Investment Pitches

Pitch Summary:
A relatively small position in Pensionbee (LSE:PBEE) was purchased during the month after their announcement of an expansion into the US, backed by a larger partner who intends to provide substantial marketing spend and know-how. In addition to the already well-oiled UK market there is substantial optionality on the US working out as well. An optically expensive price of ~7x EV/ARR was paid, but I expect the business to be an order of magnitude higher in the next 5 to 10 years.

BSD Analysis:
The manager initiated a position in PensionBee following their US expansion announcement, viewing it as a compelling growth opportunity despite paying a premium valuation of 7x EV/ARR. The investment thesis centers on the company's proven UK operations providing a foundation for US market penetration, supported by a strategic partner offering marketing expertise and capital. The manager expects significant scale expansion over the next 5-10 years, suggesting confidence in the digital pension platform's ability to capture market share in both geographies. The 'optically expensive' valuation is justified by the substantial optionality the US market represents. This appears to be a growth-oriented investment betting on geographic expansion and market disruption in the pension management space. The manager's willingness to pay a premium suggests strong conviction in the long-term growth trajectory. The position sizing as 'relatively small' indicates prudent risk management while maintaining exposure to the upside potential.

Pitch Summary:
APi is the global leader in life and safety services, helping businesses navigate the increasing and complex web of health and safety regulations. Despite its short life as a public company, APi has a long and storied history. The company was founded in 1926 by Reuben L. Anderson in St. Paul, Minnesota. It began as a small insulation contracting and distribution business focused on consolidating companies in order to provide a full suite of services for their customers. After graduating from West Point in 1961, Reuben's son Lee Anderson, bound for a career in the military, returned to Minnesota to lead the company after his father suffered a heart attack. Lee was appointed president in 1964 and immediately began acquiring firms in the construction and fire-protection fields where he saw substantial growth opportunities. Since 2005, APi has completed over 100 acquisitions, adding several quality companies to their portfolio of brands, such as Chubb Fire & Safety, SK FireSafety Group, and International Fire Protection Inc. These acquisitions has allowed them to take significant market share from competitors while expanding their presence into new global markets. In 2019, Lee sold his interest in APi Group for $2.9 billion to J2 Acquisition Limited, a SPAC (Special Purpose Acquisition Company) led by Sir Martin Franklin, James Lille and Ian Ashken. The company went public through the SPAC and all three men serve as board members. Now headquartered in New Brighton, 15-miles north of St Paul, Minnesota, APi operates through two segments: Safety services, which account for approximately 70% of revenues and Specialty services, which represent approximately 30% of revenues. In the Safety segment, the company designs, installs, inspects, and services various fire protection solutions, life safety equipment, and HVAC systems for a wide array of customers. Inspections are required by regulatory bodies (i.e. fire marshals, US government), to be done at least once a year, creating a recurring fee based revenue for the firm. Currently, inspection, service and monitoring fees comprise approximately 50% of the firm's revenues. The target is to reach at least 60% by 2025. As the percentage of service income increases, gross margins are expected to increase by an additional 10-20%. In the Specialty segment, the company provides maintenance, repair and retrofitting services to critical infrastructure such as underground electric, gas, water, sewer, and telecommunications infrastructure to ensure proper functionality. Customers in the segment vary from private and public utilities, healthcare, education, transportation, manufacturing, and government. The two segments complement each other nicely and will often encompass the same customers due to cross-selling capabilities, enabling APi to service the entire facility life cycle. Buildings require inspection and monitoring of their infrastructure across their entire premises, from storm drain and sewer pipes underground, all the way up to fire sprinkler heads and security cameras on the ceiling. APi stands apart from competitors due to its go-to-market strategy of targeting smaller-ticket work to existing facilities and offering quality inspection services first. Management believes on average, $1 of core inspection work leads to $3-4 of future non-inspection service work, ultimately creating very sticky and strong relationships with customers. In contrast, competitors pursue winning bids for higher-ticket installations on new builds, then sell their inspection services once approximately 95% of the construction work is complete. APi's strategy seems to be working well with customer retention rates of over 90% and a large untapped market ahead of them. Currently, the company holds a 10% market share in the US inspection and service market, and is the market leader, with a 5% market share, in the >$60 billion global fire protection systems market. Given APi's size, they have the scale to continue investing in leading technology allowing them to win larger enterprise customers and drive their market share even higher. For example, APi's technology was the first to provide their clients with the ability to generate same-day inspection deficiency reports for customers, ensuring they're compliant with local regulations and up to date on their insurance requirements each year. Since the great financial crisis in 2008, management has directed its focus towards shifting the business away from cyclical, capital-intensive projects and installation work to more defensive, asset-light service work, driving APi into a stable, higher margin, recurring revenue business with greater pricing power. Inspection and service work increased from 15% of revenue in 2008 to 53% at the end of 2023 and continues to grow quickly. Part of this growth is due to increased regulatory requirements in recent years, which have become more onerous for businesses. The NFPA, has more than 300 requirements and codes for new construction, including the installation of sprinkler systems, national fire alarms, signaling codes, etc., which are on average updated every 3-5 years. Meanwhile, the US government is continuously reviewing expanded regulations and essential safety mandates along with state and local governments. These trends have created a meaningful tailwind for APi Group with inspection and service monitoring revenues growing by double-digits every quarter since 2020! Another significant contributor to APi's transition towards a more service and inspection-oriented company was the acquisition of Chubb Fire and Security, a global market-leading safety and security business. In its long history of acquiring comparable companies, APi had never undertaken an acquisition as transformative as Chubb, which management described as a 'center of the fairway' transaction. APi announced the acquisition in July of 2021, from Carrier Global for $3.1 billion which closed at the beginning of 2022. Under Carrier's safety services arm, Chubb was largely a neglected asset that suffered years of decline due to significant underinvestment and mismanagement. For context, Chubb operates in 17 countries, serving over 1.5 million customer sites through 200 branches. Their top 6 markets comprise 90% of their revenue, with over 60% of revenue coming from high-margin recurring services, making it a perfect target for an APi takeover. Since the acquisition, APi has been busy with integration, which has led to more than $40 million in cost savings to date, with expectations of an incremental $80-85 million in savings over the next two years. Over the last decade, the company has built itself into a defensive, non-cyclical, asset-light, service-oriented, recurring-revenue focused business. This positioning has clearly established APi as the dominant leader in a highly fragmented market, ripe for consolidation. We're also pleased with the quality management team. Russ Becker, the company's veteran CEO, is committed to creating a culture of leadership across the organization, whereby everyone in the APi family is known and recognized as a leader, from the field-service inspector all the way up to senior management. Russ and the co-chairman have aligned themselves with the the company and together own approximately 15% of the company. Most importantly, the company generates significant free cash flow for shareholders. With the integration of Chubb and the ongoing growth in the business, the stock increased by 86% in 2023, and at the time of writing is up almost 20% year-to-date. Moving forward, the free cash flow will be used for bolt-on acquisitions, share buybacks, and reinvesting back into their business. As a new addition to our client accounts, we are excited with the future of APi and will continue to add to our position in both client portfolios and our ROCKLINC Partners Fund.

BSD Analysis:
ROCKLINC presents a compelling bull case for APi Group, positioning it as the global leader in life safety services with significant competitive advantages. The manager emphasizes APi's successful transformation from cyclical installation work to a defensive, recurring revenue model, with inspection and service work growing from 15% of revenue in 2008 to 53% by 2023. The company's unique go-to-market strategy of targeting smaller-ticket inspection work first creates sticky customer relationships, with $1 of inspection work generating $3-4 of future service work and customer retention rates exceeding 90%. The transformative $3.1 billion Chubb Fire and Security acquisition has accelerated this transition while providing substantial cost synergies of $40 million realized and $80-85 million expected over the next two years. APi benefits from strong regulatory tailwinds, with increasingly stringent NFPA codes and government safety mandates driving double-digit growth in inspection revenues every quarter since 2020. The company holds a dominant 10% market share in the US inspection market and 5% globally in the $60+ billion fire protection market, providing significant runway for expansion. Management quality is strong with CEO Russ Becker and leadership owning 15% of shares, aligning interests with shareholders. The stock's 86% gain in 2023 reflects the successful execution of this strategy, with strong free cash flow generation supporting future acquisitions, buybacks, and reinvestment.

Pitch Summary:
The Hong Kong and Shanghai Hotels Limited (0045.HK) (THKSH) has been around since 1866, was one of the first companies listed on the local stock exchange and has a colourful history - given its multi-national prime properties - which is scrupulously documented on its website. However, THKSH shares have been rather less exciting than the company itself. Recent prices have seen them trading at levels last seen in 2009; indeed the current price is roughly equivalent to the level (HK$5.80 per share) in a general offer by the then 35% shareholding Kadoorie family to ward off a takeover offer from Lo Yuk Sui; including various trusts in which the family has some entitlement, the "locked" shareholding was around 55% in 2007 and had crept up to 60% by end 2021. In January 2022, the Kadoorie's agreed to purchase 12% of the company – after shareholder agreement not to force a takeover offer was obtained – at HK$12.80 per share to take their holding to 72%. Sino Holdings (1221.HK) owns 5.1% of HKSH as a "long term investment". These appear to the foundation stones for a classic "value trap". That can't be ruled out but we see scope for a significant uptick in earnings, gradual improvement in cash flow and the potential to see a closing of the enormous gap between stated NAV and share price of these amazing trophy assets, for which Middle Eastern interests are currently ravenous. THKSH owns and operates 10 hotel properties with at least 50% ownership across four regions for a total of 2400 attributable rooms. In addition, THKSH owns four retail arcades attached to hotels in the same proportional ownerships, two commercial office buildings in Hong Kong, two mainly residential complexes in Hong Kong and Saigon, a retail tower in Hong Kong and a mixed-use building in Paris. It also owns the Peak Tram in Hong Kong and a golf course in Carmel, California. THKSH also owns 20% of the property and operations in Peninsula Paris and Beverly Hills. At face value, THKSH looks extraordinarily cheap. At end March with the shares at HK$5.95 (market capitalisation HK$9,811million), this compares to the 31 December 2023 "fair value" net assets per share of HK$24.95 – a 76% discount; if we adjust for the net debt of HK$15,033 the notional asset level discount against assets of ~HK$55.65billion is about 55%.

BSD Analysis:
East72 presents Hong Kong and Shanghai Hotels as a deeply discounted opportunity to own trophy ultra-luxury hotel assets trading at a 76% discount to stated net asset value. The company owns and operates the prestigious Peninsula Hotels brand across 12 properties globally, representing some of the world's finest luxury accommodations. The manager identifies significant earnings leverage from the post-COVID recovery, with room rates rising substantially across all regions and new properties in London and Istanbul contributing full-year revenues. The analysis suggests investors are effectively getting the core hotel portfolio for free when accounting for the value of non-hotel assets including prime Hong Kong real estate. Recent transactions in the luxury hotel sector at US$1,176k per room support the company's asset valuations, while THKSH trades at an implied US$642k per room with a 50% haircut on non-hotel assets. The 72% Kadoorie family control provides stability but also potential value realization catalysts through partnerships with Middle Eastern investors who are actively acquiring trophy hotel assets globally.

Pitch Summary:
BIAL is Bangalore International Airport Limited, operator of Kempegowda International Airport located 40km from the centre of Bengaluru, India's third largest – but fastest growing city – with 14million people in its metro area, up from 6.5million twenty years ago. BIAL has a monopoly within a 150km radius until 2033 and has a 30 year concession with a further 30year option to operate Kempegowda. The airport has an estimated catchment area of 250million people (it's worth noting when you read the next section, how long any competing facility may take to be planned, let alone built when the monopoly expires). The dynamics and analysis of Kempegowda are identical to most other "greenfield" airports – gradual expansion and use of adjoining vacant land to add non-airport revenues over time. It's a model seen elsewhere around the world in recent years, but for one exception: the numbers here are far bigger than anywhere outside the Middle East – and it is predominantly a domestic operation for the time being. Dare to dream of the word "hub" sometime down the track. BIAL is now 13% owned by each of Karnataka State Industrial & Infrastructure Development Corporation and Airports Authority of India 13% - two Government instrumentalities. The remaining 74% is 20% owned by Siemens Project Ventures – part of the €134billion market cap Siemens AG – and through two entities by Fairfax India Holdings (FIH-U.TO). Fairfax India - a specialist holding company managed by the Toronto based Fairfax Financial Holdings (FFH.TO) chaired by the ex-patriate Indian, Prem Watsa. FIH has a gross asset base of US$3.82billion (including cash of $175million) with borrowings of $500million and creditors of $120million, to make a pre-tax equity base attributable to unit holders of ~$3.06billion. FIH's equity holding in BIAL is by far its largest asset, valued at 31 December 2023 at a carrying value of $1.6billion. There are twelve other assets of which five are listed companies. The two most significant of these are IIFL Finance and CSB Bank, each accounting for ~11% of assets at 2023 year end. Based on the 31 December 2023 NAV of US$21.85 per share, FIH-U trades at a 32% discount to this stated figure.

BSD Analysis:
East72 identifies Fairfax India Holdings as an attractive vehicle to access BIAL (Bangalore International Airport), which operates a monopolistic airport serving India's fastest-growing major city. The investment thesis centers on BIAL's exceptional growth profile, with Bengaluru's metro area expanding from 6.5 million to 14 million people over twenty years and a catchment area of 250 million people. The airport benefits from a monopoly within 150km until 2033 and substantial expansion plans to increase capacity from current levels to 90 million passengers annually by 2037. The manager highlights the regulated revenue structure that provides visibility, with aeronautical charges set to increase significantly in FY2025, and strong growth in non-aeronautical revenues as passenger volumes recover. FIH trades at a 32% discount to NAV, providing discounted access to this high-quality infrastructure asset. The implied entry multiple of 10.2x EV/EBITDA for BIAL appears reasonable compared to other listed airports, with significant upside potential from an eventual IPO as the asset matures.

Pitch Summary:
Belron – a staggering compounder in vehicle glass repair and replacement. Belron is one of the premier global businesses we have come across, but it's really only in the past five years that a confluence of factors have come together to enable it to earn the returns commensurate with its global positioning. Belron has virtually every beneficial attribute outside of an IT growth or natural monopoly business you could wish to find. Market leadership in every one of its major markets, pricing power, network effect, a material technology advantage in an industry where technological change – in vehicle glass - becomes a moat of vast significance. The company produces prodigious cash flow which has facilitated generous dividends and capital returns to the equity owners via private equity-style financial engineering and debt refinancing. Since late 2021, Belron has been owned by four shareholder groups: Staff and management with 11%; The private equity group Clayton, Dubilier and Rice (CD+R) via an SPV (20.5%); An investor group of San-Francisco based Hellman & Friedman, Singapore's GSIC and Blackrock (18.2%); and The Belgian listed, family-controlled conglomerate, D'Ieteren Group (DIE.BR) with 50.3% and which is equity accounted in D'Ieteren's books. Hence, D'Ieteren is the only realistic avenue for public investment in Belron. Moreover, since D'Ieteren is 63% controlled by the eponymous family whose predecessors incorporated the company as a coach builder in 1805, and is only listed in Brussels, plus there are other assets within the holding company, the vast majority of investors seem happy to let the opportunity pass by. Dynasty Trust started acquiring shares in D'Ieteren in the third quarter of 2023 at an implied valuation of Belron (on our maths) 58% lower than the November 2021 transaction where the investor group acquired their shares from CD+R. D'Ieteren shares are up about 31% since then, but the ongoing performance of the holding company's largest asset by far, continues to more than justify the Top 10 position in our portfolio, despite the four-fold run up in the shares since late 2020. That came after a fifteen-year period where the shares did very little at all.

BSD Analysis:
East72 presents a compelling case for D'Ieteren as a discounted entry point into Belron, a dominant global vehicle glass repair and replacement business. The manager highlights Belron's exceptional competitive positioning with market leadership across all major markets, significant pricing power, and technological advantages in ADAS (Advanced Driver Assistance Systems) that create substantial moats. The explosion in profitability since 2019, with operating margins expanding from 6% to over 20%, demonstrates the structural tailwinds from increasing value-added services and technological change in windscreens. D'Ieteren's 50.3% stake in Belron provides the only public avenue to access this exceptional business, trading at an implied 25% discount to the December 2021 private equity transaction value. The manager calculates an effective entry multiple of 15.8x after-tax earnings for 2024, which appears attractive for a business with strong structural growth drivers. The potential for a Belron IPO within 2-3 years, driven by private equity shareholders' typical holding periods and upcoming debt maturities, could provide significant value realization catalysts.

Pitch Summary:
We opened a new position in EssiLux in Q1. We have been following the business through the merger of Essilor with Luxottica, and the subsequent prolonged integration period. We think the challenges of integration have now been largely overcome, with the new company uniquely positioned as the dominant and only completely vertically integrated player in the large and growing global eye-care industry. For instance, we estimate EssiLux now commands c. 45-50% share of branded frames and lenses, c. 10-12% share of retail in key markets of US and Western Europe, and owns the second largest managed care provider in the US, which is a crucial customer acquisition tool for the business. The industry itself is still under-served and secularly growing. We estimate c. 2-3% consistent and structural volume growth for the business from ageing populations and increasing incidence of myopia amongst children. As the industry #1 operator, EssiLux spends c. 75% of the industry's R&D, which we think the business is now positioned to start to monetise in three distinct ways. Firstly, through the launch (in the US and Western Europe) and scale-up (in China and Asia) of its myopia management business, which is clinically proven to cut myopia progression in children by up to 67%. We think this market could eventually represent c. EUR 2.5bn of revenues for EssiLux, or 10% of the Group currently. Secondly, through the launch of its invisible hearing aid embedded within eyeglass frames for patients with mild hearing loss. With c. 1bn such patients globally, and majority of them also wearing eyeglasses, even a conservative take-up assumption could drive very meaningful revenue upside to the business. We estimate this could also represent up to EUR 2bn revenue upside for EssiLux in the long-term. Finally, we have acquired and trialled EssiLux's 2nd generation smart glass product produced in a joint venture with Meta. This generation represents a significant advance from the previous one, and we see this as a highly attractive product proposition and way for wearers of eyeglasses to benefit from GenAI applications (e.g. text translation, maps guidance, hands-free photography and video recording etc). We conservatively estimate just c. EUR 500m of revenues from this product for EssiLux, with substantial scope for upside. Together, we think these innovations can take Group organic growth sustainably to 5-7%, which, with ongoing margin expansion and cash generation sets the business for sustained low teens TSR, with scope for further upside from better than our conservatively expected take-up of the above and upcoming innovations. We view the stock as attractively valued for this return profile and have, hence, opened a new position in the name. We are travelling to Milan in May to meet with senior management and will further assess our holding thereafter.

BSD Analysis:
Lansdowne initiated a new position in EssilorLuxottica following the completion of integration challenges, viewing it as the dominant vertically integrated player in global eye-care. The company commands 45-50% market share in branded frames/lenses and 10-12% retail share in key Western markets, with the second-largest US managed care provider. The manager sees 2-3% structural volume growth from aging populations and rising childhood myopia. EssiLux's 75% share of industry R&D spending positions it to monetize three innovation areas: myopia management (EUR 2.5bn revenue potential), invisible hearing aids (EUR 2bn potential), and smart glasses with Meta (EUR 500m conservative estimate). These innovations could drive 5-7% sustainable organic growth, supporting low-teens total shareholder returns through margin expansion and cash generation. The fund views the valuation as attractive for this return profile and plans management meetings to assess the position further.

Pitch Summary:
Relx is a global leader in providing productivity enhancing professional services encompassing Risk, Legal and Scientific research/publishing services. The business benefits from several secular growth drivers, such as demand for tools and analytics to manage risk & minimise fraud, rising spend on R&D etc. In addition, we view the business as very well placed to benefit from being able to incorporate GenAI services within its offerings, specifically within its legal tools, analytics and databases products. We view that even with conservative assumptions, this alone could further enhance Group organic growth by up to c. 100bps, taking the Group to structural organic growth of c. 7% p.a., driven almost entirely from hard-currency markets of the US and Western Europe. When coupled with ongoing margin expansion and strong cash generation, we estimate the business can sustainably deliver low-mid teens TSR, which leaves the current valuation of c. 26x PE highly attractive given it represents a discount to the market on a PEG basis.

BSD Analysis:
Lansdowne views RELX as well-positioned to capitalize on secular growth drivers including demand for risk management tools, fraud prevention analytics, and rising R&D spending. The manager sees significant potential from GenAI integration across legal tools, analytics, and databases, estimating this could add 100bps to organic growth. This would drive structural organic growth to approximately 7% annually, primarily from hard-currency markets in the US and Western Europe. The combination of growth acceleration, margin expansion, and strong cash generation supports sustainable low-to-mid teens total shareholder returns. At 26x PE, the fund views the valuation as attractive on a PEG basis, representing a discount to the broader market. RELX's professional services model provides defensive characteristics while offering meaningful growth optionality through technology integration.

Pitch Summary:
Leonardo is a global leader in the defence industry with capabilities extending across in aerospace, defence electronics, cybersecurity and space. The company participates in major international strategic programs such as the Eurofighter Typhoon and has a well-diversified global sales footprint. With the Russian invasion of Ukraine raising the risk of a high-intensity conflict on European territory, and US prioritisation of strategic interests in the Indo-pacific region, we believe that European defence spending will experience a major up-cycle in the coming decade, with the potential to add over EUR 80bn to the regional defence budgets to meet the NATO requirement to spend 2% of GDP on defence. Furthermore, Leonardo is a beneficiary of two other secular trends within this space to which it is over-indexed: increased spend (as a proportion of the total defence budget) on major equipment procurement and the increased value of electronic content within key platforms. Beyond the supportive environment, a new CEO has taken over the reins and is keen to turn around a company that has historically underperformed industry peers despite possessing various high-quality assets. The company is exceedingly cheap compared to its peer group if it can execute on financial targets set out in its recent industrial plan, which we believe are conservative.

BSD Analysis:
Lansdowne views Leonardo as positioned to benefit from a major European defense spending upcycle driven by geopolitical tensions and NATO requirements. The manager estimates over EUR 80bn could be added to regional defense budgets to meet the 2% GDP spending target. Leonardo is well-positioned for two secular trends: increased major equipment procurement spending and higher electronic content in defense platforms. The company participates in strategic programs like Eurofighter Typhoon and maintains diversified global sales. A new CEO brings turnaround potential for a company with high-quality assets that has historically underperformed peers. The fund believes Leonardo trades at a significant discount to peers despite conservative financial targets in its industrial plan. The combination of favorable industry dynamics, operational improvement potential, and attractive valuation creates a compelling investment opportunity.

Pitch Summary:
During Q1, we added to our long standing holding in KBC. Over 2023, the business was impacted by several adverse shocks, from regulatory (ECB mandated increase in capital requirements in spite of no change to the Bank's credit risk profile) to political (numerous State sponsored retail bond issuances in Belgium forcing deposit flight from the banking system). In an environment of rapidly rising ECB policy rates, the Bank's more balanced business model (NII represents only c. 50% of Group revenues vs >80% for other rate sensitive banks) reduced upside beta of earnings to the interest rate cycle. However, we think that the outlook is now more supportive for the Bank. The one off increase in capital requirements has been absorbed by the Bank's organic capital generation and the Belgian government has changed the terms of its 2024 retail bond issuances to make it less appealing to investors post tax deductions. In addition, the impending ECB rate cut cycle should reinforce the attractions of KBC's more balanced business model. At just 9x earnings for sustainable 8% dividend yield, we view the shares as being substantially underpriced and hence, increased our holding in the name.

BSD Analysis:
Lansdowne added to their long-standing KBC position despite the bank facing regulatory and political headwinds in 2023. The manager views KBC's balanced business model as a competitive advantage, with net interest income representing only 50% of revenues versus 80%+ for rate-sensitive peers. This diversification provided downside protection during rising rates but limited upside participation. The fund believes the outlook has improved as KBC absorbed ECB capital requirement increases through organic generation and Belgian government bond terms became less attractive. The impending ECB rate cut cycle should favor KBC's balanced model over pure rate-sensitive banks. At 9x earnings with an 8% sustainable dividend yield, the manager sees substantial undervaluation. The decision to increase the holding reflects confidence in the bank's resilient business model and attractive valuation metrics.

Pitch Summary:
ASML is the leading producer of front-end lithography equipment used in the production of semiconductors globally. What is unique about ASML is its monopolistic position in the latest generation of lithography equipment in Extremely Ultraviolet (EUV) machines. ASML is a company that we have closely monitored as we favourably view its high-quality defensible position in the semiconduction value chain, earning remarkable ROIC of >30%, and its critical importance in the advancement of technology. Earlier this year, we took the opportunity to build a starter position in the name. ASML's strong bookings number of EUR 9.5bn in Q4 2023 in addition to TSMC's higher than expected capex spend guide of USD 28 to 32bn gave us confidence in their 2025 sales targets, allowing us to underwrite double digit topline growth which is well supported by a credible backlog. We continue to monitor the stock and could look to increase our position over time as we increase our conviction levels.

BSD Analysis:
Lansdowne initiated a starter position in ASML, recognizing the company's monopolistic position in EUV lithography equipment essential for advanced semiconductor manufacturing. The manager highlights ASML's exceptional ROIC of over 30% and its critical role in technology advancement as key investment drivers. Strong Q4 2023 bookings of EUR 9.5bn and TSMC's elevated capex guidance of USD 28-32bn provide confidence in ASML's 2025 sales targets. The fund underwrites double-digit topline growth supported by a credible backlog, indicating strong demand visibility. ASML's defensible market position in the semiconductor value chain offers significant competitive advantages. The manager views this as a high-quality business with sustainable competitive moats. The position sizing suggests a cautious but optimistic approach with potential for expansion as conviction builds.

Pitch Summary:
Another position we have in Korean defense is in Poongsan, whose business is focused on two seemingly unrelated areas – copper refining and munitions. The world has very few munitions pure plays as most of these businesses are either owned by governments or small parts of large conglomerates. As mentioned earlier, the price of 155mm shells has doubled or more and shortages have become extreme. By law, Korea does not allow defense exports to war zones which is why they are not selling their arms directly into Ukraine. Rather, the orders have been to restock inventory in Europe and the U.S. Poongsan's munitions can be used with Korean howitzers and tanks as well as western produced equipment. The company recently announced a doubling of capacity for its munitions business. Disclosure is very limited but given what we have seen from European peers (namely Rheinmetall discussed below), we suspect the margins on these exports are in the 25-30%+ range, dramatically higher than domestic Korean margins. Historically, the copper refining division has contributed 50-60% of company earnings and, as a result, the market has placed a low earnings multiple on the stock, typically 4-8x p/e. With the increased contribution from defense, the mix from copper should drop substantially and the market should place a much higher multiple on earnings. Recently, Rheinmetall purchased a private munitions producer in Spain paying 1.2 billion Euros for 400 million of sales. Using this ratio to value, Poongsan would at least double the stock price and we would still get the copper business for free. It should also be noted that copper is seeing a resurgence in price which is expected to drive Poongsan's copper profits much higher as well.

BSD Analysis:
The manager identifies Poongsan as a rare munitions pure-play benefiting from extreme ammunition shortages and price inflation. The investment thesis centers on a dramatic business mix shift from copper refining (historically 50-60% of earnings) to high-margin munitions exports. With 155mm shell prices doubling and capacity doubling announced, the manager expects export margins of 25-30%+ versus much lower domestic margins. The valuation opportunity stems from the market's historical 4-8x P/E multiple based on the low-margin copper business. As defense contribution rises, the manager expects multiple re-rating using Rheinmetall's recent acquisition as a benchmark (3x sales), which would double Poongsan's stock price while getting the copper business "for free." The thesis is further supported by rising copper prices providing additional upside to the legacy business.

Pitch Summary:
Hyundai Rotem is a manufacturer of tanks and trains. The company has an initial contract for 180 tanks called the "K2" out of a framework agreement with Poland for a total of 1,000 units. The "K2" can trace its heritage back to the American Abrams tank that General Dynamics produced. Much of Korea's defense industry has legacy connections to the U.S., extending as far back as the Korean War. As a result of Rotem's success with the K2, the company's defense exports have surged from 0% in 2020 to an estimated 70%+ of defense sales in 2025. Similar to Hanwha Aerospace, the profit margins on these export sales approach 20%+ versus low-single-digits for domestic Korean sales. As a result, the overall contribution to profits from defense sales is expected to rise to 90%+ of company earnings. Romania is also rumored to be negotiating an order for 250 tanks and the Czech Republic is expected to place an order as well. The stock is currently valued at about 12x forward earnings, but as with Hanwha, we think there is significant upside to these numbers as margins are being underestimated and potential orders from additional countries are not being considered.

BSD Analysis:
The manager presents a compelling thesis on Hyundai Rotem's transformation from a domestic rail and defense manufacturer to a major defense exporter. The key catalyst is the massive Polish tank order (1,000 K2 tanks) which has fundamentally shifted the company's business mix and profitability profile. Defense exports have exploded from 0% to an estimated 70%+ of defense sales by 2025, with export margins of 20%+ versus low-single-digit domestic margins. This margin expansion should drive defense contribution to 90%+ of company earnings. The manager sees significant valuation upside from the current 12x forward P/E, arguing that the market is underestimating both margin improvements and the pipeline of additional European orders from Romania and Czech Republic. The thesis capitalizes on Europe's defense spending surge and Korea's unique position as a modern, full-scale defense equipment producer.

Pitch Summary:
TIS, Inc. (Japan) is one of Japan's largest IT services companies. We are familiar with TIS as we previously owned it but sold it when the stock price reached our estimate of intrinsic value. More recently, the stock has underperformed because growth is likely to slow next year due to the completion of several large-scale projects, which makes for a difficult comparison base. However, excluding these large projects, business fundamentals remain robust as IT spending in Japan continues to be very strong. In our view, the country lags most developed nations in digitizing its economy. This fact, combined with its shortage of IT engineering talent, should bode well for Japanese IT spending in the future. In addition to long-term structural demand for IT services, we like that TIS is led by a strong management team with a good track record of creating shareholder value through smart capital allocation decisions.

BSD Analysis:
The manager re-initiated a position in TIS after previously selling at full valuation, taking advantage of recent underperformance to re-enter at attractive levels. While near-term growth may decelerate due to difficult comparisons from completing large-scale projects, the underlying business fundamentals remain strong with robust IT spending trends in Japan. The investment thesis centers on Japan's significant digitization lag compared to other developed markets, creating substantial long-term demand for IT services. A shortage of IT engineering talent further supports pricing power and demand sustainability. The manager particularly values TIS's experienced management team with a proven track record of shareholder value creation through disciplined capital allocation. The combination of structural digitization tailwinds, supply constraints in IT talent, and quality management provides a compelling long-term investment opportunity despite near-term growth headwinds.

Pitch Summary:
Fielmann (Germany) is one of the largest optical retail companies in the world. It provides eyewear, contact lenses, hearing aids and primary eyecare services—all products that benefit from steady demand and significant barriers from online disruption. Industry headwinds related to higher costs and weak consumer confidence have weighed on the stock price, but we are comfortable with Fielmann's defensive positioning and pricing actions to offset inflation. The company's margins have declined in recent years due to investments in internal initiatives that are nearly completed, which should provide the opportunity for improved cost control and profitability going forward. We believe the company's fundamental performance is nearing an inflection point, and we were able to purchase shares at a discount to our estimate of intrinsic value.

BSD Analysis:
The manager initiated a position in Fielmann based on its defensive market position and attractive valuation following recent weakness. As one of the world's largest optical retailers, Fielmann benefits from steady demand for eyecare products and natural barriers to online disruption in this service-oriented industry. While industry headwinds including inflation and weak consumer confidence have pressured the stock, management's pricing actions should help offset cost pressures. Margin compression from internal investment initiatives is nearing completion, positioning the company for improved cost control and profitability recovery. The manager views current fundamentals as approaching an inflection point and was able to acquire shares at a significant discount to intrinsic value. The defensive nature of the eyecare market combined with the company's market leadership provides downside protection while offering upside potential as margins recover.

Pitch Summary:
St. James's Place (U.K.) was a top detractor during the quarter. In January, the wealth manager reported net inflows for 2023 that were £4.6 billion lower than in 2022. The disappointing update came on the heels of the company's announcement of a large overhaul of its fee structure. In February, the company reported full-year 2023 results. Underlying cash results fell below our expectations primarily due to the margin from new business and other revenues and expenses. The big miss, in our view, was the large provision charge that St. James's Place took to account for potential client reimbursements. There were increasing complaints from clients that the company was charging them without actually dispensing any advice. St. James's Place conducted an internal investigation, which cited service gaps that existed before the company implemented Salesforce in 2021. The provision charge covers the appointment of an investigative assessment, the anticipated cost of refunding service fees, the administration costs to operate the refund program, and an interest expense to compensate for the time value of money. We met with management following the release of results and continue to believe in the long-term prospects of St. James's Place.

BSD Analysis:
Despite significant near-term headwinds, the manager maintains conviction in St. James's Place's long-term prospects. The wealth manager faced substantial challenges in 2023, including £4.6 billion lower net inflows and disappointing cash results that missed expectations. A major provision charge for client reimbursements reflects service gaps and fee structure issues that preceded the 2021 Salesforce implementation. The company is addressing client complaints about being charged without receiving advice through an internal investigation and comprehensive refund program. While the fee structure overhaul and provision charges create near-term pressure, management engagement suggests confidence in the underlying business model. The manager's continued belief in long-term prospects indicates they view current challenges as temporary operational issues rather than fundamental business deterioration.

Pitch Summary:
Konecranes (Finland) was a top contributor during the quarter. In February, the industrials company reported a strong set of fourth-quarter results. Organic revenue growth came in above our expectations, mainly driven by the service and port solutions segments. Service sales increased by 11% in local currencies, driven by strength in both spare parts and field service. We like that Konecranes' service business is delivering higher growth that is largely recurring in nature and of much higher quality than the growth in the equipment manufacturing divisions. This is a key component of our investment thesis. In addition, port solutions grew revenue by over 38% in local currencies in the fourth quarter as the business delivered on high order intake from prior periods while comparable EBITA margins increased. Also of note, port solutions entered 2024 with an order book higher than the previous year. Lastly, Konecranes reported 2024 guidance largely in line with our expectations. We continue to believe this investment offers an attractive upside.

BSD Analysis:
The manager maintains a bullish stance on Konecranes based on strong Q4 results that exceeded expectations. The investment thesis centers on the company's high-quality service business, which grew 11% and provides recurring revenue streams superior to the cyclical equipment manufacturing segments. Port solutions delivered exceptional 38% revenue growth while maintaining strong margins and entering 2024 with a robust order backlog. The manager appreciates the defensive characteristics of the service business model and views the current valuation as offering attractive upside potential. Management's 2024 guidance aligns with expectations, providing confidence in the company's trajectory. The combination of recurring service revenues and strong port solutions momentum supports the bullish outlook.

Pitch Summary:
Managed care organisations (MCOs) serve the vast US healthcare market, which is more complex than those elsewhere. In the US, most working people get health insurance through their employer, and decades ago this was the MCOs' core business. For these plans, relationships with local hospitals matter far more than national bargaining power, so local scale is essential. A smaller portion of working people buy insurance individually. Those who cannot afford private insurance get coverage through Medicaid, which is run by individual states with additional funding from the federal government, and most older people receive at least part of their care through the federal government's Medicare scheme. Both Medicare and Medicaid plans can be administered by the MCOs. But the MCOs are not just insurers—they increasingly own and manage physician practices, care centres, and pharmacies, making them better placed to connect the dots for patients across this complex system. Dealing with that complexity is hard. Insurance underwriting skill is important but insufficient. A successful MCO needs good local scale to negotiate prices with care providers and good national scale to negotiate drug prices. To meaningfully improve the efficiency of the overall system, MCOs also need to be plugged into care providers to help the system shift from fee-based care, which incentivises activity regardless of outcomes, to value-based care, which aligns costs with outcomes for patients. UnitedHealth's Optum unit has been especially successful in integrating parts of the healthcare chain to lower costs and improve care for patients. For new entrants, the healthcare market has been a tough nut to crack: Amazon, JP Morgan, and Berkshire Hathaway announced to great fanfare that they were entering the health insurance market in 2018, only to abandon the venture three years later. With this industry setup, the MCOs benefit from two long-term tailwinds: an aging population, and increased outsourcing of Medicare and Medicaid administration. Propelled by the aging population, US healthcare spending is growing by about 5% per annum, a little faster than the wider economy, and the MCOs are getting exposure to more of that growth as they administer more Medicare and Medicaid plans and build out their health services businesses. This has been a winning formula historically, with UnitedHealth and Elevance growing earnings per share by 15-17% per annum over the last ten years. Indeed, we find the two companies rather special investment opportunities when comparing their moats, growth runways, returns on capital, historical track records, and management quality with how the stocks are priced by the market. Today those prices look reasonable, due to pessimism we see as excessive. Looking through each of those bear points, we remain confident that the companies can continue to deliver as they have in the past. Healthcare spending should continue to grow a little faster than the US economy, and the companies should continue to grow moderately faster than wider US healthcare spending as more people adopt MCO-administered Medicare and Medicaid plans, and as the leading companies take market share from their competitors within those plans. Meanwhile, we see Elevance and especially UnitedHealth taking intelligent risks in building out their own care networks, positioning them to drive better efficiency and outcomes across the system—and to be rewarded for it. Stacking those up, we believe the companies can grow earnings per share by 12-15% per annum for years to come. UnitedHealth normally trades at a similar price-earnings multiple to the S&P 500. It now trades at a discount. Elevance, which has somewhat lower returns on capital than UnitedHealth, trades at an unusually large discount to the US market. In both cases, that is despite long-term growth prospects that we believe are above-average. At the portfolio level, the MCOs are also appealingly defensive, as their profits have little to do with the broader economic cycle.

BSD Analysis:
Orbis presents Elevance Health as an attractive managed care investment alongside UnitedHealth, benefiting from the same structural industry tailwinds and defensive characteristics. The manager emphasizes Elevance's strong historical performance with 15-17% annual EPS growth over the past decade, driven by the aging US population and increased government outsourcing of healthcare administration. While acknowledging that Elevance has somewhat lower returns on capital compared to UnitedHealth, Orbis views this as reflected in the valuation, with Elevance trading at an unusually large discount to the broader US market. The investment thesis centers on the company's ability to capitalize on healthcare spending growth outpacing GDP, market share gains in Medicare and Medicaid programs, and the defensive nature of healthcare demand. Orbis projects continued EPS growth of 12-15% annually for Elevance, supported by the company's strategic investments in building out care networks to improve system efficiency. The manager views current pessimism around managed care organizations as excessive, creating an attractive entry point for a high-quality defensive growth story with above-average long-term prospects.

Pitch Summary:
Managed care organisations (MCOs) serve the vast US healthcare market, which is more complex than those elsewhere. In the US, most working people get health insurance through their employer, and decades ago this was the MCOs' core business. For these plans, relationships with local hospitals matter far more than national bargaining power, so local scale is essential. A smaller portion of working people buy insurance individually. Those who cannot afford private insurance get coverage through Medicaid, which is run by individual states with additional funding from the federal government, and most older people receive at least part of their care through the federal government's Medicare scheme. Both Medicare and Medicaid plans can be administered by the MCOs. But the MCOs are not just insurers—they increasingly own and manage physician practices, care centres, and pharmacies, making them better placed to connect the dots for patients across this complex system. Dealing with that complexity is hard. Insurance underwriting skill is important but insufficient. A successful MCO needs good local scale to negotiate prices with care providers and good national scale to negotiate drug prices. To meaningfully improve the efficiency of the overall system, MCOs also need to be plugged into care providers to help the system shift from fee-based care, which incentivises activity regardless of outcomes, to value-based care, which aligns costs with outcomes for patients. UnitedHealth's Optum unit has been especially successful in integrating parts of the healthcare chain to lower costs and improve care for patients. For new entrants, the healthcare market has been a tough nut to crack: Amazon, JP Morgan, and Berkshire Hathaway announced to great fanfare that they were entering the health insurance market in 2018, only to abandon the venture three years later. With this industry setup, the MCOs benefit from two long-term tailwinds: an aging population, and increased outsourcing of Medicare and Medicaid administration. Propelled by the aging population, US healthcare spending is growing by about 5% per annum, a little faster than the wider economy, and the MCOs are getting exposure to more of that growth as they administer more Medicare and Medicaid plans and build out their health services businesses. This has been a winning formula historically, with UnitedHealth and Elevance growing earnings per share by 15-17% per annum over the last ten years. Indeed, we find the two companies rather special investment opportunities when comparing their moats, growth runways, returns on capital, historical track records, and management quality with how the stocks are priced by the market. Today those prices look reasonable, due to pessimism we see as excessive. Recently, UnitedHealth has had its own problems. In February, one of its recently-acquired units suffered a cyberattack, threatening patient data and necessitating a halt in billing and payment services to some care providers. The episode reveals a threat to the broader healthcare industry, as patient data is seen as highly valuable to bad actors. To its credit, UnitedHealth advanced more than $3 billion from its own balance sheet to help providers suffering through the outage, and it has since restored payment services. While the cyberattack was serious, we believe its perceived impact on UnitedHealth's intrinsic value will be short lived. UnitedHealth is also the subject of a US anti-trust investigation. We struggle to see an argument that UnitedHealth has harmed its customers. Its Optum care provider business helps achieve better outcomes for patients at a lower cost. UnitedHealth connecting the dots from government programs to plan administration to care providers has been a net positive for patients and for the financial soundness of the US healthcare system. Looking through each of those bear points, we remain confident that the companies can continue to deliver as they have in the past. Healthcare spending should continue to grow a little faster than the US economy, and the companies should continue to grow moderately faster than wider US healthcare spending as more people adopt MCO-administered Medicare and Medicaid plans, and as the leading companies take market share from their competitors within those plans. Meanwhile, we see Elevance and especially UnitedHealth taking intelligent risks in building out their own care networks, positioning them to drive better efficiency and outcomes across the system—and to be rewarded for it. Stacking those up, we believe the companies can grow earnings per share by 12-15% per annum for years to come. UnitedHealth normally trades at a similar price-earnings multiple to the S&P 500. It now trades at a discount. Elevance, which has somewhat lower returns on capital than UnitedHealth, trades at an unusually large discount to the US market. In both cases, that is despite long-term growth prospects that we believe are above-average. At the portfolio level, the MCOs are also appealingly defensive, as their profits have little to do with the broader economic cycle.

BSD Analysis:
Orbis presents a compelling bull case for UnitedHealth Group, emphasizing the company's dominant position in the complex US healthcare system through its managed care operations and integrated Optum unit. The manager highlights UnitedHealth's historical track record of 15-17% annual EPS growth over the past decade, driven by structural tailwinds including an aging population and increased government outsourcing of Medicare and Medicaid administration. The investment thesis centers on UnitedHealth's competitive moats through local and national scale advantages, its successful vertical integration strategy via Optum that improves patient outcomes while reducing costs, and the defensive nature of healthcare spending. Despite recent headwinds including a cyberattack and antitrust investigation, Orbis views these as temporary issues that have created an attractive entry point. The manager projects continued EPS growth of 12-15% annually, supported by healthcare spending growth outpacing GDP and market share gains in government programs. With UnitedHealth trading at a discount to the S&P 500 despite superior growth prospects, Orbis sees significant value in this defensive growth story.

Pitch Summary:
D'Ieteren was the top contributor during a month in which the company reported full year results. The shares rose +16% adding +78bps to AGT's NAV. We had been adding to the position during January and February, which combined with strong share price performance has pushed the company to be our third largest position (5.8% of NAV). Although in our last update we wrote more extensively about D'Ieteren's newer holdings TVH and PHE, the bulk of the value and crux of the investment case lies in Belron, the global no.1 operator in the Vehicle Glass Repair and Replacement ("VGRR") industry which accounts for 61% of our estimated NAV. Belron continues to benefit from structural trends toward increased windshield complexity and the proliferation of Advanced Driver Assistance Systems ("ADAS"), with recalibrations now accounting for 36% of replacement jobs. Belron is many multiples larger than competitors with >40% US market share and this results in significant scale advantages in terms of purchasing economies of scale and cost leadership, as well as relationships with insurance partners who are industry gatekeepers and account for c.70% of jobs. Moreover, scale has allowed for technological investment, which has become increasingly relevant as ADAS recalibrations – which require more expensive capital equipment - have grown to become a larger proportion of replacement jobs. Mom and pop operators are increasingly ill-suited to meet the increased technical complexity required for new vehicles. As such we expect Belron to continue taking share and driving growth. For FY23 Belron grew sales +9% organically with a further boost of +2% for M&A. Positive mix effect and price increases saw operating margins increase +226bps to 20.5%, which led operating profits to increase +22% year on year. For the year ahead, management are forecasting sales to grow at mid-to-high-single digits and margins to continue towards what for some time now has appeared a relatively modest 2025 margin target of 23%. We expect Belron to provide updated targets at next year's Capital Markets Day – which will be the first since Carlos Brito became CEO. As readers may remember, in 2021 a consortium of private equity investors (led by Hellman & Friedman) became minority shareholders in Belron at a €21bn enterprise value. We estimate the EV is closer to €24.5bn today (17x our 2024e EBIT), and note D'Ieteren's 50% equity interest accounts for 61% of D'Ieteren's NAV. In due course we expect a liquidity event for these investors to help highlight Belron's significant value, and like situations such as this where we are aligned with highly incentivised PE co-owners and management teams. As such we see scope for a further narrowing of D'Ieteren's 33% discount, as well as NAV growth underpinned by strong earnings growth prospects.

BSD Analysis:
AVI views D'Ieteren as an attractive investment primarily driven by its 50% stake in Belron, the global leader in vehicle glass repair and replacement. The investment thesis centers on Belron's dominant market position with over 40% US market share and significant competitive advantages through scale economies and insurance partnerships. Structural tailwinds from increasing windshield complexity and Advanced Driver Assistance Systems create barriers to entry for smaller competitors while driving margin expansion. Belron delivered strong FY23 results with 9% organic sales growth and 226bps margin improvement to 20.5%, with management targeting 23% margins by 2025. The presence of private equity co-investors (Hellman & Friedman) who invested at €21bn enterprise value in 2021 provides validation and potential catalyst for value realization. AVI estimates current enterprise value at €24.5bn and expects a future liquidity event to highlight Belron's value, helping narrow D'Ieteren's 33% holding company discount.

Pitch Summary:
We started building a position in News Corp last year and wrote it up in the April 2023 newsletter, highlighting the deeply discounted valuation and the overlooked quality and prospects for Dow Jones generally, and its Professional Information Business ("PIB") specifically. In recent months we have added to the position such that it is now our largest position (6.7% of NAV). In February, News Corp reported a solid set of results which have seen the shares rise +8% subsequently. For the quarter ending December 2023, group EBITDA (which includes the consolidated stake in REA Group) increased by +16%, some +12% ahead of consensus expectations. Results showed the strong continued evolution of Dow Jones (37% of NAV), where revenues grew +4% and EBITDA +17% as margins expanded +320bps to 27.9%. The key driver here was PIB, where revenues grew +13%, led by Dow Jones Risk & Compliance and Dow Jones Energy. We argued last year that that these assets were overlooked by the market and misunderstood by the sell side, who carried Dow Jones at derisorily low multiples in their sum-of-the-parts ("SOTP") models, and for whom the ramp up in margin and evolution of business quality was missed. The margin impact is coming through and investors – aided by improved disclosure – are starting to appreciate the attractive nature of these sticky, largely recurring and high margin revenue businesses. We note that sell side analysts have started to increase the multiple at which they carry Dow Jones in their SOTP models, but the prospects and value of these businesses remains overlooked by many. Indeed, we certainly do not believe these attractions are captured in News Corp's current valuation, with the company trading at a 38% discount to our estimated NAV. Adjusting for the stake in REA, the stub trades at an implied value of $5.4bn, or approximately 4.7x next year's EBITDA. We estimate that Dow Jones alone is worth ~1.6x the implied stub value and note that the New York Times at 15x and Info Services peers which trade between 19-29x. Management have become increasingly vocal about the undervaluation. As CEO Robert Thomson described on the last earnings call, the company is engaged in "serious introspection about structure…[and] how to fully monetize a precious, prestigious portfolio that has an obvious growth trajectory. That is indeed not an evolution, but a revolution". At current prices, the market is seemingly ascribing a low probability to "a revolution", with significant upside if management do indeed take concrete and tangible steps to unlock value. Combined with strong operating and earnings momentum, prospective returns appear attractive.

BSD Analysis:
AVI Global Trust has built News Corp into their largest position at 6.7% of NAV, viewing the shares as deeply undervalued at a 38% discount to estimated NAV. The investment thesis centers on the overlooked quality of Dow Jones, particularly its Professional Information Business which grew revenues 13% with expanding margins. The manager argues that sell-side analysts have historically undervalued Dow Jones in sum-of-the-parts models, missing the evolution toward sticky, recurring, high-margin revenue streams. Recent results showed group EBITDA up 16% and Dow Jones margins expanding 320bps to 27.9%, validating the thesis. Management's increasingly vocal stance on undervaluation and CEO comments about potential structural changes suggest catalysts for value realization. The stub trades at only 4.7x next year's EBITDA while comparable media assets trade at much higher multiples. AVI sees significant upside if management takes concrete steps to unlock value through structural changes.