Dr. Jelena Arsic van Os, CEO, Accsys Technologies PLC
Accsys Technologies PLC CEO Dr. Jelena Arsic van Os has a PhD. in Solid State Chemistry from Radboud University Nijmegen, Netherlands.
Her company participates in one of the largest building supply sectors in the United States and around the world.
“…With our technology, we are able to transform fast-growing wood, guaranteeing its durability and performance for 50 years above the ground and 25 years if it’s in the water or underground.
No other existing wood product today can match this performance.
We are very proud to see Accoya used in many very high-profile projects like Google offices around the world, Wood City in Helsinki, Microsoft, Starbucks and Louis Vuitton shops.
Many architects really prefer us as a solution — for example, Kengo Kuma and Associates or Foster + Partners, BIG from Denmark, etc.
Our two brands, called Accoya and Tricoya, are considered a reference point in the marketplace.
Our products are used in decking, cladding, and joinery — e.g. windows and doors.
We are replacing the use of hardwood, and in that sense are helping to prevent deforestation.
So there is a very strong sustainability story on the back of Accoya.
On one hand you have technology patents, a worldwide presence; on the other hand, you have this very strong sustainability driver which we are very proud of.
The process that we use is called acetylation.
It is essentially soaking wood in vinegar, simply put.
So chemically, we are boosting the naturally occurring acetyls in the wood, making it harder for water to penetrate.
These techniques have existed since 1920.
Accsys was the first company in the world to actually master this technology in order to get a final wood product that maintains superior durability over the period of 50 years that we guarantee.”
The investment moat for Accsys Technologies PLC is this durable wood technology.
“…We own the technology for one of the most durable wood products in the world, which is providing us with significant growth potential in the building and construction industry.
Accoya and Tricoya are sustainable products.
Accsys is a company that is also becoming fundamentally much stronger.
With the peak capex behind us, we will now start to see the progressive benefits of increasing capacity and improved fundamentals.
It is a company that is becoming more efficient.
We are transforming for growth.
And I do believe that investors are going to notice this progressive trend very soon.”
Ketan Mamtora, Building Products Analyst, BMO Capital Markets Equity Research
Ketan Mamtora is Building Products Analyst at BMO Capital Markets Equity Research.
He joined BMO in April 2014 as a research associate covering the North American packaging and forest products sector.
He was promoted to an analyst role in 2016, covering the packaging and forest products sector.
In 2017 and 2018, Mr. Mamtora was named among the “All-America Research Team Rising Stars” by Institutional Investor magazine.
Mr. Mamtora emphasizes the technology trend developed by Accsys Technologies PLC CEO Dr. Jelena Arsic van Os.
“We are seeing increasing use of technology in the way products are made. So that is one. And as that happens, there is improved productivity. There is also less waste, and it just makes a process more efficient.
So that is one on just the production side, but then the other aspect is being able to provide options to consumers in the way they can think about how they want to build a home, which historically in the past didn’t happen all that much.
And you just have to look at the samples and decide based on that.”
One large cap stock that Mr. Mamtora identifies as a prime example of a lumber leader is Louisiana-Pacific (NYSE:LPX).
“Louisiana-Pacific (NYSE:LPX), and I’ve been following that company for over a decade.
The company was historically focused on just commodity oriented strand board.
Think about sheeting of a home.
But over the last few years, they have increasingly focused on the exterior siding business.
That is not a commodity business.
There is brand value and there is a service component.
And what’s unique is, they are using their oriented strand board mills and adding one or two steps to the process to make exterior siding.
And so, they’ve converted some of those mills into a product category which has higher growth rate, but also stable margins over a cycle.
And as they have done that, what they’ve also done is when the commodity markets are stronger and commodity prices are higher — like OSB markets when they were strong in 2021 and 2022 — they’ve also bought back a lot of stock, so Louisiana-Pacific cut its share count by 50% between 2018 and 2022.
And the stock price is higher today than it was back then.
So they have grown the business.
They are in the middle of this transformation.
They’ve also effectively allocated capital, and the investors have rewarded them for what they have done.”
Ketan Mamtora’s analysis leads him to two specific stock picks for 2024 and beyond.
“…The names that I like a lot, include a company called West Fraser (NYSE:WFG).
West Fraser is the largest lumber producer and the largest oriented strand board producer in North America.
Current lumber prices are quite depressed right now, and part of the issue is, in general, housing demand has been weaker this year.
We’ve also had supply growth in lumber over the last few years.
So, a combination of those two have pressured prices.
But if we look at where the stock is trading today — coming back to my earlier point on intrinsic value, we value these companies on normalized EBITDA, normalized margins.
And on that metric, the stock is trading near trough levels.
The stock is trading below 5 times our estimate of mid-cycle EBITDA.
The stock is actually trading below book value.
Usually, those are pretty good markers of attractive valuation for a company like West Fraser.
They have got a very strong balance sheet as well. They’ve got a net cash position. So, it’s a name that I like a lot at these levels.
The other name that I like a lot is Beacon Roofing (NASDAQ:BECN).
Beacon Roofing is the second largest roofing distributor in North America. It’s the largest public roofing distributor.
Roofing end markets tend to be quite stable because the vast majority of demand is tied to non-discretionary repair and remodeling.
If your roof is leaking, you’re going to fix it.
Where the interest rates are 3% or 6% will really not matter.
And the company has also made a lot of improvements over the last couple of years, both operationally, but also in the terms of just the portfolio.”
Julian Francis, President and CEO, Beacon Roofing Supply
Julian Francis serves as President and Chief Executive Officer of Beacon Roofing Supply Inc., a leading distributor of specialty exterior building products. Prior to Beacon, he was the President of the Insulation Business at Owens Corning.
He has created his own strategy for dominating the housing lumber market.
“…We believe we have three competitive advantages.
One is our scale; we are one of the largest companies in the space and leveraging our scale is really important to us.
The second is how we go to market, what we’ve called our OTC network — that’s On-Time and Complete.
It’s a go-to-market model where we network our branches in larger markets, so they don’t operate independently.
We operate as a network in cities like Atlanta, New York, and Chicago and we think that gives us an advantage.
We don’t deliver from the branch that took the order, we look at the best combination of availability of product and service to deliver from the branch that’s best suited to do that.
That’s a very different model, you must have scale to implement that model.
But even if you have scale, not all companies operate that way.
So we think that’s a competitive advantage for us.
And then, the third competitive advantage we believe we have is around specific investments that we’ve made historically.
We believe we lead in digital.
We think we’ve got the leading platform in the exteriors building product space for customers to come in and look at projects, order materials, pay for the materials, and get them delivered.
We’ve seen that grow rapidly.
In our residential business more than one-fifth of our orders are now placed through our online platform and that delivers better margins for us.
One more advantage is our private label brand — that’s been a tremendous asset for us that’s closing in on a billion-dollar business.
It has better margins than the branded labels, and we’ve invested in building TRI-BUILT as a high-quality recognizable brand in the industry.
It’s been a great success for us.”
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