Schopenhauer Capital
@SchopenhauerCap
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Investor and entrepreneur. I run a holding company + a software company. Tweets are my opinions and not investment advice.
Joined June 2021
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1)Dear deep value lovers, you are gonna love $JAKK –Jakk’s pacific, a toy and costume manufacturer that was near death and has pulled off a turnaround that is hard to screen (accounting of converts and preferred). 550M revenue, 45M EBITDA, $150M EV, 30M adj. NI, 110M Market Cap
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I think Stellantis $stla results are insane… especially when compared to €53bn market cap and 30bn net cash = EV of 23bn… gotta be one of the cheapest large cap stocks out there!
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1 - My favorite idea is Global Fashion Group ( $GFG ), a fashion marketplace business trading at 0.27x GMV, 0.4X revenues, 0.9x gross margins while growing GMV at 25% per year.
Management (2 co-ceos + CFO) + a board member just bought shares in the open market (December).
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1) $RCS.MI is one of my favorite ideas and I believe deep value lovers will absolutely love this one.
$RCS owns Italy's most popular newspaper (Corriere della Sera), basically the NY Times of Italy.
It also owns Gazzetta dello Sport (Italy's main sports paper),
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Another great quarter for $JAKK. YTD FCF at $67M vs. 170M Market cap and net cash. Q4 likely to generate cash based on Balance sheet. With 70M ebitda for 2022, it just seems way too cheap at below 3x EBITDA!
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What an insane quarter for $JAKK.
$96M cash, no debt (liq. value of preferred currently $38m). 200m market cap assuming $20 stock price. Ev at 150m. 75m ebitda with commentary during call (1st time I hear them saying that)"we believe it'll grow in profitability and revenue in 24"
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I’m really not surprised at all that $STLA Stellantis is
@michaeljburry
Michael Burry’s biggest position. It’s just too cheap! And with the huge cash position, I wouldn’t be surprised if they eventually do a massive special dividend or larger buyback.
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$jakk absolutely crashed earnings… results just speak for themselves… 96% sales growth. TTM net income at 55.5M… with 160m market cap…
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Net-net alert: $gfg Global Fashion Group completed the sale of LaModa for 100m. Trading below net cash…
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$jakk absolutely crashed earnings! How long will it take for this company to re-rate? This turnaround has been a thing of beauty! Also “analysts” estimated down revenues…they were up 44%…
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I have been terribly wrong on Global Fashion Group $GFG and certainly overestimated a fashion e-commerce marketplace's competitive advantages.
At the same time, I still believe that there's more value in the business that the current share price suggests.
I wrote an email to the
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Great to see $RCS.MI has included the authorization to buyback shares for the upcoming shareholder meeting agenda. As it trades at a little more than 2x ebitda, it would be a very welcome use of cash!
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Yep - Stellantis $STLA is really crazy cheap 😅
Barclay's thinks $STLA will decline -5% forever and their margins will collapse from 11% to 7% in 2030, so that the fair value derived using a DCF isn't too high. With these crazy assumptions they nonetheless have a fair value of $44, 144% above current prices.
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$RCS.MI Cairo commented that he is happy about 2022 earnings (March 21) and moderately optimist on advertising revenues for 2023.
He also said he is very much looking around for some deals Market will take notice some day...
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3) As I was setting myself up to write this thread, I went back and re-read some of the good work out there and I found the comments by Brian Bellinger with
@StockJabber
I almost stopped writing as this says everything in such a concise and compelling way
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$Jakk Rosen filed form 4 for the first time. He is buying more every day! He now owns 18.4% of the company! It seems pretty damn serious (it was 16.1% about a week ago)
@Plum_Capital
@CasinoCapital
@TheMuffinMan28
@BrownMarubozu
1)Dear deep value lovers, you are gonna love $JAKK –Jakk’s pacific, a toy and costume manufacturer that was near death and has pulled off a turnaround that is hard to screen (accounting of converts and preferred). 550M revenue, 45M EBITDA, $150M EV, 30M adj. NI, 110M Market Cap
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Enjoyed BMO report on $jakk with $21 target price.. they also mention an upside scenario of $48 based on $4eps. Since it’s currently around $3, all it takes is for the debt to be paid down to get there (saving would be c.$1 per share). Quite likely given cash they’ll generate…
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$GFG As anticipated, I got a cordial but fairly general reply from the board at Global Fashion Group.
Here’s my reply to them.
I have been terribly wrong on Global Fashion Group $GFG and certainly overestimated a fashion e-commerce marketplace's competitive advantages.
At the same time, I still believe that there's more value in the business that the current share price suggests.
I wrote an email to the
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$GFG Global fashion group selling lamoda for a 100m plus cash they have in Russia. They are now officially trading below net cash…
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$jakk Legendary Rosen buying his daily dose of jakk’s pacific! Getting very close to 20%…
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Absolutely monstrous quarter yes! $jakk
The preferred can be liquidated for around $37M as a maximum price... Hopefully they can reach an agreement to pay less as 6% pik is not super attractive to owners in any case...
Boooom! $JAKK with a fantastic Q3, massive beat, 74,4m ebit in 3 quarters on a ~75m enterprise value (plus maybe 50-60m for the preferred shares) - insane….congrats
@SchopenhauerCap
@finance_schmidt
💪
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Reaction to $jakk earnings make very little sense to me… they had guided for 80m in rev and made 131m..debt is now at 30m (having it further reduced by 38m) and cash at 40m. In 2022, they generated 86m in cash flow (76m FCF). There’s a new 52m in deferred tax assets that means
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11) who can collect 8%+ dividends in the meanwhile (with a low payout that could increase or hopefully buybacks could be started) for a dominant business with a c.20% Ebitda margin and 25%+ ROIC...
cc
@hkuppy
@Investmentideen
@Aktionaer_JR
@frankinvesting
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If someone knows a fund (possibly with an active inclination) that invests in small caps in Europe, do let me know! The idea might be interesting to them.
I have been terribly wrong on Global Fashion Group $GFG and certainly overestimated a fashion e-commerce marketplace's competitive advantages.
At the same time, I still believe that there's more value in the business that the current share price suggests.
I wrote an email to the
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$rcs Corriere della Sera reached 500k digital subscribers…it was 457k by September 30th. Nice growth! Also World Cup should be a nice boost for marca and gazzetta dello sport
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Finally some decent news on $GFG
€206M net cash vs. 42M market cap....
Adj EBITDA break-even in Q4.
They have been cutting costs and it should start showing in the numbers.
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$GFG global fashion group results looking great with 10.2% adj. Ebitda, 50% gross margin and continuous growth.
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This buyback from $GM could finally allow $STLA Stellantis to be a lot more aggressive with buybacks. Tavares always seemed cautious because of worries about unions reactions…
Stellantis is in a much much better position (and it’s way cheaper) than $GM and has a gigantic net
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$jakk great to finally see some institutions picking up on jakks with Divisadero Street Capital reporting 5.4% ownership
Anyone knows the firm well?
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Finally an upgrade for $jakk…still $10 too short with a $21 target but it’s a start I guess…
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@ReneSellmann
I think people don’t like some of their cars and they don’t look at the numbers or the actual data. Yes - I do think sometimes people are that superficial in assessing facts.
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11 - Please share with anyone you think might be interested.
Very happy to discuss the idea with anyone.
I’ll try to write something more comprehensive but in the meantime, feel free to reach out.
cc
@Twasluck1
@MadThunderdome
@_inpractise
@MaldenDriveCap
@briefnorris
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10) Now the price (<4x FCF) doesn’t make sense anymore and I believe the market has failed to appreciate the huge impact of the transaction. Nobody cares about a thinly traded small cap stock in Italy, but here lies the opportunity for patient investors
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8) Management (CEO) is hated for previous misteps taken: Oaktree tried to buy the company for $670M in 2011. Not only jakk's refused the offer, but it started buying back shares at that level…With current market cap at 110M, it’s quite clear it wasn’t a great move.
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12)I caught a slide that was eliminated from final version of Q3 presentation (was live for a few minutes) - it projects further growth and improved profitability for 2022. New movies, Disney strength (high % of revenue), new licences and Halloween can all contribute to beat that
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$jakk With a month delay from his last purchases, Rosen is back. Purchased a further 40k shares (0.4%). I had missed him 🤣
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🤣🤣
We lost a potential Hemingway to finance journalism. $JAKK
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My quick thoughts on $GFG earnings
Company confirmed that cash is held at holding level. So net cash of c.300M (640m cash - debt) is real with limited Russia risk.
Ukraine GMV was €12m in 2021 (total GMV for GFG was 2.4bn…). Lamoda’s products are 80% sourced within CIS...
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11)and finally Lawrence Rosen, a toy veteran who just filed 16.1% ownership.Rosen recently bought back his family company from Mattel He had originally sold it to Mega Brands for $350M in 2005. He is not exactly cash-strapped or clueless about the industry
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13) Please share with anyone who could be interested
@Plum_Capital
@InflexioSearch
@FortuneMaster4
@BrownMarubozu
@RodAlzmann
@Investmentideen
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@shot_change
Exactly. Rcs sport is worth the whole market cap. Does 40m in ebitda on 80m in revenue. Very high quality business. I believe for 400m he would sell.
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Looks like a major news is coming out on $FNKO … toy sector really is in play… $jakk $mat $has
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$jakk So Lawrence Rosen doubled his stake in Jakk’s to 1 millions shares (10% ownership) from previously reported 522k shares. Not bad…
@Plum_Capital
@FortuneMaster4
@BuffaloBillCo
@s_speculator
@BalmikJoe
@CasinoCapital
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returning cash through dividends in the future if price gets closer to value).
Even if it was to trade at $30 it would be very very cheap in my opinion!
$JAKK
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@InvestorInsane
This is by far the cheapest (especially when you take out the 30bn net cash…)
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@BrownMarubozu
My take is a bit different: say we pay 25% extra vs 50% extra. That saves us 6-7M. It’s not nothing of course but I think we can create significantly more value by buying back stock at depressed levels. If we lose the chance to buyback at this super low price, we’d lose an oppt
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7) I always ask myself why any opportunty exists... An easy to understand business at 3x EBITDA and 5x tax-adjusted EPS..
First, it is too small for many funds to own. 110M market cap... 2 shareholders own 15.5% and 16.1% respectively. Float is tight. But also ->
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Also… they are only applying a 7x multiple to EPS. Quite conservative in my opinion. I enjoyed their comments on the defensiveness of the toy industry with references to 07-09 period
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10)Mistakes are part of the game and scuttlebutt is that the CEO is incredibly committed and hard working. It's undeniable the company has changed and it has 3 key entities helping: CFO + Benefit street partners (key board member+ owns debt + 15.5% equity + majority of preferred)
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2) $JAKK acquires or licences IP, mostly from “evergreen brands”, including Disney and Nintendo.
Owned brand Disguise produces costumes mainly sold at Halloween and it is the largest costumes manufacturer in the US.
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4) RCS has been completely turned around as demostrated by its latest results. Here's 2021: €100M levered FCF on €846M of revenue. Net cash of 16M vs a debt of €500M in 2015! Online media ads is 44.4% of ad revenue and Corriere has 28.4M MAUs and Marca 94.5M just as an example
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$jakk interesting: jakk’s has options from today…
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@puppyeh1
Long story short:
€50M market cap
158M net cash (should be more after q4). 3 businesses: one burns most of the cash (Dafiti in latam) and should be immediately sold to focus on much stronger businesses (Australia and SEA). Happy to give you a lot more color.
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I would love for them to deal with the preferred and do a buyback. I believe this is a very decent business with high returns on capital. Trick is to not overinvest and use capital in excess smartly (ie buying back stock at this depressed valuations for now and potentially ->
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5) At a time when the publishing industry has been dealing with a shift to online, Cairo worked super hard on cost cutting (avoiding mass firings) and becoming strong online. He has a reputation of being obsessed about costs, checking and approving every invoice.
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@Martianofsafety
Ha - the literal translation sounds worse but he is basically saying “otherwise i would get bored” which is pretty common to say as an expression in Italian. One thing you can be certain of is that Cairo won’t overpay for M&A.He might miss some cause he doesn’t want to pay enough
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@honam
I honestly think you are misinterpreting the quote. Obviously the hard part is being able to perfectly value a company as perfectly predicting future cash flows is almost impossible. But he’s not saying that a company doesn’t change or won’t greatly increase CFs.
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$jakk Interesting.. Snapchat now lets you virtually try on and buy (Disguise) Halloween costumes directly within its app $jakk jakk’s pacific owns Disguise
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Paul is a truly outstanding person —-> this opportunity should not be missed by anyone who is hungry for knowledge and personal development (and $$$ to be fair - as the rewards can be exceptional if one is willing to put the work)
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9)Toys r Us bankruptcy almost brought the company to the ground. It forced it to get funding through highly dilutive converts. But we now have a company that is potentially prospectively better than the one Oaktree was trying to buy in 2011.
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having added a new partnership with Authentic Brands Group (owns quicksilver, roxy, element,etc.) which should allow them to make their business less seasonal and they also announced they will make Simpson toys.I could hear Berman's excitement when announcing it. It's a big deal!
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Offer for other €50M of converts to be repurchased by $GFG
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..Jakk’s won’t pay cash taxes for a while..
and with debt close to zero, interests will also be at zero.. so even normalizing ebitda at 50m (in 22 it was 76m), you have a lot of cash generation..
Enterprise value is currently at 140m…
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4) Go back and read above... it's all you need, really!
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10 - Link to speculation (not that it matters to the thesis, but still interesting) $GFG
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@FocusedCompound
$GFG
1 - My favorite idea is Global Fashion Group ( $GFG ), a fashion marketplace business trading at 0.27x GMV, 0.4X revenues, 0.9x gross margins while growing GMV at 25% per year.
Management (2 co-ceos + CFO) + a board member just bought shares in the open market (December).
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Even assuming no growth or lower EBITDA, they've demonstrated to be very rational operators, keeping inventory under control and with focus on profitability (gross margins up to 34.5%!) and they now have more options for their so called ever-green businesses ->
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@RodAlzmann
Curiosity: if you are going for a short squeeze trade, why not Corsair $CRSR.. 32-42% short interest depending on source and trading at 17x earning despite growth. Fees are at about 10%. Super low float and in general a company one could held for the long term…
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12) There is reason to believe that Q4 will show some of those sales that were pushed back in Q3 because of shipping delays. Toy demand is off the charts and management commentary is extremely bullish
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8 - Company has €680M cash and €370M debt (issued incredibly favorable converts with conversion price at €17.95 - current stock price is at €4.30 - and 1.5% interest rate - maturity in 2028).
Market cap is €930M so Enterprise Value of only €600M. $GFG
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7) After several years of back and forth (that culminated on Blackstone asking $600m to RCS for blocking a transaction to sell the building for €250m to allianz (BS had bought it for 120m), on July 18th a deal was finally reached!
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8) RCS bought back part of the building for 59m (originally sold that part in 2013 for 30m but Allianz was indeed buying it for 60m in 2018). Milan real estate prices went up a lot so this is a transaction at or slightly below market prices. And RCS agreed on 10M of legal fees
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Outlook also better than expected with €3bn NMV, 1.9Bn revenue and profitability…
Current price (320M market cap and 120M EV) seems at least “unfair” vs results.
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@BrownMarubozu
Also I think we could try to convert this to a 150% term loan with super low interests and an yearly amortization plan.
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Very positive comments on Toys during Target $tgt investor call. Great for $jakk …
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3) CEO Urbano Cairo (through his controlled Cairo Communications) owns 60% of RCS and he has been the CEO since acquiring control of the company in 2016 (paid around €1,07 with a mix of stock and cash)
From a financial perspective, his work has been nothing short of exceptional.
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9) From a purely capital allocation standpoint, this wouldn’t necessarily be the best use of cash. Yield on the investment is around 3% (saved lease) vs buybacks which would generate a much higher 25%+ FCF yield. However solving the 600m overhang was so important!
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@Onlystocks24
Yes - that’s what they told me also. However I believe this cannot wait anymore. We seat on 158m of net cash and likely q4 should be cash generative based on seasonality. We must protect the cash and remain very focused!
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Only one analyst covering $jakk at the Q&A on the call...The more I analyze this company, the more lucky I feel I’ve caught it early (it’s still early). We are facing a really clear market inefficiency straight out of Seth Klarman’s margin of safety!
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@AdrianKowollik
Hi Adrian, net cash is much higher than that. They have cash invested in securities (short term €/$). They were at 200m net cash at q2. They are now at 300m net cash. So basically they are trading at negative EV!! Let me know if you struggle finding the data
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@CloneShameless
@funikularinvest
@hkuppy
@Investmentideen
@Aktionaer_JR
@frankinvesting
Finally enough today Cairo confirmed what I mentioned rcs delisting impossible while Cairo’s delisting is not impossible. “But I haven’t really thought about it yet” = “I think about it every day” 🤣
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@BrownMarubozu
You are probably right! But markets are very inefficient so I’m hopeful haha :)
I also like the idea that they start thinking about capital allocation and outlining a strategy sooner rather than later.
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6) Company was shrunk to more relevant/profitable licences “Our goal has been to have a solid, profitable business without the big hits, which we have achieved, so that when a big hit occurs, and we know they will come again, we will be even more profitable.” CEO – Q1 2021 Call
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5)John Kimble was hired as CFO in 2019.He worked on Debt refinancing (full year E22 interest expense of $9.1 million vs $21.6 in 20 and $14.1 in E21) and got rid of unfavourable licence agreements. Gross margins are up to 31.2%, highest level since 16, which was highest since 10
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@HiddenValueGems
If you take out the €25bn of net cash, the PE is much lower than that! It’s trading at a 1x Ev/EBiTDA
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@robvinall
I just listened to the letter on Spotify! Truly excellent! Can I ask your opinion on $BABA’s VIE structure? Thanks!
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3 - $GFG works with 41 of the world’s top 50 brands and invested in creating an infrastructure that supports brands with fulfillment, logistics, marketing and data.The marketplace model offers GFG a capital light way to expand product assortment while increasing margins-GM at 45%
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Looking forward to this :)
1/ 1st Twitter Space (LINK BELOW)
I'm very honoured to have
@PaulAndreola
as a Guest on Sunday, the 27th of August at 9 PM (CET) / 12 PM (PDT).
He's considered as one of the most successful micro cap investors.
During this space we will dig into his investment framework.
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@evfcfaddict
@finance_schmidt
@Investmentideen
Haha you guys are too kind!
I’m glad we are making $$$ together!
Let’s spend them all in Omaha ;)
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Another $17.5M was paid down from the debt and it's likely they will continue further reducing debt and interests with a continued positive impact on FCF.
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