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Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!!
Some motive for not studying this publish:
You may have already posted YTD Efficiency numbers on FinTwit
You don’t like capital intensive shares
You don’t like cyclical shares
You like shares which have optimistic share worth and/or elementary momentum
You require quick time period catalysts/Share purchase backs/activists and so forth.
You want easy companies with easy buildings
You assume 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 internet 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 rather 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 isn’t a express catalyst and 2023 was a troublesome yr, each for container commerce and in addition for infrastructure generally, Eurokai represents a really engaging, contrarian alternative to associate with a household on nice belongings at a very low worth.
Within the mid-term there are some developments (Generational change, new port initiatives) that would assist to get the valuation of Eurokai nearer to its friends which in my view 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 must 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 nicely 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 “smooth catalysts” within the subsequent few years
solely coated by 1 analyst, TIKR/Bloomberg numbers deceptive, very arduous to grasp
+/- Change to sixth technology occurred in 2023
+/. Bigger Capex initiatives deliberate
No arduous catalysts, potential for a “worth entice” form of scenario
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 lots longer than common. I’ve been Eurokai many occasions up to now 15-20 years and by no means acquired snug till but.
A part of my motivation won’t be 100% rational, as an illustration I identical to ports which was the preliminary motivation to go actually deep. There’s clearly a non-zero likelihood that the inventory won’t be “found” over the subsequent 3-5 years and I’ll “solely” be capable to accumulate dividends. Investor consent in the mean time appears to be that an affordable inventory with out a catalyst is like lifeless wooden and can all the time keep low cost. David Einhorn as an illustration 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..
Then again, I do assume that the valuation is so absurdly low, that even when we assume a big low cost to the most affordable opponents, the inventory may simply double or triple and it will nonetheless be modestly valued.
In my view, possibly additionally pushed by the inaccurate knowledge in instruments like TIKR or Bloomberg, few individuals perceive the undervaluation and even fewer assume that it’s a appropriate funding. Eurokai is illiquid, has a low Beta (0,6) and for anybody managing in opposition to a benchmark is nearly assured to underperform for some prolonged time.
Nevertheless, as my solely actual “edge” is an extended time horizon as the standard market participant and an above common capability to endure 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 is just not in a rush, I do need to luxurious to spend money on one thing the place there isn’t 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 which may result in a re-valuation.
My worst case state of affairs over 4-5 years on this case is the present dividend yield of 5%. I feel over 3-5 years there’s a good likelihood that in some unspecified time in the future the market discovers (once more) this gem after which the share worth may simply go up by +100% or +200% and the inventory could be undervalued.
If I assume a 50/50 likelihood of this occasion occurring, my anticipated return could be north of 10% p.a. over 5 years with in my view little or no actual draw back. Typically, shares which can be as low cost as Eurokai are sometimes in some form of existential hassle, which in my view is just not the case right here. That’s ok 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 yr to get a greater feeling for the corporate.
Bonus monitor (for all Time Arbitrageurs):
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