Tamburi Funding Companions (ISIN IT0003153621) – NAV vs. “Intrinsic Worth”

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Tamburi Funding Companions (TIP) is type of a “secret star” within the space of European Holding corporations. I checked out it briefly inside my Italmobiliare write-up friom final week. The inventory worth has carried out extraordinarily nicely particularly over a ten yr horizon:

TIP has been based in 2000, listed in 2005 and the historical past is nicely documented on TIP’s homepage.

TIP has a pleasant Investor presentation with plenty of well-known firm logos, however some essential info, as an example how the break up is between listed and unlisted participations, is nicely hidden:

Based mostly on their “Intrinsic worth” (extra on this later), 3/4 of the portfolio is listed, 25% is non-public. The bigger a part of the listed holdings is Italian, with a concentrate on “prime quality” corporations, except possibly Elica and OVS which look extra like “worth shares”. With Hugo Boss and rochebobois additionally they gained a German and a French place.

Throughout the Personal Investments, additionally they have a smaller allocation to Begin-ups (~50 mn EUR)

General, for my part the funding technique is much less clear. They make investments largely in Italy, but in addition exterior (Hugo Boss, Roche Robois). Some names look actually prime quality (Moncler, Interpump) some much less so (OVS, elica). 

“Internet intrinsic worth” definition

The place it will get fascinating is how they outline their “internet Intrinsic worth”:

Right here the effective print is related:

So simply to make this clear: For listed corporations, they don’t use the present share worth however within the “conservative” model that focus on worth of analysts and within the “optimistic” model some type of worth that’s even larger than that. So this chart, which I additionally referred to within the Italmobiliare write-up doesn’t present “actual” NAVs however Bloomberg estimate primarily based calculations and a fair larger TIP estimate:

In addition they make it fairly troublesome to calculate the market worth of the listed corporations, as they don’t give % possession of the portfolio.

So one main takeaway is the next: The “internet Intrinsic worth” of TIP has nothing to do with a mark-to-market NAV and it’s not straightforward to calculate the “MTM NAV”.

Holding prices:

Prices are fairly substantial, in 2022 we will see 32 mn, in 2021 even 47 mn, largely personnel bills that are distributed amongst roughly 12-13 workers..

Trying on the worth creation, this seems Okay, however continues to be fairly excessive. Dividend revenue from portfolio investments is comparatively small:

The annual report lastly provides some extra detailed insights into the holdings, however nonetheless makes it laborious to construct an actual record of participations, as there are additionally some “double holding constructions” and so forth

Compensation:
Apparently, the principle variable compensation element for Tamburi and his Co-founder appears to be primarily based on “Pre tax income, which to my understanding embrace realized good points but in addition non-cash earnings from at Fairness participations.

Between the three most senior guys of the corporate, they get 14% of that revenue which is adjusted for the compensation itself. A part of that’s paid in shares, most of it in money.

I discover this problematic, as that is clearly a trailing issue. Unrealized good points have been created up to now and could be generated kind of at will. 

So theoretically one ought to deduct ~14% of complete unrealized good points from NAV as it will accrue to Administration.

Different observations:

They did repurchase shares in 2020 however during the last 5 years, share rely has risen by 10% based on TIKR. Treasury shares are talked about as “potential firepower” for brand spanking new acquisitions.

Administration/Board owns an honest quantity of shares. Giovanni Tamburi round 8.3%, total board possession is round 25% based on the annual report. Giovanni Tamburi, the CEO is 69 years previous, so succession may be a difficulty, though Italian CEO’s have a tendency to stay round fairly lengthy.

Abstract:

Regardless of the stellar monitor document of TIP, this time I didn’t fall into one other rabbit gap. Why ? Primarily due to the next:

  • Sure, TIP has a stellar monitor document in selecting Italian shares, however to me it’s not clear what the “actual” NAV is, on account of their unusual “intrinsic worth” definition. This lack of transparency is a giant problem for me.
  • Second, the excessive revenue share in Administration compensation primarily based on historic worth creation additionally for my part has the potential to distort alignment and must be integrated right into a NAV calculation.
  • And third, with 75% in listed corporations, in idea one may replicate the portfolio fairly simply. So with no clear understanding how the low cost seems like, the “worth add” right here shouldn’t be clear to me.

General, I believe TIP is an fascinating firm to observe, as they appear to be actually good inventory pickers, however I don’t suppose it’s a significantly engaging funding proper now.

P.S: If somebody has an in depth sheet with Tamburi’s place, I’d more than pleased to have a look at it as a way to estimate a “actual” NAV.

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