We're posting up notes from the 2017 London Value Investor Conference. Next up is Michael Keller of Brown Brothers Harriman who pitched a long of Wendel SE (EPA:MF).
Michael Keller's Presentation at London Value Investor Conference
Long: Wendel SE (EPA: MF)
Wendel is a holding company based in France that invests in a variety of industries. It usually takes control positions and at the very least it has significant influence. The Wendel Family has overall control but professional managers run the day to day operations. They are drawn to Wendel by:
- Attractive combination of assets
- Most of their companies sell products that are vital to other companies
- The stable and long-term capital structure
- The overlap of the businesses philosophy with their own
- A double-digit discount to NAV
Be sure to check out the rest of the presentations from the London Value Investor Conference.
Tuesday, May 30, 2017
Michael Keller's Presentation at London Value Investor Conference
Wednesday, June 1, 2016
Michael Keller Long Zoetis & Perrigo: London Value Investor Conference
We're posting notes from the London Value Investor Conference 2016. Next up is Michael Keller of Brown Brothers Harriman who pitched long Zoetis (ZTS) and long Perrigo (PRGO).
Michael Keller's London Value Investor Conference Presentation
Brown Brothers Harriman are bottoms up, research intensive high quality franchise investors who look to hold stocks for at least five years. Too many investors are index huggers that charge large fees. They aim to beat the market on the way down. They focus on the full cycle even if it means missing out on some of the upside.
Investment idea: Zoetis (ZTS)
Tim Harch of Brown Brothers Harriman pitched Zoetis at the conference last year. They still like it. Zoetis is a global leader in animal health for livestock and pets. It offers a broad array of products for preventative care and disease treatment. Unlike human healthcare animal medicine does not suffer from a lack of government reimbursement issues. The secular trends in animal health are durable. Expect steady mid-single digit revenue growth. (MF note: Bill Ackman recently sold ZTS shares.)
Investment idea: Perrigo (PRGO)
Perrigo produces white label consumer goods for chemists – pain medication, health products, branded products and generics. It holds royalty rights for Tysabri a mature MS drug with a large patient population. It is domiciled in Ireland.
There are three business drivers: the ageing demographic that favours pharma; store brand products; conversion of Rx to over the counter. The stock is down because:
- The long term CEO has left to join Valeant (VRX)
- Pricing pressures in generics
- The Omega acquisition has been less successful than expected
Keller believes the price weakness is overdone. The current valuation implies an 8% FCF.
Be sure to check out the rest of the presentations from the London Value Investor Conference.
Monday, October 17, 2011
Timothy Hartch: Long Dentsply & Energy Solutions (Value Investing Congress)
At the Value Investing Congress today, Timothy Hartch of Brown Brothers Harriman gave the case for longs of Dentsply (XRAY) and Energy Solutions (ES) in a presentation entitled "Quality and Value".
Be sure to check out all of our notes from the Value Investing Congress.
Timothy Hartch (Brown Brothers Harriman)
Embedded below is his full slideshow presentation:
Dentsply (XRAY): Number one company in the dental industry, trades at a discount to “intrinsic value.” Sells consumables to dentists, equipment to labs, and orthodontists. Very attractive industry. Aging population, rising standard of care in emerging markets, private pay in the US.
Big secular story is instead of pulling teeth in emerging markets, they are saving teeth. Dental is private insurance, or out of pocket, so supply and demand determine prices. Over time, there have been 1-2% price increases on top of volume growth. Very fragmented supply market, XRAY has number one, but fewer than 10% market share, can keep making tuck-in acquisitions. Customers are very fragmented, 2-3 person dental offices- no buying power.
Competitive advantage: scale, dominant brands, 2800 person sales force, customer relationships.
Key risks: macro economic weakness, large presence in Europe, integration of Astra Tech acquisition, still recovering from disruption of Japanese supplier.
Revenue declined 2% in 2009. Average rate is 6-7% growth rate over last 20 years. Stock flat over last 5 years, down from 40 to 32 recently on Europe fears.
Valuation: Currently trades at $32, has a $44 target price, 13x 2012 FCF. He says multiple doesn’t look that low, but for this high quality, steady business, this is a good price.
Energy Solutions (ES): Stock has been in total collapse since LBO IPO’d the company. Number one nuclear waste disposal company in the US. Disposal city an hour outside of Salt Lake City. Near-monopoly for disposal of commercial nuclear waste in the US, 95% of it goes through this site in Utah. It has a 30-year remaining life for the current facility.
May have contracts in Japan for their clean up. They have life-of-plant contracts with 84 of 104 reactors in the US. Other 20 they do business. Doing the dismantling of the Zion plant owned by Exelon. There are 12 waiting to be dealt with, and several plants are closing over the next few years.
Obvious risks: political risk, waste risk. Leverage, but generating 40M in cash flow to pay down debt.
Potential Upside: additional contracts with the other 20. Acceleration in large component removals. International opportunities.
Stock trades at $3, they say value $8+ with low single digit revenue growth, modest de-levering.
Q&A Session:
1. How does XRAY create value? Answer: further small acquisitions they can roll up, and stock buybacks
2. How do they measure/predict intrinsic value? used EBAY as an example, they like it, own it now, say intrinsic value over 40. Steady business is easier for them to value.
3. Why XRAY vs. Henry Schein? XRAY is leading manufacturer, not only distributor. Likes the Henry Schein as well.
4. ES public at $23, now $3, how does it get back to $8? Answer- it was promoted as a growth story and the volumes declined instead of growing. Nuclear industry is under a cloud, but this is actually an opportunity for them.
About Timothy Hartch: He manages the fund that won Lipper 2008 large cap fund of the year in 2008.
You can view our notes from the Value Investing Congress for the rest of the hedge fund manager presentations.
