June 1, 2022
Best investments are just like good stories or movies: with three-part story structure (complication, development, resolution), important turning points, intrigue, drama, and surprises.
Strictly analytical approach to investment management does not provide us with tools for dealing with uncertainty.
The closed and fixed form of analytics leaves no place for imagination.
And without imagination, we are just not capable of fathoming uncertainty, fathoming the future.
Narrative, by its nature, allows us to understand the time dimension better: order of events, their length, and different time periods.
For example, George Soros, in his book “Alchemy of Finance” describes how he analyzed certain investment situations.
In order to see the big picture and analyze the case he uses terms borrowed from the world of literature, movies, and theatre. He calls the overall cycle “scenario” and different stages of the cycle “act one”, “act two”, “act three”, “act four”, and puts an emphasis on main “actors”: the shareholders.
I think that the use of such terms is not a coincidence: it serves well the purpose of looking at how the situation develops over time.
In the last few days investors in Maisons du Monde found themselves in a real movie. Perhaps even a horror movie.
Share price declined 30% percent since May 27th, 2022 after company published a trading update and revised guidance.
Revenue growth guidance went from positive to negative, EBIT margin from around 9% to 5% or above, Free Cash Flow from EUR 65-75 mil to EUR 10-30.
To make a long story short, the whole package.
All this looks very strange, especially given the fact that only 3 weeks before this, on May 4th, 2022, company issued first quarter press release and presentation, and the tone of the press release was very positive overall:
““Our first-quarter performance was fully in line with our expectations, despite the global macro-economic and geopolitical context, and continuing supply chain disruptions. Overall activity has grown strongly over pre-pandemic levels as we turned in double-digit growth compared to Q1 2019. Our pan-European omnichannel model continues to prove its relevance, as does the continued strength of our brand and unique offering.”
Plus, company confirmed FY 2022 guidance (assuming no further deterioration of macro-economic and supply chain conditions).
Company also signed two shareholder agreements: one with Teleios and one with Majorelle. Majorelle recently increased its holding and currently owns 20.3% percent while Teleios owns 21.8% (from AMF May 5th, 2022 filings related to shareholder agreements).
Majorelle is associated with Gabriel Nouri and Casa Holdings S.a r.l. which in turn is indirectly controlled by several controlled investment funds, advised, or managed by affiliates of Apollo Global Management, Inc.
We believe that given recent developments, buyout offer might be in the works. In one way or another we think that current share price and company’s valuation provide an attractive investment opportunity.