Adam Crocker “Invert, Always Invert”: Long Groupe FNAC

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The 10th Annual New York Value Investing Congress takes place in New York on September 8th and September 9th 2014. ValueWalk will be providing coverage of the event- below is a long pitch from Adam Crocker.

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Adam Crocker, CFA is co-manager of Metropolitan Capital Advisors, a value oriented hedge fund founded in 1992. Prior to joining Metropolitan, he was an analyst at Morgan Stanley Investment Management conducting research on behalf of growth and value investment teams. Adam is a graduate of the Value Investing Program at Columbia Business School and has a degree in Economics from Columbia University.

Adam Crocker “Invert, Always Invert”

Invert – many complex problems could be clarified by expressing backwards.

Adam Crocker – Groupe FNAC (EPA:FNAC)


okay business, facing tough challenges

large cash balance

spun out last 2013

own the largest ticketing business in France

high quality, cheap at 6x ebit, underfollowed, peers trade a lot higher

550m euro market cap

too small for most investors, recent spin off

Perceived risks:

volatility, embarrassment of being wrong on something obvious (amazon and the likes will eat their lunch), economic malaise

Real Risks:

complete disintermediation by online or other brick and mortar competitors

business erosion as core products are digitized

Suppliers and customers would def care if the company no longer existed

Retail overview:

56% of revenues came for FNAC loyalty customers

extremely well located

3rd most visited website

Focusing on new iniatives and cost saves

Ticketing franchise

the ticket seller of France, similar to ticket master in US

50% share in France, #2 is livenation


225m Euro in ticketing value

approx 250m Euro in net cash

assume brazil assets, including tax loss carryforward of 25m euros

35 euros stock price implies 1.6x retail ev/ebit, with peers trading much higher


mgmt has goals of 3% ebit margins, stabilize revenue, stabilize gorss margin, reduce inventories (2015 stated mgmt goals)

Conclusion — national retail leader

underappreciated ticketing business (lot of potential value here)


Adam Crocker – Molina Healthcare, Inc. (NYSE:MOH)

Medicare and medicaid have unsustainable cost trends

Govt can utilize Molina Healthcare, Inc. (NYSE:MOH) to control costs and improve care

Medicaid managed care– insurers manage health benefits

the medicaid program is a growing progrma (projected at 8% a year)

MOH has proven ability to drive equal or better outcomes at lower cost than govt run alternatives

medicaid is the largest cost item on states P&L

Potential to grow in new states

dual eligible pilots and medicaid expansion states to double in coming years

9m citizens in US are elgible for duals (these dual citizens caused $350B in health care spending last year)

Molina Healthcare, Inc. (NYSE:MOH) coordinates everything dealing with care and health, and enable patients to live at home, saves taxpayers money

ACA rapidly expands role of medicaid managed care

if everyone already knows why revenue is set to double, why invest now?

Real risks:

managed care does not increase share of medicaid spend

inadequate reimbursement for new members

Perceived risks:

Difficult to predict short term cost trends

political/government is unreliable customer

dual population has never been managed before, costs uncertain

Molina Healthcare, Inc. (NYSE:MOH) is trading inline with peers, but should trade at a premium

thinks they can do $4.53 in 2015 EPS, with a share price of $63 (upside of 38%) –based on 94% cost ratio

2016 could see additional states expand medicaid plus continued growth of existing medicaid business

optionality: could be possibly acquired

WLP bought AGP in july 2012 for double the current valuation of Molina Healthcare, Inc. (NYSE:MOH)

interest income

expansion into new states

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