The good, the bad and the ugly

Kenon Holdings

Complexity allowed for the bargain purchase of a global power champion

Our investment thesis was that three very different divisions contained within the same company caused investors to significantly misprice Kenon.

Kenon was a hodge podge of strange assets that did not fit together. We termed the three businesses making up kenon as the good, the bad and the ugly, which caused investors to avoid all of the assets due to the complexity of analysing such diverge assets.

Kenon was trading at a distressed valuation of 0.3x book due to investors avoiding the company due to its unattractive non-core shipping and start-up chinese electric car businesses.

Our investment team analysed the core and non-core businesses separately. Recognising the value of Kenon’s core power business, the team concluded that the key impediment to realising Kenon’s intrinsic value was the significant un- certainty around how to price the risk from the bad non-core shipping business and ugly electric car start-up business. Taking this into consideration, our team believed that Kenon shares were worth at least 3x their market price.

Management strength

Our investment thesis was based on the excellent management team of Kenon reducing this uncertainty by selling off the assets over time in an orderly fashion. Our belief was that this should result in the investment community revaluing the stock more favourably as the complexity disappeared.


Eventually, investors recognised the substantial disconnect between Kenon’s market value and intrinsic value.

The company’s stock price more than tripled over our 3 year holding period.


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