#125 - Ramblings Nov2024

When to Sell - Peter Lynch

The most important stat

Steve Jobs on Intuition

From this thread:

This became his signature approach - making decisions based on instinct.

Even when those decisions seemed to defy market trends, he trusted in his inner compass.

“This approach has never let me down, and it has made all the difference in my life.”

To Steve Jobs, every feature, every detail, every pixel had to earn its place.

If something didn’t serve a clear purpose, it was out.

This was the philosophy of Apple.

No clutter, only focus & clarity.

4chan is right

Trump won!!

And as I’ve been indulging in videos of crying liberals, this one takes the cake:

My mother in law.

S&P500 Valuation

Turning Stocks

$RELY

Remitly up 17% today (2024-10-31).

Sudden (to me) turn into profitably. I looked at it before and passed.

Chitchat Stocks had covered it 2 months ago.

$WISE.L

Business is doing well.

Wise becomes first foreign firm to gain direct access to Japan’s payment clearing network: link.

$MBB.SE

Looks interesting…

The TL;DR is: EV/EBITDA = 4x, EBITDA historically growing at a CAGR of 10%, on-going buybacks.

A writeup here.

And another from Tresor Capital: archived.

FCF yield of 13%. I kindof like this one, I shall try and better understand their business.

Andrew Brown has a Youtube video on it here.

Some more recent news (thread here):

Here’s how Michael gielkens of Tresor Capital values the company:

These are my favorite parts from the thread:

I think I do like this stock.

Publicly listed child companies and their market caps:

• Vorwerk $VH2.DE: EUR 516M; looks fairly valued to me, but could be undervalued if the EBITDA margin recovers. MBB’s ownership: 50.32% = 258M.
• Aumann AG $AAG.DE: EUR 142M (what the HELL is going on here?! Seems EXTREMELY undervalued. Why?!). MBB’s ownership is also close to 50% = 71M.
• Delignit AG $DLX.DE: EUR 24M (also looks undervalued). 60% ownership = 14M

Total = EUR 343M.

Market cap of $MBB.DE: EUR 571M

Net cash according to Koyfin: EUR276M (confirmed form their 2024-09 presentation or their 2024Q3 earnings report: “€281.4 million are attributable to MBB SE”).

So EV of $MBB.DE = 571 - 280 = 291M.

Therefore just their stake in Vorwerk, Aumann and Delignit is worth more than the current EV.

What in the world is going here?!

What’s left is CT Formpolster (100% owned) and Hanke (94%), not very interesting but still EBITDA-positive, but more importantly, DTS IT AG (80% owned). DTS as of 2024Q3 had annualized revenue of EUR 100M (MBB’s stake) with 14% EBITDA margin.

How much is growing IT cybersecurity company worth? 10x EBITDA = EUR 140M.

Therefore I would put the conservative SOTP valuation of MBB at 343 + 140 = EUR 483M (totally ignoring CT Formpolster), giving us a **discount of (1 - 291 / 484) = 40%.

If the discount shrinks to 20% through rerating, the EV would be 0.8 * 484 = 387M and the market cap would be 387 + 280 = EUR 667M, upside of 16.8%, attributing zero value to Formpolster and Hanke.

From their 2024Q3 report, DTS (the cybersecurity company), had EUR 100M of annualized revenue and 14% EBITDA margin.

$FFH.TO

BMO on Fairfax:

$GIFI

Provides services to offshore oil in the Gulf of Mexico, as well as steel fabrication.

We specialize in the fabrication of complex steel structures for offshore production and offshore wind developments as well as onshore refining, petrochemical, LNG and industrial facilities. The division also provides maintenance and other services in onshore facilities and on offshore platforms and performs municipal and civil works projects.

FCF yield of 16% but SBC is high ($2M on $14.3M FCF).

$THEP.PA

Lots of praise for this company (Thermador Groupe) and its management (especially the transparent communication).

The screenshot below almost turned me off:

But on Koyfin, I see a 10% FCF yield:

Revenue 2.5x in the last 10 years ~ 9.5% CAGR.

Probably some room for multiple expansion (~17% upside from that):

SBC is nil.

I have to say I like what I’m seeing.

All in all maybe a 12% IRR from here, + margin improvement? Probably good, not great.

But I’m interested in learning more about this business.

$HA4.DU

HAL Trust. Idea shared on the Value and opportunity blog. Initial idea found in East 72 Dynasty Trust investor letter (archived).

The charts on Koyfin look really good.

According to E72DT:

Unfortunately this is a really complicated thesis…I’m not sure I have the mental energy for such setups. I might come back to it later.

$AEBZY

As of 2024-11-14:

Coca Cola Icecek ($COLZF) market cap = US$4.25B

50.3% of that = $2.14B

Anadolu Efes $AEBZY market cap = $3.81B

Leaving $1.67B for the beer operations.

The beer group had FCF of 10 billion annualized try in 9M2024, i.e. ~US$291M.

That puts it (the beer group) around a 17% FCF yield.

p.s. I have $CCOLA.IS trading for about 8x EBIT based on their latest earnings release.

I can hold a bit longer.

$HAYPP.ST

Haypp down 16% today.

Some guy claimed an 18% yield on operating cashflow so I had to look.

From 2023Q3 report:

So I think the guy is deluded.

• he’s excluding some pretty significant investments in “intangible assets” (50M in 2024 Q3 YTD, 40M in 2023 Q3 YTD).

Overall is not nearly as cheap as he makes it out to be.

I think this is a 5% FCF yield instead (not 18%!!!), which could be a fair price, I don’t know.

UPDATE: I will not invest in Haypp. I don’t see this company’s existence as a net positive for the world. The investment will probably be a very good one anyway. That’s OK.

$NWOR.L

WTH is going on here?!

Stable revenues:

Improving gross profit margin:

No debt issues:

Really, really cheap. This looks like a double to me:

Some pushback:

From advfn:

Dowgate Capital's update after the interims notes that the adjusted PBT was well ahead of expectations - £4.8m compared to the forecast £4.4m.

The £13m net cash - 30% of the entire m/cap - was also well ahead of the £10.5m forecast.

Here’s their summary:

“Interim Results

National World has reported interim results that are ahead of our expectations and which underpin our FY24 forecasts. Group revenues advanced +17% to £48.8m (Q1 +19%, Q2 +16%) driven by acquisitions including Midlands News Association. Within this, we were encouraged to see strong growth in Digital (+12% to £10.0m) and a near doubling of Events (to £2.5m). The group continues to restructure its operating model, including an increase in automation.

Adjusted Operating Profit leapt +65% to £4.7m, comfortably ahead of DCe £4.2m, with margin expanding +2.6pts to 9.6%. Adjusted PBT increased +50% to £4.8m (DCe £4.4m) and Adjusted EPS rose +56% to 1.4p. The group declared an inaugural interim dividend of 0.2p, as forecast. It finished with net cash of £13.0m, ahead of DCe £10.5m.

We believe that National World continues to make strong progress in rebalancing its revenue streams, developing expert and specialist content (notably business and sport) and growing its national footprint. The group has been successful both in acquiring heritage assets and developing other revenue streams, notably in events. This has facilitated the evolution of the group to provide increasingly specialist content that can be monetised through multiple channels. Further, it is creating local digital marketplaces using the information gleaned from platform registration walls.

We view the H1 results as encouraging and they underpin our FY24 PBT/EPS estimates of £11.0m/3.0p. National World shares have been left behind compared with other B2C peers and we view them as anomalously valued at under 3x EV/EBITDA.

• H1 Results. Adjusted PBT rose +50% to £4.8m, ahead of DCe £4.4m. • Revenues. Group revenues rose +17% to £48.8m with Q1 +19% and Q2 +16%. The six acquisitions completed in 2023 contributed £11.8m of revenue in H1 vs £2.0m in H1 last year. Print revenues rose +16% to £35.4m, Digital +12% to £10.0m and Other +48% to £3.4m, including Events revenues nearly doubling to £2.5m. Revenues in July are up +13% benefiting from acquisitions, new launches and heritage brand relaunches. • Operating Profit. Adjusted Operating Profit rose +65% to £4.7m with margin expanding +2.6pts to 9.6%. • Balance sheet. Net cash finished the period at £13.0m, equal to 5p per share. The group has no defined benefit pension obligations or earnouts. • Forecasts. We view the encouraging H1 results as firmly underpinning our FY24 PBT/EPS estimates of £11.0m/3.0p.”

Interesting to now:

"Balance sheet. Net cash finished the period at £13.0m, equal to 5p per share. The group has no defined benefit pension obligations or earnouts."

The company’s own thesis can be found here.

$GCT

Interesting…

(link)

The full thesis from September: pdf.

$PSFE

The warrants ($PSFE-W) were up 50% on Friday.

Worth keeping an eye on…

$CLAR

Written up in Maran Capital Management letter of Aug 2024.

To be honest I don’t really understand the thesis here. I’m probably turned off by the low growth.

(link)

$QRTEA

I really have to make up my mind on this one.

UPDATE: After reading some comments on Reddit, right now seems too risky to enter.

$XMTR

Xometry has mooned in a very short timespan:

I’m tempted to take profits here.

Here is a financial model I built in 15min:

In order to achieve 15% IRR with 5% terminal FCF yield:

• according to this model and using conservative growth assumptions (20% next year, then 17.5%, then 15% after that), this would be a sell for me at $34-$35.

• if we are a bit more optimistic about growth rates (losing only 1% per year until 2030), and if we use 15% tax rate instead of 21%, I’d be comfortable up to a current price of $37-$38.

One assumption that I’ve made and could be debatable is the 21% tax rate.

See this article about Trump’s intentions:

So with the current price of $32, we’re getting pretty close to a sell price although it’s not yet too uncomfortable to keep holding.

$CXZ

This stock is getting very cheap…

It looks cheaper than $PCSV in particular (5%-6% FCF yield) and both of them are very small positions in my portfolio, so I need to assess whether I want to consolidate.

Unfortunately the stock remains a risky bet so I can’t size it up. See Kreuzmann’s writeup.

$CRON.TO

EV/GP ~ 1.1x

I bought a good chunk, will continue to do so if it drops.

$GMX.TO

Globex Mining Enterprises. Such a weird stock: thesis from NoNameStocks (archive).

Despite being an asset play, there is a decent FCF yield.

I probably will buy some.