Premium Brands Holdings Corp (PBH-T)

Good stock, but frustrating. Has climbed back from downdraft last fall because investors have supported it on valuation. Growth plans are realistic, and will probably execute on them. Some upside momentum. Difficult space to be in right now -- tariff and trade uncertainty, plus affected by the economic outlook in NA. If dividend can grow over next 5 years, stock's in a good position.

A new position for clients this year. Consumer staple. Specialty foods (main segment) + food distribution to schools, hospitals, and restaurants. Operates under 60 different banners, so there's little brand risk. On a huge growth trajectory right now that's being discounted by the market. Yield is 4.42%.

Last few years spending big to increase US distribution. For example, one of its biggest customers in Canada is COST. With increased US presence, now has access to the US stores of COST as well. Through this, it can also change distribution, so not as much exposure to tariffs. Total exposure is less than 5%, and working to mitigate that even further.

Exposed to tariffs by only a small extent. What they are exposed to is the Canadian consumer, who might already be scaling back. It was one of his Top Picks last time around, mainly because added a lot of capacity in US. Concern around SBUX, its biggest client in the US; last quarter indicated this relationship is working. Interesting at these levels.

EPS of $1.05 beat estimates of 94c; revenue of $1.63B beat estimates of $1.60B. EBITDA of $148.7M beat estimates by 1.62%. 2025 guidance was raised to $7.20B+ from $7.15B+. Not a huge raise but it was a sigh of relief for investors. The dividend was not raised for the first year in 10. There remains some tariff concerns, though PBH says it is 'positioned well'. Sales rose 5.5% year over year. Specialty foods was very strong (+13%) but distribution was weak (-3.2%). But overall, good results. 
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She's been researching this name for a year, may soon initiate a position. Excellent management team, very long-term focus. Rational M&A and capital allocation strategy. Three recent acquisitions, plus lots of organic growth too. Really trying to grow US side. Capex spend on US manufacturing facility just about done, so cashflow will follow.

PBH has been on an investment cycle to expand production capacity in recent years, which has ramped up its capital investments meaningfully. That being said, the company has shown some early signs of a complete investment cycle and could be poised to reaccelerate growth in the near term. We think investors need some patience with PBH. A few catalysts that could make PBH interesting again include:

-Capital expenditures come down

-Organic growth accelerates

-Free cash flow recovers

We think a combination of these factors could lead to a significant multiple re-rate in share price. 
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Going through significant transformation. Starting to realize benefits from new manufacturing capacity, can generate as much as $700M of incremental revenue. What excites him is that margin profile of this extra capacity is ~30%. This tells him that margins for the company as a whole will expand significantly over next 12-18 months. 

Going to reduce leverage. Trading at a multiple that doesn't reflect any of these positive developments. Significant insider buying. Yield is 4.3%.

Disappointing. Squarely in consumer discretionary. Even though it's wholesaling more to grocery retailers, end-consumer is tight on cash right now. Solid, but you don't want to be here right now. 

EPS of 54c beat estimates of 52c; revenue of $1.46B was marginally better than consensus. EBITDA of $121M was 6% better. Sales forecast was affirmed. EPS did slip from 64c last year. Revenue rose 2.2%, with specialty foods up 4.1%. Speciality foods has recovered nicely from its 4%+ contraction in the prior quarter, and showed 1% organic growth this quarter. The quarter was good and will likely be a relief for investors. 
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It is starting another 5 year plan to bring their sales up to $10 billion. This time it wants 80% of growth to be organic which is better since there will be more within its control. For this to happen it will need to increase revenue by 9 1/2%, more than the increase needed before. Although traction has not yet started, it can raise or hold prices since all are branded products. It is a good buy for the long term.

PBH is up 40% from seven years ago, but up 145% from exactly eight years ago. It is up 9% this year, nine percentage points ahead of the TSX. None of these returns include dividends. It is up 60% since it was added to the 5i Balanced Portfolio. Now, these are not 'stellar' returns, but consensus calls for 20% growth next year, higher than its valuation multiple. EPS has tripled since 2015, and, considering its stable and growing cash flow, we remain comfortable with it. We show IGM with a five-year return of -5.7% and PBH with a five-year return of 26.7%. 
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Still owns shares in company, and has been buying more lately. Last two years has impacted bottom line with inflation. Great management team with excellent capital allocation skills. Very strong long term investment. Good time to buy at current share price. 

After its 35% run this year it is perhaps more vulnerable to profit taking if it misses earnings next week. But we do like the company and the positive momentum is encouraging. We would be fine holding it for the long term, but would keep position size in mind after its recent run up. 
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