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Looked at Embecta at a high level, they are guiding adj EBITDA ard 30% in 3 years from about ~41% in 2021. They also have $1.6B in debt, which is quite a bit if EBITDA margins are compressing. The price needs to fall quite a bit to make this a good opportunity in my opinion.

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Apr 3, 2022Liked by Johan Lunau

1. Michelmersh brick holding (MBH). Specialist bricks manufacturer, housing is always in demand and bricks are always needed. Even with the most conservative fair value it stands at £190 per share share, currently it trades at £117

2.Heidelbergcement Ag (HEI). Mainly produces cement along with other building materials linked to cement. Seemingly undervalued due to high energy costs and with the most conservative fair value it stands at 80 euros per share compared to its current price of 52 euros

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SMG .... They have a near monopoly in this country on fertilizer, potting soil, and growth supplements. With raging food inflation on the horizon, and more & more people looking to grow their own, they should be able to name their own price on their goods going forward.

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Apr 2, 2022·edited Apr 3, 2022Author

A) Technip Energies (TE.PA). This is an idea that I pitched in January. That case still stands, and I actually think the firm has become more attractive due to the Russia-Ukraine crisis. This is because Technip Energies has solid exposure to the 'transition fuel' LNG space. The U.S. has pledged to boost LNG shipments to Europe, and the latter is certain to cut its dependence on Russian energy, which could mean new energy infrastructure and an accelerated transition. I'm also confident that Technip Energies will overcome its current exposure to Russian projects. Here's the link: https://johanlunau.substack.com/p/special-situation-technip-energies?s=w

B) Alliance Data Systems (ADS), now known as Bread Financial Holdings, is also on my radar. The firm is in the private-label and co-branded credit cards business in the U.S, and I'm attracted by it's strong value proposition for retailers (its customers). It bears all the credit risk, removes interchange fees, and grows retailers' sales via data analytics and marketing expertise accumulated over decades. Its niche with small to medium retailers does not move the needle for larger financial firms, and it has sold and spun off peripheral business over the past years (most notably Loyalty Ventures). Naturally, as with all the firms in this comment, it is incredibly cheap, but also has a high ROE between 20-25%. It's Price to normalised FCF is only 2x, despite its stable business model. It was also one of few financial firms to remain profitable during the subprime crisis.

C) I'm also looking at Embecta (EMBC), which is a market leader in diabetes injection devices. It has been covered briefly in a previous thread. If its price continues to fall I will definitely give it serious consideration. The WarnerMedia - Discovery spinoff-merger act is also on my watchlist, and I'm hoping for some inefficiency there. And finally, ESAB corporation (ESAB) is due to be spun off on April 4th. It makes welding and cutting equipment and has strong positions in its markets. I'm put off by its M&A strategy and low growth, but as above, if the price is low enough, I would take a look.

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OTC Markets (OTCM): long runway, massive ROI compounder, CEO and his family own 35% of stock, business model is asset light, zero debt, only 107 employees, business model likely will benefit from inflation and volatility.

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