Description

While Nice Holdings (NH) is cheap from a sum of the parts basis, the is a long term fantastic compounder with a number of great businesses. They keep spawning new ones and have a great track record. It may be worth several billion dollars in a few years. Set it and forget it. 

This is what you get for $665.9 million. They have a number of listed and unlisted subsidiaries that are market leaders:

Nice Info Svs:     Leader in Credit Scoring (FICO like); Consumer and Corporate Credit Bureau; Debt Collection; Big Data; Embryonic credit scoring and credit bureau in Vietnam. Listed. NH owns 43% with their stake having a market value of $519 million

 ITM Semiconductor:       Manufactures Battery Mgt. Units; They are sole source supplier of these in the Apple Airpod, iphone 11 and iphone 12. Listed; NH own 32.3% with market value of their stake being $382 million. People scratched their head when NH went into semiconductor manufacturing with a $17.5 million investment in ITM in 2012. They invested a total of $53 million, which is now worth nearly $400 million. The group has shown a remarkable ability to enter a variety of businesses over the years and become #1 and #2 in it. 2021 and 2022 should be blowout years for ITM as post-covid iphone and Airpod sales take off. They have recently had design wins with Samsung, Oppo etc. Their form factor is a lot smaller than others, enabling larger batteries etc.

 KIS:                        Unlisted; VAN Biz; NH owns over 90%; $12 million PAT is growing; Worth $250+ million

 Nice Investor Service:    Unlisted; Top Tier Credit Rating Agency in Korea. 34% market share; 100% owned by NH. Makes $6-7 million recurring PAT plus $22 million cash; Worth around $200 million

 Nice I&T:              Leader in digital payments in Korea. Embryonic digital payment biz in Vietnam. Listed. NH owns 43% and their stake is valued at $105 million

 Nice TCM:           #1 in ATM Mgt. in Korea; High growth smart parking (1000 lots going to 5000 lots in a few years), High growth digital kiosks for fast food (Burger King etc.), ticketing etc. NH 38.5% stake is valued at $72 million (listed value)

 Nice D&B:            Credit Authentication; Global Info Service; Corporate Info. Service; NH 35% stake is valued at $50 million (listed value)

 LMS:                      Light Metal Solutions. This is another manufacturing business that is scaling light EV battery cases. They have had recent design wins with LG Corp. This business is likely to be the next NH subsidiary to get listed in maybe 2021 or 22. NH owns 57% and business may be worth north of $130 million after listing. 

BBS:                       This is a German Light alloy wheels biz they bought for $37 million in 2015. It was the only money losing dog in the portfolio. They took the pain, put in another $30 million and got rid of it a few months ago. NH has done many acquisitions in the past. Almost all have worked. When they haven’t they face reality and move on.

Other:                   Office Bldgs worth $45 million (net of debt), Other investments worth $45 million

I have met with the various Nice listed subsidiaries and NH in Seoul several times over the last few years. They are a post chaebol progressive company with a great culture. Their offices have a “Google lite” feel to them with ping pong and other games etc. The various company websites have lots of good data and presentations etc. in English. IR is friendly and have decent English skills. It is an amazing business built by an amazing founder who died of cancer suddenly a few years ago. He was in his fifties. The son is young and being groomed. NH hasn’t missed a beat since founder passed away. They empowered their CEOs and gave them plenty of stock options and incentives. They realize they are undervalued and have done buybacks in the past. Capital allocation is quite good. Their Vietnam businesses could be meaningful in 5-10 years. Virtually all the businesses have strong recurring revenue type characteristics.

Fair Isaac might well be the most amazing business to own in the US. Buried within NH is the Korean equivalent to Fair Isaac. And they are building out a brand new credit scoring system for Vietnam at the invitation of the Vietnamese government. Could be another great monopoly biz. in which they have a meaningful stake in a few years.

While NH is cheap on a sum of the parts basis, each of the parts themselves are undervalued. And they will spawn and nuture many new businesses in the future. Best to buy and hold forever. Koreans have zero interest in their multi-decade flatlined equity markets. No one wants to buy stocks. They just wanna buy apartments. At some point that will change. 

Catalyst

Value is its own catalyst.