Value - Franco Gianotti

Hurco Companies – Classic net-net

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.

Thank you!

Net-net: Tandy Leather – Deswell Industries

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.

Titanium Transportation – $TTNM

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:

Discount Rate = WACC (https://valueinvesting.io/TTR.V/valuation/wacc)
Terminal Value = 5 (Multiple EV/EBITDA)

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.

Thank you! Hope u enjoyed

Anexo Group Plc – Net-net British microcap

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:

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.

Millenium Hospitality ($YHMRE) – High Quality REIT below Net Asset Value

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.

Valuation

The strategic plan 2024 – 2027 sets these goals for the company:

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.

Unidata – My favourite Europe microcap

When I first heard about this company in an investment webinar, I looked it up on TIKR and realized it’s a microcap ($83M market cap), Italian (which usually means undervalued), and in a simple, easy-to-understand sector: fiber.

The company was founded in 1985 as a hardware business. Then, in 1994/95, it started developing as an ISP. In 1999, it was sold to Cable & Wireless, but it was reacquired in 2001. By 2002, the company had started deploying fiber and transitioned into a telecommunications provider operating in the Lazio region.

The company operates in these segments:

Fiber
Cloud & Data Center
IoT
Cybersecurity and managed services

This thesis is going to focus on the most important (and potentially high-growth) segment: fiber. And I love it because:

The other segments definitely have growth potential too, like datacenters (the company is building a completely green datacenter in Italy) and IoT (they deployed a LPWA network, which also has growth potential). But these segments are relatively small compared to fiber.

Financial overview

The company revenues has grown 63% CAGR from 2019, EPS in the same time 35%.

In 2023 the revenues growth 81% thanks to the acquisition of TWT which helped the company expand into Lombardia.

The main growth driver has been the expansion and deployment of fiber, both B2C and B2B.

In 2018 the fiber network covered 2,100 km, and as of the H1 2024 report, it has expanded to 7,400 km. By Q2 2025, a new submarine cable to southern Italy is expected to be completed—a project developed in partnership with Uniterreno (a Unidata subsidiary) and Azimut (an investment fund).

Related to margins, in 2024 the company is projected to reach a 26% EBITDA margin (consolidated with TWT). Their industrial plan 2025 target an improvement on EBITDA margin close to ~30% which is in line with the industry median.

Related to FCF generation, in recent years the FCF margin was small and even negative most of the years due to high CAPEX investment, but it’s expected to improve the coming years.

Related to debt the company always has a slow Net Debt / EBITDA ratio (below 1x) but in 2023 with the acquisition of TWT, the ratio up to 2x but it still manageable for this kind of company with highly recurring income.

When it comes to FCF generation, the margin has been small (and even negative in most years) due to heavy CAPEX investments. However, it’s expected to improve in the coming years.

When we see debt, the company has always kept a low Net Debt/EBITDA ratio (below 1x). But in 2023, following the TWT acquisition, the ratio jumped to 2x, still very manageable for a company with highly recurring revenue.

Next years

The company target to growth revenue by 12% and achieve an EBITDA margin between 29% – 30%, from 2025 to 2027 as their present in the industrial plan 2025.

Additionally, a €56 million CAPEX investment is planned until 2027, covering:

Continued fiber network deployment.
The completion of Uniterreno (submarine cable project).
A new datacenter in Italy (Unicenter).

I agree with the target growth and I’m pretty confident they’ll be achieved, mainly because Italy still has low coverage of FTTH network (only 49% vs 69% avg EU).

Additionally the customers are shifting from big operators to smaller ones—a trend similar to what’s happening in Spain, where companies like DIGI has been rapidly gaining market share. The company highlights this:

To sum up, I see strong market growth potential in Italy, margin improvement, and high cash flow generation. And, the company stands to benefit from new segments as it continues to expand.

Valuation

When comparing Unidata’s valuation with similar companies in Italy, it’s clear that both the company and the sector are trading at depressed valuations.

All of them are affected by low valuation metrics due to their status as European microcaps, except for Intred, which is more efficient with a higher ROIC, better margins, and a larger market cap—hence the higher valuation.

I see an opportunity for multiple expansion over the next few years, targeting 6x EV/EBITDA and around 11x P/E and MC/FCF, which seems reasonable for Unidata. Also, companies like this have a high chance of being acquired by a larger player due to their low valuation and the fragmented market.

I’m estimating 10% growth, with the company reaching a 26% EBITDA margin in the coming years alongside multiple expansion:

A few key points to highlight:

I don’t estimate buybacks (though they’re highly likely in the future, as the company has done them before)
Dividend yield 0%
FCF will be low in 2025 and 2026 due to an expected CAPEX of €56 million but should stabilize from 2027.

Using this, we get a high CAGR for 2026E:

	Multiple	Intrinsic Value 26E	Upside from €2.70
EV/EBITDA	6x	€5,96	120%
P/FCF	11x	€4,96	83%
P/E	11x	€5,00	85%

For this reason (and I think this is a conservative estimate), I expect strong growth for this stock.

I have opened a 10% weight position.

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.

Fountaine Pajot ($ALFPC)

Today I shared this French Microcap (€166M market cap) that designs and builds luxury catamarans. I found out about it because two funds I follow—Independence AM and Amiral Gestion—have positions in it, which seems like a good sign.

Financial Overview

The company’s revenue has grown every year (except for 2009 and 2020). From 2018 to 2024, it saw a 17% CAGR in growth, with a stable EBITDA margin of 13%–15% and an EPS growth of 20% CAGR.

	2018	2019	2020	2021	2022	2023	2024
Revenue MM	136,81	207,11	172,87	202,31	219,86	276,82	351,30
EBITDA	21,66	26,93	27,41	32,70	34,19	42,49	67,00
EBITDA Margin %	15%	13%	15,8%	16%	15,5%	15,3%	19%
	6,66	8,41	4.86	10.06	9.79	6,89	20,10

Of course, this kind of luxury product is cyclical and requires consistent CAPEX investment, with an average Sales/CAPEX ratio of around 5%. On top of that, the company can generate free cash flow every year.

	2018	2019	2020	2021	2022	2023	2024
Free Cash Flow	27.92	15.19	13.05	51.25	46.36	19.11	-9.69

In 2024, FCF was impacted by increased working capital investments to prepare for next year’s order book.

Regarding debt, the company consistently holds a strong cash position (exceeding its market cap) and keep a low level of debt.

	2018	2019	2020	2021	2022	2023	2024
Net Debt / EBITDA	0.13x	-0.17x	-0.97x	-2.17x	-3.11x	-2.83x	-1.54x

The company pays dividends almost every year, usually between 1%–2%, and do a small amount of buybacks. The issue with the buybacks is the low number of outstanding shares and the lack of liquidity.

So, the company has a history of growth, has a lot of cash in balance (even more than its market cap), avoids dilution, does buybacks, and pays dividends… but why is it still so cheap?

I think several things comes together: Europe microcap, low liquidity and expected drop in sales for next two years due to high post-covid sales.

Next years

The company expect a slowdown of this sales for the next years and it can be inferred due to they highly investment on working capital this year (this going to help FCF next year). The company doesn’t give any guidance butd the analyst expect (17%) 2025E – (6%) 2026E.

But to help to improve the efficiency and partially offset the expected drop sales, the company announce a plan in they last communication:

The new 2028 plan is based on the following major pillars:

Product innovation, with the launch of 11 new models: 6 catamarans and 5 monohulls;

Enhanced customer service, aimed at improving the experience and satisfaction;

A capacity investment and modernization plan, with a total budget of nearly €19 million over four years;

Human capital development, through skills enhancement, talent retention, and continuous improvement of working conditions;

Environmental commitment, by continuing technical innovations and implementing a zero-carbon trajectory.

Let’s talk about valuation

Comparable companies valuation:

Company	NTM EV/EBITDA	NTM MC/FCF	NTM P/E
San Lorenzo SpA	6.37x	18.41x	10.90x
Beneteau SA	8.29x	11.27x	16.19x
SA Catana Group	5.15x	8.92x	9.26x
Fountaine Pajot	1.66x	46.11x	7.90x

SA Catana Group is the closest as it focuses on catamarans and has similar ROE, ROIC, and ROA. Plus, it’s also a French microcap.

	ROE	ROIC	ROA
SA Catana Group	32%	26,4%	10,9%
Fountaine Pajot	35,2%	34,3%	10,6%

For this reason, I think Fountaine Pajot’s valuation is ridiculous.

Now, back to valuation—I’d still be very conservative, expecting:

2025-2026: I will use analysts’ estimates of a -10% CAGR revenue and then back to 3% Growth (average catamaran market expected)
FCF should improve as the company starts benefiting from positive working capital and customer payments (as it always has).

	2025	2026	2027	2028	2029
Revenue (M)	289	262	270	278	286
EBIT Margin %	15%	15%	15%	15%	15%
EBITDA (M)	44,4	42,1	43,4	4,7	46
Net Income (M)	18	16	17	17	18
FCF (M)	22	20	21	21	22
Shares Outstading (M)	1,6	1,6	1,6	1,6	1,6

Target Price

For this valuation, I’m expecting some multiple expansion, but still at a discount compared to peers due to low liquidity.

EV/EBITDA = 4x
MC/FCF = 7x
PER = 7x
Dividend Yield = 2%

	2025	2026	2027	2028	2029
EV/EBITDA	€183	€180	€187	€193	€199
PER	€152	€146	€151	€152	€162
MC/FCF	€167	€163	€169	€175	€180

I see an interesting opportunity here, with high expectations for multiple expansion and maybe even an offset to declining revenues!

I opened a 5% weight position at 98.40

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.