Key insights
- The post discusses three value stocks: HLF, KSPI, and FINV. HLF's MLM model and debt management are highlighted. KSPI's monopoly in Kazakhstan and potential Turkey expansion are noted, but inflation risks are mentioned. FINV faces regulatory risks in China but has international growth potential and a large cash position. Overall, the analysis focuses on individual company fundamentals and emerging market risks, with a slightly negative sentiment due to regulatory and geopolitical uncertainties.
HLF - bought at $12 interested in adding. Company is trading at ~5x EBITDA which implies an unlevered return of 20%, but the company is levered and growing. Recently refi’d their debt, has been consistently paying down debt, and the MLM model seems to be pretty durable in generating growth (questions of ethics on it aside).
KSPI - bought at $70 interested in adding. $2.75B EBITDA, $15B market cap, $1B net cash war chest. Roughly 5.5x. This company is essentially a monopoly on all payment and banking in Khazakstan through their super app everyone uses. Arguably a higher discount rate should apply to DCF’s for this company because of the inflation rate in country being 11%, but recent inflation data has shown inflation slowing. Also the country’s economy is mostly oil so higher oil prices from the Iran war probably help their currency. Turkey expansion seems promising and can potentially over double the company. Something like this would probably trade 25x+ in the USA.
FINV - bought at $4.80 interested in adding. Has faced significant regulatory pressure in china which threatens their main revenue base, but has growing international market exposure. 1.2B market cap, net cash $850M, trading for less than 0.5x EBITDA. There are non-zero risks the ADR gets pulled or EBITDA goes to zero, but seems like upside of them pulling off a pivot with $850M cash more than compensates. They are one of about 5-10 P2P lenders out of 5000 or so that survived being regulated away in china 5ish years ago so they have a track record of successful pivots. Bear case maybe they transition out of China entirely and then you own a growing international company?
Anyone have positions here or are interested in discussing?