybacks, and a U.S. listing (via GAAP transition).
Business model increasingly resembles Hilton/Hyatt, where operators manage properties rather than owning them.
Expanding partnerships should drive future profitability and operational leverage.
The partnership segment is growing fastest, with profitability expected to improve as more locations mature.
A shift to a U.S. listing could enhance valuation by aligning with higher-multiple markets.
Valuation
Trades at 7x estimated operating cash flow
Comparable hotel management companies trade at 20x–30x free cash flow
Sources:
Greenhaven Road Capital
https://www.greenhavenroad.com/
https://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/67c1bf97195b81791576e9ad/1740750744090/Greenhaven+Road+-+2024+Q4+FINAL.pdf
https://twitter.com/GreenhavenRoad
Feb 28, 2025
Q4 2024
BranchOut Food Inc. - $BOF - Feb 08, 2025
Business Model: Food-tech company producing freeze-dried, healthy foods.
Operations: Expanded with a new Peru facility (Q4 2024), increasing production capacity.
Major Customers: Walmart, Costco; expanding geographic distribution.
Competitive Advantage: Lower production costs in Peru vs. U.S.-based competitors.
Growth: Revenue $2.8m to $8m up 186% YoY (2023–2024); strong demand and operational scaling. Turn casflow positive in Q1 2025.
Production Capacity: Peru facility can handle up to $40M in annual production.
Debt-Free Target: Plans to eliminate debt by end of 2025.
Valuation
Current Valuation: Trades at ~6x EBITDA.
Sources:
Fairlight Alpha Fund
https://www.fairlightcapital.com/
https://www.fairlightcapital.com/_files/ugd/a6cb30_24aa1b8d54bf4c32a07259140852ce36.pdf
https://twitter.com/Fairlight_Cap
Feb 08, 2025
Q4 2024
Logic Instrument S.A. - $ALLOG - Feb 08, 2025
Specializes in rugged devices and laptops, focusing on defense and industrial sectors.
Reported 2024 revenue of EUR 27.4 million, up 68% YoY, but slightly below the EUR 30 million target due to logistical delays.
2025 revenue target: EUR 50 million, with strong expected growth even if falling short.
Operates in a niche market with a TAM of $3.4 billion and SOM of $595 million in Europe.
Positioned for long-term expansion with few direct competitors.
Valuation
Currently trades at 0.38x 2024 revenue, significantly below comparable companies.
Expected valuation range: 12–15x earnings or 2–2.5x revenues based on growth potential.
Market has not fully priced in the company’s rapid expansion.
Sources:
Fairlight Alpha Fund
https://www.fairlightcapital.com/
https://www.fairlightcapital.com/_files/ugd/a6cb30_24aa1b8d54bf4c32a07259140852ce36.pdf
https://twitter.com/Fairlight_Cap
Feb 08, 2025
Q4 2024
Crossroads Capital Philosophy
Crossroads Capital follows a high-conviction, catalyst-driven strategy with strict risk management, aiming for market-beating, long-term, risk-adjusted returns while minimizing downside exposure.
Investment Philosophy
Value-based, long-term investing focused on businesses, not stock movements.
Large margin of safety and clear catalysts for value realization.
Concentrated portfolio (best ideas only, no over-diversification).
Exploits inefficiencies in pricing due to market biases and misperceptions.
Patience, discipline, and superior risk control to maximize long-term returns.
Investment Strategy
Two main investment types:
Value Investments – Undervalued, high-quality businesses with strong competitive edges.
Special Situations – Short-term trades based on external events.
Targets small-cap stocks ($100M-$5B market cap) but invests opportunistically in larger ones.
10-15 core long positions, up to 10 shorts, average net exposure ~70%.
Seeks 100% returns in 2 years, limiting downside risk to 20%.
Investment Process
Idea Generation: Leverages a wide network, deep research, and proprietary analysis.
Diligence & Selection: Identifies mispriced securities with asymmetric risk/reward.
Portfolio Construction: Positions sized 5-10% based on conviction level.
Ongoing Monitoring & Exit: Exits when price nears intrinsic value or better opportunities arise.
Risk Management
Capital preservation is the top priority.
Low leverage (max net exposure 125%, gross 200%).
Cash used defensively when opportunities are scarce.
Avoids low-quality businesses and high-risk sectors.
Diversification across industries & non-correlated assets.
Constant evaluation of risk & liquidity.
Sources:
Crossroads Capital
https://www.crossroadscap.io/
https://www.dropbox.com/scl/fi/gm7gpfg72vhjkyvcksm9w/Crossroads-Capital-Investor-Presentation-2.pdf?rlkey=faq30v4kd8movshpsh6c30tb2&e=1&st=pe0ec6y2&dl=0
https://x.com/CrossroadsOnX
Mar 02, 2025
Q4 2024