Alex Roepers Long Owens Illinois, Huntsman, G4S: Capitalize For Kids Conference 2018 ~ market folly

Monday, October 29, 2018

Alex Roepers Long Owens Illinois, Huntsman, G4S: Capitalize For Kids Conference 2018

We're posting up notes from the Capitalize For Kids 2018 investment conference.  Next up is Alex Roepers of Atlantic Investment Managment who pitched three long ideas: Owens Illinois (OI), Huntsman (HUN), and G4s (GFS.L).

Alex Roepers' Capitalize For Kids Presentation: Three Long Ideas

•    3 High conviction value stocks

•    Owens Illinois
o    Third time pitching this
o    Largest maker of glass bottles in the world
o    25% global market share
o    Grown 20% despite largest segment shrinking 4% a year
o    Very stable, luxury product is put in glass bottle
o    Taking mega-beer capacity to craft and specialty bottles
o    $400mm FCF, has $100mm annually in asbestos payments
o    Pushing on major corp dev move
•    Sell EU biz 8x EBITDA
•    Use to cut debt in half, use rest to buyback stock
•    With that, can get to $42 share price in 12-18 months
o    All of the negative impact is multiple compression despite earnings power growing, lower debt, etc
o    Talking to financial sponsors, Koch industries, BRK, trying to put fire under their ass
o    15 % global fund position, 25% US fund

•    Huntsman
o    168% upside
o    5.4x PE, 5x EV / EBIT
o    $55 target price
o    Taking their most cyclical business (Venator) public, paid down debt
o    Went from $23 -> $35 and has sold off
o    Fears around their product
o    Downstream, differentiated, not as effected by the spot price changes
o    6% organic growth in polyurethane, great biz
o    Own 53% of Venator – listed spinoff
o    Roadmap to $4.40 EPS by 2020

•    G4S
o    One of the big security contractors. For corps, embassies, airports
o    3-5 year contracts, price escalators
o    Tech components, camera, software, etc which is higher margin
o    9.3x PE
o    Target Price £3.9, 85% upside
o    #1 or #2 player in cash delivery solutions (think Brinks truck)
o    They have a contract with WMT for cash close that saves them two days from cash close at store level to delivering to bank acct at head office
•    Target also starting a pilot
o    Grow 360 cash biz then take it public at scale at high multiple
o    High quality business

Be sure to check out the rest of the presentations from Capitalize For Kids 2018

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