market folly

We're posting up notes from the Invest For Kids Chicago conference 2015.  Next up is Cloud Gate Capital's David Heller who pitched long Berry Plastics (BERY).


David Heller's Invest For Kids Chicago Presentation

•    Long position in Berry Plastics (BERY).
•    Largest consumer plastic packaging biz in the world. Low oil a tailwind although a pass through.
•    $5B in sales.
•    Acquired Avintiv, global leader in the plastic nonwoven fabrics industry. Paid 8.1x EBITDA pre synergies/6.9x after synergies. Combined sales $7.2B and $1.2B of adj EBITDA.
•    $500MM FCF or 11.7% FCFE yield.
•    Why does the opportunity exist? Doesn’t make strategic sense, desperate move to achieve volume growth.
•    Contrary 9/10 top Avintiv customers overlap, purchasing power in polypropylene, faster growing energy markets.
•    2nd bear case – leverage is high once again to 5.2x. Argument is stable biz, locked in financing, delivering 0.5x per year. Debt markets very comfortable with leverage financing 100% at 4.3%.
•    Third bear case is melting ice cube. Think it grows with wage inflation, food dilation, population growth, etc.
•    Trades at 50% discount on a FCF basis and 10% disc on an EBITDA basis.
•    7%-8% FCF yield, could be worth $51 to $58, using conservative projections which gives you 25.8% - 35% IRRs.
•    Catalysts for growth such as new products, or acceleration of rev growth.


Check out the rest of the presentations from Invest For Kids Chicago 2015.