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Premium Brands Holdings (PBH TSX)
Premium Brands Holdings is on the cusp of a significant transformation driven by its multi-year investments in new manufacturing capacity, which are now beginning to be filled. These investments are setting the stage for highly predictable and much higher profitability, with incremental EBITDA margins on new business around 30 per cent. PBH’s robust U.S. pipeline includes around $700 million in new client programs slated for 2025, with additional opportunities in later stages. As these programs scale, margins are expected to expand significantly, leading to higher free cash flow and reduced leverage throughout 2025 and beyond. The company is trading at multiples that do not reflect benefits of forthcoming higher margins, higher profitability and greatly reduced leverage. Recent high insider buying is another indication of positive unfolding underlying dynamics.
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%.
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