Investment Pitches

Pitch Summary:
We added Embellence post its strong report for the quarter. This one has flown under the radar for us until now, but as a wallpaper company with a large Nordic footprint, it has shown impressive resilience. Being able to post organic growth during the last three years with a big consumer footprint in a high-interest environment is impressive. Makes you wonder how it will perform when we enter a low medium-interest environment in the coming years, no? To be fair, this is an international company with strong brands in several large markets, and mainly caters to high-end consumers, and the hospitality sector. We attended their recent CMD and were struck by the engagement and involvement from new CoB Magnus Welander (former CEO of Thule). His energy and enthusiasm are likely to propel the company to new heights, as well as increase interest in the company. The Embellence PnL might suffer a bit from increased product investments but will benefit from their organic growth á la Thule. Valuation remains low despite strong recent performance.

BSD Analysis:
Protean added Embellence after recognizing its impressive resilience during a challenging high-interest rate environment, where the company achieved organic growth over three years despite significant consumer exposure. The manager sees this as a compelling setup for potential acceleration when interest rates normalize. The appointment of Magnus Welander (former Thule CEO) as Chairman brings proven expertise in scaling consumer brands internationally. Embellence serves high-end consumers and hospitality sectors with strong brands across multiple markets, providing some defensive characteristics. The manager expects increased product investments may temporarily pressure margins but anticipates this will drive organic growth similar to Thule's successful strategy. Despite recent strong performance, valuation remains attractive, suggesting further upside potential.

Pitch Summary:
ITAB released a very strong Q1 report, benefitting from an improved mix where sales of technology solutions to prevent "shrinkage" (the euphemism used by retailers to describe in-store theft) is growing quickly. We initiated our position in ITAB post their Q4 report in February, and the share has more than doubled since, making it our best performer so far this year.

BSD Analysis:
Protean initiated a position in ITAB following strong Q4 results and has been rewarded with the fund's best performance year-to-date, with shares more than doubling. The investment thesis centers on ITAB's improved product mix, particularly the rapid growth in anti-theft technology solutions for retailers. The "shrinkage" prevention technology addresses a significant pain point for retailers facing increasing in-store theft. The Q1 results validated this thesis with very strong performance driven by this higher-margin technology segment. The timing of the February entry proved excellent, capturing substantial upside as the market recognized the value of ITAB's evolving business model toward higher-value technology solutions.

Pitch Summary:
Acast performed strongly after a Q1 report that underlined that this podcast ad company is approaching profitability. The strategic importance of the platform Acast has built remains underestimated in our view, and as the advertising potential of podcasts is still far from where it should be, we still see considerable upside ahead. Acast has organically grown to become our largest position.

BSD Analysis:
Protean views Acast as an undervalued podcast advertising platform approaching profitability with significant upside potential. The manager believes the strategic value of Acast's platform is underestimated by the market, particularly given the underdeveloped state of podcast advertising monetization. The Q1 results demonstrated progress toward profitability, validating the investment thesis. Acast has organically grown to become the fund's largest position at 5.0%, indicating high conviction. The manager sees considerable room for growth as podcast advertising matures and reaches its full potential. This represents a structural growth opportunity in digital media advertising with Acast well-positioned as a leading platform provider.

Pitch Summary:
International Workplace Group (IWG) is poised to capitalize on the growing demand for flexible office solutions as companies increasingly adopt hybrid work models. The company's strategic shift towards management contracts reduces capital intensity and operational risk, enhancing profitability. With a robust global presence and a diversified brand portfolio, IWG is well-positioned to benefit from the expanding flexible office market, projected to grow significantly by 2030.

BSD Analysis:
IWG's pivot to management contracts mirrors successful models in the hospitality industry, such as Marriott and Hilton, which have demonstrated strong shareholder returns. This strategy allows IWG to leverage its brand and operational expertise without the burden of capital expenditures, resulting in higher margins and reduced financial risk. The company's focus on suburban expansion and diverse pricing tiers positions it favorably against competitors like Wework, which is more concentrated in premium urban markets. IWG's ability to generate ancillary revenues and achieve cost efficiencies further strengthens its competitive advantage. The anticipated resumption of buybacks in 2025, coupled with a potential US re-listing, could enhance liquidity and investor interest, driving a re-rating of the stock. Despite macroeconomic risks, IWG's strategic initiatives and financial discipline suggest a compelling opportunity for long-term growth and value creation.

Pitch Summary:
Shift4 Payments (FOUR): Shift4 provides software and payment solutions in North America and Europe. The company was founded by Jared Issacman as a teenager in his parents' basement, and he remains the CEO to this day. The company has been EBITDA-positive since 2004 and has grown payment volume and revenue by double-digits in every single year since its inception 24 years ago. FOUR's business can be grouped into three main verticals – restaurant, hospitality, and sports & entertainment. An overview of each is below: - Restaurant: the company's flagship product is called SkyTab, a full suite of tools for modern restaurant management. It's a fully cloud-based platform with among the lowest total costs of ownership and the best reviews of any of its competitors. The segment is aiming for 30,000 system installs this year, and management recently commented that they're currently ahead of schedule in the first half of the year. FOUR recently broadened Skytab's POS capabilities by acquiring a smaller competitor named Revel for $250 M, the impact of which will begin to flow through the financials in the second half of the year (though no benefit from it is included in the company's guidance). - Hospitality: FOUR's hospitality segment tends to focus on resorts and casinos for which there are a wide variety of commercial activities on site (think dining, retail, entertainment, etc.). The complexity of handling these different use cases means that few players have the expertise required to manage the 500+ software integrations needed to effectively compete. - Sports & Entertainment (S&E): FOUR's ability to seamlessly handle a range of revenue streams has also made them a leader in the S&E space, for which POS, mobile ordering, ticketing, and parking payment solutions are all required. Recent signature wins include the NFL's Chiefs, Ravens, and Rams. This segment is now starting to expand internationally as well; FOUR recently signed its first two European stadiums, including FC Barcelona's Camp Nou. The combination of robust organic growth and thoughtful capital allocation has led to impressive financial performance. Since its unceremonious IPO during the throes of the pandemic, FOUR has deployed $2.1 B of capital to generate an incremental $570 M of EBITDA and $420 M of FCF. This dynamic of essentially paying a 3.6x EBITDA or 4.9x FCF multiple to expand the business while your stock trades far north of that has generated immense intrinsic value growth for shareholders. But despite these operational successes, FOUR stock remains well off its 2021 highs as its trading multiples have been compressed by more than half. While the stock likely got ahead of itself in the heady days of near-zero interest rates, we think it's now overcorrected given the business's quality, performance track record, and whitespace for future growth. FOUR has guided to about $575-610 M in true EBITDA for 2024 as they continue to execute their gateway sunset strategy. This puts the stock at 9.5-10x on this year's numbers – more than reasonable given the 25%+ organic growth and a deep pipeline of future M&A opportunities in the fragmented payments space. It's also a significant discount to other diversified software+payment peers. The range of future fair values is broader than usual here for two reasons. First, FOUR regularly does bolt-on acquisitions that make up a meaningful portion of total growth. This year, of their ~40% net revenue growth, 15% of it will come inorganically, a material amount. Second, payment peers have traded at a wide range of P/E multiples in recent years based on investor sentiment, and FOUR has not been public long enough to estimate true through-the-cycle median multiples; in the past four years, it's often traded north of 50x forward earnings, but I am not willing to underwrite that as anything more than a stretch upside case going forward. Rather, it's better to make our estimates based on just the existing business and apply a more conservative multiple based on organic growth and earnings durability, treating any additional M&A or investor euphoria as a bonus. We think fair value is somewhere between $95-105 per share discounted back to year-end, suggesting 35-50% upside from current prices. From the period between now and 2027, we assume material revenue deceleration, EBITDA margins and FCF conversion in line with current guidance, and a P/E ratio below the market and payment peers. This fair value range is where FOUR traded in 2021, when it was less than half the size by sales. Further revenue upside should be possible if the company continues with its roll-up strategy, but again, we prefer to project based solely on organic growth. Finally, while FOUR is a well-managed business trading at a more-than-fair price, the biggest appeal of this investment to us is the potential catalyst of a sale of the business in the relatively near future. CEO Isaacman has made it no secret that he has no interest in handing the reins to his children or stepping aside for someone else to take control – his eventual exit will be from a sale, and it is just a matter of when. There are certainly risks to having an investment in a company with a super-majority voting structure, but the founder is also the largest economic owner here (and was recently buying more) and has earned the benefit of the doubt over 20+ years. And payments are a competitive industry, but FOUR has proven in the last two decades that they can handle it. Considering the valuation discount alongside the potential catalyst and effective downside protection from prospective buyers signaling interest even at higher prices, we think the risk-reward and potential IRR here are very appealing.

BSD Analysis:
The manager presents a compelling bull case for Shift4 Payments based on strong fundamentals and an attractive valuation. The company demonstrates exceptional operational consistency with 24 consecutive years of double-digit growth and EBITDA positivity since 2004. FOUR's diversified business model across restaurants, hospitality, and sports & entertainment provides multiple growth vectors, with the SkyTab platform showing particular strength in the restaurant vertical. The manager highlights impressive capital allocation efficiency, with $2.1B deployed generating $570M in incremental EBITDA at attractive 3.6x multiples. At 9.5-10x 2024 EBITDA despite 25%+ organic growth, the stock trades at a significant discount to payment peers. The investment thesis is further strengthened by a potential near-term catalyst, as CEO Isaacman has signaled his intention to eventually sell the business rather than transition leadership. The manager's $95-105 price target implies 35-50% upside, supported by conservative assumptions that exclude potential M&A benefits.

Pitch Summary:
When we came across CRH plc a little over a year ago in our research process, it was a company we and likely many other U.S. investors had little familiarity with. The company is headquartered in Ireland, was listed through a sponsored ADR, had no direct U.S. analyst coverage, and was not included in any relevant indices. This was despite the fact that CRH is one of the largest building materials companies in North America with unrivaled size and scale, generated over 75% of its total EBITDA in the region, and had a $40bn market cap. As we dug in further our excitement quicky built as we learned how the current management team had repositioned the portfolio to less cyclical, faster growing markets all while driving EBITDA margins higher (over 350bps since 2018) and balance sheet leverage down to the best level in its 50-year history. CRH's consistent free cash flow generation coupled with its prudent capital structure has allowed the company to allocate an increasing amount of its excess capital back to shareholders through dividends and buybacks in recent years. From a sustainability perspective, CRH would have been an easy name to dismiss under a traditional "exclusionary" approach given the legacy of its industry. Yet in our opinion, CRH's Sustainable Cash Flow Advantage centers around its leading position among its peers in terms of circularity, emissions, and innovation. CRH is the largest recycler of any material in North America (44m tons last year) and generates over 50% of its revenues from products with enhanced sustainability attributes. One of every four miles of road that CRH paves in North America is made with fully recycled content. This has helped CRH not only lower its overall cost structure but also win share in the market as more customers seek out more sustainable solutions from their supplier base. Finally, with an absolute valuation at a substantial discount to its closest U.S. peers, we initiated our position. Since that time, CRH has moved its primary stock listing to the U.S. which we think will help it to get on more U.S. investors radars over time. CRH remains a core position within the strategy today.

BSD Analysis:
Brown Advisory presents a compelling bull case for CRH plc, emphasizing the company's transformation from an overlooked Irish-listed ADR to a recognized North American building materials leader. The manager highlights CRH's impressive operational improvements, including 350+ basis points of EBITDA margin expansion since 2018 and balance sheet leverage at 50-year lows. The investment thesis centers on CRH's 'Sustainable Cash Flow Advantage' through industry-leading recycling capabilities, processing 44 million tons annually and generating over 50% of revenues from sustainable products. This sustainability focus has enabled cost structure improvements and market share gains as customers increasingly demand environmentally conscious solutions. The manager views CRH's recent U.S. primary listing as a catalyst for increased institutional recognition. With consistent free cash flow generation, disciplined capital allocation through dividends and buybacks, and a valuation discount to U.S. peers, Brown Advisory positions CRH as a core holding that exemplifies their value-sustainability intersection strategy.

Pitch Summary:
Leading provider of business process services, driven by data/tech and people. 2 divisions; Public and Private sectors. 43,000 employees. No.1 UK, No.4 Europe. Sales £2.6bn, 21% GPM, Ebitda £214m, PBT £56.5m '23, orderbook £5.8bn. Terrible past with over-expansion leading to contract difficulties, excess debt (was >3x), pension burden, Woodford. Long process of 'stabilisation' via disposals (raised >£500m), pension injection/deal = no contributions from '25. Cyber-attack delayed progress. Excellent clients, sticky long-term contracts, significant opportunity for technology transformation offer. Strong brand name with customers (investors). New CEO extended restructuring = £160m cost savings target my mid '25. Net Debt £182m (extension to '26), leases £545m (reducing office footprint), £133m deferred tax asset and unrecognised tax losses £847m. Life & Pensions activity cash drain must be addressed, would transform FCF generation. Key is margin recovery – company target 6-8%. Valuation: EV/Sales 0.3x, PE & EV/Ebitda <3.5x. Target £90m FCF, 10% yield. Thesis: Scope for improved profitability (public 6.1%, private 4.3%), re-rating, further simplification, tech-enabled growth acceleration, significant inflection in FCF generation. Possible further business mix change to improve narrative.

BSD Analysis:
Rockwood presents Capita as a deeply undervalued business process outsourcing leader emerging from a multi-year restructuring with significant operational leverage potential. The company maintains market-leading positions as No.1 in UK and No.4 in Europe with £2.6bn sales, £5.8bn orderbook, and sticky long-term government and corporate contracts providing revenue visibility. Historical over-expansion and the Woodford association created operational and financial distress, but management has systematically addressed legacy issues through £500m+ of disposals, pension deal elimination, and debt restructuring. The new CEO's £160m cost savings target by mid-2025 should drive margin recovery from current depressed levels toward company targets of 6-8%, with public sector already achieving 6.1% versus private sector's 4.3%. Balance sheet improvements include net debt reduction to £182m with extension to 2026, plus significant tax assets of £133m deferred and £847m unrecognized losses providing future cash flow benefits. The key catalyst involves addressing the Life & Pensions cash drain which would transform free cash flow generation toward the £90m target, implying 10% FCF yield at current valuations. Trading at just 0.3x EV/Sales and sub-3.5x Ebitda multiples, Capita appears significantly undervalued for a market-leading BPO business with improving fundamentals and substantial operational leverage as margins normalize.

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:
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 identifies Sartorius as the pure-play leader in bioprocessing, dominating the high-growth single-use bioreactor market from research through commercial production. The fund emphasizes Sartorius's exceptional customer relationships, with clients describing them as true "partners" rather than mere suppliers due to their comprehensive service offerings and reliable execution. The company's AMBR platform captures critical early-stage research placements that translate into spec'd-in commercial wins, particularly in the emerging cell and gene therapy space. RGA highlights a unique valuation opportunity where Sartorius now trades below Danaher's multiple despite historically commanding a premium due to its pure-play status and higher growth profile. The fund purchased shares at a mid-teens 2025 EBITDA multiple, viewing this as an attractive entry point for a company gaining market share in the transition from stainless steel to single-use bioreactors. With bioprocessing being an oligopolistic market with high barriers to entry, RGA sees Sartorius positioned to outgrow the industry through continued share gains.