Millenium Hospitality Real Estate Socimi SA – $YMHRE
One of my favorite undervalued stocks released its 2024 full-year results, reporting its first accounting profit of €0.10 per share, driven mainly by asset sales and golf operations. The company also announced its first dividend of €0.116 gross per share. To boost profitability, the company should focus on improving operational efficiency to increase margins from hotel leases.
Lower interest rates in the Eurozone should help enhance the company’s valuation. I bought additional shares at €2.40.
On June 16, 2025, the company announced the sale of assets worth €175 million, along with a special dividend of €1.44 per share. This is excellent news: simplifying its structure by selling non-core assets like golf properties and returning profits to shareholders!
Fountaine Pajot – $ALFPC
As I write this, my position in the stock is up 7.11% after a nearly 20% drop when the share price fell to €83. This decline followed the announcement of first-half results, which showed a 5% revenue decrease, possibly influenced by trade war concerns.
The company then announced a share buyback program for 140,000 shares, representing 8.4% of the float, with a total value of €16.8 million. Source.
I haven’t changed my position and am waiting for the full-year results. If the current results hold for the full year, it would be good news, as analysts expect a 17% revenue decline for the year.
Havas
In Q1 2025, the company’s revenue grew by 5.2% compared to Q1 2024.
It paid a dividend of €0.08, offering an average dividend yield of about 5%.
The company announced a share buyback program with a maximum allocation of €50 million, starting on June 2, 2025, and continuing until 2026. Source,
This is good news! However, I believe this type of business may face challenges in the next quarter due to the current macroeconomic situation. Still, the company has strong potential to benefit from artificial intelligence (AI).
New positions
None of these companies have their own posts yet, but I plan to publish one about a company in a couple of days.
Akwel SA
Akwel is a French company that manufactures mechanical parts for the automotive sector. Due to the current challenges in this market, the company’s valuation has been significantly impacted. It is currently trading at just 0.73x its Net Current Asset Value (NCAV), making it a net-net stock. I opened a position in the company on April 13, 2025, at €7.30 per share.
Hunting PLC
I’ll share my investment thesis for this company in a couple of days. Hunting PLC is a British company that manufactures steel tubes, perforating systems, and precision instruments for the Oil & Gas industry. Currently, the company is undergoing restructuring and is starting to expand its products into other industries.
The company is trading below its Tangible Book Value, with a potential upside of 40%. I opened a position on June 5, 2025, at £2.53 per share.
This is not an investment advice, make your own research before investing
I discover this opportunity through the Liquidation Stocks Substack, which I highly recommend (check his Substack and X account).
I also suggest reading the analysis by Real Assets Value, which covers real estate valuation better than I do. My focus is mainly on balance sheet valuation and my thoughts on the quality of the lease clients and properties.
abrd European Logistics Income is an investment trust that focuses on acquiring and managing logistics properties.
Due to liquidity issues and the company consistently trading at a discount from its Net Asset Value (NAV), the board and management decided to liquidate the trust after a strategic review. This was announced on May 20, 2024, in a press release.
We know that the company invests in high-quality logistics properties with reliable tenants and inflation-linked contracts.
According to the 2024 Annual Report, the company’s property portfolio includes:
Here is the history of properties sold by the company:
March 2024: A warehouse in Meung, France, sold for €17.5 million (matching its book value).
January 2025: A property in Oss, Netherlands, sold for €15.7 million (1.9% above its 2023 book value).
January 2025: Two properties in Spain (Coslada, Madrid, and Barcelona) sold for €29.7 million (11% above their Q3 2024 valuation).
In May 2025, the company announced (in its latest unaudited NAV update) that five assets are under offer. After repaying the debt, the proceeds will be distributed to shareholders.
Historically, the company has sold properties at or above their book value, often with a premium. I am confident this trend will continue.
At the current exchange rate of €0.845 = £0.71, with the share price at 59.40 GBX, there is a potential upside of approximately 19%.
Real Asset Value estimated the liquidation timeline to be 12–18 months, while Liquidation Stocks predicted 2 years. I believe it will be closer to 2 years, which suggests an Internal Rate of Return (IRR) of about 9.09% (quite good).
I opened a position in this special situation at 57.60 GBX.
This is not an investment recommendation, if you want to invest make your own research first.
Hurco Companies ($HURC) is a company founded in 1968 that designs, manufactures, and sells proprietary machine tools for the metal cutting industry. It’s a classic net-net stock with a soft catalyst in the medium to long term.
This industry is highly specialized but also very cyclical, depending on economic cycles. Investment in new tools for the manufacturing industry grows a lot during economic expansion and decreases during contraction periods. This is important to understand the company’s current situation and its future.
Overview
Between 15% and 20% of revenue comes from services and service parts (related to maintenance, replacements, and warranties), which provides some recurring revenue. Although this recurring revenue is still a small percentage, it’s worth noting.
The revenue by region is distributed as shown in the image:
This is important because 40% of revenue comes from the USA, and with the PMI index below 50, we can clearly see a negative economic cycle:
The company has no financial debt, only leases. Its leverage ratio over equity is just 6%, with a current ratio of 4.93x. Financially, the company is healthy with zero debt, which is excellent for managing the negative economic cycle and avoiding financial stress. Historically, the company has maintained low debt.
In terms of margins, the company reported operating losses in the last two years, 2023 and 2024. However, in 2021 and 2022, which were years of revenue growth, the operating margin was around 4% to 5%. This was lower than the margins between 2011 and 2019, which ranged from 8% to 11%. The lower margins in 2021 and 2022 were affected by higher costs due to inflation. In 2024, the company reduced its SG&A costs from $49 million to $46 million (one of the target of incentive plan is improve margin and reduce costs).
Hurco can generate free cash flow in positive years, with a free cash flow margin of about 5%.
In 2023, Hurco announced a share buyback program for a total of $25 million, which was extended from 2024 to 2026. Current results (last 10K) are shown in the image.
I think the buyback program’s progress is poor, with only 13% executed. I believe they are waiting for a better company cycle to continue the buyback.
Historically, Hurco paid a dividend, but in 2024, they suspended it to maintain financial health during this negative cycle.
I agree with the decision to suspend the dividend, and I understand why they paused the buyback due to poor financial results. However, at the current company valuation, with the stock price below net current asset value, it’s a good time to do a small buyback to return value to shareholders.
Management aligned or not?
Related to management, the 2025 proxy statement shows the salary composition as follows:
The table of salaries is shown here:
From this, I have two conclusions: I think the salaries are reasonable and fair. I like the short-term goals focused on margin improvement and the long-term incentive plan, which includes different variables:
You can review the 2025 proxy statement for more details.
The management’s salary mostly depends on the long-term incentive plan. The base salaries are acceptable, maybe a bit high, but nothing unusual for a U.S. company. Do they have skin in the game?
Yes, a little: the Chairman owns 3.24% of the company, and the CEO owns 1.88%. This is not much, and I would prefer more ownership.
Are they buying or selling stock? No, they are only receiving stock awards.
In conclusion, the management is somewhat aligned with shareholders, but not strongly. It would be a good sign if they bought shares at the current low company price.
Valuation
Valuing this company based on last year’s income statement is difficult due to operating losses caused by a sharp drop in revenue. Historically, Hurco has faced significant sales declines (with pressure on margins) followed by recovery in expansion cycles. Revenue drops occurred in 2009, 2013, 2015, 2019, 2020 (as expected), 2023, and 2024, matching periods when the PMI Index was below 50.
I’m waiting for a catalyst: the recovery and expansion of the manufacturing industry in the USA and globally.
Does this mean revenue will grow strongly in the coming years, as in past cycles? Not necessarily. This is a soft catalyst, and we don’t know if the industry will recover in the mid-term or if companies will choose Hurco’s machines. There’s no certainty here, but as I’ll explain later, we have a significant margin of safety.
This company is interesting because it trades below its net current asset value (NCAV) and below its tangible book value, which is similar to NCAV if we exclude items like long-term investments. Therefore, the assets act as insurance for our valuation, allowing us to use other multiples based on cash flow or earnings while waiting for better years.
First, I plan to use a valuation metric based on earnings and cash flows, modeling the company with a revenue recovery to $220 million in one year, an operating margin of 6%, and an effective tax rate of 25%.
I’ll assign these multiples, which align with the company’s history and cyclical industrial companies:
P/E: 10x
MC/FCF: 10x
EV/EBITDA: 6x
P/TBV: 1x
P/NCAV: 1x
We can expect similar profitability across all multiples, but for this company, I will focus 100% on valuing its balance sheet, ignoring other metrics, because this is a balance-sheet-focused investment.
We have three scenarios, and in general, except for the last one with a high discount on each item, I think we have a strong margin of safety on both earnings/cash flow and balance sheet valuations.
Conclusion
This is the kind of investment I’m happy with right now: a simple company with a focus on its balance sheet, an ideal potential catalyst, and a strong margin of safety. It’s similar to the investments Warren Buffett made early in his career. I highly recommend the book Buffett’s Early Investments.
Of course, this company is not risk-free. We don’t yet know how tariffs or a worsening trade war will affect it. A large portion of its revenue comes from the USA, and it has one factory in the USA but two abroad (one in Taiwan and one in China). It also exports to Europe, which could be a negative factor. However, I’m not sure what the outcome will be for this company. It might benefit by selling more in the USA due to less competition from foreign companies, but only time will tell. These are just assumptions.
For this reason, I opened a small position, just 3.5% of my portfolio, to wait and see what happens and how tariffs affect the company.
Not investment advice – Just educational and informational – Make your research before investing
Tandy Leather
I got this idea from deepvalueinsight.com on Substack (I really recommend the original post). I agree that Warren Buffett would be very interested in this type of stock.
A quick overview of the company:
It’s a company with more than 100 years of history. It’s a retailer with physical stores selling leather products and tools for working with leather, serving both B2B and B2C customers. They operate in the USA, Canada, and have one store in Spain to serve the European market.
When we analyze the company using NCAV and Tangible Book Value, it clearly looks undervalued:
If we look at this simple table, the latest Balance Sheet on the right shows a potential revaluation over NCAV of 30% and a Tangible Book Value of 120%. That looks pretty good, doesn’t it? However, I also made a simple estimate on the right, assuming the inventory could be liquidated at about 20%. Suddenly, things don’t seem so attractive anymore.
What’s the problem?
The company’s assets depend heavily on inventory, and I’m not a big fan of that. In 2021, Tandy Leather was delisted from Nasdaq because they delayed reporting required data due to an inventory error, which is explained here [you can keep the link or reference as is].
Another issue is that the company seems to be winding down. Their EBITDA is decreasing every year, and it looks like they’re restructuring. I’m not comfortable with their past problems and the strong margin compression.
For these reasons, I’d rather avoid this company and not invest in it. Yes, I know these “Cigar Butt” companies are often misunderstood, but I’m not confident this one can close the gap..
Deswell Industries
I found this company, Deswell Industries, on the Deepvalueinsight Substack (Link). It’s a Chinese company with segments: plastic injection, tooling, and molding, and electronic and manufactured product development. It’s headquartered in Macao, operates in Dongguan, China, and is legally incorporated in the British Virgin Islands.
My advice: first, read the original post, then come back to this.
At first glance, this company seems really boring:
It doesn’t grow.
It depends on a small number of customers.
The website looks like it’s stuck in 2010, and parts of it might even be hacked.
Could it be a scam because it’s a Chinese company? Don’t worry—it’s been listed on Nasdaq since 1995, so there’s a lot of history. (Note: Michael Burry bought shares in the company on August 15, 2000, as shown in this document).
But there are two strong points:
The company pays a dividend every year, with a current dividend yield of 9.2%.
It has zero debt and holds a large amount of cash and marketable securities.
If we value the company using only its Balance Sheet and assume the inventory is worth 0% in liquidation, we get the following (in three different scenarios):
The potential upside for Deswell Industries ranges between 28.0% and 77.8%.
I know this type of investment usually needs strong free cash flow (FCF) or net income to support such a revaluation. To analyze the company, I created a simple scenario where revenues decline by 10% each year (very pessimistic!) and margins stabilize at 3%. I applied a 3x P/E ratio and 3x market cap-to-FCF ratio, added an 8% dividend yield, and assumed the company uses its cash to pay the dividend:
Using these low multiples and a steep revenue decline, we still get a high intrinsic value. This model works well for companies with a net-cash position, using this formula: (Net Income (or FCF) * Multiple) – Net Cash.
To explain further, I opened a 3.5% position in Deswell Industries at $2.19 USD. I believe the company won’t be heavily impacted by tariffs since only about 10% of its revenues come from the USA. I also modeled a scenario where revenues decline by 10% each year, not just once.
Not investment advice – Just educational and informational – Make your research before investing
Today, I’m gonna share a post about Titanium Transportation. Just keep in mind that most of the stuff here was written for myself back on November 11. Back then, I put together a thesis (and I still do) just for my own use.
Titanium Transportation is a trucking freight company that operates in the USA and Canada. It works as both a broker (without owning assets) and a truck-freight operator (with its own assets). They also provide tech solutions for logistics that make the user experience better and help improve profit margins.
Segments
Logistic
This is the broker segment, which doesn’t have assets but comes with fixed salary costs. It started operating in the USA back in 2019, and in recent years, it made up 60% of the total revenue (though it’s now dropped to 50%).
Even though this segment doesn’t need any capex, the margins are pretty low (around 6%, which is average for the industry) because of the high fixed costs. The expansion of this segment it’s so cheap: 250.000 – 300.000 to open a new office location.
This segment grew at a 16% CAGR from 2018 to 2024.
It’s worth mentioning that Titanium also sells technology under this segment. This tech helps boost the operating margins of truck businesses, strengthens customer relationships, and lets smaller players in the truck segment join the supply chains of big companies that need a higher level of tech compliance. This sound relatively not important or ignorable, but believe me that not and this is one of the most important differentiation of Titanium, and they explain this on this video.
Truck
This is the segment where the company owns its own trucks. It used to be the smaller part of the business, but now it makes up more than half of the total revenue. All the mergers and acquisitions (M&A) in recent years have been tied to this segment, and it makes sense since, as they say, it’s a super fragmented market where 87% of operators in the US have fewer than 6 trucks.
This segment has lower operating costs since it needs fewer employees and boasts a higher EBITDA margin (16%), but it’s also the segment with higher CAPEX investment.
It grew at a 12% CAGR from 2018 to 2024, and the management thinks a 20% EBITDA margin is doable (though, of course, it depends on the economic cycle – and management said this before tarif…).
Finance Review
Let’s take a quick trip through the company’s numbers before we dive deeper into the valuation and what’s ahead.
This include the discounted operations in net income
Revenue
Over the past 6 years, revenue has grown at a 16% CAGR, both organically and through acquisitions.
In 2021, the company made two acquisitions: International Truck Load Services (ITS) and Bert And Sons Cartage (BSC). Thanks to these, the company saw a 53% growth in the Truck segment and a massive 120% jump in the Logistics segment.
In 2022, revenue grew by 24.3% year-over-year, mostly because of higher price rates.
In 2023, though, revenue dropped by 11%. This was mainly due to industry overcapacity, pressure on operating costs, and double-digit price declines. The Logistics segment got hit hard with a 14% decline, while the Truck segment actually grew by 32%, largely thanks to the acquisition of Crane, which contributed 66% to that growth.
In 2024, entire company revenue grows ~5% (including fuel surcharge and discounted operations) mainly driven by logistic segment that growth ~10.6% YoY. In contrast truck segment that we see a decline if we
Around 90% of the revenue comes from fixed contracts. And as they say, they’ve got a big list of clients with no single one being too dependent on them, plus they’re spread across different industries.
What was the company expecting before the Trump tariffs? They were aiming to hit $1 billion in revenue in the coming years by making 1 or 2 big acquisitions like Crane, plus growing organically to expand operations to over 20 locations in the USA (they currently have 8).
Margin
As we know, we’ve got two segments with different operating costs and, of course, different operating margins (no big shock there).
Historically, the company’s EBITDA margin (I’m sticking with EBITDA instead of EBIT because of the high depreciation and amortization costs in the Truck segment) has averaged around 10.9%, hitting a pretty solid 12% at its peak. But for last year (2024), the consolidated EBITDA margin is expected to land between 8% and 10%.
And why’s that? Well, the whole sector’s facing some tough headwinds right now due to overcapacity. During COVID, with the crazy high demand for shipping, companies went all-in on extra capacity. But now, that level of capacity just isn’t needed. So we’ve got a perfect storm: lower volumes, lower rates, and higher operating costs thanks to inflation.
The Truck segment in the last quarter (Q3 2024) had a margin of 15%. Management mentioned it’s been hit by price cuts and the expected slowdown after integrating the new company (Crane). Before COVID, it was closer to 17%, with plans to push it up to 20%.
The Logistics segment also took a hit on its EBITDA margin (down to 6.5% this year from 9% in Q4 2023) because of these headwinds. But this segment still managed to grow organically by 18% year-over-year, thanks to a strategic price drop to pull in new clients.
Honestly, I don’t see a massive or alarming margin drop to freak out about. The 6% margin in the Logistics segment is pretty much in line with competitors like Landstar, and while 15% in the Truck segment is a bit lower, I think it could climb back to 17% (like it was before, without the new company integration). That’d put it close to Schneider International’s 18%, though still a bit below TFI’s 21%.
Update 2024FY: 13% EBITDA margin for truck.
Debt
Ohhh, debt has almost always been a problem for this company, and I think it’s one of the reasons for its low valuation and the negative views about it. The current ratio is at 3.5x for the 2024 fiscal year, which is high for a company that is cyclical.
In 2024, the company lowered its net debt from $197 million to $147 million (including leasing), which is impressive! It shows that the management is focused on reducing debt one proof of this is their decision to pause the dividend.
I expect the company will make an extra effort to reduce debt (and will benefit from lower rates in Canada) due to the dividend suspension.
Management
I have to point out that there are certain things I like about the management team. One is that they always make it clear they will use free cash flow to reduce debt, pay dividends (suspended), and buy back shares (the latter they have done year after year for example, in 2023, they approved a repurchase of 5% of the outstanding shares).
Within the company, they have a program where employees can buy up to 5% of their salary in shares, up to 9,000 Canadian dollars.
Also, the CEO owns 7% of the company and has a low salary, meaning he is quite aligned with the company’s interests, especially since he is the founding CEO.
Another good thing about the management team is that they are not overly optimistic. They generally speak with a lot of caution when discussing margins and growth.
Future and recap last announcements
Okay, I know the company had very poor performance in its share price over the last few years. I think this was because (excluding the recent tariff-war factor):
Low margins due to overcapacity in the sector.
High company debt (~4x EV/EBITDA).
High capital expenditure (capex) investment due to truck fleet renewal.
What happened with each item?
Low margins: It doesn’t seem like this will be fixed in the short term. Originally, the market thought this would happen (or at least start to improve) in 2025, but with the current Trump administration and the trade-war effects, we can expect overcapacity and low margins to continue.
High debt: The company is focused on improving its balance sheet and could benefit from lower interest rates in Canada.
High capex investment: This won’t happen in the coming years because their trucks are already renewed, and they don’t need to make this expense every year.
So, is everything fixed? No, my friend. As you know, there’s a major problem destroying the share price: the trade war.
What will happen with this? I can’t say anything because I don’t know. However, some sectors in the USA depend heavily on Canada, so maybe there’s a chance this won’t escalate too much. Another factor could be the Canadian elections, where a pro-Trump outcome seems likely. By the way, I always try to avoid making assumptions about politics or the economy when I invest in a company. If the company’s fundamentals are good, that’s enough for me. Of course, we can’t ignore the recession risk, which might keep the share price low for longer than I expect.
What does the company want?
When I first wrote this analysis and kept it to myself, I thought the company still wanted to expand its truck segment and focus more on its asset-based segment, ignoring an interesting company presentation. At around the 23:00 mark, someone said something like: “TFI is not a brokerage company. We are 50% brokerage and 50% asset-based. We are digital; we are a different model.”
This phrase might not seem interesting, but it is. It shows they are setting a direction for the company. They want to focus on their asset-light segment. In recent months, they’ve been expanding by adding new offices across different states in the USA.
Does this mean we won’t see another acquisition in the truck segment? Probably not in the coming years, due to the company’s high debt levels.
In conclusion: Titanium is focusing on its asset-light segment in the USA. This is very important for valuing the company.
Valuation
Originally, this company gave me an impressive annual return for next 3 years between 24% and 46%, with a stock price of $2.26 and a 3% dividend yield. But things have changed. Now, there’s no dividend, and the company still has a weak operating margin.
Then, shit happens and stock price fell to $1.34… dividend suspension and the tariff war.
How can I re-evaluate the company with all this uncertainty? I decided to make a valuation by estimating the growth and profit of each segment (instead of the whole company). This is important because the logistics segment will be the main driver of this company.
To do this, I created a sheet (Link to sheet) where I included the full income statement for each segment, plus some cash flow, balance sheet debt, and cash details.
Then, I projected growth using these parameters:
Important notes about parameters:
D&A Over Revenue: This is a ratio I used to estimate the depreciation and amortization (D&A) costs. It has a big impact on the Truck segment.
% Total Debt Payment through Interest: I calculated how much interest each segment pays compared to the total debt. That’s how I got this number.
Net Debt Reduction Per Year (PY): This is a number I used to estimate how much the company reduces its total leverage each year.
With these, I made estimations for each segment:
Then this is the aggregation of both segment:
Estimated Free Cash Flow (calculated from EBITDA):
Estimated net-debt using the debt reduction parameter (5% it’s an average, can be higher due to lower Canadian interest rate):
Then, I used a simple valuation method with my estimated income statement, cash flow, and balance sheet. I applied a multiple, which I think is quite conservative. Here’s what I got:
Next, I used a Discounted Free Cash Flow (DCF) model:
Notes about parameters of discounted free cashflow model:
We get an intrinsic value of 1,55 CAD, which shows that the stock is undervalued at this price (1,34 CAD).
Conclusion
Right now, it’s hard to take action on this company. My estimations might still be too optimistic because of the current geopolitical and macroeconomic environment. If so, the company is a no-go for now. Or maybe my assumptions are balanced, which makes it interesting to open a small position and watch the company’s progress over the next year.
I already have a 10% position in my portfolio at 2.37 CAD, and it’s down 43% today. That was a beginner’s mistake: putting a full position into a cyclical company. It’s a lesson for the future.
I’ll keep my current position and track how the company performs. If I ever think it becomes a value trap, I won’t hesitate to accept the losses and close the position. That’s part of investing: if you can’t handle a 40% loss, you shouldn’t be doing this.
Not investment advice – Just educational and informational – Make your research before investing
Introduction to the Operation
This is a spin-off where the following are separated:
Lionsgate Studios Corp
Starz
The operation will be like this:
For each common share of the holding company Lions Gate Entertainment Corp (LGF.B), you get 1 share of Lionsgate Studios Corp and 1 share of Starz.
For each preferred share of the holding company (LGF.A), you get 1.12 shares of Lionsgate Studios Corp and 1 share of Starz.
In this case, one of the spin-offs, Lionsgate Studios Corp (ticker $LION), had already started trading on May 17, 2024. LGF owns 87% of the shares, and the rest are free-floating.
Company history
Usually, I start explaining which company is, but for this case, I thought it was interesting to talk about the operation first, before the company. This way, it’s clear from now on that when I mention Lionsgate Studios and Starz, I’m talking about two (eventual) separate companies.
Lions Gate Entertainment was officially formed in 1997. It includes very famous films and sagas like John Wick, Saw, Hunger Games, and many others. The company (like the rest of the industry) had problems in recent years because of protests by writers and actors in 2023.
Starz was bought in 2016 for 4.4 billion dollars. It provides premium digital content (series and movies) based on subscriptions. This is offered directly and through distributors, including OTT providers (like Amazon, Apple, etc.) and MVPDs (Comcast, Charter, DirecTV, etc.). As of March 31, 2024, it had 21.8 million active subscribers. It is mainly aimed at women.
Numbers of the Spin-Off
Obviously, since this is a media company (the same happens if you analyze Canal+, Vivendi’s spin-off), it has very high depreciation and amortization (D&A) expenses in the income statement, which strongly affects its accounting profit.
I don’t want to dive too deep into whether it’s a good company or not, or justify if it could be a good investment by analyzing how it generated Y amount of free cash flow over X years, and so on. Personally, this is a sector where I wouldn’t invest, for a simple reason: the high D&A costs tell you something there are big investments in capital expenditures (CAPEX) required. Maybe one year you have a blockbuster film that brings in a lot of cash, but other years you’re just burning money.
Of course, I’ll give a little overview of the holding company and its segments because I need to do this to test my theory that one of these spin-offs is potentially extremely undervalued (plus, there’s an additional situation that could happen, like a possible sale, but that’s speculating too much).
Let me clarify first that the prospectus for this spin-off is a mess it seems almost intentionally disorganized.
With all the disorganization, I decided to use LTM pro-forma data (Full Year March 31, 2024 + 9 months ending December 31, 2024 – 9 months ending December 31, 2023) so that it includes the eOne acquisition. It also fits pretty well with what the company has reported in previous years and what’s been discussed in meetings.
The valuation will be based on EV/EBITDA for simplicity. First, because of the high charges in depreciation, amortization, and impairments that this type of company has (and also because they decided to take some extra impairments to get rid of goodwill).
As we can see, we have an EV/EBITDA of 9x for Lionsgate Studios, which is very similar to what the company published as its current valuation in the December 2023 presentation. However, historically, M&A deals in this sector have happened at a much higher multiple.
Here we see first that, very likely, the spin-off of Starz will help improve the potential valuation of Lionsgate Studios.
And what about Starz? Why do we have so many unknowns? For the simple reason that the company isn’t trading yet. But we can still find a value with a simple subtraction. We take the share price of the holding company and subtract the current value of the Lionsgate Studios share ($LION), and that gives us the value the market would be assigning to Starz, right?
Well, if we consider that the holding company has two types of shares trading, $LGF.A and $LGF.B, with different conversion rates, let’s do the calculations.
For simplicity, we’ll start with $LGF.B, where the conversion ratio is 1:1.
We see that using the common shares ($LGF.B), we get a share price of $0.28 and a market cap of $70 million. This means an EV/EBITDA of 5x (I won’t get into whether that’s low or high yet).
Now, let’s use $LGF.A, where the conversion ratio is 1:1.12.
Negative price? Yes, obviously, if we assume a static price for $LION. But in theory, we are getting Starz share for free and with a decent safety margin to buy it cheaper than $LGF.B. Arbitrage traders, take note!! One way to ensure we really get the Starz share for free is to short $LION for the same amount at the same time. However, in IBKR, it shows as not shortable (and, in fact, it already has quite a bit of short interest).
I wrote about this opportunity on Sunday, March 30, 2025, when in the pre-market the preferred share ($LGF.A) was down 3.6. This opportunity has since disappeared, so the numbers mentioned earlier are no longer valid. But it remains as an exercise for anyone if this opportunity comes up again before the spin-off.
Now, is it better to start a position now or wait until the spin-off is official? We could use one part of the money to take advantage of the arbitrage now and another part to buy more shares in the days after, because:
It’s a low-capitalization company, so many funds or indices that include the holding company’s stock will sell it off => selling pressure.
It’s a bad company (yes) and not well-known, and the proof is the arbitrage gap in this well-announced spin-off, which makes me think most shareholders of the holding company will quickly get rid of these shares => selling pressure.
This last part might not happen, but I find it strange if it doesn’t, considering what I’ve said before.
Starz Valuation
As we know, Starz was bought in 2016 for 4.4 billion, which equals 10x EV/EBITDA. Since the company lost almost half its margin (but it should improve after the spin-off), valuing it at 6x to 8x EV/EBITDA seems reasonable to me. Even though it’s a bad company, it still has 20 million subscribers and steady income.
In other words, we have potential upside, and for me, it’s not too optimistic to think the company could have an EV of 1 billion to 1.2 billion, considering it was bought for 4.4 billion 9 years ago.
Additional Operations in the Spin-Off
I want to highlight some important news that might explain one of the reasons for this spin-off (besides improving Lionsgate’s valuation): it prepares the company to be sold.
Here’s a fact: we have the Liberty Strategic Capital fund, led by Steven T. Mnuchin, who was the Treasury Secretary during Donald Trump’s previous presidency. This is a big signal because the fund is likely either waiting for or planning to push for a sale, especially since the Trump administration is expected to be more friendly to these kinds of corporate deals.
So, a possible sale of Lionsgate is on the table, and if it happens at an average valuation of 15x EV/EBITDA, it would be around 14 dollars per share.
Conclusion
This is a very interesting operation, the type that Joel Greenblatt talks about in his book.
I want to make clear that, at the time of writing this post, I don’t have any open positions in the company because the potential gain from buying shares at a negative price didn’t happen due to timing. I’ll keep tracking the company’s stock price and wait to see if another arbitrage opportunity comes up. If it does, I might buy coverage to lock in that price (by shorting $LION).
We can wait for Starz to start trading and expect a likely sell-off, then buy the shares at a bargain price and sell them as soon as they reach a price we think is reasonable. I don’t think it’s a good company to hold long-term.
Another option is to buy $LION shares (if we don’t own holding company shares) and wait for a very likely sale. The issue with this is how long it might take to find a potential buyer.
I found this case on the Special Situation Investments website, which I really recommend. It’s great for anyone interested in special situation ideas, and it’s amazing as educational content if you’re into this topic.
Today, I want to talk about the US Masters Residential Property Fund. It’s a real estate investment trust (REIT) managed externally, listed in Australia, but owning properties in the USA.
A bit of history: In March 2022, the company announced a deal to sell itself at a low price (0.22 AUD per share, compared to its value of 0.68 AUD per share). A fund called Raper Capital wrote a letter to the management, complaining about how bad the deal was. (You should read the letter—it’s really interesting!) Then, in April 2022, because of rising interest rates and inflation, the buyer canceled the deal. After that, the company decided to voluntarily liquidate meaning it would close down and sell everything. They also turned preferred stock into ordinary shares in 2023, an idea Raper Capital had suggested in their letter.
So, let’s dive into the numbers in detail (based on the 2024FY last report):
The first table shows the company’s Net Asset Value, or NAV, which is the total value of its assets minus its debts. The company has properties worth 710 million AUD, plus cash of 83.372 million AUD. After subtracting its debts (liabilities) of 411.238 million AUD, the NAV is 382.994 million AUD. The company has 708 million shares, and the current share price is 0.40 AUD.
The second table gives two estimates for 2028, when the company plans to finish selling all its properties. I made some assumptions based:
Discount on selling price compared to book value: The properties are listed at their market price in the company balance sheet. But according to the company’s press releases, they usually sell properties at a price between -2% and +2% of the book value (on average). I used a 1% discount for the normal estimate and a -1% discount (meaning a small gain) for the optimistic estimate.
Transaction costs: These are the costs of selling the properties, like fees for agents or legal paperwork. On average, this is 5% of the sale price, but I used 2.5% for the optimistic estimate. I got this information from the company’s press releases.
2028 deadline: This is the estimated year when all properties will be sold.
To keep things simple for this activity, I didn’t include some future costs, like:
Management fees: The company is managed by two external companies, Brookville and Pinnacle. Their fees can change every year based on inflation (CPI), but I left this out for now.
Taxes: The company changed from being a REIT to a US corporate structure, so it now has to pay federal and state taxes. However, it can use past losses to lower its taxes, which reduced its tax bill from 40 million AUD to 3 million AUD. I didn’t include taxes in my calculations.
CAPEX: The company needs to spend money to maintain its properties so they don’t lose value. This will continue until the last property is sold, but I didn’t include these costs here.
Based on my estimates, the distributable NAV (what shareholders might get) could be between 360.014 million AUD (normal case) and 377.249 million AUD (optimistic case). This means a distribution of 0.51 AUD per share in the normal case, or 0.53 AUD per share in the optimistic case.
Compared to the current share price of 0.40 AUD, this could mean a gain of 27.12% to 33.21% for shareholders, which sounds nice. But there’s a problem: this gain will take a long time—at least 3 years. During that time, you might miss other opportunities to make money elsewhere, which is called the “cost of opportunity.” Also, I didn’t include one important thing that could speed things up: the company is doing a share buyback, which means it’s buying back its own shares. This can increase the share price, but it also means the company will have less cash available in the future, and I didn’t consider that in my calculations.
In my opinion, at this price and time, it doesn’t look like a great deal. But it might be worth keeping on our watchlist. We can follow the liquidation process and see what happens. Maybe the company will announce a major distribution, or the stock price might drop a lot, which could make it more interesting to buy later.
To start, let’s take a brief look at the highlights from Havas NV’s 2024 FY presentation, which delivered some positive news:
Net revenue growth of 1.5%, with organic growth at -0.8%, aligning with guidance
Adjusted EBIT margin improved to 12.4%
Free cash flow (FCF) reached €223 million
Dividend set at 8 cents per share
A 10% share buyback program announced!
Additionally, the company provided guidance for 2025–2028, projecting further margin improvements.
Following this overview, we can expect modest organic growth paired with margin improvements.
When the company refers to organic growth, it’s focusing on its internal performance. However, Havas is a company with a strong track record of executing M&A strategies, which can drive inorganic growth as well.
Now, a more critical point: I recently discovered some errors in my valuation model (thanks to a helpful tip from this tweet) and I learned some things.
1 – Net Debt calculation
In my previous post I talked about 425M of net debt, I failed in not including Earn-Out.
What is an earn-out? An earn-out is a contingent payment in a merger or acquisition where the seller receives an additional compensation if the acquired business meet specific performance targets.
Under IFRS or GAAP, if a payment is measured it’s included as a liability in the balance sheet.
Does this imply a fixed payment? No, so why include it in the net debt calculation? After conducting some research, I learned that it’s typically included into the M&A process. However, this doesn’t apply here since I’m not planning to buy the entire company! Well, including it could serve as a conservative measure in our valuation process and as a reminder, we should always be conservative.
Using data from the latest 2024 FY presentation, here are the updated calculations:
Financial debt (including long-term borrowings, – short-term borrowings, and bank overdrafts): +23
Lease liabilities (current + non-current): +300
Earn-out: +269
Off-balance-sheet debt (on original prospectus): +300
Cash: -234
Net Debt: 658M
This results looks higher than my original (and now updated) estimate of 468M. Naturally, this adjustment impacts the overall valuation of the company.
2 – FCF and Stock Based Compensation (SBC) adjustment
One detail I didn’t noticed is the stock-based compensation outlined in the original prospectus under section 11.10.6.1, “The Havas Equity Incentive Plan.”
Havas spin-off prospectus
This plan implies a maximum of €37.5 million in stock-based compensation annually, not as a one-time expense, but as a recurring cost each year. Therefore, as a conservative measure, it’s prudent to include this SBC in the FCF calculation.
Valuation Adjustment
When applying this to Free Cash Flow (FCF) valuation, we no longer see ultra-high potential upside. However, with the EV/EBITDA method, there is still some high potential (meaning undervaluation). The challenge arises when there is a significant divergence between different valuation methods there is something that is not good. In this case, the acceptable EV/EBITDA multiple would be closer to 5x rather than 6x, due to the low EBITDA-to-FCF conversion ratio of 43% (based on next twelve month)
Therefore, using a 5x multiple, we can still expect a slight upside, though it is less favorable than it would be at a higher multiple.
After reviewing this, I’ve decided not to close my current position. However, if a better opportunity arises, I will, of course, consider rotating my portfolio accordingly.
This is my first investment discovered searching for a net-net company =).
I began exploring this type of opportunity because it’s both intriguing and a fresh addition to my investment portfolio
I’m going to talk about Anexo Group PLC, a British company offering integrated credit hire and legal services:
Credit Hire (EDGE it’s the name of the brand): This division provides replacement vehicles (cars or taxis) to individuals involved in traffic accidents that aren’t their fault. They supply a replacement until the customer’s car is repaired, with the costs ultimately covered by the at-fault party’s insurance.
Legal Services (Bond Turner): This segment specializes in claims related to traffic accidents, personal injuries, medical negligence, and emissions litigation.
Housing disrepair: A newer segment (still under the Bond Turner brand) introduced in 2019, which I’ll talk in more detail later.
Financial overview and Working capital
From 2018 to 2023, the company revenue grew at 21.5% CAGR, with EBITDA closely tracking at a 21.3% CAGR.
The core business revolves around credit hire, providing replacement vehicles (cars, motorcycles, or taxis) to accident victims, repairing damaged vehicles, and recovering costs from insurers. While this model is profitable, it is also cash-intensive. Anexo must cover the upfront costs of vehicles and repairs, then wait for insurance reimbursements.
In 2023, the receivable turnover ratio was 0.7x, implying an average collection period of 561 days. Even if we conservatively assume a shorter cycle say, 1 year it still represents a significant delay in cash recovery.
This dynamic creates a structural drag on working capital. Every year the need to finance receivables and fleet investments results in negative cash flow from operations and, consequently, negative free cash flow. The exception was 2023, when a £7.2 million net cash payment from Volkswagen related to the Dieselgate scandal, combined with improved working capital management (as noted in their transcript), provided a boost and a proved that the management want to improve WC turnover.
For this reason, I believe the company is trading at an unjustifiably low valuation. This is not a failing business, but one constrained by its working capital cycle. If management can address this bottleneck, the market could re-rate its shares significantly higher. The key question is: are there catalysts on the horizon to drive this change?
The 2023FY and 2024H1 interim results offer a hope. Revenue distribution across the company’s segments highlights both challenges and opportunities:
2024H1 Revenue per segment %
Credit Hire up 21.8% YoY compared to H1 2023, this segment remains the backbone of Anexo business. Steady growth here reinforces the core thesis of resilient demand. A key catalyst in this segment is the shift toward handling a higher percentage of motorcycle claims over cars, driven by lower working capital requirements and faster cash collection.But Housing Disrepair launched in 2019 following the Homes Act, this newer segment is a potential game-changer. Anexo estimates that 25% of UK renters could file damp-related claims, indicating a vast addressable market. Unlike credit hire, housing disrepair claims require minimal upfront capital relying primarily on legal expertise and client acquisition offering a faster payment cycle and improved cash flow dynamics.
In 2021 earning calls, the management told that cash collection for this segment are between 7 – 9 months which is better than 500+ days in average for the rest of the segment.
Valuation
If we examine the company’s balance sheet from the 2024 H1 interim results, we find the following:
£243 million in trade receivables (a conservative estimate of future cash from claims)
£3.1 million in cash
This suggests an upside potential of 89.64%, based solely on a snapshot of current assets and excluding future growth, which the company is likely to achieve given the nature of its business.
Conclusion
I’ve decided to include Anexo Group PLC in my portfolio. Does the company carry risks? Of course it does, including:
Regulatory changes that could limit credit hire or housing disrepair claims
Management’s potential failure to improve working capital or grow the housing disrepair segment
However, the margin of safety is substantial. We’re looking at a company trading below its liquidation value, with a history of growth, consistent dividend payments, and a promising new segment poised for expansion.
I do not hold a position with the issuer such as employment, directorship, or consultancy. I hold a material investment in the issuer’s securities.
Honestly, this isn’t my favorite sector because I’m not a fan of property investment. Also stuff like accountability and valuation here can be trickier than in a “normal” business. Still, it’s hard to ignore this sector when you compare its average returns to the S&P 500.
Millenium Hospitality Real State SOCIMI, is a Spanish REIT that builds and develops luxury hotels at prime areas of Spain.
At first glance, this company might not seem too exciting it doesn’t pay dividends, has rarely (if ever) turned a profit, and in 2023, it faced management troubles, including a conflict of interest involving the former CEO.
With that description, doesn’t sound interesting… but keep reading.
Company Assets
In Operation (54% of assets)
Hotel Meliá Bilbao
Hotel Radisson Collection Sevilla
Hotel Radisson Collection Bilbao
Hotel JW Marriott Madrid
Hotel Mercer Plaza Sevilla
Hotel Nobu San Sebastián
Under development (46%)
Hotel Nomade Madrid
Fairmont La Hacienda Cadiz
Autograph Collection Madrid
Hotel Nobu Madrid
Plus, it runs a Golf Club called “Alcaidesa Golf – Restaurante Casa Club,” which is highly profitable.
Every hotel is rated as a 5-star.
The total value of its assets in H1 2024 is 664 million, after subtracting a deal where the company sold two properties to the old CEO for 18 million.
So, we’re looking at a REIT with top-notch assets, trading below its tangible book value. It’s a catalyst the new management and their 2024-2027 plan (we’ll get into that later). Also, 46% of its assets aren’t fully up and running yet, but they will be in the coming years (by Q1 2026, everything should be 100% operational). Their goal? Start paying dividends in 2025.
Another good new is we are in a favorable environment for this type of REIT, as the company say:
Financial Review
Millenium revenue per segment:
In 2023, Golf (listed as “Otras Actividades”) made up 17.10% of the revenue, but it had a negative margin. Meanwhile, Hotel Leases made up 82.90%, with a really high EBITDA margin (over 90%), since the costs of the Corporate unit aren’t included in this segment.
As we see between 2022 and 2023 the revenue grows a lot due to the operational starts of new hotels.
The Golf Club is unprofitable but the idea it’s to get it break even and eventually lease it out to a third party operator.
Overall, the EBITDA margin was 42%, and it grew six times in value from 2022 to 2023.
Related to debt, REITs are usually high leveraged (around 45% LTV on average for Hotel REITs), but here it’s different. With a Loan-to-Value (LTV) of just 19.3% (in the first half of 2024), this low debt level means the company can take advantage of lower Euro interest rates to buy more properties with leverage.
Improve operating efficiency to reach an EBITDA margin of 75% to 80%.
Double the revenue.
CAPEX is already set at 100 million until 2026 (50% in 2024, 35% in 2025, and 15% in 2026).
Pay the first dividend in 2025!
Adjust employee interest and pay to keep them happy.
If the company hits these goals, it’ll pull in a Net Income of about ~20 million and an FFO of ~15 million.
Using the net asset value (which I think is the best way to look at this company right now), there’s a potential upside of 74.24%. This gap should close as the company gets close to meeting its targets and all the hotels are fully operational.
Conclusion
Even though closing the NAV gap might take longer than I thought (I’m guessing around 2026–2027), this company has assets that I really like, and the new management is heading in the right direction and they have got a lot of skin in the game (the current CEO was picked by the biggest shareholder, Castlelake LP, which owns 49%).
Another cool thing, it’s I found this idea from an investor letter by Equam Capital from Q3 2024.
I started with a 5% position at a price of 2.50. I’ll keep an eye on any news about the company and check if they’re hitting their goals. If they do, it could be a great chance to add more to my position.
Thank you!
I do not hold a position with the issuer such as employment, directorship, or consultancy. I hold a material investment in the issuer’s securities.
