Investment Pitches

Pitch Summary:
Grown Rogue is an investor's dream. It is a company with demonstrated operational and cost advantages that has a long reinvestment runway with extremely high returns on invested capital. In fact, in a Schedule 3 world with some financial protections from SAFER Banking, this is a lender or a private equity firm's dream investment. And the company is starting to go on the offensive with its cost advantages including entering the state of New Jersey. What happens when a company that is free cash flow positive at $800 to $900 flower prices enters a market with $2500-$3000 pricing and competition is low and so is quality? Even in its existing markets, Grown Rogue is seeing sales and profits continue to soar, with revenue soaring by 48% last quarter and cash flow by 79%. So, how does a company with some of the fastest growth in the industry that is now accelerating possibly trade at one of the lowest valuations on next year's estimates? First, not one analyst covers the company. Second, it is a microcap cannabis company and can be extremely illiquid. Third, even in cannabis, in which stocks are notoriously illiquid, buying Grown Rogue can be even harder than your average cannabis stock. For example, investors cannot buy the stock on Interactive Brokers, a major financial platform for small to medium sized money managers and investors. We have had to open two different Canadian brokerage accounts and work with sellers to buy shares. Though, we have done so happily. Due to our early conversion of our December convertible, we crossed the 5% ownership threshold in Grown Rogue between our two funds and now own over 8% of the company. I expect our ownership to only increase. Why? Because it's not often you get the chance to invest in the following: 1. One of the best operationally run companies in a sector. 2. The fastest growth rate that is now poised to accelerate. 3. A clear and long reinvestment runway (almost too many opportunities right now) 4. Focused attention when competitors are struggling financially and distracted. 5. And then trading at 2 times my end of year 2024 unlevered cash flow estimate. The problem in cannabis is not limited licenses, but a shortage of operational excellence. The governor or limiting factor for Grown Rogue is talent and making sure they don't bite off more than they can chew at any one time. Even though Grown Rogue is up more than 150% since the beginning of the year, I believe the upside is even greater now.

BSD Analysis:
Edelheit presents a compelling bull case for Grown Rogue, emphasizing the company's operational excellence and cost advantages in the cannabis sector. The manager highlights exceptional recent performance with 48% revenue growth and 79% cash flow growth, positioning the company as a standout performer in a challenging industry. The investment thesis centers on Grown Rogue's ability to generate positive free cash flow at low flower prices ($800-900) while expanding into higher-priced markets like New Jersey ($2500-3000), creating significant margin expansion opportunities. The fund has increased its ownership to over 8% through convertible conversions, demonstrating strong conviction. Edelheit values the company at only 2x 2024 unlevered cash flow estimates despite accelerating growth, suggesting significant undervaluation. The manager attributes this discount to lack of analyst coverage, microcap illiquidity, and limited trading platform availability. The investment represents a rare combination of operational leadership, accelerating growth, long reinvestment runway, and attractive valuation in a consolidating industry.

Pitch Summary:
Unsustainable business model; 13% of the NAV is estimated to be valued zero; distributions are not covered with cash; trading at x2 NAV whilst other comparibles trade at x0.85; Update 4/16/24 - Follow-up report: The company's financial structure incentivizes managers, but is toxic to limited partners.

BSD Analysis:
Brookfield Infrastructure invests across utilities, transport, midstream, and data assets. The bear case focuses on its reliance on constant capital recycling and external financing, making results highly sensitive to interest rates. The partnership structure is complex, obscuring distributable cash flow, while acquisitions carry execution risk. Leverage and FX exposure create additional fragility. Infrastructure;

Pitch Summary:
Other potential winners will be companies with large propriety datasets that are unique within their industry. For example, I do not believe that there are any companies in the US with as large of a dataset of the borrowing behavior of short-term, subprime borrowers as Enova International (ENVA), a portfolio holding of our firm. Companies that fail to take advantage of newly developing AI tools will be at a great disadvantage to their competitors who do.

BSD Analysis:
The manager views Enova International as a beneficiary of the AI revolution due to its unique competitive moat in proprietary data. The thesis centers on ENVA's unparalleled dataset of short-term, subprime borrower behavior, which the manager believes is the largest in the US. This data advantage positions the company to leverage AI tools more effectively than competitors in the consumer finance space. The investment rationale suggests that companies with unique proprietary datasets will be key winners in the AI boom, as these data assets become increasingly valuable for training AI models. The manager implies that ENVA's failure to capitalize on AI would put it at a significant competitive disadvantage. This represents a data-driven moat thesis in the evolving AI landscape. The position appears to be a current holding in the portfolio.

Pitch Summary:
Equifax is best known as one of three primary U.S. credit bureaus, but the company's crown jewel is the Equifax Workforce Solutions (EWS) business. The core business of EWS is Verification Services, which is powered by The Work Number (TWN) database with income and employment data on 120 million Americans. TWN is used for mortgage origination, pre-employment background screening, and government benefit applications. The EWS business generally grows at a teens rate with high margins, a long unit expansion runway, and pricing power. We think Equifax is underearning today due to depressed mortgage volumes and weak gross hiring. As these end markets stabilize, our view is that revenue and cash flows can accelerate meaningfully.

BSD Analysis:
Weitz initiated a position in Equifax, focusing on the underappreciated value of the Equifax Workforce Solutions (EWS) division rather than the traditional credit bureau business. The investment thesis centers on The Work Number database, which contains employment and income data for 120 million Americans and serves critical verification functions across mortgage, employment screening, and government benefit markets. The manager highlights EWS's attractive fundamentals including teens growth rates, high margins, and significant pricing power with a long runway for unit expansion. Weitz views current earnings as depressed due to cyclical headwinds in mortgage origination and hiring markets. The opportunity lies in the potential for meaningful revenue and cash flow acceleration as these end markets normalize. This represents a contrarian bet on a high-quality data asset trading at a discount due to temporary cyclical pressures.

Pitch Summary:
Microchip is a leading provider of mixed signal microcontrollers and analog semiconductors to a broad range of industrial, data center, automotive, communication and consumer appliance customers. The company enjoys favorable product characteristics that help drive strong profitability, and it benefits from several long-wave demand tailwinds such as electronification, automation, and growth in data communications. While Microchip is not immune from semiconductor cycles, its cash flows have been durable through cycles. The multi-year outlook is sturdy, and we think the company is poised to further boost per-share value growth through increasing share repurchases at discounted prices.

BSD Analysis:
Weitz initiated a new position in Microchip Technology, viewing the semiconductor company as attractively valued despite near-term headwinds. The manager highlights Microchip's leadership position in mixed signal microcontrollers and analog semiconductors across diverse end markets including industrial, automotive, and data center applications. The investment thesis centers on the company's exposure to secular growth drivers like electronification and automation, which should support long-term demand. Weitz emphasizes the durability of Microchip's cash flows through semiconductor cycles, suggesting defensive characteristics. The manager sees opportunity for value creation through share repurchases at current discounted valuations. The multi-year outlook appears favorable despite cyclical pressures. This represents a classic value play on a quality semiconductor franchise trading below intrinsic value.

Pitch Summary:
During the third quarter, we initiated a new position in Equifax, Inc., (EFX). Many will be familiar with Equifax as one of three consumer credit reporting bureaus and an indispensable partner for lenders in the extension and pricing of loans. Right now, surging borrowing costs are pressuring demand for mortgages and, therefore, banks' demand for credit reports. Mortgages remain an important end market for Equifax, but we believe the current environment has overshadowed the opportunity within the faster-growing, higher-margin Equifax Workforce Services (EWS) business. EWS extends Equifax's traditional credit reporting business with additional sources, most notably income and employment data sourced directly from employers' payrolls or third-party payroll providers. This additional data increases the potential use cases for Equifax's verification services into faster growth end-markets, for example employment background screening or qualification for government benefits programs.

BSD Analysis:
Weitz initiated a new position in Equifax during Q3 2023, viewing the current mortgage market weakness as creating an attractive entry point. The managers believe the market is overly focused on near-term headwinds from reduced mortgage demand due to higher interest rates, which pressures traditional credit reporting volumes. However, they see significant value in Equifax's Workforce Services (EWS) division, which represents a higher-margin, faster-growing business segment. EWS leverages employment and income data directly from payroll systems, expanding Equifax's addressable market beyond traditional credit reporting into employment verification and government benefits qualification. This diversification strategy positions Equifax to capture growth in less cyclical end markets. The investment thesis centers on the market undervaluing this business transformation during a temporary downturn in core credit reporting demand. Weitz appears confident that EWS can drive long-term value creation as economic conditions normalize.

Pitch Summary:
Ferguson is the nation's leading distributor of plumbing supplies and is growing in the related field of HVAC (heating, ventilation and air conditioning). It's a good business: pipes, valves, boilers, water pumps and the like are mostly unbranded products. There are a lot of manufacturers with limited pricing power. On the other side, plumbing and HVAC contractors are mostly small businesses without a lot of negotiating clout. The distributor sits in the middle with more buying power than the manufacturers and more pricing power than the plumber. It's a competitive industry, not a monopoly, but Ferguson is #1 in most of its categories. With its size, it offers good service and a deep inventory position to contractors. Earnings have compounded steadily over time, but likely will be flat in the coming year, partly because residential home construction is off. We bought the stock for about 15 times 2024 earnings and feel like that's a good value given Ferguson's financial strength and long-term outlook.

BSD Analysis:
The manager initiated a position in Ferguson, recognizing the company's advantaged position as the leading distributor in plumbing and HVAC supplies. Ferguson benefits from a favorable industry structure where fragmented manufacturers lack pricing power while small contractor customers have limited negotiating leverage, allowing the distributor to capture value in the middle. The company's scale advantages provide superior service levels and inventory depth that contractors value, reinforcing its market leadership position across most categories. While the business model isn't monopolistic, Ferguson's #1 market position creates competitive advantages through procurement scale and distribution efficiency. The manager acknowledges near-term earnings headwinds from weak residential construction but views this as cyclical rather than structural. At 15x 2024 earnings, the valuation appears attractive for a business with steady long-term compounding characteristics and strong financial position. This investment reflects confidence in Ferguson's ability to navigate cyclical downturns while maintaining market share and pricing power.

Pitch Summary:
Turning to our new positions, we have been following Fiserv for a couple of years now and finally bought a position during the third quarter. Fiserv has two businesses that reinforce each other: it is a key technology provider to several thousand global banks and credit unions. Mid-sized financial institutions need to offer a full complement of digital banking services to compete with larger national banks, but they can't afford to build out an internal tech capacity. It's more cost effective to outsource to Fiserv. Fiserv's other business is, broadly, payment processing: when you tap and pay at your favorite restaurant or retailer, you may be using a Fiserv device. That device, in turn, may connect directly to the business owner's bank – and Fiserv built out the bank's tech stack. The synergy here is important. Fiserv can sell terminals to the restaurant itself, but banks may also sell Fiserv products as part of their customer relationships. There is terrific distribution synergy. For the next few years, Fiserv's growth should be led by Clover, a payments acceptance system that offers merchants faster transaction times, better fraud protection and stronger operational controls than many existing acceptance networks. While Clover is a clear leader in acceptance, it has a small market share today and could grow at double digit rates for some years. In turn, that should drive solid earnings growth for Fiserv. I believe the stock trades for a low-teens multiple of likely 2024 earnings, an attractive price for a steady compounder.

BSD Analysis:
The manager initiated a position in Fiserv after years of research, attracted by the company's dual business model with strong synergies between banking technology and payment processing. Mid-sized financial institutions rely on Fiserv's technology stack to compete with larger banks without building expensive internal capabilities, creating sticky customer relationships. The payment processing business benefits from distribution synergies as banks can cross-sell Fiserv terminals to their merchant customers. Clover represents a significant growth catalyst, offering superior transaction speeds, fraud protection, and operational controls compared to legacy systems. Despite Clover's market leadership in acceptance technology, its small current market share provides runway for double-digit growth over multiple years. The manager views the low-teens 2024 earnings multiple as attractive for a steady compounder with multiple growth drivers. This investment reflects confidence in Fiserv's ability to capitalize on digital banking trends and payment modernization while benefiting from cross-selling opportunities between business segments.

Pitch Summary:
Ashtead Group operates the second-largest US equipment rental business, Sunbelt Rentals. The market seems concerned that a slowdown in commercial construction will hurt Sunbelt, but I believe federal infrastructure projects, new semiconductor plants and warehouse and factory construction combine to create a healthy market. Ashtead has a terrific management team and a number of advantages of scale. We felt comfortable adding shares at about 15x earnings.

BSD Analysis:
The manager added to Ashtead Group despite market concerns about commercial construction weakness, viewing the valuation as attractive at 15x earnings. The company operates Sunbelt Rentals, the second-largest equipment rental business in the US, benefiting from significant scale advantages and strong management execution. While traditional commercial construction may face headwinds, the manager identifies multiple growth drivers including federal infrastructure spending, semiconductor plant construction, and industrial facility development. This diversified demand base should support rental volumes even if certain construction segments weaken. The equipment rental model benefits from high barriers to entry due to capital intensity and local market dynamics. Ashtead's scale advantages in procurement, maintenance, and geographic coverage create competitive moats. The manager's confidence in adding shares reflects belief that current market pessimism creates an opportunity to acquire a quality industrial business at reasonable valuations with multiple demand catalysts ahead.

Pitch Summary:
I have written about Schwab in prior letters, but at the risk of being repetitive I believe it offers a strong value proposition both to individual investors and professional investment advisors who run their businesses on the Schwab platform. It has chosen to reduce the fees it charges for trading and other services to win investor trust and fuel growth. Consequently, it may be overly dependent on its practice of sweeping customer cash balances into its bank, where it reinvests those deposits into safe fixed income securities and pockets the interest. As interest rates have risen over the past 18 months, many Schwab customers are leaving less idle cash in their accounts and putting more of their funds into US Treasuries or money market funds. This leaves Schwab with lower earnings. Importantly, Schwab continues to add hundreds of thousands of new accounts every month. The issue of customers leaving less cash in their accounts has leveled off recently, meaning Schwab should begin growing again as it keeps adding accounts. Even if so-called cash sorting never levels out, Schwab has significant pricing power it could tap while remaining a low-cost provider for customers, including charging more for some trades, margin loans or wealth management services, or perhaps charging modest custodian fees to investment advisors, a common industry practice. It has tools in the toolbox to offset a long-term loss of interest income, even if it prefers not to use them. The combination of steady account growth and pricing power tell me Schwab's earnings won't be permanently impaired.

BSD Analysis:
The manager maintains conviction in Schwab despite near-term earnings pressure from cash sorting behavior as customers move funds to higher-yielding alternatives. While the company's low-fee strategy has created dependence on net interest income from customer cash sweeps, this headwind appears to be stabilizing. Schwab's continued addition of hundreds of thousands of accounts monthly demonstrates the strength of its value proposition and platform stickiness. The manager emphasizes Schwab's significant untapped pricing power across multiple revenue streams including trading, margin loans, wealth management, and custodial fees. This optionality provides a buffer against permanent earnings impairment from reduced cash balances. The combination of robust account growth and pricing flexibility creates multiple paths to earnings recovery. The manager views current challenges as temporary rather than structural, with the business model remaining fundamentally sound. This represents a contrarian bet on a quality franchise trading at depressed valuations due to cyclical headwinds.

Pitch Summary:
We exited a larger position in SS&C during the quarter. We're fans of this business and its founder and CEO Bill Stone, but SS&C financed a large acquisition in 2018 by issuing debt at floating interest rates. As rates climbed over the past two years, SS&C's interest payments on its debt have risen from about $202 million in 2021 to an estimated $460 million this year. This heavier burden of debt service is devouring modest underlying profit growth. SS&C will report lower earnings per share in 2023 than it did in 2021 entirely because of the burden of interest payments. Bill Stone owns more than 30 million shares of SS&C; no one has a stronger interest in making prudent financial decisions than Bill. We could revisit SS&C at some point if it made significant progress in reducing its floating rate debt. But with the debt burden currently high, the cost to service the debt rising, and the business growing slowly, it feels like SS&C made a capital allocation error that will take time to unwind.

BSD Analysis:
The manager exited SS&C despite admiring the business and CEO Bill Stone due to a significant capital allocation misstep that created a debt burden headwind. The company's 2018 acquisition financing with floating-rate debt has proven costly as interest payments more than doubled from $202 million to $460 million, completely offsetting underlying business growth. This debt service burden is causing 2023 earnings per share to decline below 2021 levels despite modest operational progress. The manager acknowledges Stone's strong alignment with over 30 million shares owned, suggesting confidence in eventual resolution. However, the combination of high debt burden, rising interest costs, and slow business growth creates a challenging near-term outlook. The manager remains open to revisiting the position if meaningful debt reduction occurs. This exit demonstrates disciplined capital allocation when financial leverage overwhelms operational performance, even in quality businesses with aligned management.

Pitch Summary:
We exited our small position in Ciena at a loss. Ciena is a technology leader in network communications infrastructure. It's largest competitor, the Chinese company Huawei, has been banned from many Western nations for fears that it cooperates with the Chinese government in spying on customers. We bought Ciena with an expectation that its future looked bright given healthy demand from both telecom and cloud computing customers, plus a less competitive bidding environment. Unfortunately, we were disappointed with Ciena's difficulties managing its supply chain, inventory level and backlog. We opted to sell the stock in the belief we could find better opportunities elsewhere.

BSD Analysis:
The manager exited Ciena at a loss due to operational execution issues despite the company's strong competitive positioning. While Ciena benefits from reduced competition following Huawei's ban from Western markets and enjoys healthy demand from telecom and cloud computing customers, management's inability to effectively handle supply chain disruptions and inventory management proved disappointing. The company's struggles with backlog management suggest operational inefficiencies that could persist in a complex supply chain environment. Despite the favorable industry dynamics and competitive moat, the manager prioritized capital allocation toward opportunities with better execution track records. This exit reflects a disciplined approach to cutting losses when operational performance fails to meet expectations. The decision underscores the importance of management execution even in companies with strong market positions. The manager's willingness to exit demonstrates focus on finding superior risk-adjusted returns elsewhere in the portfolio.

Pitch Summary:
Over-reliance on Tesla, which signaled reduced cooperation in the future; massive undisclosed risk from the primary supplier; overvalued (trading at x24 EBITDA, x52 FCF)

BSD Analysis:
XPEL sells paint protection films, window tints, and related auto-care products, primarily through installers. The company has posted impressive topline growth, but the bear argument stresses concentration risk, competitive encroachment, and valuation premium. Much of XPEL’s success has come from penetrating luxury auto aftermarket customers, but this niche is inherently limited in scale. Gross margins are strong but face risk as larger chemical and coatings firms (3M, Eastman) ramp up competing product lines with deeper distribution. The stock trades at a premium multiple relative to traditional aftermarket suppliers, with the assumption that XPEL maintains high double-digit growth. Any slowdown in luxury vehicle sales or installer expansion could compress multiples quickly. Capital intensity is low, but dependence on installers makes growth harder to control directly.

Pitch Summary:
Paywalled (The site mentioned: The Bear Cave has uncovered dozens of complaints concerning overbilling, fraudulent billing, and unfair and deceptive business practices.)

BSD Analysis:
LifeStance runs outpatient behavioral health clinics with both in-person and telehealth models. The short case centers on unit economics, scale drag, and provider churn. Revenue growth is driven by clinic openings and acquisitions, but margins are thin—providers are expensive, and payors negotiate aggressively on rates. Retention of clinicians is a persistent issue, raising both recruiting costs and patient churn. The company has leaned heavily on private equity-style roll-up tactics, which introduces integration and culture risk across hundreds of sites. While behavioral health is a secular growth story, the model’s dependence on insurance reimbursement caps pricing power, and competition from pure-play telehealth rivals pressures volumes. Bears highlight leverage, poor cash flow conversion, and the risk that organic growth slows sharply once acquisitions taper.

Pitch Summary:
Recently signed large-scale contract has zero chance of being executed; Has only 15 months of cash to finance its operation; shareholder dilution; former CFO sold all of his stake recently; un-economical business; Update 11/16/23 - Follow-up report: As expected, the major contract was terminated. The remaining major contract is insignificant. Potential bankruptcy. Update 5/16/24 - Follow-up: Deceived investors about the certification of its reactors. Update 5/28/24 - The short-seller provided an update on its recent PR news.

BSD Analysis:
NuScale develops small modular reactors (SMRs) positioned as scalable, lower-cost nuclear solutions. The BSD short thesis stresses uncertain commercialization timelines, dependency on subsidies, and cost overruns. Its flagship UAMPS project has been plagued by delays and rising cost estimates, raising doubts over economic viability. With no commercial units in operation, NuScale remains pre-revenue while continuing to burn cash. Bears argue the equity valuation embeds unrealistic assumptions about adoption and government support. For sophisticated investors, the risk/reward tilts negative unless tangible commercialization milestones are achieved. Key metrics to monitor include DOE support levels, project timelines, and competitor advancements (e.g., Rolls-Royce, China).

Pitch Summary:
Seneca Foods (NASDAQ: SENEA) is a consumer-packaged goods company that sells canned vegetables in the US. The opportunity to buy the stock came when it was removed from the S&P 600 index at the end of June. The stock declined by over 25% within a few weeks as many funds that track the S&P 600 became forced sellers. In addition to the index deletion, the company took a massive LIFO accounting charge obscuring the company's reported earnings. The accounting charge relates to how Seneca values its inventory which it has historically done on a "last in, first out" basis. After adjusting for this non-cash accounting charge, Seneca's stock was trading for just 4x cash flow and less than 1/3 of its book value. I viewed this as an extremely attractive valuation for an otherwise staid business. We purchased shares of SENEA stock in July for approximately $36.50 per share. What happened next was equally impressive. Other participants in the market started to catch on to the value offered by Seneca. The company reported solid financial results in August and the stock quickly caught a bid. Within a month, the stock rallied 40% and we were able to sell our shares in August at a price of around $51 per share. Seneca isn't a bad business, but it isn't a super high-quality business either; therefore, the plan was always to sell the stock once it appreciated back to its fair value range. The stock reverted back to the level it traded at before the index deletion, so I felt that the event-driven thesis had played out and it was time to take profits and move on.

BSD Analysis:
The manager executed a successful event-driven value play on Seneca Foods following its removal from the S&P 600 index. The forced selling by index funds created an artificial discount, with shares trading at just 4x cash flow and less than one-third of book value after adjusting for non-cash LIFO accounting charges. This represented an extremely attractive entry point for what the manager characterized as a stable, if unremarkable, consumer packaged goods business. The thesis played out quickly as the market recognized the value disconnect, with shares rallying 40% in just one month from $36.50 to $51. The manager demonstrated disciplined profit-taking, exiting the position once shares reverted to fair value and the event-driven catalyst had run its course. This trade exemplifies opportunistic value investing with clear entry and exit criteria based on technical market dynamics rather than long-term fundamental conviction.

Pitch Summary:
Listed on the Paris Stock Exchange, SES imagotag stands as the undisputed global market leader for electronic shelf labels (ESL) and complementary cloud-based software solutions (VAS), with minimal analyst coverage. This distinguished French company serves approximately half of the top 250 global retailers, offering retailers up to 20% in cost savings on labels and augmenting operational efficiencies. The company currently holds a commanding position in an oligopoly industry with a 50% market share, while the rest of its top competitors collectively hold a 30% market share. We believe the company's market leadership is sustainable because, unlike its competitors, SESL offers significantly more digitally enhanced solutions, and the technological edge is poised to expand as it continues to leverage its robust cash flow profile to commit industry-leading capex on solution innovations. Importantly, SELS's products are mission critical but constitute only a small fraction of retailers' total operating cost, making the business extremely sticky. SESL also has a long runway for growth. Globally, the penetration rate of ESL stands at a mere 7%, and just 1% among U.S. retailers. We believe the penetration is on the cusp of an inflection. The company recently secured a nationwide contract with Walmart, a company renowned for investing in cost-saving programs, even during economic downturns, granting the SESL another degree of recession resilience on top of its net debt negative balance sheet. We anticipate that the success of this pivot program will entice more U.S. retailers to embrace the ESL technology, positioning the company well for >30% annual growth in the years to come. We also foresee this, coupled with margin accretion opportunities from the burgeoning VAS segment, would result in a 100%+ share upside over the next four to five years. We initiated our position after the publication of a 60-page short report by Gotham City Research on June 22, accusing the company of fraudulent accounting practices. This report triggered a 60% selloff of the company's shares. We took advantage of the situation believing that the impact of this report would be short-lived as the central argument of the report, which revolves around the double counting of revenue through related party transactions, lacks substantiation. The company has successfully demonstrated in its response to the short report that the transactions between the two entities hold legitimate industrial ground and do not impact the consolidated financials. Furthermore, the company's external auditors, KPMG and Deloitte, have released certificates confirming the legitimacy of these intra-company transactions. At 0.28x forward price/earnings-to-growth, we believe this selloff has presented an exceptional opportunity for us to snap up shares of this high-quality, underfollowed market leader in an underpenetrated industry at a bargain price.

BSD Analysis:
Kathmandu Capital presents SES-imagotag as a special situation opportunity following a 60% selloff triggered by a short seller report. The manager emphasizes the company's dominant 50% market share in electronic shelf labels with significant competitive moats through technological superiority and mission-critical, sticky products. The investment thesis centers on massive growth runway with only 7% global ESL penetration and 1% US penetration, supported by a transformational Walmart contract that validates the technology. The manager views the short seller accusations as unsubstantiated, with KPMG and Deloitte auditors confirming transaction legitimacy. Key financial metrics include net cash balance sheet and expectations for 30%+ annual growth driven by US market expansion and higher-margin VAS software solutions. At 0.28x PEG ratio post-selloff, the manager sees exceptional value in this underfollowed market leader, expecting 100%+ upside over 4-5 years as penetration accelerates.

Pitch Summary:
Kaspi is a Kazakhstan-based tech titan listed on the London Stock Exchange. The company operates a super app that encompasses payments, a third-party marketplace, and fintech, reigning as the unequivocal leader in each category in Kazakhstan, with no close substitutes or competitors. Like most successful flywheel businesses, Kaspi is a highly profitable (44% net margin) cash flow gusher (9.4% FCF yield) with a net cash balance sheet. Kaspi's economic moat is formidable. Its super app has created a powerful flywheel and network effect as more consumers attract more merchants, and vice versa. For instance, the company leverages customer data from the marketplace to make more informed lending decisions to merchants, thereby improving the delinquency rate. Its marketplace utilizes proprietary data from fintech and payments to track customer buying patterns and deploy precise targeted ads, stimulating purchases. Additionally, its payment system is seamlessly integrated into the marketplace, simplifying transactions for consumers. To illustrate the company's dominance, it stands as one of the few enterprises globally that could displace Visa and Mastercard as a country's primary payment platform. It's also an app that is deeply embedded into users' lives. Consumers can fulfill all their essential needs, including obtaining their PCR results, receiving pensions, registering their cars, and paying taxes and state duties through the app. Consequently, the company maintains a near 100% consumer and merchant retention rate, coupled with a near 90 net promoter score, outclassing companies like Google and other world-class enterprises. The company also possesses substantial room for growth. The user overlap across its services stands at a mere 38%, leaving ample space for cross-selling. Given the company's existing technology infrastructure, replicating the model and expanding into adjacent services and other regions of Central Asia—where digital adoption is still in its infancy and the population is young and growing—would be relatively easy. We hold a strong belief in the company's ability to execute successful expansion and maintain a >30% growth rate for the foreseeable future, given the management team's impeccable track record of execution. The entire management team, which comprised of all Harvard graduates, orchestrated a remarkable transformation in 2008. They strategically divested 95% of the commercial banking businesses and redirected their focus to the remaining 5% retail banking businesses, recognizing retail is a tech-driven game where companies can breed a lasting competitive edge. This calculated long-term vision proved pivotal. Within just 11 years, the company secured commanding market shares of 41% in e-commerce, 35% in payments, and 31% in consumer finance. Importantly, the company seemed to have figured out the winning formula. When the company introduced its POS system in 2020, it secured over 51% of the market share in just a year. The same trend was observed in its P2P business; the company initially held a mere 2% market share in the space, but twelve months later, it dominated with a 66% market share. We believe the management team is highly incentivized to continue its flawless execution, as the team and its private equity backer, which also funded Yandex, the Google of Russia, have a combined ~80% interest in the company. Despite being one of the most impressive flywheel businesses I've encountered in my investing career and ranking as a top company on the London Stock Exchange in terms of net income, revenue growth, and net profit margin, Kaspi currently trades at a modest 8.5x forward earnings multiple. We believe the undervaluation is attributed to its classification as an emerging market business, a factor that often deters institutional investors. Moreover, concerns revolving around the ongoing Russia-Ukraine conflict have further widened this value disconnection. Contrary to the market, our extensive research has unveiled a promising outlook. Kazakhstan's Prime Minister has adeptly seized on the opportunity to position the country as a viable replacement for Russia, actively working to transform Kazakhstan into the central corridor of trade between Europe and China. Notably, trade has picked up in Kazakhstan since the conflict's onset, with China trade alone up by 22% in the first half of 2023. Additionally, Kazakhstani companies like Air Astana have announced ambitious plans to expand their fleet by almost 50% by 2025 due to their confidence in the country's growth trajectory. We believe once the disconnection reconciles, along with a potential U.S. uplisting, Kaspi's share price could appreciate 100%+ over the next 2-3 years.

BSD Analysis:
Kathmandu Capital identifies Kaspi.KZ as a dominant super app ecosystem in Kazakhstan with exceptional financial metrics including 44% net margins and 9.4% FCF yield. The manager emphasizes the company's powerful network effects across payments, marketplace, and fintech platforms, with near-monopolistic market positions and 100% customer retention rates. The investment thesis centers on significant undervaluation at 8.5x forward earnings despite best-in-class profitability and growth metrics, attributed to emerging market discount and geopolitical concerns. Key growth drivers include low 38% cross-selling penetration, Central Asia expansion opportunities, and management's proven execution track record of rapidly capturing market share in new verticals. The manager highlights Kazakhstan's strategic positioning as a Europe-China trade corridor benefiting from Russia sanctions, with China trade up 22% in H1 2023. Catalysts for value realization include potential US uplisting and geopolitical risk normalization, with 100%+ upside expected over 2-3 years.

Pitch Summary:
Headquartered in Cambodia and listed on the Hong Kong Exchange, Nagacorp (3918.HK) operates a Vegas-style gaming and entertainment hub in the heart of Cambodia's capital, Phnom Penh. The company obtained a 70-year casino license from the government in 1995 and holds the exclusive right to run casinos within a 200-km radius of Phnom Penh until 2045. Nagacorp operates as a highly competitive monopoly and functions as a structural low-cost provider, leading to an impressive financial performance. The company achieved an industry-leading 24% return on investment and a 30% net margin over the five years leading up to the pandemic. Nagacorp's economic moat is solidified by its CEO and majority owner's close relationship with the government and the firm's significance as one of the most successful foreign direct investments in the country. The economically aligned interest has facilitated the company in securing advantageous tax deals and extending its monopoly license at bargain prices over the years. The Chinese government's crackdown on junket players and the slower-than-expected post-Covid Chinese tourism recovery, along with "scamdemic" in Southeast Asia, have created a compelling opportunity to invest in this undervalued, small-cap emerging market business with limited coverage. While there is no guarantee that the market would not further discount Nagacorp's stock price, especially as foreign capital continues to flee from Hong Kong, we believe the company's decade-low valuation has provided a sufficient margin of safety for our investment. The company currently trades at a forward price-to-earnings (P/E) ratio of 6.3x. The market values the firm at $2.0B, a figure lower than the market value of its real estate, which Collier International assessed at $5.1B+ back in 2017. We firmly believe that the firm's real estate value has appreciated since then, particularly given Cambodia's continued attraction of record levels of foreign investment from China due to the 'One Belt One Road' initiative. Even under the most conservative assumptions that overlook demographic, geopolitical, and infrastructural tailwinds that could further enhance the company's value over time, we anticipate the firm's share price to easily double by 2030 following the commencement of its new casino, Naga 3.

BSD Analysis:
Kathmandu Capital presents a compelling deep value thesis on Nagacorp, a Cambodian casino operator with monopolistic characteristics. The manager highlights the company's exclusive 70-year casino license and 200-km radius monopoly around Phnom Penh until 2045, creating substantial barriers to entry. The investment case centers on a significant valuation disconnect, with the company trading at 6.3x forward P/E while its real estate alone was valued at $5.1B+ in 2017 versus a current market cap of $2.0B. The manager emphasizes strong historical fundamentals including 24% ROI and 30% net margins pre-pandemic. Key risks include Chinese tourism recovery delays and continued Hong Kong capital flight, but the manager views current decade-low valuations as providing adequate downside protection. The catalyst for value realization includes the opening of Naga 3 casino and potential tourism normalization, with the manager expecting shares to double by 2030.

Pitch Summary:
Listed on the Paris Stock Exchange, SES imagotag stands as the undisputed global market leader for electronic shelf labels (ESL) and complementary cloud-based software solutions (VAS), with minimal analyst coverage. This distinguished French company serves approximately half of the top 250 global retailers, offering retailers up to 20% in cost savings on labels and augmenting operational efficiencies. The company currently holds a commanding position in an oligopoly industry with a 50% market share, while the rest of its top competitors collectively hold a 30% market share. We believe the company's market leadership is sustainable because, unlike its competitors, SESL offers significantly more digitally enhanced solutions, and the technological edge is poised to expand as it continues to leverage its robust cash flow profile to commit industry-leading capex on solution innovations. Importantly, SELS's products are mission critical but constitute only a small fraction of retailers' total operating cost, making the business extremely sticky. SESL also has a long runway for growth. Globally, the penetration rate of ESL stands at a mere 7%, and just 1% among U.S. retailers. We believe the penetration is on the cusp of an inflection. The company recently secured a nationwide contract with Walmart, a company renowned for investing in cost-saving programs, even during economic downturns, granting the SESL another degree of recession resilience on top of its net debt negative balance sheet. We anticipate that the success of this pivot program will entice more U.S. retailers to embrace the ESL technology, positioning the company well for >30% annual growth in the years to come. We also foresee this, coupled with margin accretion opportunities from the burgeoning VAS segment, would result in a 100%+ share upside over the next four to five years. We initiated our position after the publication of a 60-page short report by Gotham City Research on June 22, accusing the company of fraudulent accounting practices. This report triggered a 60% selloff of the company's shares. We took advantage of the situation believing that the impact of this report would be short-lived as the central argument of the report, which revolves around the double counting of revenue through related party transactions, lacks substantiation. The company has successfully demonstrated in its response to the short report that the transactions between the two entities hold legitimate industrial ground and do not impact the consolidated financials. Furthermore, the company's external auditors, KPMG and Deloitte, have released certificates confirming the legitimacy of these intra-company transactions. At 0.28x forward price/earnings-to-growth, we believe this selloff has presented an exceptional opportunity for us to snap up shares of this high-quality, underfollowed market leader in an underpenetrated industry at a bargain price.

BSD Analysis:
The manager presents SES-imagotag as a special situation opportunity following a 60% selloff triggered by a short seller report alleging accounting fraud. The investment thesis centers on the company's dominant 50% global market share in electronic shelf labels, serving half of the top 250 retailers with mission-critical products offering 20% cost savings. Key growth catalysts include extremely low penetration rates (7% globally, 1% in US) and the recent Walmart nationwide contract win, which should drive adoption across US retail. The manager expects 30%+ annual growth and 100%+ upside over 4-5 years, supported by expanding VAS software margins and recession-resistant characteristics. The short seller concerns around related party transactions have been refuted by management and validated by KPMG/Deloitte auditors. At 0.28x PEG ratio, the manager views this as an exceptional entry point into a high-quality, underfollowed market leader in an underpenetrated but growing industry.