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Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!!
Some motive for not studying this publish:
You might have already posted YTD Efficiency numbers on FinTwit
You don’t like capital intensive shares
You don’t like cyclical shares
You favor shares which have optimistic share value and/or elementary momentum
You require quick time period catalysts/Share purchase backs/activists and many others.
You want easy companies with easy buildings
You suppose Germany/Italy/Europe goes down the drain anyway
In such a case, do your self and myself a favor and transfer on.
For anybody nonetheless studying, please discover right here the “Elevator Pitch”, the “Professionals & Cons” part in addition to the abstract. All of the gory particulars can be found on this 21 web page PDF file:
Elevator Pitch:
Hamburg based mostly Eurokai is a sixth technology household owned & managed Container Port proprietor and operator. The corporate is extremely conservatively financed (vital web money and “further belongings”) and ridiculously low cost in comparison with friends and up to date M&A transactions, though TIKR and Bloomberg incorrectly present way more costly multiples.
Primarily based on my calculation. Eurokai trades at ¼ or ⅓ of the valuation in contrast even to the most affordable Peer group inventory and M&A multiples.
Though there is no such thing as a specific catalyst and 2023 was a tough 12 months, each for container commerce and in addition for infrastructure basically, Eurokai represents a really enticing, contrarian alternative to companion with a household on nice belongings at a very low value.
Within the mid-term there are some developments (Generational change, new port tasks) that might assist to get the valuation of Eurokai nearer to its friends which for my part outweigh the overall dangers and some extra particular ones. Subsequently I feel Eurokai is an fascinating deep worth play for the affected person investor who doesn’t have to beat any quick time period market benchmarks however who has the luxurious of participating in “time arbitrage”.
L) Professional’s & Con’s
As all the time, earlier than coming to a conclusion, here’s a assortment of Professional’s and Con’s
Extraordinarily low cost however effectively run infrastructure asset
sixth technology household owned/managed, long run orientation
financially extraordinarily conservative
Decentralized group
5% dividend yield for ready
a number of potential “gentle catalysts” within the subsequent few years
solely coated by 1 analyst, TIKR/Bloomberg numbers deceptive, very exhausting to grasp
+/- Change to sixth technology occurred in 2023
+/. Bigger Capex tasks deliberate
No exhausting catalysts, potential for a “worth lure” sort of state of affairs
excessive complexity for a small cap
some elementary dangers (China/Taiwan, Hamburg vs Rotterdam)
M) Abstract, Return expectation & “time arbitrage”
I’ve to confess that my choice course of for Eurokai took so much longer than typical. I’ve been Eurokai many occasions prior to now 15-20 years and by no means obtained comfy till but.
A part of my motivation won’t be 100% rational, as an example I identical to ports which was the preliminary motivation to go actually deep. There may be clearly a non-zero chance that the inventory won’t be “found” over the following 3-5 years and I’ll “solely” have the ability to gather dividends. Investor consent in the mean time appears to be that an inexpensive inventory with no catalyst is like lifeless wooden and can all the time keep low cost. David Einhorn as an example has talked about typically that the capital market is damaged for worth buyers and that the one various is to have a look at catalysts like share purchase backs or take overs..
However, I do suppose that the valuation is so absurdly low, that even when we assume a major low cost to the most affordable opponents, the inventory might simply double or triple and it will nonetheless be modestly valued.
For my part, possibly additionally pushed by the wrong knowledge in instruments like TIKR or Bloomberg, few individuals perceive the undervaluation and even fewer suppose that it’s a appropriate funding. Eurokai is illiquid, has a low Beta (0,6) and for anybody managing towards a benchmark is sort of assured to underperform for some prolonged time.
Nevertheless, as my solely actual “edge” is an extended time horizon as the everyday market participant and an above common capability to undergo underperformance, I discover the inventory very fascinating. I feel that is one thing that I might name “time arbitrage”: As a non-public investor who just isn’t in a rush, I do should luxurious to spend money on one thing the place there is no such thing as a clear exit or catalyst. The arbitrage right here is that I feel over time there may be an rising risk that one thing occurs that may result in a re-valuation.
My worst case situation over 4-5 years on this case is the present dividend yield of 5%. I feel over 3-5 years there’s a good probability that sooner or later the market discovers (once more) this gem after which the share value might simply go up by +100% or +200% and the inventory could be undervalued.
If I assume a 50/50 probability of this occasion occurring, my anticipated return could be north of 10% p.a. over 5 years with for my part little or no actual draw back. Usually, shares which can be as low cost as Eurokai are sometimes in some sort of existential bother, which for my part just isn’t the case right here. That’s adequate for me.
As I wish to retain some flexibility, I allotted 3% of the portfolio into Eurokai pref shares at round 26 € per share and can monitor carefully how the market will take up 2023 numbers going ahead. I additionally plan to attend the AGM in Hamburg this 12 months to get a greater feeling for the corporate.
Bonus observe (for all Time Arbitrageurs):
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