Jeff Hales is a Founding Partner and Portfolio Manager at Alignvest Capital Management, a Toronto-based alternative investment management firm focused on North American long/short strategies. Prior to joining Alignvest, Jeff was a Vice-President & Portfolio Manager at Gluskin Sheff + Associates, where he managed and co-managed a number of portfolios including the Canadian Equity, North American Value and Resource Funds. Jeff Hales spoke today at the Capitalize For Kids Conference in Toronto and presented his favorite idea. Below are some (very) informal notes from Hales who pitches Corby Spirit and Wine Ltd (TSE:CSW.A) (OTCMKTS:CBYDF).

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Jeff Hales

Alignvest Capital Management

Long short equity strategy

 

Canadian investment market is has a less competitive business environment, allows for more competitive advantages

 

Jeff Hales on Corby Spirit and Wine Ltd (TSE:CSW.A) (OTCMKTS:CBYDF)

Leading marketer of spirtis and importer of wines, represents six of the top 25 top selling spirit brands

net cash $108m

They have owned owned brands and agency brands (where they resell others)

 

ROIC 25%

High FCF yield

 

Canadiana spirits franchise is a great business

High barriers to entry

 

Catalysts

Recently joined forces with Pernod Ricard to launch JP Wisers brands into the US — a market that is 4x the size of the Canadian market

Potential M&A target — pernod already owns 48% of Corby

Balance sheet optionality

Needs to take on leverage

 

The North American whiskey renaissance, seeing the fastest growth since 1960’s

 

If they can sell 400 cases (2.5% of US Market) it would add $.43 to EPS

 

It would make total sense for Pernod to acquire the rest of Corby

 

Pernod could use their cash and leverage the business and not even have to pay that much

Average take out multiple is around 18x ebitda (would be 50-70% upside to current corby price)

 

If Corby traded at the avg comp multiple of 16x EBITDA then Corby should trade at $31

 

See limited downside of 10% if the US launch of JP Wiser’s is a complete failure

Corby Final Sohn Conference