Marcelo Lima, Heller House — “An Owner-operator to Rally Around”

Value Investing Congress notes

By Travis Johnson, Stock Gumshoe, September 8, 2014

These are my notes and instant reactions from a presentation at the Value Investing Congress, the notes below might contain errors, paraphrases, incorrect quotes, or misinterpretations.

Marcelo Lima has a retailer to share today — he argues that retail is not as dead as we think it migth be — notes examples of South Koreans flocking to retail stores despite the fact that it’s the most web-connected country on Earth, other successful retail examples.

(adsbygoogle = window.adsbygoogle || []).push({});

Ecommerce is 6% of all retail sales, and half of those go to companies with physical locations. And in some places, online retailers are seeking out physical stores — physical shoppers purchase three times as much as online customers.

Specifically: Food retail.

Least impacted by online trends. Grocery is projected to still be below 10% e-commerce even in 2018 (by Tesco).

But it’s also a tough business with very thin margins, and bad management can really screw things up. Tesco, for example, was too slow to cut prices when competition came in from Lidl and Aldi, launched its own tablet, and had four corporate jets.

He’s recommending, very coincidentally, Casino Groupe — the parent of Sahm Adrangi’s Via Varejo that we heard about just moments ago.

Casino thinks it’s a French company — sales are predominantly France 65%, Brazil 22%, Vietnam and Colombia about 7-9%… but when it comes to earnings it’s much more even — Brazil, Vietnam, Colombia Thailand are much bigger pieces of the profit and are growing much faster. The parent has controlling assets of GPA in Brazil, Exito in Colombia and Big C in Thailand — together those are worth more than Casino’s market cap (by about a billion euros).

The implied value of the French business is negative 1.5 billion euros — you’re being paid to own this business. Seven years ago the subsidiaries were only accounting for half of the value of the Casino parent and the implied value of the French business was 4.5 billion euros. The value of Casino’s holdings/subsidiaries grew by 194%, but Casino’s market cap has gone up by only 29%.

Controlling shareholder Jean-Charles Naouri was a child genius and earned a math PhD in one year, was a French economic minister who helped modernize some of the French financial markets before becoming an investment manager. David Rothschild seeded him with some capital and ...

Sign Up for a Premium Membership

To view the rest of this article (and to have full access to the rest of our articles), sign up.
Already a member, log in.

Become a member