market folly

We've posted up notes from the Value Investing Congress in Las Vegas and next up in the series is Isaac Schwartz of Robotti & Company who pitched Halik Savings Bank and Tarkett.


Isaac Schwartz's Value Investing Congress Presentation

•    Hidden in Plain Sight
•    Update on Kazakh Bank pitched prior – after a good performance it has declined by a third due to nervousness around the Russia/Ukraine situation.
•    Company is timely today versus last year – local investors in Kazakhstan – four primarily done by local investors buying back assets at low price to book values.


•    Idea – Halik Savings Bank – 20% ROE and trades at book value. Book value for share has doubled over the past years. •    Country supplies 3.5% of the world’s oil, and could double that. The other countries that can double output are not-stable. 


•    Tarkett is another idea. Trades in Paris and went public last fall. Leading company in global flooring. Generates 18% ROCE.
•    Poorly done IPO went public at 29 euros, trades at 26. 1.2B USD market cap.
•    Family and other shareholders like KKR and management own over 74% - 26% is free float. Family brought in KKR.
•    Thinks PE can be positive – look at the nature of private equity involvement (i.e. milk for earnings, multiple arbitrage or as a plus utilize industry contacts and plan for the long term). Family REMAINED in control so it did not utilize private equity leverage.
•    Rollup know how provided by KKR.
•    Business diversified around the world – including the former USSR countries. A lot of focus on these companies.
•    They are not in tile – they are the most global and diversified of the global flooring companies. Industry is globally consolidated.
•    Tarkett has a strong market share in Russia. Two thirds share in vinyl – the most popular category. •    A lot of renovation possibility from old soviet era buildings.
•    Barriers to entry in Russia? World’s largest vinyl factory (8x their competitor)
•    Decade to build and distribute brand.
•    Flooring is not a discretionary purchase. 
•    Trades at a big discount to peers – usually doesn’t like relative valuation. In Tarkett’s case margins are lower than competitors and a clear method to increase methods, especially North America. It has rolled up a dozen targets in 5 years.
•    North America has been a drag – but made an interesting acquisitions through Tandus. Purchased from Colin & Aikmans by Oaktree Capital.
•    After a few years, Tarkett purchased this asset from Oaktree.
•    Now they have a large scale and cross selling ability in the USA now.
•    A lot of optionality.
•    In global sports flooring – 50% market share – competes against Berkshire Hathaway (Shaw) is economically sensitive. 
•    Why is it cheap: Russia political issues, USA commercial recovery distant and sports is a bad business going off the past decade.
•    Multiple paths to 50% EBITDA growth – strong upside – good business.

Be sure to check out the rest of the Value Investing Congress presentations.