Investment Pitches

Pitch Summary:
Provides specialist engineering services to the energy, defence, renewables and marine markets. 175-year-old business, 2367 employees, 18 countries. '23 Sales £496m, Ebitda £54.4m, underlying EBIT £29.6m. ROCE 6.6%. Net margin low (c.6%) vs history (>10%) due to loss of operational oversight and some (temporary) external issues. Became over-leveraged due to poorly executed acquisition strategy. Recovery opportunities (company target 10% margin, 15% ROCE): Defence business 2.1% margin '23. New Chairman, CEO and CFO high quality, CEO already re-organised to 3 divisions and appointed new Heads of each (2 external). Net Debt was elevated (£150m), now materially addressed by recent sale of RMS PumpTools for £83m net cash. Valuation: Target recovery £85m Ebitda. Current depressed multiples est. '25 4x Ebitda, >10% FCF yield, 0.5x EV/Sales. Thesis: New management to deliver margin/return recovery and stronger balance sheet driving on-market re-rating to historical avg (>10x Ebitda).

BSD Analysis:
Rockwood identifies James Fisher as a quality industrial services business trading at distressed valuations following operational missteps and over-leveraging from poor acquisition strategy. The 175-year-old company maintains strong market positions across energy, defense, renewables and marine sectors with £496m sales and global presence across 18 countries. Current margins of 6% and ROCE of 6.6% significantly underperform historical levels above 10% and management targets, particularly in the defense division operating at just 2.1% margins despite strong end market fundamentals. The recent appointment of high-quality management across Chairman, CEO and CFO positions, combined with divisional restructuring and new external division heads, signals commitment to operational excellence and margin recovery. Balance sheet concerns have been materially addressed through the £83m net cash disposal of RMS PumpTools, reducing net debt from elevated £150m levels. The valuation at 4x estimated 2025 Ebitda and 0.5x EV/Sales appears deeply discounted for a business with defensive end markets and recovery potential to £85m Ebitda target. Key catalysts include margin expansion toward 10% targets, ROCE improvement to 15%, and re-rating from current depressed multiples toward historical averages above 10x Ebitda as operational improvements demonstrate sustainability.

Pitch Summary:
International manufacturer (30%) and distributor (70%) of fasteners (nuts 'n' bolts): 33 locations, 7 high volume manufacturing sites, 15bn parts sold per year, 1400 employees. Sales £245m, 25% GPM, Ebitda £15m '23. NAV £132m (Gross PPM £66m) 2023, returns poor with ROCE 5.4%. Operating margin depressed vs long history ('23 5.3%, vs target of 10-13%.). 75% of sales are customer-specific branded products, 18-year avg tenure of top ten customers, largest 100% upside. Target >£35m Ebitda. Thesis: Significant turnaround and recovery opportunity, early stage. Scope to materially increase cash generation (reduce leverage), improve returns and profits leading to normalisation of rating.

BSD Analysis:
Rockwood presents Trifast as a deep value industrial turnaround with substantial operational leverage potential in the global fasteners market. The company's scale advantages include 33 locations, 7 manufacturing sites, and 15 billion parts sold annually, yet ROCE of just 5.4% and operating margins of 5.3% significantly underperform historical levels and management targets of 10-13%. The business model benefits from sticky customer relationships with 18-year average tenure among top clients and 75% customer-specific branded products, providing defensive characteristics during the recovery phase. Recent completion of a £17.5m ERP system investment should drive operational efficiencies while new management across all C-suite positions signals commitment to restructuring and margin improvement. Elevated inventory of £91m and net debt of £28m present immediate cash generation opportunities as working capital normalizes and operational improvements take hold. Rockwood's 14% stake and board representation through Nick Mills provides significant influence over the turnaround strategy. The valuation at 0.5x EV/Sales appears deeply discounted for a business with global scale and defensive end markets, with recovery to 1x sales multiple implying over 100% upside as margins normalize toward the £35m+ Ebitda target.

Pitch Summary:
Established supplier to UK education market, £180m sales. Resources to 90% of Primary schools with market leadership position (TTS), £80m sales (incl overseas), target 10% margin (turnaround). Assessment services marking exams internationally under contracts, >£45m sales, target >20% margin (growth). 'Jewel in the crown'. Technology division providing IT services to schools, £60m sales, target >8% margin (market share strategy). Shambles execution of new ERP system roll-out and warehouse consolidation project resulted in excess cash outflows, operational issues and elevated debt of £52m, covenant waivers needed (banks supportive). Large pension scheme but deficit now materially reduced. New CEO, CFO, + Heads of Transformation, Digital, Technology Div, People. Valuation: SOTP £170m = >100% upside. Harwood stake 15.2%, Proposed NED successfully appointed as SID. Thesis: Stabilised business and reduced financial risk will re-rate equity, material profit recovery potential, fair value realised through a well-managed divisional disposal process.

BSD Analysis:
Rockwood identifies RM as a classic operational turnaround with significant value creation potential following management upheaval and ERP implementation issues. The company maintains dominant market positions across three education-focused divisions, with 90% penetration in UK primary schools and a high-margin international assessment business described as the 'jewel in the crown.' Recent operational failures around ERP rollout and warehouse consolidation created temporary financial stress with £52m debt requiring covenant waivers, but new management team across all key positions signals commitment to operational excellence. The sum-of-the-parts valuation of £170m implies over 100% upside from current £70m market cap, reflecting the market's oversold reaction to execution issues rather than fundamental business deterioration. Rockwood's 15.2% stake and successful board appointment as Senior Independent Director provides significant influence over the turnaround strategy. The thesis centers on margin recovery across divisions (10% Resources, 20%+ Assessment, 8%+ Technology) as operational issues resolve and new management implements best practices. Key catalysts include debt reduction, pension deficit resolution, and potential divisional disposals to unlock fair value while maintaining focus on the highest-return assessment business.

Pitch Summary:
Leading UK & US SME lending platform since 2010 matching professional lending demand with SME financing needs generating income in fees for arrangement and servicing. AUM £2.9bn. 150,000 businesses have borrowed £17bn since '10 creating huge 'data-lake' of >2bn data-points for 29m businesses enabling fast approval process for this huge but poorly served part of the Banking market. In-line impairment record, stopped peer-to-peer, proven partner for govt lending schemes (which created excess lending growth during Covid). '23 Run-rate UK Sales £130m, Aebitda £7m. Loss-making due to lack of scale vs cost-base. Loss making and Balance sheet intensive US operations exited. £170m of unrestricted cash, £50m of restricted cash, £64m of equity invested in loans (to facilitate, otherwise exit). Tax losses £185m. Overdue share buybacks of £25m commenced, can afford more. Cost-cutting initiated to accelerate move to break-even. Company targeting 15-20% annual growth and 15% PBT margin. Requires further Board evolution, Buy-backs and improved comms. Rockwood holding 3.1%. Valuation: P/B 1.2x. Goldman Sachs IPO '18 £1.5bn Mcap. Thesis: Overdue 'awakening' leads to focus on shareholder value, cash profitability (via cost-cutting & growth), buy-backs and re-rating of unique platform. Material upside.

BSD Analysis:
Rockwood presents a compelling turnaround thesis for Funding Circle, emphasizing the company's dominant position in the underserved UK SME lending market with £2.9bn AUM and a massive proprietary dataset. The fund highlights the strategic exit from loss-making US operations and substantial cash position of £170m unrestricted plus £50m restricted, providing significant financial flexibility. Management's cost-cutting initiatives and share buyback program signal a shift toward shareholder value creation after years of growth-at-any-cost strategy. The platform's proven track record with government lending schemes and strong data moat create competitive advantages in credit assessment and approval processes. With the company targeting 15-20% annual growth and 15% PBT margins, Rockwood sees material re-rating potential from current depressed P/B of 1.2x versus the £1.5bn Goldman Sachs IPO valuation. The investment case centers on operational leverage as the business scales toward profitability while maintaining market leadership in a large, underserved market segment. Key catalysts include continued board evolution, aggressive capital returns, and improved investor communications to unlock the platform's inherent value.

Pitch Summary:
An investment opportunity that did enter the portfolio is Stellantis, ranked as the fourth largest global carmaker. While the name Stellantis often doesn't ring a bell, its large stable of car brands do: Peugeot, Citroen, Fiat, Opel, Alfa Romeo, Maserati, Jeep, Dodge, Chrysler, and a handful of other smaller brands. Despite being a mass-market manufacturer, the company has demonstrated strong profitability with an EBIT margin of 10 to 12% from 2021 to 2023. More importantly, management emphasises cash generation, despite high capital requirements for the transition to emission free vehicles. Early in 2023, Citadel acquired shares in Stellantis at an exceptional valuation. At the time of purchase, Stellantis' free cash flow of €14bn equalled its entire enterprise value. The company offered a dividend yield of 10% and additionally repurchased 5% of its outstanding shares. Stellantis' balance sheet is extremely robust, with €34bn net cash out of a €48bn market capitalisation. This financial strength ensures Stellantis remains resilient regardless of market conditions. One might ask: how can Stellantis be so attractively priced? We do anticipate several years of lower profitability after peak year 2023, and this scenario is currently unfolding. However, we factored this into our valuation analysis when the stock was purchased, and we still believe the intrinsic value is at least three times Citadel's purchase price. The auto industry is grappling with a prolonged shift from internal combustion engine (ICE) vehicles to electric cars, presenting significant challenges. Carmakers must maintain both technologies, which is costly, and investments in electric vehicles and related infrastructure (like batteries and semiconductors) will yield lower returns in the near term. Betting solely on electric or ICE vehicles would carry considerable risk. Following the merger of Fiat-Chrysler and Peugeot-Citroen that established Stellantis, management swiftly implemented a future-proof strategy with two key decisions. Firstly, among its inherited brands, Stellantis is consolidating to four main vehicle platforms for the majority of its cars. This consolidation achieves substantial efficiency gains, enhancing cost competitiveness even against Chinese competitors. Secondly, these platforms are designed to accommodate any powertrain – electric, hybrid, ICE, or even hydrogen fuel cell – allowing flexibility to adjust production based on market demand and government regulations. This intelligent engineering approach enables Stellantis to respond swiftly to market dynamics, minimizing the risk of obsolescence in a rapidly developing market. Financial markets tend to react negatively when short-term earnings face pressure. Consequently, Stellantis shares have retreated somewhat this year, following significant gains last year. Nonetheless, we maintain our conviction that the intrinsic value of Stellantis is nearly triple the current share price. As steadfast holders, we anticipate solid long-term returns.

BSD Analysis:
Citadel's Stellantis investment represents a classic value opportunity in the automotive sector, acquired at an extraordinary valuation where €14bn free cash flow equaled the entire enterprise value. The company's financial fortress includes €34bn net cash against a €48bn market cap, providing exceptional downside protection and enabling a 10% dividend yield plus 5% share buybacks. Management's strategic response to industry transition challenges demonstrates operational excellence through platform consolidation to four main architectures, driving cost competitiveness against Chinese rivals. The flexible powertrain design accommodating electric, hybrid, ICE, and hydrogen technologies positions Stellantis to adapt rapidly to regulatory and market shifts without obsolescence risk. Despite anticipating near-term profitability pressure post-2023 peak, Citadel maintains conviction that intrinsic value exceeds three times the purchase price. The combination of exceptional balance sheet strength, strategic positioning for industry transformation, and compelling valuation creates an asymmetric risk-reward profile with substantial upside potential.

Pitch Summary:
The most significant change in the portfolio was the addition of Sumco Corp, a leading producer of semiconductor wafers based in Japan. Among the pure players, Sumco holds the largest market share globally of 25% for silicon wafer production, and even around 50% for high-end wafers. These high-end wafers are crucial for the manufacturing of logic processors (including AI processors) and high-speed memory chips. With the highest number of technology patents in the wafer industry, Sumco focuses on the high-end semiconductor market, providing it with an above average growth profile and lower cyclicality compared to its peers. Demand for Sumco's wafers is strong, with customers typically agreeing to 5-year purchase agreements that include annual price increases. Moreover, Sumco is well managed and has a solid balance sheet. Citadel acquired its position at a very attractive valuation, with a normalised free cash flow yield of 14%.

BSD Analysis:
Citadel initiated a position in Sumco Corp, recognizing the company's dominant market position in the semiconductor wafer industry with 25% global market share and 50% share in high-end wafers. The investment thesis centers on Sumco's technological moat, evidenced by the highest patent count in the industry, which enables focus on premium segments with superior growth and reduced cyclicality. The company benefits from strong demand visibility through 5-year customer contracts with built-in annual price escalations, providing revenue predictability. Management quality and balance sheet strength further support the investment case. At a 14% normalized free cash flow yield, Citadel secured the position at an attractive valuation, particularly compelling given the company's exposure to AI processor and high-speed memory chip manufacturing trends. The combination of market leadership, technological differentiation, and contractual revenue stability positions Sumco as a quality compounder in the semiconductor supply chain.

Pitch Summary:
Paywalled (The company’s restaurant concept has struggled, the company’s NFT project has sputtered, the core business has faced rougher regulation, and shares have fallen ~20%.)

BSD Analysis:
RCI operates adult entertainment clubs and Bombshells sports bars, using a roll-up strategy to expand its portfolio. The BSD short thesis highlights regulatory/licensing risk, reputational overhang, and capital allocation concerns. While the clubs generate high-margin cash flow, the model depends on acquiring venues in tightly regulated markets, where licenses are scarce and subject to political pressure. Cultural shifts and social stigma could erode long-term demand, while the Bombshells chain faces competitive restaurant dynamics. Bears also flag related-party transactions and governance as areas of concern. Investors should watch acquisition multiples, regulatory challenges, and balance sheet leverage.

Pitch Summary:
Despite a seemingly negative Q1 report, BQE Water's underlying performance is strong, with a significant increase in recurring revenue driven by new selenium projects in the US. The decline in Technical Services revenue is attributed to the early stages of projects, which are expected to recover. The company's operational leverage and strategic focus on high-value water treatment projects position it well for future growth.

BSD Analysis:
BQE Water's Q1 results highlight the company's strategic shift towards high-margin selenium treatment projects, which are expected to drive substantial revenue growth. The seasonal impact on Canadian operations is temporary, and the expansion in the US market mitigates this risk. The company's ability to command premium pricing for selenium treatment underscores its competitive advantage. Management's confidence in recovering Technical Services revenue and the growing contribution from Operational Services suggest a robust growth trajectory. The recent decline in accounts receivable and improved cash balance further strengthen the financial position, while the potential for 'company-maker' projects could significantly enhance shareholder value.

Pitch Summary:
We initiated a new position this past quarter in a small-cap U.K. listed company Kitwave Group. For those who are not yet familiar, Kitwave is a U.K.-based food distributor that delivers a full spectrum of food and beverage goods to over 42,000 food retail locations across the country, primarily to convenience stores and restaurants. Kitwave is one of the U.K.'s largest food distributors that specializes in the niche of food distribution specifically to "independent" shops, or mom and pop stores and small chains, within the convenience store and restaurant segments. Kitwave was founded in 1987 and over that time has grown into a £600+ million revenue business and the U.K.'s 15th-largest food distributor. There are a lot of elements that we like about Kitwave. To mention a few, the company possesses what we perceive as a structural competitive advantage over its peers in the form of scale economies shared thanks to its scale-based bargaining power advantage with suppliers. We also find that Kitwave is in the highly capable hands of its top management. Its CEO and CFO both have a strong 13-year track record at Kitwave of growing company profits, appear ambitious for the company's future, seem to live and breathe their business, and have significant skin in the game. In addition, we appreciate the largely recession-proof nature of the industry, which should allow Kitwave to deliver consistent profits throughout the economic cycle. Over the past seven years, Kitwave grew its EPS at a +22% CAGR. With a £10 billion fragmented TAM available, we see a clear path to Kitwave continuing to execute upon its roll-up strategy and growing its profits per share at a +10-20% CAGR over the medium-term. Shares are currently priced at a trailing P/E multiple of 13.5x, which we believe provides a sufficient margin of safety considering the company's durability of free cash flows and its expected future growth. This valuation also represents a material discount to industry peers, especially considering Kitwave's industry-leading growth and returns on capital. From today's prices, we underwrite a +15-20% CAGR on our investment, driven almost entirely by our expected growth in per-share profits, as well as the potential for upside in market valuation. We view our investment in Kitwave as carrying a low probability of permanent capital loss given our confidence in the durability of Kitwave's future free cash flows.

BSD Analysis:
The manager presents Kitwave as an attractive roll-up opportunity in the fragmented UK food distribution market, targeting independent retailers and convenience stores. The investment thesis centers on the company's structural competitive advantages through scale-based supplier bargaining power and its focus on the defensive independent retail niche. With £600+ million in revenue and 22% historical EPS CAGR over seven years, Kitwave has demonstrated consistent execution under experienced management with significant skin in the game. The £10 billion total addressable market provides ample runway for continued consolidation through the company's proven roll-up strategy. At 13.5x trailing P/E, the valuation appears compelling relative to industry peers, particularly given Kitwave's superior growth profile and returns on capital. The manager underwrites 15-20% annual returns driven primarily by earnings growth, with potential valuation multiple expansion providing additional upside. The defensive nature of food distribution to independent retailers should provide recession-resistant cash flows, reducing downside risk in the investment.

Pitch Summary:
As mentioned, shares of Duratec this year have declined by -25% through March 31, and by -30% year-to-date as of this writing. The large majority of this year's share price decline took place following the company's 1H FY24 results that were reported in late February. When our holdings incur significant share price declines, we like to try and understand as best as possible exactly why other investors are fearful at the moment. In that spirit, we spoke with local brokers, local investors, and management to understand the reasons behind the market's poor reaction to Duratec's results. It appeared to be because of Duratec's lower-than-expected order book figure, which was also reported alongside strong tender activity and strong MSA revenue, and because of a decrease in net working capital, which was due largely to one Department of Defense project that required Duratec to provide capital upfront before receiving the cash at project's end from a virtually risk-free counterparty. Then, as February turned into April, negative sentiment seemed to extend further with every week that went by without an update from the company announcing an upgrade to guidance, which many market participants have evidently become accustomed to over the past couple of years. Finally, last week, Duratec released an update re-affirming that its FY24 EBITDA is expected to fall within the company's previously guided range and implying EBITDA growth of +19-24% YoY. The company also announced an all-time high tender book value of $1.47 billion, or a +44% increase from its tender book figure just 3 months ago, which suggests further revenue and profit growth for FY25. Despite this most recent update, shares have responded largely flat, perhaps because a number of Duratec's large tender wins are likely to occur in 1H FY25 and will not fully reflect in the company's results until 2H FY25. If this all sounds like short-sighted thinking from the market, that is because it appears to be so, at least in our view anyway. We understand the market's view that the lighter-than-expected order book number will in turn result in lighter-than-expected 2H FY24 and 1H FY25 project revenue. However, where we believe the market's view is incomplete is that the order book is only one of four key variables when assessing Duratec's forward-looking revenues and profits. In order to form a complete view, one should also consider tender activity, MSA revenue and profit, and EBITDA contributions from subsidiaries DDR and RCC. Tender activity is important because of its conversion into the order book, which directly converts into revenue. Historically, Duratec has communicated that it wins roughly 1-in-3 to 1-in-4 of its tenders. Duratec also performs ECI work through MEnD Consulting for a greater percentage of its tenders today than it ever has, which results in higher win rates and conversions to order book. We therefore assign a 30% tender win rate. As evident in the above graph, considering tender activity is important when evaluating order book. Duratec's order book plus an assumed 30% win rate of its tenders book is currently at an all-time high. MSA revenue is also important to consider because it is not included in the order book and is a significant and growing component of the overall business. MSA revenues most recently comprised 24% of Duratec's 1H FY24 revenues. MSA gross profits comprise an even greater portion of Duratec's business given the majority of MSA business is derived from the mining and energy segments which carry gross margins of 22% and 35%, respectively, or greater than the company-wide gross margin of 16.2%. Lastly, profit contributions from DDR and RCC are significant, and we believe their impacts to total company profits in FY25 will be materially greater than in FY24. Following a drop-off in DDR results in FY23 and 1H FY24, Duratec has communicated that DDR's activity has picked up meaningfully and should deliver a strong FY25. RCC, DDR's recent acquisition, is also estimated by Duratec to contribute at least $5MM of EBITDA in FY25. RCC has benefitted greatly from its integration with DDR's Supply Nation accreditation to win projects exclusively designated for Australia's Indigenous-owned businesses. Altogether, our view for Duratec's results in FY25, and far beyond, remain positive. From a valuation perspective, at $1.06/share today, Duratec's shares trade at 11.7x our estimate of FY24 earnings ending June 30, 2024. Despite project award delays which have likely pushed out some revenues and profits by a number of months, we believe Duratec is in a position to grow FY25 earnings by +15% or more based on order book, tender activity, MSA activity, and DDR/RCC profit contributions. At today's valuation levels, it seems to us the key question looking ahead is whether Duratec is an ex-growth company or whether its future growth trajectory will look remotely like the past. Our conviction falls in the latter camp, for myriad reasons as we've discussed in previous communications. Though we don't expect Duratec to grow revenues at its historical 34% CAGR since its 2010 inception, and though we also don't expect Duratec's profits to grow in a straight line given the nature of its business, we believe there are many rights to win in large addressable markets from here that should result in Duratec delivering a double-digit average growth rate in profits for the foreseeable future. We view the recent share price decline as a classic case of the market taking a short-sighted view of the company's fundamentals, and remain confident in Duratec's future.

BSD Analysis:
The manager presents a compelling contrarian thesis on Duratec, arguing that the 25-30% share price decline represents a market overreaction to temporary headwinds. The fund's analysis goes beyond the headline order book weakness to examine four key revenue drivers: tender activity, MSA revenue, and contributions from subsidiaries DDR and RCC. With tender book value hitting an all-time high of $1.47 billion (+44% in three months) and management reaffirming 19-24% EBITDA growth guidance, the fundamental outlook appears robust. The manager highlights that MSA revenue (24% of sales) carries superior margins of 22-35% versus the company average of 16.2%, providing quality earnings growth. At 11.7x estimated FY24 earnings and trading at $1.06, the valuation appears attractive for a business with historical 34% revenue CAGR since 2010. The thesis centers on Duratec maintaining double-digit profit growth despite near-term project timing delays, supported by a large addressable market and strong competitive positioning. The manager's confidence stems from direct engagement with local brokers, investors, and management to understand the disconnect between fundamentals and market sentiment.

Pitch Summary:
Sea Ltd (SE): Sea's stock has been doing well in the last few months, gaining ~80% year-to-date. It turns out much of the market's fears around competition eroding Shopee's market share were misplaced. Growth is reaccelerating for both its gaming and ecommerce segments. Our last update on the company was 9 months ago, and a lot has changed since then (LINK). I made the case back then that TikTok's growth was already showing evidence of slowing (contrary to the market's fears) and was following a similar growth curve to what we saw in China (with livestream ecommerce approaching a natural ceiling at 25 - 30% of total ecommerce spending). But I definitely didn't foresee what would happen a few months later. The Indonesian government instituted a complete ban on TikTok Shop last October. Officially, the reason was that Indonesian law prohibits social media companies from commingling user data with an ecommerce operation (it needs a separate license & entity). The government also claimed that TikTok Shop is hurting local merchants who aren't able to compete with cheap, imported goods from China. Indonesia was holding its presidential election in February, so it was also viewed as a way to garner votes. There's a certain amount of truth to this. But we've also heard rumors / speculation that the real reason was that TikTok's rapid growth was primarily coming at the expense of Tokopedia. And their politically connected shareholders weren't happy. We've told partners over the years that Tokopedia is essentially a piggybank for the political elite of Indonesia – many well-connected families own stakes in Tokopedia – and it's arguably these connections that allowed a weak player to last this long in such a competitive space. As such, maybe it shouldn't be a surprise that when TikTok was looking for ways to acquire an ecommerce license / re-enter the market, they figured the most fool-proof method would be buying Tokopedia outright (and bailing out these shareholders). In fact, Tokopedia's new CEO has publicly confirmed that their company was rapidly losing market share to TikTok, and felt like he had no other option (LINK). Toko's market share decreased from 28% to 23% over the course of 2023 (i.e. losing 5%), while TikTok's market share more than doubled from 5% to 11% (i.e. gaining 6%). And worse yet, we estimate that these losses accelerated in the months before the acquisition. Whatever the case, while these competitors were swapping market share, Shopee reinvested its earnings to deepen its competitive moat. It invested in its own livestreaming initiative (Shopee Live) as well as building out its in-house logistics (Shopee Xpress). Nowadays, the company ships ~60% of its packages on its own, 70% of these arrive within 3 days, and its internal per package shipping costs are cheaper than shipping via external couriers. Logistics is a scale game – the more packages you can ship across the same route, the cheaper it will be on a per parcel basis. With Shopee pulling an additional ~20% of its orders from third-party logistics providers ("3PLs"), 3PLs now need to recoup the same fixed costs on a smaller number of parcels, thus increasing shipping costs for competitors who use them. All of this enabled Shopee to defend its turf, and is now setting it up in a good position to reaccelerate growth as the industry's competitive intensity dies down. TikTok is back in the market after acquiring Tokopedia, but is showing signs it's wounded by last year's events. Its GMV growth has been stagnant since it re-entered Indonesia, and its sales are currently at ~60-80% its pre-ban levels. Shopee also took advantage of the chaos while TikTok was banned, to sign exclusive contracts with some of TikTok's largest live streamers. So this might be impairing TikTok's ambitions too. Lastly, the company is also dealing with separate issues in the US, with legislation now officially forcing TikTok to sell itself or face another ban in its largest market (LINK). It's not clear how this will play out – would TikTok only sell the US business, or all of international? If the latter, will the potential acquirer be willing to fund billions in subsidies, as TikTok did last year? Or will TikTok simply shut down the US business? There's still uncertainty here. But at the moment, we know TikTok is taking a breather and reorganizing its operations. They're starting to cut staff, and has been raising seller commission rates in the last few months (LINK). This indicates a focus on becoming profitable, rather than growing aggressively. Meanwhile, Shopee is getting stronger. GMV growth reaccelerated from just +5% y/y in Q3 2023, to +28% y/y in Q4 2023, and now +36% y/y in Q1 2024. It looks like the division will easily surpass +$100BN in GMV this year, and will soon return to profitability. The investor debate has shifted from "will Shopee be able to defend against TikTok" to "can Shopee grow profitability, and at what rate?". Lastly, Garena's largest game, Free Fire, is back to growth as well (the market was fearing the game's demise a year ago). Alternative data providers are showing Free Fire active players are back to levels last seen in Fall of 2021. And this is despite Free Fire still being banned in India – although local news outlets indicate they might relaunch later this year. If so, it may help propel Garena's player base above its prior peaks. Sentiment-wise, Sea's share price has been volatile during this period, as investors debated the above points. But the strategic clarity these past two quarters has brought investor confidence back, and investors are starting to pay attention again. After speaking with many other funds, it seems investors still have under-sized positions, and are waiting for a few more quarters of positive results before they size these positions up. The stock is still being valued at just ~12x 2026 EV / EBIT, or a -40% discount to emerging market peers like Mercado Libre. If Sea's business momentum continues, I wouldn't be surprised to see the share price much higher in just a few quarters.

BSD Analysis:
Hayden Capital presents a compelling bull case for Sea Limited, emphasizing the company's successful defense against TikTok's competitive threat in Southeast Asian e-commerce. The manager highlights how regulatory intervention in Indonesia effectively neutralized TikTok Shop's aggressive expansion, allowing Shopee to consolidate market share and strengthen its competitive position. The investment thesis centers on Sea's strategic reinvestment in logistics infrastructure and livestreaming capabilities during the competitive chaos, creating sustainable competitive advantages. With Shopee achieving 60% in-house logistics fulfillment and superior delivery times, the company has built meaningful operational moats while reducing costs. The manager notes accelerating growth metrics across both e-commerce (GMV growth of +36% y/y) and gaming (Free Fire player recovery), suggesting the company is entering a new growth phase. At 12x 2026 EV/EBIT, Sea trades at a significant discount to emerging market peers like MercadoLibre, presenting attractive risk-adjusted returns. The thesis assumes continued market share gains and margin expansion as competitive intensity subsides and operational leverage improves.

Pitch Summary:
Contrary to its claim, the website has only 50 visits per month; the company is operating a complex web of undisclosed related parties via shell companies; fake shell companies account for most of the revenue; accounting misclassification of costs;

BSD Analysis:
GigaCloud runs a B2B e-commerce platform for large-parcel goods like furniture and appliances. The BSD short thesis emphasizes thin disclosure, governance concerns, and heavy reliance on cross-border logistics. Revenue growth has been rapid since IPO, but critics question its sustainability and transparency, especially given China-linked corporate governance risks. Margin durability is uncertain given logistics intensity and competition from larger players like Alibaba or JD. Bears also flag risk of U.S.-China regulatory friction disrupting operations. Investors should focus on revenue quality, customer diversification, and audit/regulatory scrutiny.

Pitch Summary:
China Sanjiang Fine Chemicals. I encourage you to re-read the 2023 First Letter to Shareholders, where the rationale for investing in a bad business at a bad moment of the cycle was outlined. I did, to make sure that thesis creep did not take over: when the original thesis is adapted to new information, instead of being challenged by it. With the possible exception of the definition of "verge" - it was more than a year ago when I wrote that the company was "on the verge of a huge increase in earnings" -, things have been evolving reasonably in line with expectations. After more than 3 years of construction, to a total cost of multiple times its market cap, the new plant is finally up and running: 2H23 volumes were 60% higher than 1H23's, at much better margins - higher in fact than peers' like Braskem, Chandra Asri, Lotte Chemical, LyondellBasell EAI and SCGC, even in China's fiercer competitive environment. The sector is still in the doldrums, with plenty of players breaking even at best. However, there are signs that the supply and demand balance is improving. More and more, companies are being vocal about the confidence in the normalization of the cycle, and that after a transition of 12 to 18 months, industry margins should be far superior. Has the climbing out of the trough of the cycle started? Time will tell. The stock price reacted well to these developments: it was up 61% year-to-date, until the end of April. After all, the market should in theory be forward-looking. It is hardly a bull market, though: it is still 37% down from the end of 2021, at a time when the start up of the transformational new plant was more than a year away. Increased conviction might be taken not only from the upbeat tone in the Chairlady's statement in 2023 results, but most importantly from the aggressiveness that the controlling family is buying shares in the open market: it bought more than 40% of the total volume traded in the month of April - after the stock price went up 70% in March. As the saying goes, there are many reasons for insiders to sell, but only one reason to buy.

BSD Analysis:
The manager maintains conviction in this cyclical chemicals play despite acknowledging it as a "bad business at a bad moment." The investment thesis centers on a transformational new plant that cost multiple times the company's market cap and is now operational, driving 60% volume growth in 2H23 with superior margins versus global peers. The timing appears strategic as the chemical sector shows early signs of cycle normalization after an extended downturn, with industry participants expressing confidence in margin recovery over 12-18 months. Strong insider buying provides additional conviction, with the controlling family purchasing 40% of April trading volume even after significant price appreciation. Despite a 61% YTD gain, the stock remains 37% below 2021 levels, suggesting the market hasn't fully recognized the plant's transformational impact. The manager views this as a classic contrarian bet on cyclical recovery with substantial operational leverage.

Pitch Summary:
Tianjin Development Holdings: as you may recall, its most significant asset is a 16.5% stake in Otis China. Last February, Otis Worldwide presented its Investor Day, which has been happening every two years since it came back to the markets as a stand-alone company (it was part of a conglomerate, United Technologies, for decades). According to its CEO Judy Marks: "… I always repeat the most important metric to look at for Otis is how is the portfolio growing?". Portfolio consists of the amount of elevator units under maintenance service contracts. These are sticky, recurring, long-term, high-margin contracts: the soul of the business. The first time we invested in TianjinDev, Otis China's portfolio contained 210k units. At the end of 1Q24, it had grown to 400k units; more than 50% of Otis' global portfolio growth in this period came from China. With the upcoming decades-long modernization needs of elevators installed more than 15 years ago, that number is bound to keep growing as far as the eye can see. It is hard, and useless, to imagine how large it could grow to; after all, there are currently 9mm units installed in China, which means that Otis has a nimble 4% market share, in terms of units maintained. In the rest of the world, it holds a portfolio of 1.9mm out of an installed base of 11mm, or a 17% market share. Globally, almost 60% of Otis' revenue comes from services which, given its higher margins, makes its importance to profits overwhelming - close to 85%. In China, since the growth in urbanization is still in place, the new equipment segment is still relevant, even though growth lies in the higher margin service business. It is a much healthier growth path, with very little capex needs and much higher visibility. According to the CEO, "(...) in China, explicitly, we see it moving to becoming more of a mature market and reflecting that, especially in Service." Otis targets a global service portfolio of 2.8mm units in 2028, an increase of 500k units in 5 years. A significant portion of that is expected to come from China, whose portfolio should continue to grow at double-digit rates. While the outlook for construction is bleak, the most important part of the business should keep getting stronger. All that within a company whose net cash represents more than 2x (not a typo) its market cap, and other unrelated listed stakes, at market prices, are worth more than its market cap. The consolidated P/E multiple? Around 3x, with Otis China representing almost half of total profits. It requires leaps of imagination to lose money in this situation, on a permanent basis. But it is still possible, let us not be mistaken. It is easy to remain patient while holding a growing high-quality business.

BSD Analysis:
The manager presents a compelling value play centered on Tianjin Development's 16.5% stake in Otis China, which operates in the elevator maintenance business. The investment thesis hinges on Otis China's dramatic portfolio growth from 210k to 400k maintenance units, representing sticky, high-margin recurring revenue streams. With only 4% market share in China versus 17% globally, significant expansion potential exists as urbanization continues and older elevators require modernization. The service business generates 60% of revenue but 85% of profits globally, indicating exceptional margin quality. The valuation appears extraordinarily attractive at 3x consolidated P/E with net cash exceeding 2x market cap, creating substantial downside protection. The manager emphasizes the predictable, capital-light growth trajectory as China transitions to a mature elevator market focused on higher-margin services rather than new equipment sales.

Pitch Summary:
In our Q3 2023 commentary, we featured a section on our investment in Danaher entitled "Purity in the Crown Jewel of Bioprocessing." Specifically, we were speaking to Cytiva, Danaher's bioprocessing business formed by the merger of Pall Corp and GE's bioprocessing division. We will not repeat the features that attract us to bioprocessing in general, nor the elements of timeliness, though we will emphasize that our confidence in timeliness has actually increased since writing that piece. While Danaher has performed admirably ever since, its peer Sartorius, which was referenced by labeling bioprocessing "an oligopolistic market, with a small number of critical players and extremely high barriers to entry." Although Danaher owns the crown jewel of the industry, only Sartorious amongst these peers is what can be described as a "pure play." At Sartorius and its Sartorius Stedim (publicly listed in France as a stub company) subsidiary, bioprocessing is essentially the business. Sartorius boasts a comprehensive portfolio for bioprocessing, covering the upstream, downstream and media; however, its largest and most lucrative business is in the "upstream" flow. Upstream is where a small a cell line is taken, scaled from very small quantities to much larger ones and then harvested, before they are purified, separated and isolated into the "end product" downstream. Sartorius is a world leader in single-use bioreactors. These are smaller-scale bioreactors than the traditional steel ones that use replaceable plastic bags, within which the scaling takes place. Sartorius dominates single-use from the research phase through the commercial phase. For example, the AMBR is an industry-leading offering at the smaller end of the spectrum, which helps Sartorius gain critical share in the research stages and in Cell and Gene Therapy applications. This dominance in research phases helps secure spec'd in placements come time for commercialization, while the CGT placement supports the more demanding, but smaller scale needs of the next frontier of the biotech industry. Beyond the share capture of single-use, we want to highlight a few unique qualitative traits. We have spoken to numerous customers who have emphasized Sartorius' unique relationship with their customers. Several even went as far as using the word "partner" as a result of the level of service Sartorius' field team delivers. They have an "Innovative Differentiated Solutions" team who help customers from process design and equipment placement to clean room designs. These services are offered in pursuit of equipment sales and go above and beyond any peer in the industry who customers view favorably, though in a more mercenarial way. Moreover, even during the tight supply chain environment of COVID, Sartorius was viewed as the most reliably on-time and consistent solutions provider. While others in the industry have tried to copy Sartorius' service-first mentality, none have come close to delivering on it or fostering the kind of relationship that Sartorius has with their customers. We think this mentality, beyond the share gains of single-use generally, has resulted in impressive share gains over the past decade and provides the right to win further share (and grow faster than this fast-growth industry) over the next decade. Typically Sartorius trades at a decent premium to Danaher due to its pure play status in the highest growth area of the industry and its relatively higher growth rate given the share single use bioreactors are taking from stainless steel. Despite relative growth remaining favorable during the downturn and looking to continue so on the way out, Danaher's meaningful outperformance has created a unique valuation spread: We started buying Sartorius in the first quarter and will note that we purchased even more recently as Sartorius' valuation dropped beneath that of Danaher's (equal valuation would be 1.0x in the chart above, with any number above 1.0 representing Sartorius' boasting a higher valuation and less than 1.0x representing Danaher with a higher valuation). Sartorius trades at a mid-teens EBITDA multiple on our 2025 estimate and our now average price.

BSD Analysis:
RGA views Sartorius as the premier pure-play opportunity in bioprocessing, an oligopolistic industry with high barriers to entry. The fund emphasizes Sartorius's dominant position in single-use bioreactors, which are displacing traditional stainless steel systems across the upstream bioprocessing workflow. The company's AMBR platform leads in research applications and cell/gene therapy, creating a pathway to secure commercial placements through early-stage customer relationships. RGA highlights Sartorius's differentiated customer service model, with clients describing the relationship as a "partnership" due to their comprehensive support from process design to clean room implementation. This service-first approach has driven consistent market share gains and maintained reliable supply chain performance even during COVID disruptions. The investment thesis centers on a rare valuation opportunity, as Sartorius now trades below Danaher's multiple despite its pure-play premium and superior growth profile in the fastest-growing segment of bioprocessing.

Pitch Summary:
We first purchased shares of Maravai early in Q3 of 2023. Much like our experience with META in 2022, almost immediately following our first purchases, the stock's price tumbled. Given Maravai is a small cap, with a fairly illiquid float and volatile shares, we started our position on the smaller side. As the stock continued to stay weak, we used this as an opportunity to meaningfully increase our holding, much as we had done with META. Maravai first hit public markets in late 2020 on the heels of its phenomenal success in helping the Pfizer/BioNTech mRNA vaccine approach commercial launch. Maravai was formed as a holding company backed by private equity firm GTCR. Its two key subsidiaries are TriLink Biotechnologies and Cygnus Technologies, in the Nucleic Acid Production (NAP) and Biologics Safety Testing (BST) segments respectively. TriLink is the subsidiary whose capabilities formed a critical piece of the Pfizer/BioNTech vaccine, while Cygnus is one of the most important quality control companies for the manufacturing of biologics. Each is an incredibly unique asset. TriLink is the primary asset in the NAP segment, holding critical patents and capabilities for the research, development and commercialization of mRNA. CleanCap is the company's flagship product line that made the BioNTech vaccine possible. Prior to TriLink's development of CleanCap, researchers had to use a process called enzymatic capping. Enzymatic capping remains in use; however, it is far less efficacious than CleanCap and in terms of all-in cost it is significantly more expensive to deploy. Capping is critical for mRNA in both nature and in vaccine or therapeutic applications. The cap is the piece that protects the mRNA itself, helps signal the cells that it is ready to make a protein, and facilitates the mRNA's movement within the cell. CleanCap is a patented reagent for capping mRNA in a way that most closely mimics nature itself, allowing for a much simpler manufacturing process (one step vs multiple) and superior protein expression. Over time, via acquisition and development the company has broadened its capabilities around CleanCap to add a portfolio of enzymes and reagents, as well as a full-suite CDMO that can take a biotech customer from preclinical all the way through cGMP manufacturing. Maravai's new CEO, William "Trey" Martin (a hire from our portfolio holding Danaher), has been expanding the vision beyond mRNA applications itself to "programmable medicines," which includes CRISPR gene editing. NAP revenues soared with the rapid deployment of COVID vaccines around the world and then collapsed as the pandemic shifted farther into the rearview mirror. Importantly, the core business of TriLink continued to grow and the vaccine itself served as critical validation of what had formerly been largely theoretical and experimental applications. This opened the path to an accelerating rate of study and entry into clinical stage experimentation across the biotech industry. Although there is some negative public opinion about the COVID vaccines themselves, the science is now provably validated and applications for mRNA technology range well beyond COVID and then flu or RSV vaccines, to potential curative treatments for some of the most deadly forms of cancer. Cancer "vaccines" of this kind would be a gamechanger for humanity and an important propellant for Maravai's business prospects, considering they would use considerably more Maravai content per treatment than does the COVID vaccine. Cygnus, within Maravai, is a hidden gem. At peak COVID revenues it was a fairly insignificant portion of the business and to the average person looking at the stock, appeared a mere afterthought. With COVID vaccine-related revenues collapsing, its revenue contribution on a quarterly basis rose to around a quarter of the business towards the end of 2023 (and 22% for the full year). Yet, the focus remains far higher on TriLink due partly to its world-changing potential as well as its continued greater contribution to the business itself. We think Cygnus alone is the kind of asset that could conceivably fetch more than the company's entire market cap at the stock's lows in the past year. Cygnus is the industry-leading quality control testing kit that simplified and disrupted quality control for the development of monoclonal antibodies and is spec'd into all 21 of the FDA-approved CAR-T therapies. Cygnus led the BST segment to $64.2 million in sales in 2023, generating $46.9 million in EBITDA, a whopping 73% margin. Cygnus was built over years with little incremental capital or opex required and given this revenue scale, margin structure and dominant spec'd in position would generate considerable interest were it ever to hit the auction block. As for Maravai as a whole, the company's margin structure is perhaps the best we have ever seen. At peak COVID revenues, the company reported EBITDA margins upward of 70%. Despite losing about 2/3rds of their revenues from 2022 to 2023, the company still delivered 22.6% adjusted EBITDA margins. Maravai did this in an environment where COVID winners turned losers were fighting just for a chance to become profitable within the next few years. Meanwhile, towards the end of the year, the TriLink business stabilized and the path to regaining a robust growth trajectory and recouping lost margin emerged. At our average price between our Q4 2023 and Q1 2024 buys, we paid a low-teens multiple for what we think the company will deliver in 2026 EBITDA. Importantly, 2025 to 2026 are the years where the aforementioned progress of pushing mRNA treatments into the clinic should manifest in graduating more vaccines and therapies through the FDA process. This means that our low teens EBITDA multiple at prices paid should come with growth rates upwards of 20%. Although we never underwrite to multiple appreciation, we think this is a situation where it is far more likely to happen than not for two elite assets, with other-worldly margins wrapped in one company.

BSD Analysis:
RGA presents a compelling bull case for Maravai LifeSciences, viewing it as a unique play on the expanding mRNA therapeutics market through two distinct high-margin businesses. The fund emphasizes TriLink's proprietary CleanCap technology, which was critical to the Pfizer/BioNTech vaccine and offers superior efficacy and cost advantages over traditional enzymatic capping methods. With new leadership from Danaher expanding the vision to "programmable medicines" including CRISPR applications, the company is positioned for the next wave of mRNA innovation beyond COVID vaccines. The hidden gem Cygnus division generates exceptional 73% EBITDA margins and is spec'd into all FDA-approved CAR-T therapies, potentially worth more than the entire market cap alone. Despite revenue declining two-thirds from peak COVID levels, Maravai maintained 22.6% EBITDA margins while competitors struggled for profitability. RGA acquired shares at a low-teens 2026 EBITDA multiple, expecting 20%+ growth as mRNA treatments advance through clinical trials in 2025-2026.

Pitch Summary:
We believe this section is crucial for highlighting some of the key lessons we have learned since 2022. At the outset, let us clarify that Meta remains one of our three largest positions, fluctuating based on daily market movements. As you read this, it might in fact be our largest holding. In the closing remarks of our Q4 2022 commentary, we noted that we had "made…META substantially larger" during the quarter. Never did we expect the stock to generate such substantial returns in a short period of time. Between Mark Zuckerberg's "Year of Efficiency," a recovery in the digital ad market and an improving macro backdrop, META's key multiples recovered to a comfortable level within their long-term ranges: Although these multiples are now back to "normal" levels, they are hardly expensive for a company whose top line growth re-accelerated into the double digits, with operating leverage and despite ongoing heavy investments in the Reality Labs segment. These are the reasons why we continue to hold a large position in META. As for why we did some selling, we want to emphasize a few key points: 1. META had earned its way to a substantially outsized position and we felt it appropriate to pullback the sizing to more appropriate levels. 2. The pendulum between risk and reward swung back in such a way that the skew is no longer as favorable and the opportunity is far more balanced. Capital intensity is rising and growth will likely recede (albeit modestly) over the course of the year as comps get more challenging. 3. Opportunity cost–we are especially excited about certain opportunities and large positions become the most logical place to raise cash in order to reallocate into areas where we feel returns can be significantly better.

BSD Analysis:
RGA maintains a bullish stance on Meta despite trimming their position for portfolio management reasons. The fund highlights Meta's successful "Year of Efficiency" initiative, recovery in digital advertising markets, and strong operational leverage that drove double-digit revenue growth. While valuation multiples have normalized to historical ranges, the managers view them as reasonable given the company's growth acceleration and continued heavy investment in Reality Labs. The partial sale was driven by position sizing discipline rather than fundamental concerns, as Meta had grown to become an outsized holding. The fund acknowledges rising capital intensity and moderating growth comparisons ahead, but continues to view Meta as a core long-term holding with attractive fundamentals.

Pitch Summary:
The mine is grossly uneconomic (NPV of zero even at above average lithium prices); the mine is a clay deposit mine - no similar operational mine in the world; lots of technical challenges to mine at scale; underfunded and shareholders are 33% diluted; further dilution from GM investment;

BSD Analysis:
Lithium Americas is developing two major projects: Cauchari-Olaroz (Argentina) and Thacker Pass (U.S.). The BSD short thesis emphasizes execution risk on greenfield projects, environmental and permitting challenges, and lithium price volatility. Thacker Pass faces lawsuits and strong local opposition, creating uncertainty over timelines. Meanwhile, Argentina adds geopolitical risk, including capital controls and inflation. Bears argue consensus assumes sustained high lithium prices despite evidence of oversupply from Chinese converters and Australian mines. With heavy upfront capex and long lead times, funding needs could lead to dilution. Investors should track permitting outcomes, realized pricing vs. costs, and project financing.

Pitch Summary:
Aggressive sales recognition; upcoming shortage in cash flow; operating margins are inflated by 35%; accounting irregularities; the company is phased out of Home Depot, accounting 10% of its revenue; high-interest burden as EBITDA decreases; executives are leaving the company;

BSD Analysis:
Toro manufactures turf, landscaping, and irrigation equipment, as well as snow removal machinery. The BSD short thesis highlights exposure to cyclical housing/municipal capex, pandemic-era demand pull-forward, and intensifying competition. Dealer inventories are elevated, suggesting pressure on future sales. While Toro has brand strength and some pricing power, margins face headwinds from input costs and slowing demand. Bears argue that valuation embeds unrealistic assumptions of post-pandemic demand strength. Investors should track channel inventories, municipal budgets, and product mix shifts (residential vs. commercial).

Pitch Summary:
Misled investors about every critical aspect of its business; unreliable SEC disclosure; lots of red flags in financials; dishonest marketing tactics & non-cancellable plans; undisclosed 'brick-and-mortar' operation is used to inflate earnings; insiders cashing out (~$400 mil); Update 5/27/24 - Provided a twitter update. Update 6/6/24 - Twitter update. Update 6/21/24 - Twitter update.

BSD Analysis:
Oddity Tech is a digital-first beauty platform (brands include Il Makiage, SpoiledChild) that leverages AI for personalization. The BSD short thesis emphasizes rising customer acquisition costs, limited brand durability vs. entrenched beauty incumbents, and questions over scalability of its tech-driven differentiation. Bears argue the company is still fundamentally a consumer products firm, where valuations tied to “tech multiples” are misleading. Growth is highly dependent on marketing spend, and competitive entry barriers are lower than management suggests. Investors should track repeat purchase rates, CAC/LTV ratios, and gross margin trajectory.