Investment Idea #15

We are at the half way point!

When we first started out a year ago, we discussed the goal to write one investment idea per month and ultimately getting to 30 ideas. Well time files and we are now at the 15th idea. This is a good one as can be seen in the numbers below (company has FY ending in Jun):

Simple Financials (Jun 2024 estimate, USD)

• Sales: 21.0bn

• EBITDA: 7.2bn

• Net income: 4.5bn

• FCF: 3.2bn

• Debt: 19bn, Mkt Cap 84bn

Financial Ratios

• ROIC: 13% and ROE: 40%!

• EV/EBITDA 13.4x

• PER 16.8x

• Past margins: OPM 27-31%

• FCF yield: 2.4-3.7%

This is another one of the highest quality companies amongst those we have discussed and therefore do not come cheap with average FCF yield in low single digits. It has not traded above 5% FCF yield in the last 10 years and the reason is in the world map below. The company has enjoyed good growth in most geographies (with the exception of North America and Russia), partially supercharged by the pandemic. It also operates in a consumer market segment that has a lot of pricing power as a result of strong brand marketing, the perceived glamour and luxury that comes with the consumption of its products and just strong global demand as the world normalizes from COVID-19.

Company has been able to capture growth in most geographies in 2023