Giles Capital Weekly - Week 24
Welcome to another edition of Giles Capital Weekly. While markets absorbed another week of geopolitical tensions, with the S&P 500 dropping over 1% Friday on Iran-Israel escalations and oil surging 7%, company specific catalysts continue to drive value creation independent of world affairs. The rotation toward defensive positioning creates opportunities in overlooked quality businesses.
My top picks for this week showcase resilience amid uncertainty. highlights Showa Paxxs (3954.TYO), a Japanese net-net trading at 55% discount to NCAV with cash backing 100% of market cap and improving capital allocation, offering exceptional downside protection at 7.3x forward earnings. features OKP Holding Limited (O39.SI), a Singapore civil engineering microcap trading at 7.2x P/E with cash representing 55% of market cap and record S$735.8 million backlog, positioned for 27% revenue CAGR growth. I also particularly enjoyed ' analysis of International Container Terminal Services (ICT.PH), showcasing defensive port operations delivering 53.5% EBIT margins across emerging markets.
Before diving into this week's newsletter…
Americas
on Honeywell International (🇺🇸HON US - US$277 billion) Industrial conglomerate with embedded software platform generating 27.5% aerospace aftermarket margins and 60%+ software margins through Honeywell Forge, backed by $31.8 billion backlog across diversified end markets.
on Thermo Fisher Scientific (🇺🇸TMO US - US$158 billion) Life sciences leader available at 35% discount from peak with 83% recurring revenue model and $42 billion annual revenue, temporarily impacted by industry downturn and tariff concerns.
on Comcast and Warner Bros Discovery Cable Spins (🇺🇸CMCSA, WBD US - US$133 billion | US$25 billion) Cable network spin-offs creating sum-of-parts value unlock with VERSANT estimated at $1.30-$3.50 per Comcast share and WBD SpinCo at $4-7 per share through operational focus.
on PayPal Holdings (🇺🇸PYPL US - US$70 billion) Fintech platform expanding operating margins 447 basis points to 19.6% while transitioning to commerce platform with data monetization potential, backed by $6 billion share buyback program.
on Heico Corporation and TransDigm Group (🇺🇸HEI, TDG US - US$23 billion | US$81 billion) Aerospace components comparison revealing Heico's superior balance sheet strength at 2.2x net debt/EBITDA and 143% cash conversion versus TransDigm's higher leverage at 4.8x, with Heico's 14% insider ownership significantly outpacing TransDigm's 0.4%.
on Dollarama Inc. (🇨🇦DOL CN - CAD$28 billion) Canadian dollar store leader delivering 28% EPS growth and 44.2% gross margins while expanding internationally, justified premium valuation at 43x trailing P/E through exceptional execution.
on MGM Resorts (🇺🇸MGM US - US$12 billion) Undervalued integrated resort operator trading at 13.3x P/E versus peers at 14.3-15.9x, controlling 40% Las Vegas Strip share with $8.9 billion in buybacks since 2021.
on Ollie's Bargain Outlet (🇺🇸OLLI US - US$4 billion) Value retail expansion story delivering 13% net sales growth and maintaining 41.1% gross margins while executing aggressive store growth plan toward 1,000+ locations.
on American Eagle Outfitters (🇺🇸AEO US - US$2 billion) Retail turnaround opportunity trading at 0.33x P/S versus historical 0.8-1.2x range, with $25.89 target by 2027 and aggressive share buyback program reducing float.
on Galaxy Digital (🇺🇸GLXY US - US$2 billion) Digital asset financial services leader pivoting to AI infrastructure through 800MW Helios data center capacity, managing $7 billion AUM with $13+ billion CoreWeave revenue potential.
on ACM Research (🇺🇸ACMR US - US$1.5 billion) Semiconductor equipment manufacturer trading at massive discount to $5.9 billion Chinese subsidiary valuation, offering dual US-China exposure with 61% local market share.
on Traeger Grills (🇺🇸COOK US - US$600 million) Consumer durables company with razor-blade business model generating $600 million LTM revenue and $48 million EBITDA, positioned for recovery as operational improvements offset debt burden.
on ADF Group (🇨🇦DRX CN - CAD$80 million) Steel fabrication company trading at 3.6x P/E and 0.58x P/S despite 34% ROIC, showing operational resilience through tariff headwinds with strong structural project backlog.
Europe, Middle East & Africa
on Swatch Group (🇨🇭UHR SW - CHF$8.9 billion) Luxury watchmaking conglomerate trading at 0.6x P/B with CHF 1.4 billion net cash, facing activist pressure from Greenwood Capital for value unlocking in underappreciated portfolio.
on CIE Automotive (🇪🇸CIE ES - €3 billion) Global automotive supplier delivering record Q1 performance with 19.0% EBITDA margins and 31.7% ROE, trading at attractive 5.0x EV/EBITDA and 8.0x P/E multiples.
Asia-Pacific
on Tencent Holdings (🇭🇰0700 HK - HK$3.2 trillion) Chinese super-app ecosystem generating $20+ billion annual free cash flow with $27.7 billion gaming revenue and massive investment portfolio, trading at 18-20x forward P/E.
on Jardine Matheson (🇸🇬J36 SG - US$35 billion) Asian conglomerate trading at 40% NAV discount with 5% dividend yield, undergoing PE-led value unlocking through $10+ billion asset sales and management transition.
on Lenovo Group (🇭🇰992 HK - HK$90 billion) Strategic transformation from PC manufacturer to services and infrastructure, targeting 4x EV/EBIT with 21% services margins and 24% global PC market share.
on International Container Terminal Services (🇵🇭ICT PH - US$6 billion) Emerging market port operator delivering 53.5% EBIT margins and 21.5% average ROE since 2000, trading at 17x P/E with defensive characteristics and 9%+ annual earnings growth potential.
on Hotel101 Global/JVSPAC (🇸🇬JVSA US - US$2.3 billion) Singapore-headquartered hospitality platform creating global "condotel" model via NASDAQ SPAC merger, trading at $10.85 per share with 38-84% upside potential post-completion.
on IDP Education (🇦🇺IEL AU - AUD$2 billion) Global education services leader experiencing temporary policy headwinds, trading at AUD$3.59 with AUD$12 target by 2029 as 17% student growth drives $490 billion TAM expansion.
on Tianli International Holdings (🇭🇰1773 HK - HK$10 billion) Chinese education services company expanding across multiple provinces with AI integration for gaokao preparation, aligned with supportive provincial education policies. (Article in Spanish)
on OKP Holding Limited (🇸🇬O39 SG - S$120 million) Singapore civil engineering microcap trading at 7.2x P/E with cash representing 55% of market cap and record S$735.8 million backlog, positioned for 27% revenue CAGR growth.
on Showa Paxxs (🇯🇵3954 TYO - ¥2 billion) Japanese net-net opportunity trading at 55% discount to NCAV with cash backing 100% of market cap, showing improving capital allocation and trading at 7.3x forward P/E with 2.75x current ratio.
- Monthly alternative data report: OpenAI, Google, Meta, Nvidia, Amazon, Microsoft Anthropic Comprehensive AI sector analysis using alternative data to track platform growth, API usage patterns, and competitive positioning across major AI infrastructure players. (18 min read)
- A 36,000% return since IPO: CSU Case Study Deep dive into Constellation Software's business model and investment framework, examining how their systematic acquisition strategy delivered exceptional long-term returns. (22 min read)
- China Weekly Wrap: Markets, Macro & Tech Comprehensive regional analysis covering China's market developments, policy initiatives, and technology sector evolution with investment implications. (20 min read)
- What are the capabilities of Huawei's chips and software systems? Technical analysis of semiconductor competition between Huawei and Western counterparts, examining chip performance and AI infrastructure capabilities. (25 min read)
- 4 Questions I Ask Before Every Investment Investment decision-making framework focusing on risk management and systematic evaluation criteria that most investors overlook in their analysis. (8 min read)
- "The PEG Ratio" Why its flawed Critical examination of traditional valuation metrics, explaining why the price-earnings-to-growth ratio often misleads investors in growth stock analysis. (8 min read)
- Everything You Thought Was Safe… Isn't Anymore! – Jeffrey Gundlach Macro analysis exploring debt crisis implications, gold positioning, and fundamental paradigm shifts challenging traditional safe asset assumptions. (25 min read)
- On Winning Survivor and Portfolio Construction Congratulations to this young investor on winning Australian Survivor and $500k. A fascinating shift from wealth creation to preservation mindset as he transitions from aggressive growth strategies to diversified portfolio management. (12 min read)
- Grab and GoTo play hardball over merger deal Southeast Asian tech merger analysis examining the strategic negotiations between two regional super-apps and broader implications for platform consolidation in emerging markets. (12 min read)
- The Next 10 Years: S&P500, Gold, Bitcoin? Long-term asset allocation framework examining expected returns across major asset classes over the next decade, with specific focus on portfolio positioning strategies. (18 min read)
- Black Monday 1987 Historical market crash analysis providing lessons for modern investors about risk management, market psychology, and portfolio construction during crisis periods. (30 min read)
- Prem Watsa's Fairfax Playbook: Insights from 38 Years of Shareholder Letters Investment methodology deep dive analyzing value investing principles and insurance industry strategy through decades of shareholder communications. (12 min read)
Tariff uncertainty dominated Q1 2025 as managers restructured portfolios while maintaining AI infrastructure conviction. Performance diverged widely, from SaltLight's +2.70% to Icahn's -8.4% investment decline, reflecting varied approaches to policy volatility.
SaltLight Capital Management: Worldwide flexible fund with Bayesian approach to thematic investing. Generated +63.24% in 2024 and +2.70% in Q1 2025 while rebuilding NVIDIA position during valuation decline. Maintains conviction in AI infrastructure and e-commerce margin expansion. Letter discusses:
NVIDIA (🇺🇸NVDA US - US$3.0 trillion) - Existing Position: Rebuilding position as valuation became compelling, AI infrastructure leader
Sea Limited (🇸🇬SE US - US$85 billion) - Existing Position: EBITDA positive across regions, $0.09 per order profit from -$1.20 loss
MercadoLibre (🇦🇷MELI US - US$85 billion) - Existing Position: Fintech expansion model for Sea replication opportunity
Blue Label Telecoms (🇿🇦BLU SJ - US$400 million) - Existing Position: Cell C turnaround progressing, 90% MVNO market share
Icahn Enterprises L.P.: Diversified holding company across energy, automotive, and industrial sectors. Investment segment returned negative 8.4% in Q1 2025 with 20% net long exposure. Indicative net asset value decreased to approximately $3 billion. Letter discusses:
American Electric Power (🇺🇸AEP US - US$45 billion) - Existing Position: Utility holding representing $586 million position, 1% ownership stake
Southwest Gas (🇺🇸SWX US - US$4 billion) - Existing Position: Natural gas utility, $541 million position with 10% ownership
IFF (🇺🇸IFF US - US$12 billion) - Existing Position: Specialty chemicals and materials, $291 million position, 1% ownership
Caesars Entertainment (🇺🇸CZR US - US$10 billion) - Existing Position: Gaming and hospitality, $264 million position, 5% ownership
Bausch Health (🇨🇦BHC CN - CAD$8 billion) - Existing Position: Pharmaceutical company, $225 million position, 9% ownership
RGA Investment Advisors: Long-term growth strategy focused on enduring themes through conviction investing. Made three significant Q1 investments aligned with AI infrastructure and life sciences during market volatility. Letter discusses:
Taiwan Semiconductor (🇹🇼TSM US - US$550 billion) - New Position: AI winner with cyclical upside, trades below 20x forward earnings despite 27% growth
Bruker Corp (🇺🇸BRKR US - US$8 billion) - New Position: Pan-omics dominance at margin inflection, mid-teens P/E despite diversification
Lululemon (🇨🇦LULU US - US$25 billion) - New Position: Mid-single digit FCF yield, GFC-level P/E for durable competitive advantages
Fidelity Small Cap Discovery Fund: Small-cap core strategy seeking companies with low implied expectations and substantial price-to-value disparities. Delivered 10.02% five-year annualized returns and 11.48% one-year performance through intensive bottom-up research and margin of safety assessment. Letter discusses:
Insight Enterprises (🇺🇸NSIT US - US$3 billion) - Existing Position: Global technology company, fund's largest holding with strong Q2 earnings
Genpact (🇮🇳G US - US$8 billion) - Existing Position: Business process management and technology services provider
Maximus (🇺🇸MMS US - US$5 billion) - Existing Position: Government services and health program administration
Performance Food Group (🇺🇸PFGC US - US$8 billion) - Existing Position: Food distribution company serving healthcare and hospitality sectors
First American Financial (🇺🇸FAF US - US$6 billion) - Existing Position: Title insurance and settlement services provider
Kathmandu Capital: Global value-oriented fund with Columbia-educated manager focusing on undervalued opportunities. Since inception performance of -8.96% gross versus +25.50% for S&P 500, restructuring portfolio to reduce beta amid tariff uncertainty. Letter discusses:
NagaCorp (🇰🇭3918 HK - US$2 billion) - Existing Position: Cambodia casino operator benefiting from China alignment, position trimmed for opportunities
Gigacloud Technology (🇨🇳GCT US - US$3 billion) - Existing Position: China furniture supplier with strong balance sheet for tariff navigation
Ubiquiti (🇺🇸UI US - US$20 billion) - Existing Position: Networking equipment facing tariff pressure, 50%+ US revenue exposure
Kaspi.KZ (🇰🇿KSPI US - US$12 billion) - Existing Position: Kazakhstan fintech facing oil price headwinds, strong execution capability
VusionGroup (🇫🇷VU EPA - €2 billion) - Existing Position: Electronic shelf labels leader with Walmart contract escalators for tariffs
Thanks to Buy Side Digest (buysidedigest.com) for compiling the investment letters which are featured here.
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Disclaimer: This newsletter is for informational purposes only and not investment advice. The intro reflects my views, while investment summaries are my interpretations of original authors' analyses. Information may not be fully verified and is subject to correction. Original authors' complete views may differ. Always do your own research before making investing decisions.
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