market folly

We're posting up notes from the recent Sohn London investment conference.  Next up is Maxime Franzetti of Mubadala Capital, an Abu Dhabi Sovereign Wealth Fund with over $ 20 billion of invested capital who presented a long of Korian.


Maxime Franzetti's Presentation at Sohn London Conference

Franzetti runs a concentrated book of long (usually high-quality compounders) and short positions. Korian is their largest position. They made their initial investment over two years ago.

Korian is the largest European operator of nursing homes. It has over 76,000 beds spread over 4 countries. They are No. 1 in France and Belgium and No. 2 in Italy.

The business is growing organically and margins are increasing. It’s a secular growth story with the business being able to perform well regardless of geo-political events or cyclical trends. The aging population over 80 years in Europe is set to double in the next two decades. They are well positioned to gain from the shift from public sector to private sector provision. Governments are closing public sector homes and issuing licenses to private sector providers. Korian has occupancy rates of 95%. There are barriers to entry in the form of licenses and regulatory requirements. The business is resilient and grew organically during in the financial crisis.

The business is at an inflection point. Management were replaced two years ago. The new CEO has been restructuring the business. Korian can grow the top line by 6% per year via volume, increasing prices and M&A. However, pricing is not exclusively in the hands of the business as rises are capped by law in France. The market is still fragmented with the top five players owning a small amount of the total market. There is a long runway for growth. There are economies of scale.

Korian itself has attracted interest from private equity. KKR made an offer earlier this year. Franzetti suggested that further offers could follow in the future.

Leverage is 3.2x but it is backed by real estate which is worth about half of the market cap.


Be sure to check out the rest of the presentations from the Sohn London investment conference.