Giles Capital Weekly - Week 40
Welcome to another edition of Giles Capital Weekly. The Fed's 50 basis point cut has sent ripples through global markets, with China feeling the strongest impact. Beijing's aggressive stimulus measures are turning heads - and portfolios.
This week's roundup spans continents, featuring write-ups on Nu Holdings shaking up Brazilian fintech and Ingles Markets' hidden real estate play in the US. In Asia, we've got contrasting looks at Tianli's education sector ambitions and Merchant House International's strategic wind-down.
Rob Vinall's latest letter offers fresh insights on oil & gas investments, while an unexpected deep dive into footwear adhesives catches the eye. From coal to video games, this week's selections aim to uncover some intriguing opportunities.
Americas
Kairos Research on Paycom(🇺🇸PAYC US - US$16.3 billion) Paycom, a cloud-based human capital management company, trades at 20x earnings despite strong growth. Its innovative Beti product could drive future growth and margin expansion.
Waterboy's Substack on The Marcus Corporation(🇺🇸MCS US - US$518 million) Marcus Corp owns movie theaters and hotels, with real estate worth nearly its entire market cap. Trading at 8x adjusted free cash flow, it could be worth $30+ if movies make a full comeback.
Value Punks on Nu Holdings(🇺🇸NU US - US$39.2 billion) Nu Holdings, a Brazilian fintech, is disrupting traditional banking with its innovative model. Trading at 20x 2025E earnings with strong growth potential, it presents an attractive opportunity in the evolving financial services landscape.
Rock & Turner on Ingles Markets(🇺🇸IMKTA US - US$1.37 billion) Ingles Markets, a regional supermarket chain, trades at 8.59x earnings with a 2.8% net margin. The company's substantial real estate holdings and potential for improved capital allocation make it an intriguing value play.
The Superinvestors of Augustusville on Namsys Inc(🇨🇦CTZ CN - US$24 million) Namsys, a provider of cash management software, trades at 12-13x 2025E earnings. With high margins, no debt, and potential for 10-12% revenue growth, it presents an interesting opportunity in the fintech space.
Europe, Middle East & Africa
Northwest Frontier Capital's Research on Boku(🇬🇧BOKU LN - US$626 million) Boku, a specialized payment network, is well-positioned to benefit from local payment methods growth. Trading at 32x P/E, its premium is justified by growth rates double that of peers.
Asia-Pacific
One foot hurdle on Infinity Development(ðŸ‡ðŸ‡°640 HK - US$54 million) This footwear adhesive manufacturer trades at an EV/EBIT less than 2. With consistent profitability and a 10.3% dividend yield, it offers a compelling value proposition in the Hong Kong market.
Researching Global Stocks on Tianli(ðŸ‡ðŸ‡°1773 HK - US$38 million) Tianli's acquisition of MacDuffie High School in Shanghai expands its international secondary education services. With a P/E ratio of approximately 15x, the company's future growth potential may not be fully reflected in its current valuation. Note: The original write-up is in Spanish. Nonetheless, it offers valuable insights into this interesting opportunity.
Value Zoomer on Merchant House International(🇦🇺MHI AU - US$10 million) Merchant House International, a textile manufacturer, is liquidating its assets. With a potential 39% total return and 26% IRR over 1.5 years based on conservative estimates, this special situation play could offer attractive returns for investors willing to navigate the complexities of a liquidation process.
Sweet Stocks on Web Travel Group and Webjet Group(🇦🇺WEB AU - US$2.0 billion and 🇦🇺WJL AU - US$272 million) Post-demerger analysis of Web Travel Group (WebBeds owner) and Webjet Group (OTA business). Web Travel Group trades at 28x forward P/E with potential for margin expansion, while Webjet Group trades at 18x P/E with an attractive EV/EBIT of 10x.
Moatless Musings - There are weeks when decades happen An analysis of recent developments in Chinese markets and policy shifts. Provides a unique perspective on potential investment strategies in light of these changes. (6 min read)
Investing in China - Not Sure How to Think About Recent Chinese Policies Introduces a "pendulum swing" model for understanding Chinese policymaking, using historical examples to anticipate future policy shifts. A valuable companion to the Moatless Musings article, offering a longer-term perspective on Chinese markets. (5 min read)
TQI capital (Typical quality investor) - Rob Vinall - RV Capital A summary of Rob Vinall's latest investor letter, offering insights into his investment philosophy and recent moves into oil & gas and Chinese stocks. A must-read for value investors. (10 min read)
Idea Hive - Exploring The Met Coal Industry: Part 3 The third installment in a series on the metallurgical coal industry. This piece introduces a framework for comparing producers based on factors like production costs, export capacity, and capital allocation. Essential reading for anyone interested in this sector. (10 min read)
Special Situation Investing - Intellectual Capital Businesses An exploration of businesses that derive value primarily from knowledge, expertise, and innovation rather than physical assets. Offers insights into how these companies create and sustain competitive advantages. (5 min read)
Base Hit Investing - Lincoln's 2nd Inaugural Address; Investing Philosophies and Tribalism An insightful piece drawing parallels between Lincoln's succinct communication and effective investing strategies. Challenges conventional wisdom about investment philosophies. (3 min read)
Quality Stocks - Do Moats Exist in the Video Game Industry? A deep dive into the challenges and opportunities in the video game industry. Offers valuable insights for investors considering this dynamic sector. (7 min read)
Kingswell - Chapter 8 of The Intelligent Investor: Or, How I Learned To Stop Worrying & Love Market Fluctuations A refreshing take on Benjamin Graham's classic chapter on market fluctuations. Essential reading for value investors in today's volatile markets. (4 min read)
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Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. All opinions expressed are those of the quoted authors and do not necessarily reflect the views of the newsletter creator. Always do your own research before making investment decisions.