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1/ The first example of unit economics from intro tweetstorm is Swedish small cap CTT Systems ($CTT.ST). I’m long. Monopolist in humidity control for commercial aircraft. Excellent business quality can be shown in two different ways: quality-value metrics and SaaS metrics...
2/ To quality-value investors: razor-razorblade model, but better than jet engines because pricing power leads to teens est OPM on OE biz. Aftermarket filters OPM est is 50%. Double digit g in AM likely for 8-10 yrs, so 2019’s 45% ROCE and 32% OPM likely to be exceeded.
3/ To growth investors: In 2019, 72% GPM & grew ARR at +33%. ARR decomposition: 0% churn, revenue retention of 100% so all growth from installs. LTV/CAC est >> 10 due to exclusive distribution lock-in. Dominance via disruptive technology & competitors have no distribution
4/ I assume 2023 will contain most, but not all of the snapback. On my 2023e, trading at 14.5x P/E, 3.5x EV/Rev, and 5.4% FCFF yield
5/ CTT’s conquest of this market over the last 15 years, means they are on new platforms (787,A350,777x) which 1) enables supernormal growth with negligible legacy program attrition 2) their newer aircraft fleet coming back fastest (see Rolls Royce CEO from their last call):
6/Multi-bagger potential comes from humidification as a COVID mitigation. Humidifiers have been installed in hospitals and prisons to slow transmission because proper humidity allows for optimal nasal and oral mucus membrane function. Awareness in aerospace rising. Link:
7/ The shares would double post COVID if shares hit my fair value target price. Entry point still attractive as recovery in CTT’s shares still trails other top decile aerospace names like Transdigm (black) and HEICO (blue):
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10/ Upcoming research: unique eCommerce model that shows SaaS characteristics without a subscription, global #1 market share player with Street consensus very likely too conservative in the absence of guidance from new management /end
@vetleforsland @HurriCap @AltaFoxCapital @OtterMarket @saharainvesting @Symmetry_Invest @SecretCapital_
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