Small & Mid Cap focused Value Investor

Gokul Raj. P

Equity Bottom-Up

<blockquote>If you want to be a Millionaire, start with a billion dollars and launch a new airline - Richard Branson</blockquote><blockquote>The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down - Warren Buffet</blockquote>In an industry (Aviation) that is famous for its wealth destruction, there exists a small bunch of outliers that have created tremendous shareholder value over the years in different geographies. All these outliers are connected by a common operating framework (ULCC: Ultra-Low-Cost Carrier) and similar business philosophy (Outsider CEO's). I would like to point out a few amazing wealth creation track record that will convince you to look at these businesses closely, <div class="content-highlight">1.) Southwest Airlines (USA) - 43 years of uninterrupted profitability despite economic cycles:</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/024/357/original/Screen%20Shot%202017-04-17%20at%209.27.41%20pm.png?1492460894" class="editor-image img-responsive" data-smartkarma-image-id="24357"></figure>Southwest Airlines has compounded its equity value at approximately 19% CAGR over the last 40 years (without including the consistent dividend income stream to shareholders). With a market capitalization of 32.5 Billion $'s, Southwest Airlines continues to be one of the biggest value creators in US markets. <div class="content-highlight">2.) Ryan Airlines (Ireland) - 7X share price growth in last 10 years despite the Great Recession:</div>Ryan Air is a cash cow.  The firm has returned over €4.3bn to shareholders over the last ten years which is more than seven times the €560m the firm originally raised in our I.P.O. in 1997 and in two secondary issues. The company continues to grow at a healthy pace despite operating in a mature market. Ryan has given away 2/3 rd of cumulative profit as dividend over last 10 years, demonstrating the capital efficiency of the model. <div class="content-highlight">3.) Interglobe Aviation (India) - Market leader with 40% market share and 6 Billion $ market cap:</div>Interglobe Aviation (Indigo Airlines) has been a tremendous value creator. For a business that was started with around 60 Million $'s of promoter's capital a decade back, it has already thrown out over 600 Million $'s in dividends to promoters over the past decade and on top of that, the current promoter's stake is valued at 4 Billion $'s. Yet the story is just starting, Indian aviation is just in the early stages of its development. <div class="content-highlight">4.) AirAsia (S.E Asia) - 1 MYR distress takeover firm (2001) is currently valued at 10 Billion MYR's:</div>Air Asia was born out of a distressed deal for 1 Ringgit (40 Million of Debt) by Tony Fernandes in 2001 and he managed to turn around the airline and pioneered the low-cost airline philosophy in Asia. The airline currently serves over 25 countries in the region. The firm unlike other successful ULCC's has lost some focus by dabbling in several unrelated ventures which have dimmed its success story. <div class="content-highlight">5.) Wizz Air (Eastern Europe) - CEE's largest airline with strong profitability:</div>Wizz Air's promoters have infused less than 250 Million $'s since its operations started in 2004-05. They were able to get a partial exit to the tune of about 150 Million $'s during its IPO in 2015 and their residual stake in the firm (including convertible debt) is currently valued at over 1.2 Billion $'s. The business operates in underpenetrated markets with a long runway for profitable growth.

If you want to be a Millionaire, start with a billion dollars and launch a new airline - Richard BransonThe worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down - Warren BuffetIn an industry (Aviation) that is famous for its wealth destruction, there exists a small bunch of outliers that have created tremendous shareholder value over the years in different geographies. All these outliers are connected by a common operating framework (ULCC: Ultra-Low-Cost Carrier) and similar business philosophy (Outsider CEO's). I would like to point out a few amazing wealth creation track record that will convince you to look at these businesses closely, 1.) Southwest Airlines (USA) - 43 years of uninterrupted profitability despite economic cycles:Southwest Airlines has compounded its equity value at approximately 19% CAGR over the last 40 years (without including the consistent dividend income stream to shareholders). With a market capitalization of 32.5 Billion $'s, Southwest Airlines continues to be one of the biggest value creators in US markets. 2.) Ryan Airlines (Ireland) - 7X share price growth in last 10 years despite the Great Recession:Ryan Air is a cash cow.  The firm has returned over €4.3bn to shareholders over the last ten years which is more than seven times the €560m the firm originally raised in our I.P.O. in 1997 and in two secondary issues. The company continues to grow at a healthy pace despite operating in a mature market. Ryan has given away 2/3 rd of cumulative profit as dividend over last 10 years, demonstrating the capital efficiency of the model. 3.) Interglobe Aviation (India) - Market leader with 40% market share and 6 Billion $ market cap:Interglobe Aviation (Indigo Airlines) has been a tremendous value creator. For a business that was started with around 60 Million $'s of promoter's capital a decade back, it has already thrown out over 600 Million $'s in dividends to promoters over the past decade and on top of that, the current promoter's stake is valued at 4 Billion $'s. Yet the story is just starting, Indian aviation is just in the early stages of its development. 4.) AirAsia (S.E Asia) - 1 MYR distress takeover firm (2001) is currently valued at 10 Billion MYR's:Air Asia was born out of a distressed deal for 1 Ringgit (40 Million of Debt) by Tony Fernandes in 2001 and he managed to turn around the airline and pioneered the low-cost airline philosophy in Asia. The airline currently serves over 25 countries in the region. The firm unlike other successful ULCC's has lost some focus by dabbling in several unrelated ventures which have dimmed its success story. 5.) Wizz Air (Eastern Europe) - CEE's largest airline with strong profitability:Wizz Air's promoters have infused less than 250 Million $'s since its operations started in 2004-05. They were able to get a partial exit to the tune of about 150 Million $'s during its IPO in 2015 and their residual stake in the firm (including convertible debt) is currently valued at over 1.2 Billion $'s. The business operates in underpenetrated markets with a long runway for profitable growth. 

Wizz Air - Value Creating ULCC Business Model (22% ROCE) Available at 12%+ OCF Yield & 10%+ Growth!!

Wizz Air Holdings

Wizz Air - Value Creating ULCC Business Model (22% ROCE) Available at 12%+ OCF Yield & 10%+ Growth!!