Sneak Peak at Second Deep Value Polish Play

Yesterday we discussed the first of two Polish stocks I’m covering in February’s Value Ventures. In today’s email I’m going to give a rough overview of the second company. The idea is equally exciting and also has a good looking stock chart.

Like yesterday, I can’t give away the name of the company because I’m writing about it in my Value Ventures report. But after reading this you find yourself interested, check out this page to learn more. We’re keeping access open until Sunday at midnight EST. There’s also a 60-day money-back guarantee, so there’s no risk to try it out.


An Over-Optimistic IPO Leads To Bargain Prices

The second company is a product of a failed IPO. They went public at high valuations based on glossy, pie-in-the-sky projections. Those projections weren’t met, and the share price took a major hit. Over the next two years, the stock fell from 55 zloty to 15 zloty (>70% decline).

We think 15 zloty represents significantly low expectations for the future of this company. Speaking of, here’s what I love about the business:

    1. Trades <3x EBITDA and sports 36% FCF yield
    2. Growing Market Share in Core Product
    3. 30%+ gross margins and 11% pre-tax margins
    4. Founder-run with 60% insider ownership

There’s a lot not to like about the company:

    • Single-digit revenue growth
    • Declining gross profits & EBITDA
    • Partial Share Dilution
    • Investments in Non-Core, Unproven Businesses

Yet, we think some of these issues are transitory given management’s reinvestment cycle. In essence, the company’s plowing capital into sales and marketing to expand their presence beyond Poland. Here’s a quote from their CEO on this topic:

“Higher operating costs are primarily a consequence of high advertising and marketing expenditure aimed at increasing market share. These activities already have effects in the form of growing sales, especially in the markets of Western Europe and Scandinavia, where we have recorded over 50% increases.”

If those operating expenses lead to higher sales and greater reach, the company should return to its normal EBITDA margin of around 12%. But even if they don’t the current stock price is low enough to offer a margin of safety. We’ll hit on that later.


The company is run by two brothers. They own over 60% of the company between the two of them. They have over 17 years experience in telephone manufacturing, and were one of the first people to break into the senior citizen cell phone market in Poland. The brothers appear smart and capable in expanding the company’s sales into North & South America.

Alright, let’s talk about valuation …

Potential Downside

The company has a strong balance sheet which provides adequate downside protection. As of last quarter, they sported 72M zloty in current assets against 11.8M zloty in total liabilities. If we take these figures at face value, the company trades at a 46% discount to NCAV.

But we can’t take these figures at face value because most of their assets are in inventory. Let’s apply a 50% discount to inventory. A 50% discount in inventory gets us around the current share price.

That’s not bad.

Potential Upside

Our conservative assumptions on growth and EBITDA expansion put this company’s shares well over 100% of current market prices. In fact, we don’t need to see margins expand in order to realize higher intrinsic business value. We would need the business to not collapse in the next five years. That’s all.

There’s also a scenario where upside potential reaches above 200%. But we’re not assigning a high probability to that outcome.

Wrapping It Up

Here’s a business that trades at roughly NCAV if you discount their inventories by 50%. On top of that, you’ve got a profitable core business that’s growing in market share targeting a niche, boring industry. The company’s run by founders with tremendous skin in the game. Finally, a broken IPO has led to severely discounted share prices.

Oh, and check out the charts … We’ve got support at the current price level.

Once again, if you’re interested in knowing exactly what companies these are, check out this page. We’re only keeping enrollment open till Sunday at midnight EST. After that we’ll be closing the service. There’s also a 60-day money-back guarantee. So you can try out our value research service for a few months and if it’s not for you, we’ll give you your money back. No problem.

I’ll see you tomorrow!

That’s all I got for today. Shoot me an email if you come across something interesting this week at

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