Blair Levinsky Short High Liner Foods: Sohn Canada Presentation ~ market folly

Thursday, October 1, 2015

Blair Levinsky Short High Liner Foods: Sohn Canada Presentation

We're posting up notes from the Sohn Canada Investment Conference 2015 (Capitalize For Kids.)  Next up is Blair Levinsky from Waratah Capital Advisors who pitched a short of High Liner Foods.

Blair Levinsky's Capitalize For Kids Presentation

-    Questions:
o    What is the situation?
o    Why does it exist?
o    How is it going to change?

-    Crowding in non-resource equities
-    Hot IPO market, expensive food companies
-    Short High Liner Foods (TSE:HLF)
-    Customers such as Walmart, McDonalds for seafood
-    Have seen growth in sales and EBITDA yet volumes have declined 13 quarters in a row, margins have compressed.
-    Attempting to bail themselves out of the mess through acquiring companies with debt.
-    Now they are overlevered and have bad businesses to run
-    Through analysis of the cash flow statement it looks like realized incremental EBITDA/Capex+acqusitions+NWC inv. Between 2011 and 2014 imply average acquisition price of 13.3x multiple which is very high for industry
-    High Liner claims to have a 30% pay out ratio but have averaged -$40MM in FCF for the last 5 years but have been increasing the dividend payout for the large family shareholder who likes dividends
-    Current earnings are $71MM (without adjustments), have told the street they will see $150MM in EBITDA in 2016, difficult to manage given lack of balance sheet flexibility and inability to drive cost cuts

Be sure to check out the rest of the presentations from the Capitalize For Kids Conference.

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