Tamburi Investment Partners $TIP.MI + Educational: Valuation Methods
Sunday 24th Sep 2023
Today, we are publishing the analysis of Tamburi Investment Partners $TIP.MI and launching our series on valuations (Educational)
Tamburi is a company created by entrepreneurial Italian families to manage their savings; they invest in both public companies (such as Moncler, Sesa, etc.) and private ones (where they subsequently aim for IPOs and significant returns - they have a substantial stake in Azimut-Benetti). Over the past 10 years, its share price has grown at a 19% CAGR, outperforming any index.
Also, as we mentioned in recent weeks, today marks the launch of our educational series on company valuations, comprising four publications (the first one today). In these publications, we will explain step by step how to analyze companies using five different valuation methods, each illustrated with a practical example.
For the next week, we will share the analysis of a highly followed company in the Iberian peninsula, along with the results of companies we have in our portfolio and under monitoring, such as Ecoener and Beneteau.
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Results & events analysis + Portfolio management
Discussion of current topics and their implications/actionable related ideas
Analysis of the functioning of specific sectors (LNG industry, Offshore Drillers, Consumer Discretionary,…)
Today we launch a series of four publications about valuations, where we cover five different valuation methods (Comparable, Transactions / M&A, Discount Cash Flows, SOTP and Liquidation Value). For each of the methods, we choose a company / industry and carry out the process explaining it step by step. The series include a detailed DCF of The Italian Sea Group and other companies, and also benchmarks for entire industries such as luxury yacht, restaurants,..
Tamburi Investment Partners
Tamburi Investment Partners (TIP) is a public company acting as a long-term and diversified investor in businesses such as Moncler, Sesa, Azimut-Benetti,... It also acts as an advisor company in M&A and corporate finance to mid-size Italian companies. Since its IPO in November 2005, it has been listed on the Milano Stock Exchange with the ticker $TIP.MI.
TIP invests in 33 European listed and private companies focusing on quality, being most of the enterprises Italian. Whenever the stake is significant, TIP sits on the BoD and takes an active role in the management of the investee. As they have done multiple times in the past, they have an interesting pipeline of IPOs that could unlock value in the mid-term.
The company's historical performance has been superb with the share price growing at almost 19% CAGR during 10 years, beating any index. Currently, TIP is trading significantly below its NAV (even more than the historical 15-20% discount that can be considered typical for this type of companies).
In today's analysis, we conduct a rigorous, detailed and independent valuation of all the companies it holds and attempt to ascertain the size of the current opportunity.
Brief History and Shareholders' Structure
The company was founded in 2000, gathering the equivalent of €33 million euros from 70 shareholders, almost all entrepreneurs. In the beginning, TIP focused its investment on tech companies in the post-start-up phase.
In 2003, they raised an additional €44 million euros and shifted to larger and listed companies. They also started providing consulting services for M&A and corporate finance transactions.
The company was listed on 9th November 2005 and translisted to the STAR segment in 2010.
In 2014, the company launched a project dedicated to medium-sized companies with the objective of listing them in the medium term.
In 2016, TIP created “Asset Italia” together with family offices for a total available capital to be invested of €550 million euros.
One year later, they diversified their investment activities with “StarTip”, a hub in digital and technological innovation for Italian start-ups. TIP had available capital for a total of €100 million euros.
Tamburi has a very dynamic investment and divestment activity having invested during the last three years around €740 million including first investments, add-ons, and club deals. They have also divested c. €530 million during the same period.
To understand the management style and philosophy it is crucial to understand the history of the company and the shareholders' structure. Since the beginning, the major shareholders have been wealthy Italian entrepreneurs. With this in mind, it is not surprising the long-term vision Tamburi has with their investments, the interest in Italian family-led companies, and the quality component in most of the firms.
The shareholder structure is as follows:
Capital allocation is what running businesses is about but in investment companies such as TIP, allocating capital is the whole business. The basic features of most of the investments are that most of the companies are industrial with above-average quality versus the peers, and potential growth both organically and inorganically. In some interviews, Mr. Tamburi has expressed his interest in luxury companies like Giorgio Armani which they consider an example to replicate.
The difference between TIP and a private equity fund is the long-term commitment, some of the companies have been in the portfolio for more than 15 years. TIP is committed to accompanying the investees in the business development and usually sits on the BoD and takes an active role in M&A and other transactions.
The management is aware that apart from the development of the business, one of the best ways to add value to the company and the shareholders is through IPOs. There are not any planned listings in the short term. We believe that the listing activities will eventually reactivate once the appetite for investors is recovered, probably in 2024-2025. As we will later see, there are multiple companies that have the potential to be listed.
The management considers the current price to be at an exaggerated discount versus the NAV and has been repurchasing shares during the last months that we believe they will use in the future as a way to finance any investment in the future. The company also pays a small dividend since 2013 and in 2023 they distributed €0.13 per share, which represents a dividend yield of 1.5% at current prices.
The breakdown of the investments is as follows:
Mid and large listed companies
The investments in listed companies represent almost two-thirds of total net intrinsic value and we can find worldwide industry leaders such as Amplifon, or Moncler. These holdings have performed extraordinarily well with a 6.7x return on invested capital. Most of TIP’s success has come from what they are now big-caps where they have multiplied by 36 times the capital invested. For example, Moncler has been in the since the IPO.
During the first six months of 2023, the average revenue growth for this group of companies has been 11.2% with a 16.3% average EBITDA margin.
Sesa is probably the listed company with the highest potential in the portfolio. It is a digital service provider for the public sector and other businesses. Most of their revenues come from Italia, but they are also active in other European countries and China. They have a track record of growing revenues and EBITDA at a 12% and 16.2% CAGR, respectively from 2012 to 2023. The final year ends on 30th April.
It competes in three businesses:
Value Added Distribution (VAD): Active in the distribution of technological innovation solutions for the business segment, with a focus on the Data Centre, Security, and Cloud Computing segments.FY 2023 results: Revenues: 2,240 million EBITDA margin: 4.9%
Software and System Integration (SSI): Focused on digital services and business applications such as cloud technology services and security solutions (49% of revenues of the division) or proprietary ERP for SMEs.FY 2023 results: Revenues: 703 million, EBITDA margin: 12.1%
Business Services (BS): Division dedicated to digital transformation, business applications, and digital platforms for the financial services industry.FY 2023 results: Revenues: 84 million, EBITDA margin: 13%
Their M&A strategy is very active. In 2022, they acquired 17 businesses, and in the first seven months of 2023, 9 more. They buy small businesses (usually between 1 and 15 million in sales) at around 5 times EV/EBITDA. They are focusing on SSI and BS acquisitions to gradually improve the marginality.
The company presented good first-quarter results (+15.9 in the top-line (65% organic)) and confirmed 2024 guidance of 3.2-3.3 billion in revenues (+10-15%) and 240-250 million in EBITDA (+15-20%). These are great results for a year in which the rest of the peers are flat.
They continue to hire at a high pace in view of further growth in the coming years. The company is trading at around 6 times 2024´s EV/EBITDA and has started repurchasing shares more aggressively.
This company has been in TIP’s portfolio for 20 years and shows how long Tamburi is ready to hold its investments, during these years the share price of Interpump has multiplied by more than 12 times. Interpump is one of the largest producers of professional, high-pressure pumps and hydraulic components with more than 100 plants in the five continents.
It is a boring company for which we expect medium-high single-digit growth keeping marginality more or less stable after some years of really strong growth. The sector is not sexy but provides high and stable returns. Like most of the companies invested by TIP, Interpump has also an interesting M&A activity, standing out the latest investments in India where they are getting interesting traction.
The evolution of the business in the first six months has been once again excellent, growing in both divisions and in all the markets. This growth is sustained by a 9% increase in volume and 5% in price. Interpump is committed to improving the levels of free cash flows and at least in the first months of the new plan they are achieving it despite continuing to spend heavily in Capex.