Investment Pitches

Pitch Summary:
Boyd Group was founded in Winnipeg, MB in 1990 and operates auto body/ collision repair and auto glass services shops across North America. The business services their customers effectively and efficiently, making them a great partner to insurance companies. Historically, the business has grown and achieved density through acquisitions of multi-shop operators (MSOs) which would typically operate anywhere from 10-50 stores in a region. The industry has seen upward pressure on acquisition multiples over time, in part because private equity has deployed capital into the collision repair sector. We have been pleased to see Boyd remaining disciplined on the price they are willing to pay for the shops, choosing to prioritize returns on invested capital instead of growing at any cost. We see this to be a function of management alignment and incentive structure, with the management team and Board collectively owning ~$32M of equity in the business. Like Langdon’s structure, management are shareholders of the business and seek to optimize returns on capital. Recently, Boyd has started to open its own stores instead of acquiring these MSOs, which has led to short-term erosion in profitability as the stores take longer to mature when opened organically. As these greenfield stores mature, returns on capital are similar, if not better, than returns that would be expected from acquired stores. Our investment team has followed Boyd for the better part of a decade and the management team is one which we hold in extremely high regard.

BSD Analysis:
Boyd is a scale consolidator in North American collision repair, a structurally attractive niche where complexity of modern vehicles, insurer preference for large networks and limited new competition underpin steady demand. The manager likes Boyd’s discipline in M&A as private equity has bid up MSO multiples, shifting focus toward greenfield stores that depress margins near term but can generate equal or superior returns as they mature. Management’s meaningful equity ownership supports rational capital allocation and prioritisation of return on invested capital over headline unit growth. Over time, the model should deliver high single- to low double-digit revenue growth, operating leverage as new stores ramp, and robust free cash flow that can fund further expansion and buybacks. While the stock tends to trade at a premium multiple versus traditional auto retail given its recurring, insurance-driven revenue, that premium looks warranted by Boyd’s long consolidation runway and demonstrated execution. Key catalysts include improving same-store sales, maturation of the recent greenfield cohorts, and any easing in technician wage/parts inflation that would support margin recovery.

Pitch Summary:
TerraVest Industries is a consolidator of businesses that manufacture products that transport and store various fuels, chemicals, agricultural products, and food & beverage products. We added the company to our Portfolio earlier this year after spending time with senior management across Canada. We built an understanding of the business’s operating structure and an appreciation of the improvements made when integrating an acquisition. We see a business with a capable management team that is aligned with shareholders, with insiders owning over 30%. In late-2023, TerraVest announced their largest acquisition to-date, replicating their strategy used to integrate and add-value to a larger business called Highland Tank, which operates in new end markets (chemical, fuel, and water storage, and grease separation). Similarly, another acquisition called Advanced Engineering Products (AEP) operates in the transportation of liquid consumables. We believe these two acquisitions provide a new growth avenue for TerraVest to consolidate. The business has begun to show its true potential this year, with operating margins and free cash flow generation improving as these larger acquisitions have been integrated. We believe the company is still in the early innings of its inorganic growth story and is in a strong position to continue consolidating operations in highly fragmented industries. We attended several trade shows this year to understand TerraVest’s customers, acquisition targets, and its competitors, providing additional context to the strong reputation that TerraVest has built as a consolidator in the industry.

BSD Analysis:
TerraVest is a high-quality Canadian small-cap compounder, using disciplined M&A to build a diversified portfolio of niche tank, storage and transport businesses with strong cash conversion. Management’s 30%+ ownership aligns capital allocation with shareholders and supports a long runway of bolt-on deals in highly fragmented markets, with recent acquisitions like Highland Tank and AEP broadening end-markets and increasing scale. As operating margins expand and free cash flow inflects higher post-integration, leverage remains manageable and gives TerraVest strategic flexibility to keep consolidating while still de-risking the balance sheet. The business should benefit from secular demand for energy, chemical and water infrastructure, and from its reputation as a preferred buyer for succession situations. On valuation, the shares trade at a premium to typical TSX small-cap industrials, but this looks justified by double-digit intrinsic value growth, high returns on incremental capital and visible acquisition pipelines. Key catalysts include further accretive deals, continued margin expansion from the recent platforms, and the potential for increased investor attention or index inclusion as market cap grows.

Pitch Summary:
Citizens Bancshares (CZBS) - is an Atlanta, Georgia based bank that received $95.7 million of additional capital via the US Treasury's Emergency Capital Investment Program (ECIP) at the end of June 2022. The bid price declined from $49.60 per share at the end of the first quarter to $45.45 per share at the end of the second quarter. Citizens issued a press release which they normally do not do. Earnings for the first quarter of 2024 were $1.95 per share, an increase of 16% versus the prior year quarter. They have reduced their share count by 10% over the last year, from 2.0 million shares to 1.8 million shares. In the first quarter they paid a $1.00 annual dividend. Earnings run rate is roughly $8 per share. The stock is an incredible bargain at six times earnings for a massively overcapitalized bank that is shareholder friendly.

BSD Analysis:
The manager identifies Citizens Bancshares as an exceptional value opportunity, trading at just 6x earnings despite strong fundamentals and shareholder-friendly management. The bank's receipt of $95.7 million in ECIP capital has created massive overcapitalization, providing substantial downside protection and flexibility for growth or shareholder returns. Q1 2024 earnings of $1.95 per share represent 16% year-over-year growth, while the $8 annual earnings run rate at the current $45.45 price creates an attractive valuation. Management's commitment to shareholders is evident through aggressive share buybacks, reducing the count by 10% over the past year from 2.0 million to 1.8 million shares. The $1.00 annual dividend provides additional income while waiting for multiple expansion. The combination of strong earnings growth, aggressive capital return, and massive overcapitalization creates a compelling risk-adjusted opportunity. The unusual press release activity suggests potential strategic developments, while the Atlanta market provides a solid operating environment for continued growth.

Pitch Summary:
Pacific Coast Oil Trust (ROYTL) units decreased from $0.36 to $0.33 per unit in the quarter. Not much new happened in the quarter. The custodian received court approval to delay liquidation until completion of the audits for 2019-2023. Six months have since passed, and no progress has been announced on any of the audits for those years. We don't see how the audits will magically be completed in the coming months if they haven't been able to complete them for four years. BNY Mellon has not communicated what is causing the delay. The recent increase in oil prices is also a positive event. It allows for faster repayment of the asset retirement obligation (ARO) assessed by the operator, PCEC. In a worst-case scenario of dissolution and sale, higher oil prices should result in higher bid prices for the net profits interest. We have been able to add to our position at $0.30 per unit in the past few months. As of the June 28, 2024, production update, the operator has withheld $37.3 million for asset retirement obligations. If the withheld funds are credited with interest at the discount rate of 7.36% used in the ARO calculations, it puts a total value of $43.5 million. Total units outstanding are 38.58 million. Thus $0.97 per unit have been withheld and the withheld funds amounted to $1.13 per unit after interest as of the end of April 2024. Significantly more than the quarter end $0.33 unit price. If the trust is dissolved and the net profits interest sold, it is still our argument that the ARO liability transfers to the buyer, thus unitholders should be credited the withheld ARO funds less legal costs incurred by the trust and operator but should not be assessed any interest charges on current or past ARO balances. We suspect the operator would try to argue that the ARO doesn't transfer to the buyer, which would be amazingly hypocritical in our opinion, since it transferred to the operator when they purchased the properties, and the operator (allegedly) transferred it to the trust at its creation, but nevertheless we suspect they would still argue it. Another way to look at the investment is to calculate the amount of cash flow that the net profits interest would generate to the potential buyer assuming ARO is not transferred or not assessed until incurred. Over the last twelve months, the trust's 80% net profits interest in the production has resulted in approximately $10.7 million of distributable proceeds. The operator charges the trust about $1.3 million annually. Trust expenses would be eliminated if the net profits interest was sold, leaving trailing twelve-month pre-tax cash flow of $9.4 million. The unknown is what multiple of cash flow bidders will be willing to pay. The market cap at the end of June was $12.7 million, or about fifteen months' worth of cash flows.

BSD Analysis:
The manager presents a complex but compelling value opportunity in Pacific Coast Oil Trust, trading at a significant discount to intrinsic value due to liquidation uncertainty and audit delays. The key insight is that withheld ARO funds of $1.13 per unit (including interest) far exceed the current unit price of $0.33, creating substantial embedded value. The trust generates $9.4 million in annual pre-tax cash flow after eliminating trust expenses, while trading at only $12.7 million market cap, representing just 15 months of cash flow. Higher oil prices provide multiple benefits: faster ARO repayment, higher asset values in liquidation scenarios, and improved cash generation. The manager's legal analysis regarding ARO liability transfer appears sound, given precedent when the operator acquired the properties. The investment offers asymmetric risk-reward with significant downside protection from the withheld ARO funds and upside from either improved cash flows or liquidation at fair value. The ability to add shares at $0.30 provides additional margin of safety below the already discounted market price.

Pitch Summary:
Propel Media (PROM) – in January the acquisition of Propel by IQVIA (IQV) was blocked by the FTC and both Propel and IQVIA decided to walk away rather than fight. As you may recall the deal was reportedly for between $700 and $800 million, or $2.75 to $3.15 per Propel share. We were able to purchase shares for $0.23 per share after becoming aware of the deal in published reports. Propel declared two dividends prior to the deal being called off and paid an additional dividend in February 2024 and announced one for May. All told the dividends amount to $0.0352 per share, or over 15% on our cost basis. We purchased the stock in hopes of the deal going through. We had the possibility of 10-12x return. We knew that if it didn't happen, we were still likely getting a bargain. We doubted that the next best liquidity event would value the company at 1/10 of the potential merger price with IQVIA. We still believe that and are willing to wait. The dividends are a nice bonus to receive while we wait (see our 2023 Q2, Q3 and yearend letters for more details on our thoughts).

BSD Analysis:
The manager executed a classic special situation investment in Propel Media, purchasing shares at $0.23 after the failed IQVIA acquisition that valued the company at $2.75-$3.15 per share. This represents a potential 10-12x return opportunity based on the blocked deal valuation, demonstrating significant intrinsic value disconnect. The FTC's intervention prevented what appeared to be a strategic acquisition at a substantial premium, but the manager's thesis remains intact that future liquidity events are unlikely to value the company at such a steep discount. The investment thesis benefits from multiple dividends totaling $0.0352 per share, providing over 15% yield on cost while waiting for value realization. The manager's conviction stems from the belief that a company valued at $700-800 million by a sophisticated acquirer like IQVIA cannot reasonably be worth only 1/10th of that valuation. This creates an asymmetric risk-reward profile where downside appears limited given the substantial discount to demonstrated strategic value, while upside potential remains significant through future M&A activity or operational improvements.

Pitch Summary:
PharmChem (PCHM) – the fund is the largest owner, at 33% of outstanding shares, and I serve as Chairman of the Board. The bid price for shares rose from $2.71 per share to $3.32 in the second quarter. PharmChem makes sweat patches used to detect drugs of abuse. It is an alternative to urine testing. First quarter results showed improved income despite some one-time charges. Earnings per share rose to $0.034 per share from $0.027 per share. More importantly was revenue growth excluding our top customer of 4.6% in the quarter.

BSD Analysis:
The manager holds a significant control position in PharmChem, owning 33% of shares and serving as Chairman, providing both influence and deep insight into operations. The company operates in the specialized drug testing market with sweat patch technology that offers advantages over traditional urine testing methods. The Q2 share price appreciation from $2.71 to $3.32 reflects improving fundamentals, with Q1 earnings per share increasing 26% from $0.027 to $0.034 despite one-time charges. Most encouraging is the 4.6% revenue growth excluding the top customer, indicating successful diversification and organic growth. The sweat patch technology represents a differentiated product in the drug testing market, potentially offering better compliance and detection capabilities. The manager's dual role as major shareholder and Chairman creates strong alignment of interests and provides strategic control over the company's direction. This appears to be a niche market leader with improving operational metrics and diversification progress.

Pitch Summary:
ENDI Corp (ENDI) – we profiled in last quarter's letter. During the second quarter the bid price rose from $4.87 to $7.96 per share. They continue to execute on their plans. They announced the sale of Willow Oak Asset Management. AUM reached $3 billion. Assuming 40% cash operating margins, quarterly cash earnings should be approximately $0.27 per share, or $1.08 per share annualized. Net cash is approximately $1.73 per share, meaning the stock is trading at six times earnings net of cash. We wrote in last quarters' letter that we think shares of ENDI are worth eight to ten times current earnings plus net cash. That would equate to $10.35 to $12.50 per share today with that value growing $0.27 per share every quarter. Thus, by the end of the year we see fair value being $11 to $13 per share assuming the same $1.08 per share annual earnings run rate and an estimated year-end cash balance of ~$2.40 per share.

BSD Analysis:
The manager demonstrates strong conviction in ENDI Corp, an asset management company that has delivered impressive execution and share price appreciation from $4.87 to $7.96 in Q2. The company's achievement of $3 billion in AUM represents significant scale, while the sale of Willow Oak Asset Management demonstrates active portfolio optimization. With projected annual earnings of $1.08 per share and net cash of $1.73 per share, the stock trades at an attractive 6x earnings net of cash. The manager's valuation methodology of 8-10x earnings plus net cash appears reasonable for a growing asset manager, yielding a current fair value range of $10.35-$12.50. The quarterly earnings growth of $0.27 per share provides a clear path to the year-end target of $11-$13 per share. The 40% assumed operating margins reflect the scalable nature of the asset management business model, making this a compelling growth story at a reasonable valuation.

Pitch Summary:
First IC Corporation (FIEB) is a Korean run bank outside of Atlanta, Georgia. It focuses on SBA loans and has loan production offices in Seattle and Los Angeles, and branches in Carrolton, TX, Los Angeles, CA, and Palisades Park, NJ in addition to the Atlanta metroplex. It pays a $1 annual dividend. Trailing earnings are roughly $2.65 per share. Book value is $14.58 per share. Our cost basis is $6.70 per share and the most recent trade was $7.50 per share. Efficiency ratio is 43%. We believe it is conservatively worth $25 to $30 per share. We have no idea when they may sell the bank, but let's be honest most community banks with insider ownership eventually are sold. We are quite happy to earn a 13%+ dividend yield while we wait.

BSD Analysis:
The manager presents a compelling value play in First IC Corporation, a Korean-run community bank trading at attractive multiples. With trailing earnings of $2.65 per share and a recent trade at $7.50, the stock trades at just 2.8x earnings while paying a substantial $1 annual dividend yielding over 13%. The bank's 43% efficiency ratio demonstrates operational competence, and the manager's target valuation of $25-$30 per share implies significant upside potential of 233-300%. The SBA lending focus provides a differentiated business model, while the geographic diversification across multiple states reduces concentration risk. The manager's thesis centers on the eventual sale of the bank, a common outcome for community banks with insider ownership, providing a potential catalyst for value realization. The combination of attractive current yield and substantial capital appreciation potential makes this an asymmetric risk-reward opportunity.

Pitch Summary:
One company that is tackling this very large problem is BQE Water Inc. ($BQE.V). The company has a variety of technologies that it uses to reduce contaminants from mining activities, achieving very low contaminant concentrations. There are increasing regulations regarding water purity and concentration limits, and the industry as a whole is significantly lagging behind where it needs to be, which puts BQE in a very strong position. Historically, even water dilution has been used as a method of "cleaning" water, which achieves no net benefit to contaminated water levels. A key technology for this company is Selen-IXTM which efficiently removes selenium from wastewater. This is a new physico-chemical process, which unlike previous biological treatment systems makes it insensitive to water temperature and works with varying water flows and contaminant concentrations. This has been implemented at several mining sites and can remove selenium concentrations to less than 2 parts per billion. The ability of this process to handle very large volumes allows it to process water for environmental discharge, ensuring that the output has very low impurity concentrations. They also have other technologies, some patented. These include metal treatment using ion exchange (Met-IX™), sulphate treatment (Sulf-IX™ and Sulf-IXC™) to remove sulphate from hard water waste streams, and cyanide/SART (Sulphidization-Acidification-Recycling-Thickening) removal from gold ore. This latter process allows recovery of metals like copper to be sold as a by product from gold mines, waste reduction and enhances gold recovery. Apart from these technicalities the business itself has some great characteristics. There is typically a test phase or technical services phase, which the company hopes then leads into an operational phase. This later phase could be many years or decades depending on the type of mine. Margins are higher in this phase and are recurring, with a significant level of switching cost lock-in, as can be imagined. Attempting to switch providers at any stage during the operational phase would be extremely expensive. As well as the potential for an increasing stream of locked-in, recurring revenues there are also some projects which the company has referred to as "company-maker" projects. These would be much larger nature, relating to large mines with long mine lives. We purchased at less than 2x our estimate of NTM revenues. And this doesn't take into account the fact that a mining project has recently been approved that is likely one of those listed as a company-maker by BQE. The Market didn't react to this news and in fact the stock has recently fallen with some of the negative sentiment over the last few weeks. A frequent reminder that there is often more than one opportunity to enter a great position.

BSD Analysis:
The manager presents a compelling bull case for BQE Water Inc., positioning it as a solution provider for the massive water contamination problem in mining operations. The investment thesis centers on BQE's proprietary water treatment technologies, particularly Selen-IX™, which removes selenium to extremely low concentrations and operates independently of temperature and flow variations. The company benefits from increasing regulatory pressure on water purity standards while the mining industry significantly lags compliance requirements. The business model features attractive recurring revenue characteristics with high switching costs once operational phases begin, creating multi-year or multi-decade revenue streams. The manager highlights "company-maker" projects tied to large mines with long operational lives as significant growth catalysts. The valuation appears attractive at less than 2x estimated next-twelve-month revenues, particularly given a recently approved mining project that could be transformational. The recent stock decline despite positive developments presents an opportunistic entry point for patient investors.

Pitch Summary:
The Fund's biggest purchase in the first half was a new position established in Perseus Mining, an Australian-traded gold mining company with three producing gold mines in West Africa: two in Còte d'Ivoire and one in Ghana. Additionally, the company has a mine soon to be under construction in Tanzania. All three countries are preferred jurisdictions for African mining investment. The US $2.25 billion market cap company is well managed, has a debt-free balance sheet and holds approximately $800 million in cash and bullion on its balance sheet. Perseus is also a lower-cost producer, having mined approximately 500,000 ounces over the last 12 months at a competitive AISC ("all-in sustaining cost") of approximately $1,100 per ounce, generating excellent cash flow yields (in excess of 20 percent). Historically, Perseus has exhibited excellent cost control at their mines, and has hedged-out approximately a quarter of its production over the next three years at a sales price of approximately $2,100 per ounce as the company builds its new Nyanzaga mine in Tanzania. Nyanzaga is expected to cost $500 million, and is likely to be fully funded out of cash flow. When finished, the mine should increase gold production at Perseus by 230,000 ounces at an AISC perhaps as low as $1,000 per ounce. Furthermore, the company owns a 3 million ounce orebody in Sudan, the highly economic Meyes Sands project. While Sudan's civil war has ensured that analysts today give Perseus little credit for the asset, the company may have the opportunity to unlock significantly more value from Meyes Sands if the conflict cools and Perseus is able to develop the project. At mid-year, Perseus was 2.43 percent of Fund assets.

BSD Analysis:
Perseus Mining represents the fund's largest new purchase, establishing a 2.43% position in this $2.25 billion Australian gold miner. The investment thesis centers on Perseus's exceptional financial strength, featuring a debt-free balance sheet with $800 million in cash and bullion. The company demonstrates operational excellence with low-cost production of 500,000 ounces annually at $1,100 AISC, generating cash flow yields exceeding 20%. The manager values Perseus's diversified West African operations across preferred mining jurisdictions and prudent hedging strategy covering 25% of production at $2,100/ounce. The Nyanzaga mine development in Tanzania represents a significant growth catalyst, expected to add 230,000 ounces at potentially $1,000 AISC, fully funded from cash flow. Additionally, the 3 million ounce Meyes Sands project in Sudan offers substantial optionality if geopolitical conditions improve, though currently unvalued by the market.

Pitch Summary:
Losses on the Fund's Orezone Gold position alone was a primary culprit, negatively impacting Fund returns by an estimated 0.77 percentage points over the first half as shares in the Burkina Faso gold miner lost 22.4 percent. Investor sentiment towards Orezone has continued to sour amid a barrage of negative news flow out of Burkina Faso as the country struggles with civil unrest that has witnessed multiple military coups and an ejection of French troops from the Francophone country. An Islamic jihadist insurgency in the north of the country has further roiled investor sentiment. Orezone's single producing mine, Bomborè, has recently faced ore grade challenges after an indigenous village relocation to a new, superior, Orezone-built residential community took longer than expected, delaying the mine's access to higher-grade ore. Fortunately, the mine is now retrieving higher grade ore, which should soon improve financial results. Furthermore, Bomborè is located in a relatively safe and well defended area of Burkina Faso close to its capital and far from the insurgency. Moreover, we take comfort that Orezone is managed by well-respected industry veterans. While there has been some concern over corporate liquidity in recent months given the company was looking to finance an expansion of its processing capability through the addition of a hard-rock crushing unit, Orezone recently secured the required project funding and is expected to complete the project over the next 18 months and grow production by approximately 50 percent to 175,000 ounces per year in 2026, resulting in annual free cash-flow yields that we estimate should climb to above 30 percent at today's prevailing gold price and market valuation. We continue to hold our position in Orezone, comprising 2.32 percent of Fund assets at mid-year, pending an anticipated share price recovery.

BSD Analysis:
Despite a 22.4% decline that cost the fund 0.77 percentage points, the manager maintains conviction in Orezone Gold, viewing current weakness as temporary. The investment case rests on operational improvements and significant production growth potential. The manager acknowledges geopolitical risks in Burkina Faso but emphasizes that the Bomborè mine operates in a relatively secure area near the capital, away from insurgency activity. Key catalysts include resolution of ore grade issues through access to higher-grade deposits and completion of a hard-rock crushing expansion project. The manager projects production growth of approximately 50% to 175,000 ounces annually by 2026, potentially generating free cash flow yields exceeding 30% at current gold prices and valuations. With experienced management and recently secured project funding, the position represents 2.32% of fund assets as they await recovery.

Pitch Summary:
The position most positively impacting Fund performance in the first half was Natural Gas Services, one of last year's largest Fund purchases. Shares in the oilfield compression rental company rose by 25 percent in the first half as the substantial capital spending made in recent quarters to expand the rental fleet began to generate strong growth in reported cash flow. Gains on the Fund's Natural Gas Services position, spurred along after the company was selected for inclusion in the Russell 2000 Index, added an estimated 1.35 percentage points to Fund returns.

BSD Analysis:
The manager highlights Natural Gas Services as the top performer in the first half, delivering a 25% gain and contributing 1.35 percentage points to fund returns. The investment thesis centers on the company's strategic capital deployment to expand its compression rental fleet, which is now generating strong cash flow growth. The manager views this as validation of their earlier substantial investment, made when NGS was one of last year's largest purchases. The Russell 2000 Index inclusion provided additional momentum, suggesting institutional recognition of the company's improved fundamentals. The compression rental business model appears well-positioned to benefit from increased natural gas production activity, with the manager's confidence reinforced by the tangible cash flow improvements following fleet expansion investments.

Pitch Summary:
Tweet: Share price pump due to NVDA's 10% stake, which happened in 2022 with generous terms, and now the lock-up period is expiring on Jul 31st; expensive robots to build, and only 40% is active; AMZN and FDX canceled robot delivery programs due to economics;

BSD Analysis:
ServiceMaster (facilities/cleaning services) carries short interest due to model fragility. The BSD thesis highlights secular pressure in low-margin cleaning services, execution risk in franchise networks, and customer churn. Rising labor costs and inflation make scalability challenging, while debt-funded acquisitions add integration risk. For sophisticated investors, the focus is on EBITDA margin sustainability, free cash flow conversion, and churn/retention metrics. Counterpoints include sticky B2B relationships, but shorts argue the model has little pricing power.

Pitch Summary:
Endor makes racing wheels, pedals, and other hardware for gamers playing motorsport games like Gran Turismo. The company was run by industry pioneer Thomas Jackermeier and has the leading market share, brand and technology in the premium segment of the market. Despite these advantages, we sold out of our position throughout the first half of the year after realizing that we had misjudged management's competence and character. While we always haircut our expectations to reflect the risk of management misexecution and understood that meant there was a small chance of substantial downside, the company's position at the forefront of a rapidly growing industry meant we saw a very bright future, multi-bagger upside, and on balance a favorable risk/reward. Yet as management continued to misexecute we believed the risk of our downside scenario had increased greatly and so the investment was no longer attractive. We therefore sold our position. When we discussed our position in last year's Q2 letter, Endor was suffering from a global chip shortage. Management had exacerbated this problem by substantially overordering new chips in response. This caused a cash outflow just as it ran out of products in stock and therefore cash inflows. Funding the resulting shortfall required the company to tap into credit facilities that were intended to finance temporary seasonal cash fluctuations. This and other mistakes had caused the stock to decline heavily, but we believed that Endor was now trading at a distressed price for a premium brand in an attractive industry that would be worth a multiple if conditions normalized. Our analysis of the company's cash flow suggested there was limited room for further mistakes, and so we were pleased to see normalization appearing to begin in Q4 as we expected. Endor had recruited a new COO and CFO, inventory was coming back in stock, and a series of major product launches that had been delayed were debuting in time for Black Friday and Christmas. Management announced at the end of November that Black Friday sales were up 240% y/y, full year profit guidance would be met, and investors should expect significant growth in 2024 with new products and the first ever listings on Amazon. That recovery did not continue. We were surprised when just a few weeks after announcing strong Black Friday results that management reversed course by stating Endor had actually made a substantial loss. This was partly due to further mistakes: major shipping issues meant many customers were not receiving their orders, and incredibly the company had sold a product it had not yet received a license for. Our work suggested that meant the company had seen a further cash outflow during what should have been the most profitable period of the year. Given Endor's already overdue credit, we judged that our downside scenario was playing out. When our follow-up conversations with management and other sources left us dissatisfied, we concluded that the risks had increased significantly and the company was no longer an attractive investment. We therefore sold out of our position.

BSD Analysis:
Plural Investing's exit from Endor AG represents a classic case of management execution risk overwhelming an otherwise attractive investment opportunity. Despite Endor's leading market position in premium gaming simulation hardware and exposure to the rapidly growing esports/gaming industry, persistent management missteps forced the fund to abandon the position. The company's troubles began with poor inventory management during the chip shortage, where management exacerbated supply issues through substantial overordering that created cash flow problems. Even after apparent signs of recovery with new leadership and strong Black Friday sales (up 240% year-over-year), management credibility collapsed when they reversed guidance just weeks later, citing shipping failures and selling unlicensed products. The manager's decision to exit reflects a disciplined approach to cutting losses when the downside scenario materializes, despite the company's strong competitive position and industry tailwinds. This case highlights how operational execution and management quality can override favorable industry dynamics and market positioning.

Pitch Summary:
Watches of Switzerland is a retailer and partner to Rolex and other luxury watch brands. It trades on 10x this year's FCF despite double digit growth and we think can return 32% p.a. for three years for a 130% total return. We believe most of the company's value lies in its relationship with Rolex, which only sells through authorized retailers like WOSG who act as gatekeepers to the Rolex universe. That relationship gives WOSG far superior economics to a typical retailer, and makes it closer to a subsidiary of Rolex. Almost every Rolex is sold off a customer waitlist and prices only go up over time, while stores strictly adhere to Rolex's recommended retail prices. That means no price competition and no inventory risk. There is no online competition either, as that would prevent customers from being vetted and having the 'Rolex experience' in a store. Many sources told us that being selected as a Rolex retailer is like being given a license to print money. WOSG's management are competent, experienced, and well incentivized, with CEO Brian Duffy owning £32mm of stock. Duffy joined in 2014 and his strategy of investing in stores to elevate customer experiences has successfully grown WOSG's share of Rolex sales in the UK from around 35% to 50%. This encouraged Rolex to entrust WOSG with replicating its strategy in the US, where WOSG is now the number one player with 10% share and has grown at 30% p.a. for the last five years. The stock has fallen 75% since 2022 after Rolex acquired another retailer and the luxury watch bubble burst. Investors are concerned that WOSG's relationship with Rolex is in danger, but our work suggests it is more likely getting stronger. The company's scale is an advantage that allows it to invest significantly more in flagship stores than competitors can, particularly in a US market that is dominated by mom & pops. As Rolex continues to shrink its store base, we expect WOSG will continue to gain share as weaker competitors shutter. WOSG is likely to grow at 10-15% p.a. for years given the large opportunity for growth in the US. It trades for just 10x our estimate of this year's FCF despite its qualities and historically traded for 20x. We expect the stock will re-rate as short term concerns ease and the company continues to deploy capital at 20% returns.

BSD Analysis:
Plural Investing presents a compelling bull case for Watches of Switzerland, emphasizing the company's privileged position as a Rolex authorized dealer. The manager views WOSG as essentially a 'license to print money' due to its gatekeeper role in the Rolex ecosystem, where waitlists eliminate inventory risk and pricing power remains with the brand. The investment thesis centers on the company's US expansion opportunity, where it has achieved 30% annual growth and captured 10% market share in a fragmented market dominated by independent retailers. Management quality appears strong with CEO Brian Duffy holding £32 million in stock and successfully growing UK Rolex market share from 35% to 50%. The valuation appears attractive at 10x FCF versus a historical 20x multiple, with the stock down 75% since 2022 due to luxury market concerns and Rolex's acquisition of a competitor. The manager expects 10-15% annual growth driven by US expansion and market share gains as Rolex consolidates its dealer network.

Pitch Summary:
During the quarter we took the opportunity to increase our weight in D2L Inc. (TSX: DTOL) (Desire2Learn) and make it a top ten holding. D2L provides cloud-based learning management system (LMS) software to higher education, K-12 and corporate customers. Annual recurring revenue has grown from US$112 million revenue exiting FY 2020 to US$188 million at the end of FY 2024, representing a CAGR of approximately 14%. Despite modest market share across its current geographies, D2L has a win rate of approximately 50% for new implementations in higher education. More recently in the quarter, D2L announced the spinoff of SkillsWave to prioritize its core Brightspace platform, which also heightens D2L's focus on balancing growth and profitability. The spinoff is partly owned by the CEO as well as D2L, and D2L is providing a shareholder loan to help finance the company. This transaction was initially frowned upon by shareholders given the non-arms-length nature of the transaction. After digging in, we gained confidence this was in the best interest of all shareholders. We think D2L is well suited to win a notable share of contracts that are upcoming for renewal given Brightspace's differentiated LMS platform. On July 25, it was announced that KKR & Co Inc and Dragoneer Investment Group are acquiring D2L's key competitor, Instructure Inc, for US$23.60 per share (US$4.8 billion enterprise value). This works out to an EV/Revenue multiple of 6.6x (2025E) whereas D2L currently trades with an EV/Revenue multiple of 1.9x (2025E), which illustrates the discrepancy in public and private market valuations in the Education Technology space. As D2L continues to grow and increase profit margins, we see significant room for share price growth.

BSD Analysis:
The managers present a compelling bull case for D2L based on strong fundamental growth and attractive valuation. The company has demonstrated solid execution with 14% revenue CAGR over four years, reaching $188 million in annual recurring revenue by FY 2024. The 50% win rate for new higher education implementations indicates competitive strength in their core market. The SkillsWave spinoff, while initially controversial, appears strategically sound as it allows management to focus resources on the core Brightspace platform. The valuation argument is particularly compelling, with D2L trading at 1.9x EV/Revenue versus the 6.6x multiple paid for competitor Instructure, suggesting significant upside potential. The managers' confidence in D2L's ability to capture upcoming contract renewals, combined with the focus on improving profitability, supports their thesis for meaningful share price appreciation. The education technology sector consolidation activity validates the strategic value of these platforms.

Pitch Summary:
During 2Q24 the entire Indonesian banking sector had a strong sell off, predominantly due to BBCA's peers. WQe took advantage of this latest sell off to accumulate a 4% weighting in the best performing bank in the country. As per the latest May 2024 figures, BBCA continues to demonstrate that it is the best bank in Indonesia, YTD May-2024 headline profit at IDR 21.6tn (+12% y-y), funding costs of 1.01%, far below below the rest at >2.5%, and given the BI's upcoming further relaxation on reserve requirements (i.e., by giving a larger incentive for lending towards priority sectors), this could further improve system liquidity, thereby reducing funding costs pressures across banks. BBCA is likely to continue its energiser-bunny form of compounding growth in Indonesia.

BSD Analysis:
The manager presents a compelling contrarian opportunity in Indonesia's banking sector, capitalizing on sector-wide weakness to acquire the country's premier bank at attractive valuations. BBCA's operational superiority is evident in its exceptionally low funding costs of 1.01% versus peers at over 2.5%, demonstrating superior deposit franchise and cost management. The 12% year-over-year profit growth to IDR 21.6 trillion through May 2024 showcases the bank's resilient earnings power despite challenging conditions. Upcoming regulatory tailwinds from Bank Indonesia's reserve requirement relaxation should further enhance system liquidity and reduce funding pressures. The manager's confidence in BBCA's "energiser-bunny form of compounding growth" reflects strong conviction in the bank's ability to maintain market leadership. The 4% position size suggests measured conviction while allowing for potential expansion. This appears to be a high-quality value play with both defensive characteristics and growth potential in Indonesia's expanding economy.

Pitch Summary:
Kornit Digital Ltd is an Israeli company that specializes in digital printing solutions for the textile and garment industry. Products include direct-to-garment printers, direct-to-fabric printers, and chemicals and inks used in the printing process. From 2014 to 2021, the company grew sales from $66 million to $322 million. Margins expanded and the company was able to achieve profitability. The company's impressive growth and operating leverage led to a dramatic rise in the company's share price. We participated in the beginning of the stock's rally but sold shares after the valuation crossed our threshold of what we viewed as reasonable. Fast forward to today, printer sales have collapsed (2023 system sales were down >70% from 2021) and the stock has declined more than 90% from its peak. Kornit now trades near its 2015 IPO price and has a market capitalization of ~$740 million despite holding a net cash balance of ~$540 million. Despite a significant decline in printer sales, consumables and services sales have increased every year since 2020 at an 8% and 27% CAGR, respectively. Today, consumables and services make up nearly 80% of company sales. This stable and growing base of sales means that total company sales should bottom this year. Additionally, we think recent product introductions, actions taken to reduce operating expenses, and a change in the go-to-market strategy of the company should enable the company to return to profitability this year. When Kornit was founded in 2002, the company's first printers were capable of printing 50 shirts an hour and were limited to cotton substrates. Despite these limitations, the company found success selling to low-volume custom t-shirt design shops. Since then, the capabilities of the company's technology have increased dramatically. The Apollo, a machine Kornit released last year, can print 400 impressions per hour with only one worker, is able to print on most textiles, and leaves impressions that are hard to distinguish from screen printing. The Apollo is already seeing adoption from larger retailers and branded apparel manufacturers. A key enabler of this early adoption is the company's new subscription model, "All-inclusive Click" or AIC, where Kornit places a machine in a customer's facility in exchange for minimum revenue commitments. This model should lower the barrier for customers to adopt the new technology since no capital investment is required and the return on investment is much easier to calculate. Although more capital intensive for Kornit, AIC should dramatically reduce the volatility in printer sales and catalyze machine growth. Kornit Digital presents a compelling turnaround opportunity with a strong cash position, technological leadership, and growing recurring revenue streams. We think the stock should rebound materially as growth returns and profitability inflects.

BSD Analysis:
Liberty Park presents Kornit Digital as a compelling turnaround opportunity trading at deeply discounted valuations following a 90% decline from peak levels. The manager highlights the company's transformation from a cyclical printer sales business to a recurring revenue model, with consumables and services now representing 80% of sales and growing at 8% and 27% CAGRs respectively. The investment thesis centers on technological advancement through the Apollo printer system, which delivers 8x the throughput of legacy systems and can print on diverse textile substrates with screen-printing quality. The new subscription-based "All-inclusive Click" model eliminates customer capital requirements and should reduce sales volatility while accelerating adoption among larger retailers. With a $740 million market cap supported by $540 million in net cash, the downside appears well-protected. The manager expects profitability to return in 2024 as the business model shift takes hold and operational efficiency improvements materialize. This represents a classic value opportunity where fundamental business improvements are masked by cyclical headwinds and prior growth disappointments.

Pitch Summary:
CarMax is the largest independent used vehicle dealer in the US. With 245 locations and 30 years of operating experience, CarMax has built a strong brand focused on providing the best user experience for buying a used car. Consumers can shop online and in-store (quickly transitioning from one to the other at any point in the process) and don't have to haggle with salespeople. Purchasers can pre-qualify for vehicle financing on its website and then shop/compare vehicles by monthly payment with complete confidence that the price displayed will ultimately be what they pay. Vehicles all meet a 125-point inspection to the CarMax Quality Certified standard, and if something goes wrong, vehicle buyers have an industry-leading 10-day money-back guarantee. CarMax uses the data from its millions of vehicles purchased and sold to understand the right price to buy, recondition, and sell used vehicles, and as a result, has consistently generated an industry-leading gross profit per unit (GPU) for decades. We believe each part of CarMax's sales proposition would be difficult for smaller independent peers to replicate, let alone the entire customer value proposition. Even Carvana, CarMax's best-known peer, lacks: 1. The option to shop in-store or test-drive the vehicle for 24 hours before purchase. 2. CarMax's range of finance providers. 3. CarMax's 10-day money back guarantee (Carvana has a shorter 7-day money-back guarantee). While a recent downturn in used vehicle sales due to the impact of higher inflation and interest rates on monthly vehicle payments has hurt CarMax's recent volumes and market share, we believe it continues to improve the customer experience, which we think will result in increased vehicle sales volumes and market share gains within its existing store base that should drive higher profits per vehicle and improve the company's returns on invested capital. As of year-end 2023, CarMax has ~4% of the fragmented used vehicle market, and while we don't know exactly how big the company can ultimately grow, a good long-term yardstick is CarMax's oldest stores, which have 10%+ market share (which is still growing).

BSD Analysis:
The managers present a comprehensive bull case for CarMax based on its differentiated business model and competitive advantages in the fragmented used car market. CarMax's omnichannel approach, no-haggle pricing, extensive financing options, and superior customer experience create meaningful barriers to entry that smaller competitors cannot easily replicate. The company's data-driven approach to vehicle acquisition and pricing, supported by decades of transaction history, enables industry-leading gross profit per unit. Despite current headwinds from higher interest rates impacting affordability, CarMax's market share opportunity remains substantial given its 4% share of a fragmented market. The company's mature stores achieving 10%+ local market share demonstrate the scalability of the model and long-term growth potential as CarMax continues to gain share through superior customer experience and operational execution.

Pitch Summary:
Charter has faced challenging operating conditions that have led to its share price weakness. Competitors have been overbuilding with fiber assets and fixed wireless has proven to be meaningful. There has been concern regarding the sustainability of business derived from subsidized customers. And, the company's near-term capital spending budget has exceeded expectations. Compounding matters, its relatively high leverage ratio adds volatility to its stock price. We look forward to the company demonstrating the competitive strength of its converged (fixed and wireless) connectivity offering, ramping down capital spending, and reaccelerating share repurchases.

BSD Analysis:
Despite near-term headwinds, the managers maintain conviction in Charter's long-term competitive position and value proposition. The company faces legitimate challenges from fiber overbuilding and fixed wireless competition, but its converged connectivity platform combining fixed broadband and wireless services should differentiate Charter in the marketplace. The elevated capital expenditure cycle is temporary and necessary to maintain network competitiveness, with spending expected to moderate and free cash flow generation to improve. Charter's high leverage creates stock price volatility but also amplifies returns when operational performance improves. The company's dominant market positions, pricing power, and eventual capital allocation flexibility through resumed share buybacks support the investment thesis despite current operational pressures.