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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Despite short-term H1 2025 underperformance, Emeth Value Capital presents a highly compelling, deep-value turnaround pitch for SoftwareOne Holding AG, arguing that its merger with Crayon Group and decentralized management shift will unlock up to 190% upside."
In the 2025 H1 investor letter, Emeth Value Capital discusses its long-term investment philosophy and recent performance, reporting a +4.96% net return YTD for the first six months of 2025 compared to +10.29% for the MSCI ACWI Index. Despite this short-term underperformance, the fund's annualized net return since inception in December 2015 remains outstanding at +20.29%, outperforming the benchmark index by +8.98% annualized. The manager emphasizes that results are best weighed over a multi-year horizon. The letter focuses deeply on the concept of operating leverage and pricing power, identifying them as the ultimate force multipliers for compounding returns. The manager highlights a core portfolio holding, SoftwareOne Holding AG, a leading global software reseller and cloud solutions provider. SoftwareOne faced severe headwinds in late 2024, losing two-thirds of its market capitalization due to a mismanaged sales reorganization, leadership issues, and changes in Microsoft's partner incentive structures. However, the company's founders successfully regained board control, appointed long-time veteran Raphael Erb as CEO, and initiated a restructuring to restore decentralized operations, which achieved run-rate cost savings of CHF 88 million by Q1 2025. Furthermore, SoftwareOne announced a merger with Crayon Group to form Microsoft's largest channel partner. Despite initial negative market reaction to the transaction pricing, the manager argues the deal is highly accretive on a free cash flow basis and offers massive synergy potential (CHF 80-100 million in cost synergies). Valued at a cheap 6.5x EV/EBITDA, SoftwareOne is highly undervalued relative to peers trading at 13.4x average. The fund's conservative base-case model implies a target share price of CHF 22.88, representing a 190% upside.
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