market folly

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.