CandlePilot

$TEA.AX Tasmea Ltd. is an extremely capital efficient business. That’s important because it means that they are a value generator. Tasmea earned roughly 20% ROIC in FY24, rising to about 27% in FY25 (NOPAT near $52m on invested capital near $195m). Cost of capital likely hovers somewhere around 9 - 11%, so Tasmea is creating real economic value, not just accounting profit. As massive shareholders in the company, the management makes it easy on themselves by buying top businesses at around 5X EBITDA and plugging them into an ecosystem that the market is more than willing to value at 10+X EBITDA. Tasmea's cash conversion is stellar, hovering around 100%. This is because they run an asset-light business that doesn't require a lot of upkeep and maintenance capex. Their money is made by providing services that they are simply better at providing than anybody else. And the services that they provide are non-discretionary, meaning that clients must spend the money to service their heavy operational assets, come rain or shine. The alternative would be shutting down. Every top acquisition adds to Tasmea’s expertise, adds to their position as an all-in-one solution for clients, and adds to their ability to cross-sell services to clients, pushing their margins higher and higher. And that's exactly what we've seen. With Australia being massive in size, bigger than Europe in fact, and with massive secular trends underway, especially in electrification and data center build-outs, Tasmea's value-creation runway is decades-long. Their growth has been fast and their guidance is nothing short of interesting. Though they tend to bury their own guidance, if we simply choose to take it at face value and run modest price projections, the stock is extremely attractive. In the $3.5 to $5 range I was pounding the table and writing articles on this company. Now in the $8 to $9 range the attractiveness has not changed because Tasmea has surprised us with incredible deals resulting in incredible earnings growth. The management seems to agree about the stock's attractiveness because they keep buying their own stock. Steven Young, the managing director, bought stock on the open market as recently as this week. Management owns 50-60% of the company's stock between them. They want the stock price to go up as much as I do. Oh, and Tasmea is set to be included in Australia's major indexes very soon. That will result in a lot of forced buying, on top of every other tailwind. Not financial advice. $TEA.AX has become my largest position in an extremely concentrated portfolio.

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