market folly

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is John Lykouretzos of Hoplite Capital who pitched long Sealed Air (SEE).


John Lykouretzos' Presentation at Invest For Kids Chicago 2016

•    $2.6 billion AUM, Tiger Cub, equity long/short, established 2003

•    Largest holding is Sealed Air (SEE)

•    Started in bubble wrap, now has three businesses

•    Highly integrated into customers’ processes = good pricing power

•    History of management was very good and then quite bad; new CEO named in 2012 and turnaround, results have been impressive; overhauled strategy, executives, pricing, cost structure, compensation; focus now on FCF

o    Turnaround is far from over – [EBITDA] margins have another 400 basis points to expand

•    Pricing power remains, even after CEO has aggressively raised price multiple times in recent years; customers have no choice; also now getting paid as a percentage of the savings generated for the customer
o    Estimate 1-2% price increases per year through 2022; mix improving too; 2% volume growth

•    Limited capital intensity and no M&A appetite – 10% of shares likely to be repurchased each year

•    Normalized FCF per share going from ~$2.89 in FY16 to $4.49 in FY18

•    Diversey (cleaning and sanitation segment) is somewhat of a comp to Ecolab; acquired in 2012 in an ill-conceived move, leaving the company over-levered and lacking direction

o    Will spin off this business; it could grow faster as an independent company – it needs investment in its salesforce, whereas SEE’s other businesses do not

•    Target price: $60 in 2016, $70 in 2017, $84 in 2018, $102 in 2019


Be sure to check out the rest of the presentations from Invest For Kids 2016.