Nicolai Tangen: Long Assa Abloy (Sohn London Conference) ~ market folly

Monday, November 26, 2012

Nicolai Tangen: Long Assa Abloy (Sohn London Conference)

Continuing our series of notes from the Sohn London Investment Conference, next up is Nicolai Tangen of AKO Capital, who pitched Assa Abloy (SWE: ASSA B).

Nicolai Tangen founded AKO Capital in 2005. Before setting up AKO, Tangen was a partner  at Egerton Capital (1997-2002). AKO Capital LLP is a hedge fund based in London with $6  billion of assets under management. AKO Capital invests primarily in European publicly  traded equities.  They run both a Long-Short hedge fund and a $1bn Long-only fund.

AKO Capital adopts a “bottom-up” stock picking approach with a focus on fundamental  research and frequent meetings with company management.  AKO prefer to hold their  best assets for the long term.  They hold regular in-depth meetings with company  management. They do not believe in opposing management and prefer a policy of long  term co-operation. The fund is named after Tangen’s three children.

Long Assa Abloy

Assa Abloy is a Swedish based company engaged in secure door opening solutions – mainly  locks.

-  Assa is a leading global lock company
- Assa has increased earnings by 50% this year -
-  EPS CAGR = 15%
- Assa makes two-thirds of its income from retro-fit locks and only one-third from  new locks
-  Assa has a large number of well-known brands e.g. Yale, Cecco Door, Sargent,  Ditec
- It is hard for competitors to infiltrate the lock market
-  Organic growth has grown slowly at 1% per annum due to the recession / housing  -  crisis
-  Assa has good pricing power and increases prices every year. Few of its customers  have the scale to resist price increases.
- New electro mechanical locks of the type found in hotels and increasingly homes require more regular servicing. Maintenance is good for business.
-  Assa is trading on P/E 15x 2013 earnings, making it historically cheap

For the rest of the hedge fund presentations from this event, head to notes from Sohn London Investment Conference.

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