VIChallenge Daniel W. Lawrence – Elmrox Investment Group
Daniel W. Lawrence is Managing Partner and Founder of Elmrox Investment Group (EIG). EIG is an investment partnership focused on capital preservation and superior risk-adjusted returns that looks for highly idiosyncratic, asymmetric opportunities using a concentrated approach over a multi-year horizon. Prior to founding Elmrox Investment Group in 2013, Mr. Lawrence was a Managing Director and co-founder of Talara Capital Management. Previously, Mr. Lawrence was a Senior Analyst at Citadel Investment Group. Mr. Lawrence began his career as an investment banking analyst and equity derivatives analyst for Merrill Lynch & Co. Mr. Lawrence is also Founder and Principal Owner of Elmrox Media LLC, a global content firm targeting 18 to 34 year olds. In addition, Mr. Lawrence has served on the Board of Directors of SUS since 2009. Mr. Lawrence earned a B.S. in Commerce from the McIntire School of Commerce at the University of Virginia. He has since been a guest finance lecturer at the University and participates in UVa?s Galant Center for Entrepreneurship.
Misunderstood asset transformation with significant upside and catalysts
- Commodity chemicals valuation (5x–7x EBITDA) does not reflect the Company’s transformation to a specialty chemicals business (comps 8x-?12x EBITDA)
- One of strongest and most predictable earnings growth profiles in materials
- Much stronger pricing power and more sustainable margins that market gives credit for
- Much less cyclical than market realizes (~20% of sales)
- Much less cyclical than market realizes (~20% of sales)
- ~80% of EBITDA comes from competitive advantaged, specialty chemical businesses
- Consensus does not assume a turnaround of Water business under new management; if turnaround does not materialize, Water will be monetized with cash proceeds likely returned to shareholders (2013/2014)
- Consensus incorrectly believes that Water business is exposed to North American newsprint paper
- Current share price ascribes little value to unique and valuable Valvoline asset; Multiple options for unlocking significant shareholder value including a tax-?free spinoff and/or MLP qualiMication (2014/2015)
- Valvoline Instant Oil Change (“VIOC”) store base is hidden asset where significant incremental value can be created with little (if any) capex
- Raw material concerns especially around guar and oil are exaggerated and misunderstood
- Consensus does not assume any recovery in Europe in FYE 2014 and FYE 2015 despite end market improvements
- Cheap option on U.S. housing recovery through Performance Materials segment (2013-?2015)
- Free option on higher interest rates through pension
- Private market valuation creates margin of safety
