This presentation won the award for the best presentation from an unnamed organization, check it out below.

 

Also see Artisan Partners’ Bull Case For Samsung

Michael Wood’s presentation on Samsung Electronics Co. Ltd. (LON:BC94) (KRX:0059935). A contrarian’s perspective on a top 10 global brand with above average growth potential and a wide margin of safety.

Contest Qualification

Samsung by geography

How to buy Samsung Electronics

1. Samsung Electronics (005930 KS Equity)

Price: KRW 1,367,000

Shares: 150,777,000

FX rate: 0.0009 USD/KRW

Market Cap USD: $185 Billion

2. Samsung Electronics GDR (SMSN LI Equity)

Price: USD 672.50

Equiv. GDRs: 276,431,000

Market Cap: USD 185.9 Billion

Disclosure

  • All values from here on out are reported in USD
  • All prices and market caps are as of 06/13/14
  • This report contains forward-looking numbers that could differ from actual results
  • Samsung Electronics Co. Ltd. (LON:BC94) (KRX:0059935) is not a suitable investment for all investors and individual circumstances should be taken into consideration
  • This report is intended to provide the investor with research relating to Samsung Electronics and is not a solicitation to buy the stock

Proven Investment Process

  • Cheap price
  • Management: honest & skillful capital allocators
  • Dominant and strengthening competitive advantage (low-cost & high-quality manufacturing)
  • Globally recognized brand that is well taken care of (broad and strong associations)
  • Excellent balance sheet protection

Samsung Quick Stats

  • Market Cap = $ US 186 Billion
  • Non-operating assets (net) = $ US 60.4 Billion
  • Enterprise Value = $ US 125.6 Billion
  • Q1-2014 Book value = $ US 145.5 Billion
  • 2014E Net Income = $ US 24.0 Billion
  • 2014E Free-cash-flow = $ US 24.0 Billion EV/FCF2014 = 5.2x (prices as of 06/13/14)

Thesis

  1. Samsung Electronics Co. Ltd. (LON:BC94) (KRX:0059935)’s businesses are not well understood, as the market is assuming Samsung is only a smartphone company
  2. Samsung Semiconductor is worth the enterprise value itself (the market price implicitly assumes mobile is worth -$33B)
  3. Samsung trades at more than a 50% discount to peers and intrinsic value
  4. Samsung is manufacturing 13 products with global #1 market share that have very defensible market positions
  5. Several catalysts are in motion to unlock the trapped value, including IPOing non-core businesses, corporate restructuring and massive share buybacks ($60B net cash)
  6. Management has an astounding track record of successfully creating shareholder value

Dispelling the Myths

  1. Success of Samsung hinges on the success of the Galaxy S franchise
  2. There is no growth left in the smartphone industry (the market is fully saturated)
  3. Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) (HKG:0992) will drive Samsung Electronics Co. Ltd. (LON:BC94) (KRX:0059935)’s mobile operating margins to 3% (while Apple will continue to operate in a vacuum)
  4. Samsung is a copy-cat and is only successful because they infringe on others’ patents
  5. Samsung is not shareholder friendly and will never return capital to shareholders

This presentation seeks to rectify the myths that cloud the investor’s mindset on Samsung Electronics

Myth 1 Debunked: Sales by Product (2013)

Apple Inc. (NASDAQ:AAPL)’s Portfolio:

  • iPhone 53%
  • iPad 19%
  • Mac 13%
  • iPod 3%
  • iTunes 9%
  • Accessories 3%

Samsung’s Portfolio:

  • DRAM 5%
  • NAND 4%
  • Logic Chipset 5%
  • Mobile Display 5%
  • Large Panel Display 6%
  • Tablets 4%
  • Low-end Smartphones 14%
  • Premium Smartphones 28%
  • Feature phones 3%
  • Networking Equipment 2%
  • Laptop/PC 4%
  • TV/Screen 13%
  • Home Appliances 6%

Samsung Electronics Co. Ltd. (LON:BC94) (KRX:0059935) has a diverse product offering that can withstand the failure of any single product. Even if iPhone wipes out Galaxy S, Apple Inc. (NASDAQ:AAPL) will still need to buy Samsung’s DRAM and NAND memory chips (in larger quantities).

See full Michael Wood’s Presentation On Samsung Electronics in PDF format here.