Masroor Siddiqui Short Aryzta: Sohn London Conference ~ market folly

Monday, December 12, 2016

Masroor Siddiqui Short Aryzta: Sohn London Conference

We're posting notes from the Sohn London investment conference 2016.  Next up is Masroor Siddiqui of Naya Capital Management who pitched short Aryzta (VTX:ARYN).  He was previously a partner at Chris Hohn's TCI.

Masroor Siddiqui's Sohn London Conference Presentation

Aryzta is a Switzerland based speciality baker. It supplies companies like Tim Hortons (QSR) and Starbucks (SBUX).

The business does not have a moat and it would be easy for competitors to enter their space. The leverage is high at 4.5x. The margin reporting is questionable. EBITDA reporting is heavily adjusted. Their reported margins are similar to companies that own lots of brands like Nestle yet Aryzta does not own brands.

They may have been pulling forward receivables which is okay but it is a one-off game. There has been no organic growth to talk about since 2008. Their margins are not sustainable as the industry is becoming more competitive. Siddiqui thinks they are having difficulties refinancing. That is worrying at a time when borrowing is so easy. They may require a rights issue soon.

Aryzta has a new Chairman with a good reputation for restructuring. Siddiqui thinks this is a positive for the short side as he will want to raise new equity.

Be sure to check out the rest of the Sohn London conference presentations here.

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