Investment Pitches

Pitch Summary:
Siemens, a portfolio holding, is leveraged to this trend. Siemens is the global leader in factory automation and industrial technology. Factory automation and digitisation are critical if manufacturing is to return to the US due to the cost of building new facilities there and shortage of trained labour in this sector. Also, President Trump believes the world over-relies on Chinese manufacturing and wants more manufacturing to return to the US. His use of tariffs could accelerate global reshoring, as more companies increase local production to avoid import tariffs.

BSD Analysis:
PM Capital positions Siemens as a key beneficiary of the global reshoring trend driven by geopolitical tensions and trade policy changes. The investment thesis centers on Siemens' leadership position in factory automation and industrial technology, which are critical enablers for manufacturing reshoring to higher-cost developed markets. The manager identifies President Trump's tariff policies as a catalyst that could accelerate reshoring as companies seek to avoid import duties through local production. Siemens' technology solutions address key challenges of reshoring including high facility costs and skilled labor shortages through automation and digitization. The company's global market leadership in industrial automation positions it to capture significant market share as manufacturing shifts away from China toward domestic production in the US and other developed markets.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
Bank of Ireland forms part of PM Capital's concentrated European banking value play, targeting Ireland's leading financial institution at attractive valuations relative to global peers. The investment case leverages the structural undervaluation of European banks, with Bank of Ireland trading at approximately 8x earnings while generating low-teen shareholder returns. Key catalysts include rising yield curves improving net interest margins, anticipated infrastructure and defense spending boosting economic activity, and recovering lending growth after years of stagnation. The manager's thesis doesn't rely solely on growth but rather on valuation normalization as European banking fundamentals improve. Bank of Ireland's dominant position in the Irish market and exposure to both Irish and UK economies positions it well to benefit from improved credit demand and economic recovery.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
ING Groep represents a core holding in PM Capital's European banking value strategy, offering exposure to the Netherlands' leading financial institution at compelling valuations. The investment thesis centers on the significant valuation discount European banks trade at versus US and Australian peers, with ING trading at approximately 8x earnings while delivering low-teen shareholder returns. The manager identifies multiple positive catalysts including rising yield curves benefiting net interest margins, increased infrastructure and defense spending stimulating economic activity, and recovering lending growth after a prolonged period of weakness. ING's diversified business model across retail, commercial, and investment banking, combined with its strong digital banking platform, positions it well to capitalize on improving European economic conditions and credit demand recovery.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
PM Capital's investment in CaixaBank reflects their broader European banking value strategy, targeting Spain's largest bank at attractive valuations. The thesis capitalizes on the structural undervaluation of European banks relative to global peers, with CaixaBank trading at approximately 8x earnings while generating low-teen shareholder returns. Key catalysts include rising yield curves improving net interest margins, anticipated infrastructure and defense spending boosting economic activity, and recovering lending growth after years of stagnation. The manager emphasizes that the investment case doesn't depend solely on growth but rather on valuation re-rating as European banking fundamentals normalize. CaixaBank's dominant market position in Spain positions it well to benefit from improved economic conditions and credit demand recovery.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
PM Capital presents a compelling value thesis on Lloyds Banking Group as part of their broader European banking strategy. The manager argues that European banks, including Lloyds, trade at significant valuation discounts to US and Australian peers despite improving fundamentals. The investment case centers on multiple catalysts: rising yield curves benefiting net interest margins, increased infrastructure and defense spending driving credit demand, and recovering lending growth after a decade of anemic performance. At approximately 8x earnings with low-teen shareholder returns, Lloyds offers attractive risk-adjusted returns. The thesis doesn't rely solely on growth but rather on valuation normalization as European economic conditions improve and lending activity recovers.

Pitch Summary:
FICO is the leading provider of consumer credit analytics and scoring algorithms: Best known for the "FICO Score"—a three-digit metric used in 90%+ of consumer credit decisions across the U.S. (including mortgage, auto, credit card, and personal loans). FICO generates revenue in two ways: Scores (53% FY24 revenue / 76% FY24 EBITDA): Proprietary risk algorithm is licensed to banks, credit bureaus, insurance companies, and other financial intermediaries. Royalty paid on a per score basis. Software (47% FY24 revenue / 24% FY24 EBITDA): Subscription software solutions, help banks and lenders manage the lifecycle of a loan (customer acquisition, fraud detection, repayment schedules). 35+ year history in consumer scoring has established it as the benchmark used in all domestic credit decisioning: In 1987, they introduced nation's first standardized credit score. Since then, all key constituents in consumer credit value chain have adopted and embedded it into their risk systems. Industry standard: FICO score is used in 90% of lending decisions. Embedded in underwriting & secondary market risk technology systems. Entrenchment makes it difficult to displace as it serves as the common language in communicating consumer risk profiles to market participants. Score monetization/Proliferation: Accelerates volume by encouraging increased score pull cadence (monthly → weekly pulls) and monetizing new areas (mortgage non-originations). Volume Growth in Core Categories: Mortgage volumes are depressed relative to recent history (53% below the 2021 peak). We see potential for bounce back followed by long-term secular growth driven by housing starts. Pricing Opportunity across Mortgage and Auto: FICO is underpriced relative to the value it provides in credit underwriting. Management Aligned with Shareholders: CEO Will Lansing is a top 15 shareholder. Company has investor friendly capital return strategy (~$3B shares repurchased since 2021). New U.S. administration created policy uncertainty which led to a buying opportunity: Investors have raised concerns around changes at Fannie Mae and Freddie Mac that could impact FICO's position in market and its role in scoring government-backed mortgages (~57% of new mortgages). FICO has faced regulatory scrutiny before and navigated it successfully. We felt that the recent stock pullback (down 20%+ in mid-May) compensated investors for regulatory uncertainty.

BSD Analysis:
Edgewood's FICO investment thesis capitalizes on the company's entrenched position as the de facto standard in consumer credit scoring, used in over 90% of U.S. lending decisions. The manager views FICO as a classic network effect business where 35+ years of market adoption have created virtually insurmountable switching costs across the entire credit ecosystem. The investment case centers on multiple growth drivers: score proliferation opportunities (expanding from monthly to weekly pulls), pricing power given FICO's minimal cost relative to loan values, and volume recovery as mortgage markets normalize from depressed levels. Management's shareholder-friendly approach, including $3B in buybacks since 2021 and CEO ownership alignment, enhances the investment appeal. Edgewood opportunistically initiated the position during regulatory uncertainty around potential GSE changes, viewing the 20%+ pullback as attractive entry point. The company's dual revenue model provides both high-margin royalty income from scores (76% of EBITDA) and recurring software revenue, creating a defensive yet growth-oriented profile. With mortgage volumes 53% below 2021 peaks and secular housing growth ahead, FICO offers compelling risk-adjusted returns.

Pitch Summary:
Diversified Technology Leader: Broadcom is a global technology company that designs, develops, and supplies a broad range of semiconductor & infrastructure software solutions. Broadcom operates two primary segments: Semiconductors (58% of revenue): Serves networking, wireless, broadband, compute & storage end markets. AI offerings (24% of total revenue, growing 40%+) consist of custom chips & networking equipment for AI datacenter buildouts. Software (42% of revenue): Mission critical on-premise software with offerings that span cybersecurity, private cloud, observability, and mainframe. High margins: Broadcom boasts a ~60% operating margin and 38% FCF margin which enables consistent capital return. AVGO seeks to acquire businesses with #1 or #2 market share, high switching costs and attractive financial profiles. Upon acquisition, Broadcom aims to cut costs, simplify go to market strategy and continue to invest in R&D. Over the last decade, Broadcom's aperture has expanded to software companies with mission critical offerings across security, mainframe & public / private cloud infrastructure. Semiconductor market likely to grow from $655B today to $1T+ by 2030 (+9% CAGR) driven by AI compute, networking & digital communications. Broadcom's diversified semiconductor business likely to benefit from hyperscaler investment in custom silicon. AI hyperscaler capex est. $455B this year to $1T+ by 2029. Company anticipates AI compute clusters scaling from 10k to 100k or 500k over medium term. Four new unnamed customers to expand AI revenue opportunity across compute & networking. Potential new customers offer meaningful upside to AI revenue. Non-AI semiconductor business to see a cyclical recovery with mid-single digit growth longer-term. Broadcom's software business centered around VMware likely to grow. 53% of senior IT leaders say private cloud is top priority for deploying new workloads. 84% of senior IT leaders use private cloud for traditional enterprise applications & cloud native workloads. CEO Hock Tan likely to continue long history of shareholder value creation through operational efficiency, M&A, and capital return. EBIT margins up 700bps over 5 years from 53% to 60%. Dividend CAGR of 32% since FY 2016. $10B buyback announced April 2025.

BSD Analysis:
Edgewood's investment thesis for Broadcom centers on the company's unique positioning at the intersection of AI infrastructure and mission-critical enterprise software. The manager emphasizes AVGO's dual-segment model, with semiconductors capturing the AI boom through custom silicon for hyperscalers and software providing stable recurring revenue through VMware and other enterprise solutions. The AI opportunity appears particularly compelling, with management targeting $12B in AI revenue by 2027 from a $60-90B addressable market. Broadcom's competitive advantages include high switching costs, market-leading positions, and CEO Hock Tan's proven track record of value creation through disciplined M&A and operational excellence. The company's 60% operating margins and 38% free cash flow margins enable substantial capital returns, evidenced by a 32% dividend CAGR since 2016. With AI hyperscaler capex expected to grow from $455B to over $1T by 2029, Broadcom is well-positioned to benefit from both custom silicon demand and networking infrastructure buildouts. The software segment provides defensive characteristics and growth optionality as enterprises prioritize private cloud deployments.

Pitch Summary:
Boston Scientific is a global medical device company that develops and manufactures minimally invasive products used in a variety of medical specialties. BSX operates two primary segments: Cardiovascular: Includes Watchman (atrial fibrillation device), electrophysiology (EP), and interventional cardiology. MedSurg: Includes endoscopy, urology, and neuromodulation. Medical technology is an attractive segment of healthcare. Procedure based sales drive durable and recurring revenue stream. Advances in technology enabling safer, more effective treatments are potential long-term tailwinds. Regulatory approval process & scaled distribution create high barriers to entry. Durable growth profile: Broad portfolio, continued innovation, tuck-in M&A, economies of scale can drive top line and double-digit EPS growth. Product innovation driving growth: Electrophysiology (EP) product portfolio likely to continue gaining share. Watchman (AF device) has sustained physician loyalty in fast-growing end market. Pipeline of other bets in emerging areas. Near-term margin opportunity underappreciated: Key growth products are margin accretive. High quality management team with track record of M&A execution: Venture capital portfolio enhances M&A efforts. Electrophysiology is a cardiology subspecialty focused on the electrical activity in the heart. Rapid transition from legacy ablation—radiofrequency (RF) & cryoablation (Cryo)—to pulsed field ablation (PFA). Gaining market share in EP with a strong pipeline.

BSD Analysis:
Edgewood's thesis centers on Boston Scientific's position as a diversified medical device leader with strong growth prospects driven by innovation and market expansion. The manager highlights BSX's dual-segment structure spanning cardiovascular and MedSurg markets, with particular emphasis on the electrophysiology opportunity where the company is gaining share through advanced pulsed field ablation technology. The investment case rests on durable revenue growth from procedure-based sales, margin expansion from higher-value products, and management's proven M&A execution track record. With a ~$70B total addressable market growing 8-9% annually, BSX benefits from secular healthcare trends toward minimally invasive treatments. The company's strong competitive moats include regulatory barriers and scaled distribution networks. Management's venture capital approach to M&A provides additional growth optionality beyond organic expansion. At current valuations, the stock offers attractive risk-adjusted returns given the company's diversified portfolio and accelerating revenue growth trajectory.

Pitch Summary:
AIB Group led the performance among our European bank holdings, up +17% during the quarter following a directed buyback that effectively removed the Irish Government's 15-year shareholding, dating back to the 2009 financial crisis. Fund performance was solid during the June quarter, led by positive contributions from our European bank positions - primarily AIB Group - as well as commodity holdings Newmont, Freeport, and Teck, and gaming positions MGM China and Wynn Resorts.

BSD Analysis:
PM Capital's AIB Group investment demonstrates the value creation potential from European banking normalization post-financial crisis. The 17% quarterly gain was driven by a significant corporate action - a directed buyback that eliminated the Irish Government's 15-year shareholding stemming from the 2009 crisis. This represents a major milestone in AIB's return to full private ownership and normal capital allocation. The government exit removes a persistent overhang that had constrained the stock's valuation and provides management with greater flexibility for shareholder returns. AIB's strong performance within PM Capital's European banking theme validates their thesis that these institutions trade at significant discounts to fair value. The successful completion of this buyback signals AIB's financial strength and marks the end of the crisis-era government intervention, positioning the bank for improved investor sentiment and multiple expansion.

Pitch Summary:
Newmont, the world's largest gold miner, rallied 21% during the quarter amid increased geopolitical tensions, notably the escalation of the Iran-Israel conflict and direct involvement by the US. While gold prices pulled back slightly from an earlier all-time high above US$3,400 per ounce, the physical gold price remains elevated, reflecting the ongoing demand from central banks and investors seeking stability amid persistent economic uncertainty. After years of underperforming relative to gold prices, Newmont's stock price has begun catching up, though it remains almost 30% below its 2022 peak, at which point gold was trading at US$2,000 per ounce.

BSD Analysis:
PM Capital's Newmont position reflects a compelling value opportunity in gold mining amid elevated geopolitical tensions and monetary uncertainty. As the world's largest gold producer, Newmont has significantly underperformed the underlying gold price, creating a valuation disconnect that is beginning to correct. Gold prices remain elevated above $3,400 per ounce, supported by central bank demand and safe-haven flows amid persistent economic uncertainty. The manager notes Newmont trades nearly 30% below its 2022 peak despite gold prices being substantially higher than the $2,000 level at that time. This suggests significant catch-up potential as the market recognizes the value creation from higher gold prices. Escalating geopolitical tensions, particularly the Iran-Israel conflict and US involvement, reinforce gold's safe-haven appeal and support continued central bank accumulation.

Pitch Summary:
Freeport McMoRan, a portfolio holding, is the world's second-largest copper producer with strategic assets in the US. It could be a direct beneficiary of favourable US government policy for domestic copper production. President Trump is using commodities as bargaining chips for trade concessions, diplomacy and international politics. This is evident in uranium, rare earths, copper, battery metals, steel, aluminium and other commodities. China is also engaging in commodity warfare, having increased its investment in African resource projects. These artificial barriers to commodity supply coincide with decades of global underinvestment in resource projects, and with new drivers of commodity demand from the transition to renewables. Copper, for example, is a key commodity in electric vehicles.

BSD Analysis:
PM Capital's investment in Freeport-McMoRan capitalizes on multiple converging themes supporting copper demand and supply constraints. As the world's second-largest copper producer with strategic US assets, Freeport is positioned to benefit from favorable domestic production policies amid rising geopolitical tensions. The manager identifies commodity warfare as a key driver, with both the US and China using resources as diplomatic tools, creating artificial supply barriers. This coincides with decades of underinvestment in resource projects globally, constraining future supply growth. Simultaneously, the renewable energy transition is driving new demand sources, particularly from electric vehicles where copper is essential. Freeport's domestic US production provides strategic value in an increasingly fragmented global commodity landscape. The combination of supply constraints, policy support, and structural demand growth creates a compelling long-term investment case for copper producers.

Pitch Summary:
Siemens, a portfolio holding, is leveraged to this trend. Siemens is the global leader in factory automation and industrial technology. Factory automation and digitisation are critical if manufacturing is to return to the US due to the cost of building new facilities there and shortage of trained labour in this sector. President Trump believes the world over-relies on Chinese manufacturing and wants more manufacturing to return to the US. His use of tariffs could accelerate global reshoring, as more companies increase local production to avoid import tariffs.

BSD Analysis:
PM Capital positions Siemens as a key beneficiary of the global reshoring trend driven by US-China trade tensions and supply chain diversification. As the global leader in factory automation and industrial technology, Siemens is uniquely positioned to capitalize on manufacturing returning to higher-cost developed markets. The investment thesis centers on the critical role of automation and digitization in making reshored manufacturing economically viable, given high facility costs and skilled labor shortages in developed markets. President Trump's tariff policies are expected to accelerate this trend as companies seek to avoid import duties through local production. Siemens' technological leadership in industrial automation provides a sustainable competitive advantage in this multi-year structural shift. The company's comprehensive portfolio of automation solutions positions it to capture significant market share as global manufacturing patterns reshape.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
Bank of Ireland exemplifies PM Capital's European banking value strategy, trading at approximately 8x earnings while delivering low-teen shareholder returns. The Irish bank benefits from improving European economic conditions and expectations of increased infrastructure and defense spending stimulating credit demand. Bank of Ireland's strong market position in Ireland provides exposure to any domestic economic recovery, while its UK operations offer geographic diversification. The manager emphasizes that European lending growth has been weak for over a decade, creating substantial operating leverage as credit markets normalize. The steeper yield curve environment enhances profitability prospects, while the bank's conservative valuation provides significant downside protection. The combination of defensive metrics and cyclical recovery potential makes Bank of Ireland an attractive value opportunity within European financials.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
ING Groep represents PM Capital's conviction in undervalued European banking opportunities, trading at approximately 8x earnings versus higher multiples for US and Australian peers. The Dutch bank benefits from improving European economic sentiment driven by expected infrastructure and defense spending increases. ING's diversified business model across retail, commercial, and wholesale banking provides multiple avenues for growth as European credit markets recover. The manager notes that European lending growth has been anemic for over a decade, suggesting significant upside potential as economic conditions normalize. The steeper yield curve environment enhances net interest margin prospects, while ING's strong digital banking platform positions it well for market share gains. The combination of defensive valuation and cyclical recovery potential creates an attractive risk-adjusted return profile.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
PM Capital's investment in CaixaBank reflects their systematic approach to European banking value opportunities. As Spain's largest bank, CaixaBank trades at a significant discount to global peers at approximately 8x earnings while generating low-teen shareholder returns. The investment thesis benefits from improving European economic conditions, particularly expectations of increased infrastructure and defense spending that should stimulate credit demand. The manager emphasizes that European lending growth has been weak for over a decade, creating substantial operating leverage potential as economic activity normalizes. The steeper yield curve environment further enhances profitability prospects for traditional banking operations. CaixaBank's dominant market position in Spain positions it well to capture any recovery in domestic credit markets, while the defensive valuation provides downside protection.

Pitch Summary:
European banks are the largest theme in our global strategy. Holdings such as Lloyds Banking Group in the UK, CaixaBank in Spain, ING Groep in The Netherlands and Bank of Ireland trade on significantly lower valuation multiples than their US and Australian peers. Headwinds turned into tailwinds for European banks, which enjoyed a strong quarter due to a higher yield curve and growing confidence that increased infrastructure and defence spending would drive European economic activity. Improving sentiment is also supporting a recovery in lending growth. If sustained, this improvement would significantly enhance the attractiveness of the sector, given European lending growth has been anaemic for over a decade. However, our European banking thesis does not rely on growth, as the banks are currently trading circa 8x earnings and delivering low-teen shareholder returns annually.

BSD Analysis:
PM Capital presents a compelling value thesis for Lloyds Banking Group as part of their broader European banking strategy. The manager highlights a significant valuation discount relative to US and Australian banking peers, with European banks trading at approximately 8x earnings while delivering low-teen shareholder returns. The investment case is strengthened by improving macroeconomic conditions, including a steeper yield curve and expectations of increased infrastructure and defense spending driving economic activity. The manager notes that European lending growth has been anemic for over a decade, suggesting substantial upside potential if credit demand recovers. Importantly, the thesis doesn't rely solely on growth, as current valuations appear attractive even under conservative assumptions. The combination of defensive valuation metrics and potential cyclical recovery creates an asymmetric risk-reward profile favoring European banks like Lloyds.

Pitch Summary:
During the second quarter we made an investment in the Belgian company Kinepolis, one of the world's leading cinema operators. Kinepolis operates 110 cinemas with a total of 1,141 screens in Europe, the United States and Canada. The company is the most efficient operator in the market with an implemented system of continuous improvement through the introduction of best practices around all its cinemas. In addition, the company owns the real estate assets of 50 of the cinemas it operates which gives it great flexibility and greater stability to its business. Cinema attendance fell sharply in the wake of the Covid pandemic and after almost five years attendance is still 15% down. In fact, the organic evolution of viewers has been declining over the last two decades. Despite this, Kinepolis' revenues have been growing consistently due to a constant increase in ticket prices, an increase in cinema product sales and a process of premium product development (larger seats, 3D cinemas, etc...). As a result, the company achieved all-time record sales and operating results in 2023 despite the lower attendance in 2019. However, in 2024 this recovery that had been underway since 2022 was interrupted due to the actors' strike in the US during the latter part of 2023, which led to a significant slowdown in the number of films, especially impacting blockbusters which have the most significant impact on the number of viewers. In addition, the cinema market is still highly fragmented, which offers a significant opportunity for consolidation and inorganic growth. In this context, Kinepolis is much better positioned to execute acquisitions as it has a much stronger balance sheet than the other major operators as it has a lower level of debt than its competitors and owns the real estate of more than 50% of the cinemas it operates. In other words, this is the most efficient company in the sector, with the strongest balance sheet and, due to its significant operating leverage, we believe it will benefit greatly from the recovery in audience numbers expected in the coming quarters as the number of Hollywood blockbusters increases, which will allow it to achieve a substantial improvement in its profits. In addition, the company still has room to develop its premium offering in its cinemas and is in a very good position to resume the inorganic growth successfully developed in the years prior to the pandemic. Despite these good prospects we have been able to buy shares in the company at a very attractive double-digit FCF yield valuation. Even though the company's financial results in 2023 already exceeded those achieved in 2019, the company is trading at a 40% discount to the levels it was trading at in the years prior to the pandemic.

BSD Analysis:
EQUAM Capital initiated a position in Kinepolis, viewing it as the most efficient cinema operator globally with superior operational practices and a strong balance sheet. The manager's thesis centers on the company's resilience during the pandemic, achieving record sales and operating results in 2023 despite 15% lower attendance compared to 2019, driven by pricing power and premium product development. The investment case is built on expected recovery in cinema attendance as Hollywood blockbuster releases normalize following the 2023 actors' strike disruption. Kinepolis trades at a significant discount to pre-pandemic levels despite superior financial performance, offering an attractive double-digit free cash flow yield. The company's ownership of real estate assets for over 50% of its cinemas provides operational flexibility and positions it well for industry consolidation. The fragmented cinema market presents inorganic growth opportunities, with Kinepolis having a competitive advantage through its stronger balance sheet and lower debt levels compared to peers. The manager expects substantial profit improvement as operating leverage benefits from recovering audience numbers and continued premium product rollout.

Pitch Summary:
During the second quarter we made an investment in the Belgian company Kinepolis, one of the world's leading cinema operators. Kinepolis operates 110 cinemas with a total of 1,141 screens in Europe, the United States and Canada. The company is the most efficient operator in the market with an implemented system of continuous improvement through the introduction of best practices around all its cinemas. In addition, the company owns the real estate assets of 50 of the cinemas it operates which gives it great flexibility and greater stability to its business. Cinema attendance fell sharply in the wake of the Covid pandemic and after almost five years attendance is still 15% down. In fact, the organic evolution of viewers has been declining over the last two decades. Despite this, Kinepolis' revenues have been growing consistently due to a constant increase in ticket prices, an increase in cinema product sales and a process of premium product development (larger seats, 3D cinemas, etc...). As a result, the company achieved all-time record sales and operating results in 2023 despite the lower attendance in 2019. However, in 2024 this recovery that had been underway since 2022 was interrupted due to the actors' strike in the US during the latter part of 2023, which led to a significant slowdown in the number of films, especially impacting blockbusters which have the most significant impact on the number of viewers. In addition, the cinema market is still highly fragmented, which offers a significant opportunity for consolidation and inorganic growth. In this context, Kinepolis is much better positioned to execute acquisitions as it has a much stronger balance sheet than the other major operators as it has a lower level of debt than its competitors and owns the real estate of more than 50% of the cinemas it operates. In other words, this is the most efficient company in the sector, with the strongest balance sheet and, due to its significant operating leverage, we believe it will benefit greatly from the recovery in audience numbers expected in the coming quarters as the number of Hollywood blockbusters increases, which will allow it to achieve a substantial improvement in its profits. In addition, the company still has room to develop its premium offering in its cinemas and is in a very good position to resume the inorganic growth successfully developed in the years prior to the pandemic. Despite these good prospects we have been able to buy shares in the company at a very attractive double-digit FCF yield valuation. Even though the company's financial results in 2023 already exceeded those achieved in 2019, the company is trading at a 40% discount to the levels it was trading at in the years prior to the pandemic.

BSD Analysis:
EQUAM Capital initiated a position in Kinepolis, viewing it as the most efficient cinema operator globally with superior operational practices and a strong balance sheet. The manager's thesis centers on the company's resilience during the pandemic, achieving record sales and operating results in 2023 despite 15% lower attendance compared to pre-COVID levels. This was accomplished through pricing power, increased concession sales, and premium service offerings. The investment case is strengthened by Kinepolis owning real estate for over 50% of its locations, providing operational flexibility and asset backing. The manager expects significant operating leverage benefits as Hollywood blockbuster releases normalize following the 2023 actors' strike. Additionally, the fragmented cinema market presents consolidation opportunities, with Kinepolis well-positioned given its superior balance sheet and lower debt levels versus competitors. The valuation appears compelling at a double-digit free cash flow yield and 40% discount to pre-pandemic trading levels, despite superior current fundamentals.

Pitch Summary:
ITM Power is once again one of the monthly winners with a further 37% increase in its share price. This means that the share price has risen by more than 100% since the beginning of the year, supported by good company news. For us, this is a good sign and shows that active management continues to work. Two years ago, we analysed the hydrogen sector in detail following the changed framework conditions, sold a number of hydrogen shares and made a conscious decision in favour of ITM after visiting the company. A decision that is paying off today.

BSD Analysis:
ITM Power is a pure-play electrolyzer story in a market that loves hydrogen narratives but punishes execution misses. The technology promise is clear; the commercial rollout has been slower and more capital-intensive than early bulls assumed. Investors price it like a venture project because, operationally, it still behaves like one. Order quality and margin discipline matter far more than headline backlog. Policy support helps, but subsidies don’t fix manufacturing inefficiency. If electrolyzer demand scales meaningfully, ITM has positioning leverage. Until then, this is energy-transition optionality with real dilution risk.

Pitch Summary:
FICO is the leading provider of consumer credit analytics and scoring algorithms: Best known for the “FICO Score”—a three-digit metric used in 90%+ of consumer credit decisions across the U.S. (including mortgage, auto, credit card, and personal loans). FICO generates revenue in two ways: Scores (53% FY24 revenue / 76% FY24 EBITDA): Proprietary risk algorithm is licensed to banks, credit bureaus, insurance companies, and other financial intermediaries. Royalty paid on a per score basis. Software (47% FY24 revenue / 24% FY24 EBITDA): Subscription software solutions, help banks and lenders manage the lifecycle of a loan (customer acquisition, fraud detection, repayment schedules). 35+ year history in consumer scoring has established it as the benchmark used in all domestic credit decisioning: In 1987, they introduced nation’s first standardized credit score. Since then, all key constituents in consumer credit value chain have adopted and embedded it into their risk systems. Industry standard: FICO score is used in 90% of lending decisions. Embedded in underwriting & secondary market risk technology systems. Entrenchment makes it difficult to displace as it serves as the common language in communicating consumer risk profiles to market participants. Score monetization/Proliferation: Accelerates volume by encouraging increased score pull cadence (monthly → weekly pulls) and monetizing new areas (mortgage non-originations). Volume Growth in Core Categories: Mortgage volumes are depressed relative to recent history (53% below the 2021 peak). We see potential for bounce back followed by long-term secular growth driven by housing starts. Pricing Opportunity across Mortgage and Auto: FICO is underpriced relative to the value it provides in credit underwriting. Management Aligned with Shareholders: CEO Will Lansing is a top 15 shareholder. Company has investor friendly capital return strategy (~$3B shares repurchased since 2021). Why Now? New U.S. administration created policy uncertainty which led to a buying opportunity: Investors have raised concerns around changes at Fannie Mae and Freddie Mac that could impact FICO’s position in market and its role in scoring government-backed mortgages (~57% of new mortgages). FICO has faced regulatory scrutiny before and navigated it successfully. We felt that the recent stock pullback (down 20%+ in mid-May) compensated investors for regulatory uncertainty.

BSD Analysis:
Fair Isaac continues to flex its monopoly-like pricing power in 2026, doubling its FICO score pricing for mortgages to $10 per score, a move that is expected to contribute significantly to its high-margin revenue. The company’s "Scores" division recently achieved nearly 30% year-over-year growth, fueled by resilient demand in the auto and mortgage sectors despite fluctuating interest rates. While the FHFA’s inclusion of VantageScore in mortgage processing creates a long-term competitive threat, FICO’s dominant brand and entrenched status in underwriting provide a formidable defensive moat. Bearish sentiment is currently limited to the software segment’s slower scaling, but the firm’s ability to implement aggressive price increases underscores its pricing power. With a consensus "Buy" rating and robust cash flow, FICO remains a premier play on the structural reliance of the global credit ecosystem.