VIChallenge Daniel W. Lawrence – Elmrox Investment Group

VIChallenge

Daniel W. Lawrence is Managing Partner and Founder of Elmrox Investment Group (EIG). EIG is an investment partnership focused on capital preservation and superior risk-adjusted returns that looks for highly idiosyncratic, asymmetric  opportunities using a concentrated approach over a multi-year horizon. Prior to founding Elmrox Investment Group in 2013, Mr. Lawrence was a Managing Director and co-founder of Talara Capital Management. Previously, Mr. Lawrence was a Senior Analyst at Citadel Investment Group. Mr. Lawrence began his career as an investment banking analyst and equity derivatives analyst for Merrill Lynch & Co. Mr. Lawrence is also Founder and Principal Owner of Elmrox Media LLC, a global content firm targeting 18 to 34 year olds. In addition, Mr. Lawrence has served on the Board of Directors of SUS since 2009. Mr. Lawrence earned a B.S. in Commerce from the McIntire School of Commerce at the University of Virginia. He has since been a guest finance lecturer at the University and participates in UVa?s Galant Center for Entrepreneurship.

Misunderstood asset transformation with significant upside and catalysts

  • Commodity chemicals valuation (5x–7x EBITDA) does not reflect the Company’s transformation to a specialty chemicals business (comps 8x-­?12x EBITDA)
  • One of strongest and most predictable earnings growth profiles in materials
  •  Much stronger pricing power and more sustainable margins that market gives credit for
  • Much less cyclical than market realizes (~20% of sales)
  • Much less cyclical than market realizes (~20% of sales)
  • ~80% of EBITDA comes from  competitive advantaged, specialty chemical businesses
  • Consensus does not assume a turnaround of Water business under new management; if  turnaround does not materialize, Water will be monetized with cash proceeds  likely returned to shareholders (2013/2014)
  • Consensus incorrectly believes that Water  business is exposed to North American newsprint paper
  • Current share price ascribes little value to unique and valuable Valvoline asset; Multiple  options for unlocking  significant shareholder  value including a tax-­?free spinoff and/or  MLP qualiMication (2014/2015)
  • Valvoline Instant Oil Change (“VIOC”) store base is  hidden asset where significant incremental  value can be created with little (if  any) capex
  • Raw material concerns especially around guar and oil are exaggerated and misunderstood
  • Consensus does not assume any recovery in Europe in FYE 2014 and FYE 2015 despite end market improvements
  • Cheap option on U.S. housing recovery through Performance Materials segment (2013-­?2015)
  • Free option on higher interest rates through pension
  • Private market valuation creates margin of safety

VIChallenge ASH DanielLawrence: Valuation Analysis