Daniel Ferris – Altius Minerals; Arnaud Ajdler – Hill InternationalVW Staff
Daniel Ferris is the Editor of Extreme Value, a monthly investment advisory which focuses on the safest stocks in the market: great businesses trading at steep discounts. His strategy of finding safe, cheap, and profitable stocks has earned him a loyal following – as well as one of the most impressive track records in the industry.
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Daniel Ferris spoke at the 9th Annual Value Investing Congress, also see Short Emerging, Long Developed Is A Hot Hedge Fund Trade: UBS. Below are notes from his presentation.
Highlights from Daniel Ferris’ presentation
Best royalty investment in world: Altius Minerals Corporation (TSE:ALS) (OTCMKTS:ATUSF)
Organically crested royalties
10-12 chances at 50x to 100x return
Kami 3% royalty
Buy until it hits $14 a share
Could pay dividends once KAMi royalty pays royalities.
Arnaud Ajdler is the founder and managing partner of Engine Capital L.P., a value-oriented special situations fund. Prior he was a partner at Crescendo Partners since 2003. He is also teaches a course in value investing at the Columbia Business School and serves as the Chairman of the Board of Directors of Destination Maternity, Inc.
Arnaud Ajdler spoke at the 9th Annual Value Investing Congress, also see Event Driven, Long/Short Hedge Funds On Top In 2014. Below are notes from his presentation.
Highlights from Arnaud Ajdler’s presentation
Launched 9M back
Long/short value, Special situations, Activist
Focus on change and how value gap will close.
Time arb 2-3 years
Chairman of Destination maternity
Types of changes:
Proxy fight, negotiated settlement, public letters, private letters, informal communication
Ftd.com recent spinoff. Low free cash flow multiple. Owns it. Sent private letter to them.
High fcf yield
Multiple ways to own:
- operating margins are too low
- Poor cap allocation
- Lazy balance sheet
- Conglomerate discount
- Takeover candidate
Idea: Hill International Inc (NYSE:HIL)
Global project management firm with 4,100 professionals in 100 offices.
Run by Irv Richter and David (next CEO) combined 30%.
Revenue CAGR 14% over Last 3 years
2014 sales guidance: $600M. Good visibility via backlog. 1 billion backlog.
Diversified by region and client. US government exposure is low at 16 percent.
Why they like it:
High barrier to entry
Expense for hills service is small component of total project
High revenue visibility from lt contracts
Low CAPEX but high working capital
Fast revenue growth plus leverage lead to faster bottom line growth
Market cap 220M
Ebit 2013 29m
Ebit 2014e 40m. And 48.5 2015
7.8x ebit 2014 and 6.4x 2015
Goal is 10 percent margin. Will be 7.8% margin in 2015.
Median 9.8x ebitda vs hill is 6.2x 2014
Tetra tech, ARCADIS NV (ADR) (OTCMKTS:ARCAY) (AMS:ARCAD), WS Atkins PLC (LON:ATK) (OTCMKTS:WATKY), Stantec Inc. (NYSE:STN) (TSE:STN)
Why it’s under valued:
1. Most analysts don’t use correct peers.
2. Libyan receivables. Thinks they will get paid the rest of $50M of $60M. May also resume work there.
3. Leverage. Broke covenants due to Libya receivable. Had to refi using expensive debt which is now choking company. Expects refi in 2014. Which is the major catalyst for stock.
Net debt to ebitda 2.4x
Expects delveraging using FCF.
Potential return 80%. Low end 50% return.
Low end of historical multiple.
33m FCF maintenance in 2015
Won’t sell the business as 30% owned by founder’s son
Too focused on mergers and acquisitions
Insiders are selling shares regularly.