#23 ValueStream
$VTY.L $BLDR $ABG $TIGO $ASO $OSB.L $UBAB $VCTR $005930.KS $BOL.PA
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:
Vistry - $VTY.l - Mar 14, 2025 by Bonhoeffer Capital Management
Builders First Source - $BLDR - Mar 14, 2025 by Bonhoeffer Capital Management
Asbury Automotive Group - $ABG - Mar 14, 2025 by Bonhoeffer Capital Management
Millicom - $TIGO - Mar 14, 2025 by Bonhoeffer Capital Management
Academy Sports and Outdoors - $ASO - Mar 14, 2025 by Bonhoeffer Capital Management
OSB Group - $OSB.l - Mar 14, 2025 by Bonhoeffer Capital Management
United Bancorporation of Alabama - $UBAB - Mar 14, 2025 by Bonhoeffer Capital Management
Victory Capital - $VCTR - Jan 15, 2025 by Merion Road Capital
United Bank of Alabama - $UBAB - Jan 15, 2025 by Merion Road Capital
Samsung - $005930.KS - Dec 31, 2024 by AMG Yacktman Fund
Bolloré - $BOL.PA - Dec 31, 2024 by AMG Yacktman Fund
Vistry - $VTY.l - Mar 14, 2025
Vistry partners with local governments and housing authorities to develop and upgrade housing projects using a capital-light model.
Strategic Shift: Exiting private homebuilding to focus on partnerships with local governments and housing authorities.
Capital-Light Model: Public entities provide land/buildings (instead of buying land first); Vistry earns from partnership fees and selling refurbished homes.
Less Cyclicality: Demand in partnerships is more stable than private homebuilding but faces potential delays and lower margins.
Historical Returns: Similar UK firms had pre-tax returns of ~40%, now declining due to demand and funding issues.
Current Transition: 17,200 annual home deliveries (73% partnership-based); full transition in progress.
Challenges: Cost overruns in private homebuilding, deferred projects, and revenue recognition delays impact investor confidence.
Margin Decline: Profit margins fell from mid-teens to ~5% in 2024.
Management's View: Targeting 30% after-tax return on capital, 5-8% annual revenue growth, and low-teens profitability.
Share Buybacks: Selling excess land to fund £500M buyback (~25% of market cap); ongoing 4% annual repurchases.
Valuation
Bear Case: Flat volumes and low margins suggest £6 per share (9x multiple).
Bull Case: Assuming management guidance execution of strategy, valuation could reach £20-£30 per share (11-17x multiple), in 5 years.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
Builders First Source - $BLDR - Mar 14, 2025
Builders First Source is the largest and a consolidator of U.S. distributor and manufacturer of building materials, specializing in supplying and fabricating construction products for residential and commercial projects.
Industry Leader: Largest U.S. building products distributor, leveraging local economies of scale for high margins and inventory turnover.
Business Model: Integrates distribution and manufacturing, using proprietary software for design and logistics.
Market Exposure: Dependent on single-family home (SFH) and multi-family home (MFH) construction, both impacted by high interest rates.
Automation & Efficiency: Leads in truss automation, enhancing cost efficiency.
M&A Strategy: Actively acquiring companies; management indicates a strong pipeline of deals.
Leadership Change: CFO promoted to CEO; former CEO remains Chairman, retaining shares.
Brad Jacobs' Interest: Notable industry figure exploring acquisitions in the sector.
Return on Capital: Consistently improving return on equity (RoE) and return on incremental invested capital (RoIIC), bolstered by acquisitions.
EPS Growth Projection: Expected in the low 20% range annually over the next five years.
Share Buybacks: Estimated 10% annual repurchases, aligning with 85% of projected net income.
Valuation
Stock Price Target: $647 per share.
Investor Return Expectation: 31% IRR based on DCF valuation.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
Asbury Automotive Group - $ABG - Mar 14, 2025
Asbury Automotive Group (NYSE: ABG) is a leading automotive dealership consolidator that grows through acquisitions and operational efficiencies to enhance sales and profitability.
Growth Strategy: Expands through acquisitions of platform dealerships and synergistic local deals.
Capital Allocation: Balances between acquisitions and share buybacks to optimize shareholder value.
Operational Efficiency: Leverages scale for improved inventory management and customer service. Key metric inventory turn.
Industry Positioning: Benefits from consolidation, digital retailing, and rising online sales.
Profitability: Strong return on incremental invested capital (RoIIC) and disciplined cost management.
Strong Returns: FCF RoE ~19%; 5-year RoIIC ~19%
Growth Projections: EPS expected to grow 19% annually, reaching $61 per share by 2029.
Valuation
Current Valuation: Trades at ~10x forward P/E, below historical and sector averages.
Stock Price Target: Potential increase to $912/share if P/E expands to 15x.
Investor Return: Estimated IRR of 28% over the next five years.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
Millicom - $TIGO - Mar 14, 2025
Millicom (TIGO) is a telecommunications company that provides mobile and broadband services in Latin America and Africa, focusing on markets with few competitors to enhance pricing power.
Operates in markets with few competitors, allowing pricing power recovery.
A major competitor in Colombia is bankrupt, reducing competition; Millicom is negotiating asset acquisition.
Completed sale of its tower unit (Lati) to SBA Communications.
New CEO and management (appointed by major shareholder Xavier Niel) are implementing cost-cutting measures.
$3 per year dividend, yielding 11%.
Earnings have grown 10% annually (past 5 years) and are expected to grow 15% annually (next 5 years).
Valuation
15% FCF yield based on Q4 financials.
Xavier Niel has increased ownership to 40% and made a tender offer at $25.75 per share.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
Academy Sports and Outdoors - $ASO - Mar 14, 2025
Academy Sports and Outdoors (ASO) is a leading U.S. retailer specializing in sporting goods, outdoor equipment, and lifestyle products at competitive prices.
Second-largest sporting goods retailer in the U.S.
Leads in sales per sq. ft., sales per store, and EBITDA per store.
Expansion plan: 160-180 new stores in five years (+50% footprint).
New stores expected to generate >20% return on capital.
Long-term goal: $10B revenue, $1B net income.
50% of cash flow allocated to expansion, remainder for buybacks.
EPS growth forecast: 26% CAGR over five years (vs. prior 43%)
DCF model supports management's $10B revenue & $1B net income target.
EPS projected at $20 by 2029.
Valuation
Valuation multiple expected to rise from ~10x to 15x.
Target price: $300 per share.
Implied IRR: 42% over five years.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
OSB Group - $OSB.l - Mar 14, 2025
OSB Group is a UK-based specialist mortgage lender focused on buy-to-let (BTL) and residential lending.
OSB Group operates in the UK buy-to-lease (BTL) mortgage sector, specializing in multi-family lending.
Maintains low loan default rates (0.4%), modest loan-to-value (LTV) ratios, and personal guarantees from landlords.
Strong efficiency ratio (32%), return on assets (1.3%), and return on equity (18%).
Competes with Paragon Banking Group (PBG), but has better profitability and efficiency metrics.
Conservative risk profile with disciplined capital allocation and a competitive market position.
Higher RoE (18%) vs. PBG’s low teens, with a strong cost structure and efficient capital usage.
Historical loan losses of 0.4% indicate consistent performance with minimal credit risk..
Valuation
OSB trades at 5x earnings, significantly lower than PBG at 9x earnings.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
United Bancorporation of Alabama - $UBAB - Mar 14, 2025
United Bancorporation of Alabama (UBAB) is a community bank that provides SME banking, low-income housing financing, and municipal loans, leveraging government incentives and tax credits to support economic development.
Community Bank Focus: Operates in Alabama and Northwest Florida, providing SME banking, low-income housing, and municipal loans.
Strategic Advantages: Designated as a Community Development Financial Institution (CDFI), making it eligible for U.S. Treasury incentive payments.
Subsidiary & Tax Credits: UB Community Development (UBCD) manages New Market Tax Credits (NMTC) and other federal funding programs.
Revenue Mix: Generates significant non-interest income (~30-40% net income margin) from tax credit sales and community development financing.
Loan Portfolio: Strong loan growth (15% per year), diversified across commercial, real estate, and government-incentivized loans.
Operational Efficiency: Maintains a 50% efficiency ratio, below the 59% industry average.
Management Alignment: Insiders hold 4.5% of shares
Growth Levers: Expansion through Treasury incentives, low-income lending, cost efficiency, and share repurchases.
EPS Growth: 17% per year (5-year average), 22% (10-year average).
Net Interest Margin (NIM): 5.4%, cost of funds at 1.3%.
Return on Equity (ROE): 18% (5-year average), with incremental ROE of 24%
Key Catalysts: Stronger-than-expected loan growth, efficiency improvements, and additional Treasury incentives.
Risks: Slower loan growth, higher costs, or fewer investment opportunities.
Valuation
Current Valuation: Trades at 6.7x P/E
Short-term Target: $129 per share (+45% upside) using a conservative 15x P/E multiple.
Long-term Target: $308 per share (5-year IRR of 40%) if 17% EPS growth is sustained.
SOURCES:
Bonhoeffer Capital Management
https://www.bonhoeffercapital.com/
https://seekingalpha.com/article/4768777-bonhoeffer-capital-management-q4-2024-letter
https://twitter.com/Bonhoeffer_KDS
Mar 14, 2025
Q4 2024
Victory Capital - $VCTR - Jan 15, 2025
Awaiting completion of the Amundi transaction.
Management provided guidance on standalone operating performance.
Pro forma cash flow expected to be strong.
Fully utilized $95M buyback plan and approved a new $200M buyback
Valuation
Pro forma cash flow projected to exceed $6.00 per share.
Trades at <10x free cash flow (FCF).
SOURCES:
Merion Road Capital
https://www.merionroadcapital.com/
https://www.merionroadcapital.com/_files/ugd/f6ee8c_f87d9b19a06f4eec8130a76ad1a3aca8.pdf
https://twitter.com/aaronjsallen
Jan 15, 2025
Q4 2024
United Bank of Alabama - $UBAB - Jan 15, 2025
Benefits from low-cost perpetual preferred capital and CDFI programs.
Operates with a top-tier platform.
$50.00+ per share in excess capital (Q3) that can be use for repurchases.
Repurchased 5.5% of shares at $54.25 per share (Q4).
Valuation:
Stock closed at $57.00
Expected $7-$8 in normalized earnings, trading at 7.5x earnings.
SOURCES:
Merion Road Capital
https://www.merionroadcapital.com/
https://www.merionroadcapital.com/_files/ugd/f6ee8c_f87d9b19a06f4eec8130a76ad1a3aca8.pdf
https://twitter.com/aaronjsallen
Jan 15, 2025
Q4 2024
Samsung - $005930.KS - Dec 31, 2024
Leading technology company in memory chips, foundry, and mobile phones.
Faced challenges in 2024, particularly in the High Bandwidth Memory (HBM) segment.
Competes with TSMC in foundry and Apple in mobile phones.
Announced a large share buyback as a strategic capital allocation decision.
Valuation
Trades close to tangible book value.
Valuation significantly lower than industry peers.
Net cash and marketable securities covering about a third of market value.
SOURCES:
AMG Yacktman Fund
https://wealth.amg.com/products/yacktman-fund-yackx/
https://media.amg.com/content/dam/amgfunds/documents/commentary/AMG%20Yacktman%20Fund%20Commentary.PDF
Dec 31, 2024
Q4 2024
Bolloré - $BOL.PA - Dec 31, 2024
Transitioned from logistics to media holdings, now owning stakes in Vivendi and Universal Music Group.
Vivendi is restructuring by spinning off Canal+, Havas, and Louis Hachette Group.
Universal Music Group is expanding through a Spotify partnership and potential U.S. listing.
Bolloré is simplifying its corporate structure by reorganizing smaller subsidiaries.
Valuation
Estimated to be worth 2-3 times its current market valuation.
Cash balanceapproximately equal to its market capitalization.
SOURCES:
AMG Yacktman Fund
https://wealth.amg.com/products/yacktman-fund-yackx/
https://media.amg.com/content/dam/amgfunds/documents/commentary/AMG%20Yacktman%20Fund%20Commentary.PDF
Dec 31, 2024
Q4 2024
How do you calculate ROIIC if I may ask?