Hidden value in plain sight

Heads I win, tails I don't lo

If you can purchase a company that you're convinced falls under the motto of "heads I win, tails I don't lose," as described by Monish Pabrai, then it doesn't need to be top quality for me.

The company I'm presenting today is simply a solid business that achieves higher returns and margins than its competitors but operates in a fiercely competitive sector. The differentiation it has been striving for in recent years is not yet reflected in the numbers.

The company has just taken a subsidiary public. The remaining stake it holds represents 84% of the value of the entire company. The remaining part of the company, which accounts for 82.5% of revenue and 67.8% of profit, can be acquired for 0.78 times EBITDA or 2.7 times earnings.

The valuation of the subsidiary assumes a flawless trajectory, but even if I apply substantial corrections, you're only paying 2.3 times EBITDA and 8 times earnings for the parent company.

I introduce you to: