Kevin Wilde February 5, 2018

AA PLC (LSE:AA)

Opportunity: Long-time market leader in UK roadside assistance. Very little competition (RAC, Greenflag) in durable, niche industry. Incredibly predictable, high return on capital business. Strong competitive advantages: high customer retention, high switching costs, strong brand, excellent economies of scale / high barriers to entry. Normalized FCF ~315MM; EV 3.440B; FCF / EV yield of 9.1%. Risks: Highly leveraged after sale by private equity owners.   Mature, slow growing industry. Exposure to loss of insurance referral business in the future (autonomous vehicles). Recent management turnover....

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