Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!
Expectation management: If you like either/or: super cheap companies / high margins / capital light / short term catalysts / recurring revenue / low earning volatility / High dividends / share buy backs / companies with products in the supermarket → THIS IS NOT FOR YOU.
Elevator pitch:
DEME, a Belgian Marine Engineering Group, is a contrarian, secular growth /mean reversion story. Current results are noisy, but growth, especially in offshore wind installation is intact and accelerating. A combination of strong growth and improving margins could lead to a tripling of EPS over the next 5 years.
As the WordPress editor still sucks for longer writups, here is a pdf version of the full writeup. Don’t worry, it’s only 18 pages and a lot of pictures of nice ships 😉
As a special service, the investment case & summary for those to lazy to read the Pdf:
Summary:
Overall, DEME is clearly not a “no brainer”. It doesn’t screen well and you really need to believe that offshore wind is not dead. However, if you look closer, I do think that DEME is a really interesting contrarian opportunity. I am very much convinced that offshore wind will grow for some time and DEME will be able to make a lot of money installing windparks for many years.
But also DEME’s other businesses are at least super solid with profit mean reversion potential. On top of this, I do think that DEME is a high quality company.
It is clearly more risky from a business perspective than my typical target company, as it is project based and capital intensive. As any capital intensive business, it could be subject to strong cycles which could negatively impact profitability, especially in the off shore space.
On the other hand I do think that some of that risk is mitigated by the large and growing order books, the global diversification and the secular tailwinds.
For the time being, I established a 3% position at around 88 EUR per share which reflects the higher risk and that I have still to learn a lot about DEME’s business..
