Gabelli Value Plus+ has published its first Annual Report to shareholders since it listed on the London Stock Exchange on 19 February 2015. The company delivered a net asset value total return of +3.9% from the starting net asset value level of 99p per share over the year to the end of February 2016. This takes account of the costs of the issue which were capped at 1%, resulting in a starting NAV of 99p compared with the issue price of 100p. Based on the issue price, the NAV total return was +2.9%. The U.S. stock market was little changed over the period in U.S. dollar terms (total return +0.5%) but delivered a significant positive total return of +7.8% in sterling terms, as the pound fell against the dollar during the period. Therefore the NAV total return, albeit positive, lagged the market during the period.
The report goes into more detail on six of their holdings:
Bank of New York Mellon Corp. (BK-$36.83-NYSE) is a global leader in providing financial services to institutions and individuals. The company operates in more than one hundred markets worldwide, and strives to be the global provider of choice for investment management and investment services. As of December 31, 2015, the Firm had $28.9 trillion in assets under custody and $1.6 trillion in assets under management. Going forward, they expect BK to benefit from rising global incomes and the cross border movement of financial transactions. BK is also well positioned to grow earnings in a rising interest rate environment, given its large customer cash deposits and significant loan book.
Edgewell Personal Care Co. (EPC-$80.53 -NYSE), based in St. Louis, Missouri, is the renamed Energizer Holdings Inc. following the tax-free spin-off to shareholders of the household products division on July 1, 2015. Edgewell generates approximately $2.5 billion of revenue through its principal businesses: wet shaving, including Schick-branded razors and blades; Edge and Skintimate shaving preparation and private label shaving products; sun care, including the Banana Boat and Hawaiian Tropic brands; feminine care, with Playtex and o.b. tampons and Carefree and Stayfree liners and pads; and infant care, utilising the Playtex and Diaper Genie brands. As a pure-play personal care company, Edgewell competes in high-margin, attractive categories with leading brands. they expect management to focus on improving margins through product mix, restructuring savings, and operating leverage, which should afford it flexibility to reinvest in growth opportunities. EPC is a likely acquisition target, as a multinational competitor with a strong international infrastructure would benefit from scale and cost synergies, as well the ability to accelerate international expansion.
Graco Inc. (GGG-$83.96-NYSE) is a leading manufacturer of equipment that moves, measures, controls, dispenses, and sprays fluid materials. The company operates in three segments. About 30% of revenues are from the Contractor Equipment division, which produces sprayers for the application of paint and other architectural coatings for the residential and commercial building markets. The business is tied to the residential housing market, and sales should improve with the increase in housing starts. The Industrial Products division, which makes up 60% of sales, manufactures pumps that pressurise, transfer, and apply single and plural components of paints, sealants, and adhesive, through spray guns, precision valves, and other devices. These products are used in the industrial, aerospace, automotive, wood products, and building material markets, and are tied to global industrial production. This division has benefited from the growth in the emerging markets. The remaining 10% of revenues are from the Lubrication Equipment division, which supplies products and systems for the lubrication and maintenance of vehicles to fast oil change facilities, service garages, and automobile dealerships. GGG has a strong balance sheet and is a strong cash flow generator. they believe the company should continue to see earnings growth from its markets, and they believe management will continue to use its capital structure to increase shareholder value.
International Flavors & Fragrances (IFF-GBP113.77-NYSE), based in New York, is a leading global supplier of flavor and fragrances and ingredients used in food, beverage, and personal and household care products. It is the third largest manufacturer in the estimated $20 billion global industry, generating revenue and EBITDA of approximately $3 billion and $702 million, respectively. IFF will continue to benefit from the growth of packaged food and personal/household care products in emerging markets, which represent 51% of its revenue, as well as from new product innovation in developed markets. Over the next five years, they expect IFF to generate high single-digit earnings growth, which assumes share repurchases. Acquisitions may further enhance this growth rate, as the company looks to supplement its technology, geographic reach, and/or expand into relevant adjacencies. IFF recently completed the acquisitions of Ottens Flavors, expanding its flavors business in the U.S., and Lucas Meyer cosmetics, entering the active and functional cosmetic ingredients market.
Kaman Corp. (KAMN-$42.69-NYSE) is a diversified company serving the aerospace, defense, and industrial markets. The Aerospace segment manufactures aircraft bearings, precision fuses, helicopter components, and subcontracted aerostructure work. In the Distribution segment, the company distributes power transmission, motion control, and material handling products to a broad range of industries. Growth within Distribution has been hampered by low oil prices and sluggish growth in industrial end markets, while Aerospace has been able to improve profitability through the increase of precision fuzing sales to foreign countries.
Republic Services Inc. (RSG-$47.65-NYSE), based in Phoenix, Arizona, became the second largest solid waste company in North America after its acquisition of Allied Waste Industries in December 2008. Republic provides non-hazardous solid waste collection services for commercial, industrial, municipal, and residential customers in forty-one states and Puerto Rico. Republic serves more than 2,800 municipalities, and operates 193 landfills, 201 transfer stations, 340 collection operations, and 67 recycling facilities. Since the Allied merger, Republic has benefited from synergies driven by route density, beneficial use of acquired assets, and reduction in redundant corporate overhead. Republic is committed to its core solid waste business. While other providers have strayed into alternative waste resource technologies and strategies, they view Republic’s plan to remain steadfast in the traditional solid waste business positively. they expect continued solid waste growth acquisitions, earnings improvement, and incremental route density and internalisation growth in already established markets to generate real value in the near to medium term, highlighting the company’s potential.
GVP : Slow start for Gabelli Value