Long idea: Sodexo, the catering giant at deeply discounted valuation

Hi team,

Wanted to flag a good long opportunity: Sodexo (Bloomberg ticker: SW FP). Sodexo runs canteens, like serving lunch at your university cafeteria or company, cooking meals at the hospitals, or managing the snack bar at a football game etc.

In short:

* Sodexo is a French giant in food services ($10bn+ market cap), quietly serving up meals for millions of people in many sectors (catering / canteens); it is the number 2 player in catering behind Compass, with c. 10-15% market share riding the structural growth of the market
* It has significantly sold off recently as management messed up with the guidance (they guided too aggressively few months ago and took down the guidance yesterday, which led to big sell-off)
* Still the company is a high-quality compounder, growing revenue mid-single digit and increasing margins
* The valuation is completely dislocated (10x P/E) while peers like Aramark and Compass are on 23-25x P/E
* The Bellon family has 40% of Sodexo and has been recently rumoured to potentially take over Sodexo in partnership with a PE fund: this deal would make a lot of sense, LBOs maths are flying on this company given dislocated valuation vs. growth profile
* FCF yield is 8-9% - likely to re-rate towards 5%; super attractive profile for a low beta defensive stock
* If peace is made in Ukraine, there will be a margin tailwind as food price will ease

This is not a financial advice, but I am long, and I think short-term risk reward is super attractive.