This is one of those opportunities that’s simply too cheap to ignore - where you get to own a decent operating business after indiscriminate selling.

The pricing is frankly ridiculous. I just had to pick it up, just as I would as a private owner.

Summary

The market is currently pricing the company as if the business is broken, yet the fundamentals suggest otherwise. A large share of revenues comes from recurring service revenue, while another key segment has a long-term contract extension based on a long-standing relationship with high switching costs, providing strong visibility into future revenue as well as income.

At the same time, the stock trades below net cash, meaning investors are effectively being paid about $3 million to take ownership of a profitable business that has grown revenue at roughly a 6% annual rate over the past four years.

If the company were simply valued in line with a comparable, profitable and stable business, in relation to the free operating business, the business alone could be worth $30–40 million - implying roughly >100% upside from today’s market value.

I have followed the company and the story for some time, but a press release in November got me very interested. Recently, I also took a position.

Read more

I am currently accumulating a position in a company that has become simply too cheap to ignore after what appears to be indiscriminate selling. Real Early Buffett-kind of type!

The situation is so extreme that investors are effectively being paid to own what looks like a very decent, profitable operating business. On conservative assumptions alone, the operating business could reasonably be worth around 100% more than today’s valuation - and that’s before factoring in any upside from improving profitability.

Opportunities like this do not appear often, especially not in businesses with recurring revenue, contract visibility, and a solid balance sheet.

I will be sharing the full investment thesis very soon. Given the stock’s limited liquidity and the nature of the opportunity, this idea will remain paywalled.

If you want access - and would like to support my work - make sure to secure your subscription while the 20% discount is still available.

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Some of these ideas move so fast that I don’t even get the chance to write them up in time. Two ideas I was preparing to publish here are already up 72% and 250% year-to-date. Both are highly illiquid, which means once they receive the necessary market attention, they can reprice quickly.

I may still write them up depending on how they develop - but as often happens in this space, the biggest moves can occur before the full thesis is even published.

Beyond this current opportunity, I am also working on a restructuring case and another idea (value growth) trading at just 7x EBIT, featuring a 17% shareholder yield, +80% operating margins, and solid growth.

Stay tuned and enjoy the weekend!

Best
Anders

Legal Disclaimer

The Bargain Newsletter is a publication and only for informational and educational purposes and does not constitute personalized investment advice, a recommendation, or a solicitation to buy or sell any security.

I truly appreciate that you take the time to read along. I’m writing today because I have some news to share, along with a few updates regarding the newsletter.

First and foremost, I’m incredibly proud and grateful to have been accepted into the Value Investors Club (VIC), founded by Joel Greenblatt of Gotham Funds and John Petry of Sessa Capital. A personal milestone!

VIC, which in its early years was capped at just 250 members, is widely regarded as one of the most prestigious communities among value investors. I’ve read several accounts of highly qualified professionals from Ivy League backgrounds working in major investment banks, private equity firms, and hedge funds who were unable to gain admission. In fact, I came across the story of someone at Goldman Sachs who reportedly applied eight times and was rejected each time.

Greenblatt, who founded the club in 1999, is an investing legend. He has written several books and teaches at Columbia Business School, where Benjamin Graham once taught and, as most people know, mentored Warren Buffett. Greenblatt is also known for an extraordinary investment track record, compounding both client and personal capital at roughly 50% annually at Gotham Asset Management between 1985 and 1994. In short, he’s one of the greats.

The admission process for VIC requires applicants to submit a condensed, high-conviction investment idea. This submission is then reviewed by a committee - presumably including Greenblatt and Petry - in a first-round evaluation. If approved, the idea is ‘‘advanced’’, you get to submit a more throughout thesis and it is posted for two weeks, during which existing VIC-members vote and ask questions. At this stage, it is crucial to respond thoughtfully and substantively to feedback from other members.

Last week, I was fortunate enough to make it through the process:

So now, I find myself in the company of investors such as Greenblatt, Mohnish Pabrai, Michael Burry of The Big Short, Norbert Lou, and many other exceptionally skilled investors.

But enough about VIC.

The reason I’m also writing today is to provide a brief update on the newsletter and what you can expect going forward. My ambition has always been to keep the quality of the newsletter high, prioritizing well-researched, high-conviction ideas over quantity. I see my subscribers as partners, and I have no interest in writing about whatever stocks happen to be popular on FinTwit just to attract members, nor in publishing short-term track records purely for clickbait purposes. I truely don’t think I can add any alpha to you on Oscar Health (OSCR), Hims and Hers (HERS), Duolingo (DUOL) or a VIE-structure Alibaba (BABA), knowing I am competing with an established sell-side. Hence, my eyes are naturally attracted to obscure and neglected places.

That said, I spend a tremendous amount of time researching and digging for investment opportunities - probably more than those closest to me think is entirely reasonable. In many ways, I sometimes feel like a young Buffett, staying up late reading annual reports. And every once in a while, you come across something truly interesting.

For that reason, I’d like to make a humble request. If you find value in my work, I hope you will consider supporting my newsletter by upgrading to a paid subscription.

If you’re not already aware, I consider myself a flexible value investor and you can read more about my background here and what to expect here. I have been investing for about a decade delivering returns in the high 20s.

As I consider my subscribers equal to investment partners, I am offering a permanent 20% discount for those who choose to upgrade:

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While I do the research regardless, turning it into something publishable takes additional time. For that reason, a few readers have already chosen to subscribe simply to support my work, something I’m truly grateful and humbled by.

As a paying member, you’ll also receive my ideas earlier, and certain high-conviction ideas - often in more illiquid stocks, which will be placed behind a paywall so that both I and fellow subscribers have the opportunity to build positions before broader attention arrives.

If you’d like to support my work, consider locking in your discount today - several high-conviction ideas are already being put to paper. Make sure not to miss these.

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No carried interest or any performance pay, just a flat rate with wonderful operating leverage to your investment portfolio.

I consider it a partnership, but without all the hazzle in dealing with clients, regulatory filings and so on.

For strong returns & a potential fellow investment partner!

Thank you for being part of the journey,

Sincerely,
Anders
The Bargain Ticker

Legal Disclaimer

The Bargain Newsletter is a publication and only for informational and educational purposes and does not constitute personalized investment advice, a recommendation, or a solicitation to buy or sell any security.

I promised to publish what I think fits the bill as a an asymmetric bet with large upside optionality after my British Columbia Power (Early Buffett-type workout) post - and here the opportunity is. Time to place your bets!

Today’s stock is one of my largest positions and within my pile of 5-7 companies comprising about 70-80% of my portfolio.

Summary

This is a deeply undervalued ASX-listed non-bank financial company with solid, cash-generative core operations. Trading at a distressed multiple due to corporate governance issues, it presents a rare special situation investment with asymmetric upside, attracting activist investors. The downside appears well protected by tangible assets, surplus cash, resilient earnings from secured lending and card portfolios, and an existing third-party indicative bid that anchors valuation near current levels. Even in a bear case where governance issues persist, the market is already pricing in extreme pessimism, leaving limited room for further multiple compression. The upside, however, is significant: a successful board reset and capital return program could unlock a rapid re-rating toward peer multiples, implying 50–100% upside without requiring heroic operating assumptions. Additional optionality exists through asset rationalisation, improved capital allocation, or a properly run M&A process that could surface higher bids. In effect, this sets up a rare “heads I win, tails I don’t lose much” situation, where governance - not earnings - determines the outcome.

I am Humm Group: an Australian Buy Now Pay Later (BNPL) company with a governance overhang but with decent prospects.

Overview

Humm Group is an Australian-based, undervalued non-bank financial services company, providing BNPL (Buy Now Pay Later) and SME lending solutions across multiple markets. The company operates across multiple markets including Australia, New Zealand, Ireland, Canada and the United Kingdom.

Under brands such as humm, humm90, Q Card and others, Humm offers buy-now-pay-later (BNPL) services, interest-free installment plans and credit card products that help individuals finance purchases ranging from everyday goods to higher-value items such as home renovation, healthcare and furniture. It also provides commercial financing solutions - including leasing and asset finance - for SMEs through its FlexiCommercial division.

Unlike a traditional bank, Humm doesn’t rely on customer deposits; it funds its lending activities through wholesale funding arrangements and securitisation partnerships while managing credit risk and servicing receivables via its technology and risk infrastructure.

BNPL Activities - Across Business and Geographical Segments

Commercial (Flexicommercial - Australia & New Zealand)

The commercial segment is Humm’s largest and most stable earnings engine with A$95.5m in net interest income (NII), focused on asset-backed lending to SMEs across Australia and New Zealand. The business operates primarily through broker and aggregator channels, offering equipment finance, vehicle finance and other secured lending products (chattel loans). A key strategic differentiator is its diversified funding model, including the recently established forward flow arrangement, which allows Humm to originate loans while recycling capital and reducing balance-sheet intensity, although only equalling about 11% of AUM.

In FY25, commercial delivered cash profit of $45.3m, broadly flat year-on-year despite a more challenging SME credit environment:

Credit losses increased as expected due to portfolio seasoning following strong growth in prior years. In other words, it is a lag-effect mainly because older loans are starting to show risk and because it’s taking longer to recover some secured loans, and certain sectors like Victorian transport. The credit losses incurred remain low in absolute terms and well within management’s expectations. Importantly, assets under management grew 12% to $3.3bn, demonstrating that the business continues to gain market share despite a contracting SME lending market. Overall, the commercial segment remains a high-quality, cash-generative pillar to Humm’s overall performance.

PosPP (Point-of-Sale Payment Plans - Australia, Canada, Ireland & UK)

The PosPP segment represents Humm’s growth-oriented consumer finance unit, offering point-of-sale installment products across multiple geographies. This includes the core Australian business alongside faster-growing international operations in Ireland, the UK and Canada. The segment has been undergoing material transformation in response to new BNPL regulations, with a strategic shift toward regulated, hybrid credit products (combination of traditional credit and BNPL-offerings) and vertical specialisation (focus on certain industries/segments). In turn, this also led the legacy “humm classic” product and platform to be placed into runoff and an impairment of $8.5m in software to be capitalised.

FY25 marked a clear inflection point for PosPP. The segment delivered cash profit of $4.7m, a significant turnaround-like reversal from a loss in FY24 (and there is more to come as a cliffhanger for later). This improvement was driven by strong growth in receivables, disciplined credit tightening, lower losses and a materially leaner cost base following the exit of suspended and legacy products.

Internationally, Ireland and the UK were the standout performers, delivering strongest growth at double-digit growth in loans and advances, coupled with improved unit economics and lower loss rates, albeit from a smaller base. The Canadian operations delivered lackluster performance.

In Australia, Humm accelerated the launch of its new regulated “humm” product, while placing the legacy “humm classic” platform into runoff as mentioned, which suppressed earnings.

New Zealand Cards

The New Zealand Cards business is a mature, high-margin consumer lending franchise, anchored by well-established brands such as Q Card, Farmers Finance Card and co-branded Mastercards. It benefits from strong retailer relationships, pricing power and a loyal customer base, positioning it as a defensive earnings contributor within the group.

In FY25, the segment delivered cash profit of $15.7m, slightly below the prior year. This modest decline was largely due to higher funding costs rather than any deterioration in underlying business quality. Volumes grew nearly 5%, receivables increased, and interest income rose on the back of repricing initiatives.

Credit performance remained robust despite a challenging macro backdrop in New Zealand, with only a marginal uptick in loss ratios. Cost control was tight, and margins benefited from higher customer pricing. Overall, Cards NZ continues to function as a reliable, cash-generative asset, providing earnings stability and funding capacity for the broader group.

Australia Cards

The Australian Cards segment is a smaller, legacy portfolio that is currently being managed for optimisation rather than growth. The business operates on an ageing technology platform and is subject to heightened regulatory and legal scrutiny, which has shaped management’s conservative approach.

FY25 cash profit declined to $4.4m, reflecting elevated legal costs and a deliberate slowdown in customer acquisition. However, this strategic retrenchment has meaningfully improved credit quality, with net credit losses falling sharply year-on-year. Margins improved at the unit level, but this was insufficient to offset lower balances and higher fixed costs in the latest fiscal year.

The segment is effectively in maintenance mode ahead of a planned platform rebuild in FY26. While near-term earnings are subdued, management’s actions have reduced risk and preserved optionality, suggesting the downside is now largely contained for this segment.

Corporate

The Corporate segment captures central group functions including finance, risk, technology, people and governance without a strong nexus to the business segments. While loss-making by design, it plays a critical role in enabling scale, regulatory compliance and platform transformation across the group.

In FY25, Corporate losses narrowed materially due to lower overheads and disciplined cost control, reflecting management’s broader focus on efficiency and simplification. The introduction of Corporate as a separate reporting segment improves transparency and highlights the underlying profitability of the operating businesses.

Funding and Capital

The company operates with a mature and well-diversified funding platform designed to support sustainable growth while maintaining a disciplined and capital-efficient balance sheet. As a non-bank financial institution, the group does not rely on customer deposits as mentioned earlier, but instead funds its lending activities through wholesale funding facilities, securitisation programs and capital markets transactions.

The funding strategy is centred on maintaining a committed, cost-effective mix of facilities while strengthening the group’s presence in debt capital markets. Humm accesses funding from a broad base of domestic and international banks and institutional investors, supported by long-established asset-backed securities (ABS) programs in both Australia and New Zealand.

During FY25, the company established a A$1.0bn Forward Flow program, under which A$682.8m of commercial loans were sold in two tranches. This structure is strategically important for the FlexiCommercial business, enabling capital recycling, reduced balance-sheet intensity and continued origination growth. In addition, an existing private placement facility was upsized by A$239.0m, while A$593.8m of notes were publicly issued under the Australian FlexiCommercial ABS program.

Within the consumer businesses, Humm issued A$196.1m of additional notes under an existing private placement to fund the Australian humm AU solar receivables portfolio. In New Zealand, NZ$369.0m of notes were publicly issued under the Cards master trust program. The group also completed the full repayment of its perpetual notes, with the remaining A$28.6m repaid in April 2025 following a partial repayment in December 2024.

At 30 June 2025, Humm had A$5.9bn of wholesale debt facilities funding its loan assets, with A$1.2bn of undrawn capacity. These facilities comprise a mix of public and private secured debt, backed by diversified pools of chattel loans, customer loans and finance lease receivables. A portion of the facilities operates on a revolving basis, allowing collections to be reinvested into new originations, while the remainder amortises in line with repayments of the underlying assets. The Forward Flow program provided a further A$0.4bn of undrawn capacity at period end.

Humm continues to actively optimize its capital structure, balancing liquidity, funding diversification and cost of capital. Opportunistic access to debt capital markets remains a key lever to expand funding capacity and lower overall funding costs. As at 30 June 2025, Humm had A$63.0m outstanding under its corporate debt facility, including A$3.0m of capitalised accrued interest.

A Discounted Valuation

As of today, Humm has 492,495,340 diluted shares outstanding and trades at a price of A$0.735/share, implying a market cap of A$361.98 million. Humm holds A$125.4 million in unrestricted cash on the balance sheet. Recent judgement related to the 2020-claim to SMBC was largely provisioned for and the recent Court judgment should only add A$3-4m in incremental costs. In other words this legacy risk is gone and should not oppress the large unrestricted cash pile. They have A$63.0m outstanding under its corporate debt facility, including A$3.0m of capitalised accrued interest. Real unrestricted net cash is around A$60m.

On aggregated basis, FY2025 delivered A$52.9 million on cash profit (after tax):

In relation to FY 2025, Humm seems to be trading at a P/E multiple of 6.84x and a P/E excluding unrestricted cash of 5.7x.

In relation to the PosPP-segment, we analyzed above it was clear that the Canadian operations were loss-making:

Also, it was worth noting that the “humm classic” product and platform were placed into runoff with an impairment of $8.5m. Coupled with easing of the portfolio seasonality like Victorian transport, I think cash profit on a more normalized basis and with some restructuring/reorganization efforts towards Canada will land in the area A$60-75 million. In turn, this would make Humm trade at a P/E of 4.8-6x or 4.0-5.0x times on P/E ex cash basis.

I consider this to be way too low compared with peers:

All peers does not necessarily constitute pure BNPL-comparables, but they gives us a hint as to how Humm should be valued. If we were to value Humm from this relative valuation, Humm should trade around A$636 to 973m based on LTM & NTM P/E ratios and from A$553 to 829m on price to book / tangible book (where goodwill and other intangible assets have been excluded). This would suggest a price of 1.08 to 1.91 Australian dollar per share - or an upside of 47 to 159%.

Humm has grown the topline the last 3 years at a CAGR of 14.4%, which is a bit less than Zip Co. and Sezzle Inc., but even if we omit these comps due to better growth prospects, we still find Humm to be trading lower than the peers on both P/E and P/B-basis.

The Reason to The Discounted Valuation

… terrible corporate governance with no respect given to minority investors.

I could leave it with that. But let us have a look into the past escapades of Humm.

Humm’s depressed valuation is best understood through the lens of corporate governance rather than operating performance. The roots of the problem trace back to August 2015, when Andrew Abercrombie became chairman. Since then, Humm’s share price has fallen by roughly 80%, even as the broader Australian equity market has risen by more than 50%. Over that decade, investor confidence has steadily eroded as governance concerns compounded.

Under Abercrombie’s chairmanship, the board has increasingly appeared misaligned with minority shareholders. The company cycled through six different CEOs, experienced repeated senior resignations, and ultimately lost five experienced non-executive directors following governance disputes. These issues came into sharper focus after the collapse of the proposed Latitude transaction in 2022, where five non-executive directors resigned. Abercrombie ran an aggressive campaign against the sale of this value-enhancing sale of the consumer division, it seemed.

More recently, governance concerns intensified following an opportunistic, low-ball MBO-takeover proposal from the chairman himself in mid-2025 at a crazy low price of A$0.58 a share. Rather than immediately rejecting the offer and testing the market, the board’s so-called ‘‘independent board committee’’ engaged in prolonged due diligence for more than three months. The committee should have immediately rejected the proposal from the chairman, calibrated with the market for competing offers, but the committee was not independent at all. It comprised three ‘‘independent’’ directors and ALL appointed by Mr. Abercrombie himself.

Further damage was done by opaque decision-making around financial disclosures, dividend policy, and capital allocation, including disputes over the FY25 accounts and the handling of a subsequent, higher indicative proposal from Credit Corp, although 33% higher than Abercrombie’s low-ball offer (bid reflecting a price of A$0.77 a share). At each step, the board’s actions appeared defensive, slow, and reactive - deepening the governance overhang.

As a result, the market has come to apply a structural discount to Humm’s shares. Despite decent growth in topline and earnings, surplus capital, and a balance sheet capable of supporting materially higher dividends and buybacks, investors remain sceptical that value will ever be returned while the current board remains in place. In effect, governance risk - not earnings power - has become the dominant driver of valuation.

This is hopefully about to change.

Shrewd Activists Pounce Back

By December, activist investor Jeremy Raper had enough. After almost six months of sparring with the board (for instance he wrote a letter to the IB committee in June 2025), he moved to trigger a long-foreshadowed board spill at Humm.

Together with Collins St Asset Management, Jeremy is calling out fellow shareholders with a letter by the title: ‘‘END THE CIRCUS - OVERHAUL THE HUMM BOARD’’ in late December ‘25.

In summary, they criticize Abercrombie’s low-ball offer, lack of independence on AGM’s, refusal to approve FY25 accounts when Abercrombie was trying to takeover the company and the handling of the Credit Corp offer. Generally, they argue these events demonstrate a largely captive board with no true independence from the chair; and a corporate governance culture that is fundamentally broken and not fit for purpose.

Regarding the low-ball offer, they estimate Abercrombie’s failed bid valued Humm at 4.4x last LTM EPS and at around 0.75x price to net tangible assets, meanwhile no listed non-bank financial services company trades below 10x LTM EPS or below 1-2x P/NTA in the peer group.

They propose:

• a fully-franked special dividend of at least A$15 million;

• a 10% share buy-back over the next 12 months;

• a clarified dividend policy that establishes a payout ratio of at least 75% of underlying earnings, reflecting a mid-teens dividend yield;

• a restructuring or exit from the loss-making Canadian operations;

• ongoing board renewal via the appointment of a further 1-2 independent directors;

• a full and complete review of the actions and decisions of the previous board over the past 12 months; and

• engage former LT non-executive director Rajeev Dhawan as a strategic board consultant. His deep experience with Humm will be invaluable assistance to their turnaround plan (e.g. the Canadian operations).

Another letter followed to the Audit and Risk Committee’s chair Mr. Robert Hines. This letter alleges serious corporate governance failures relating to the approval of the Humm chairman’s large on-market share purchases in December 2025.

It argues that the trades should never have been permitted given the high risk of actual or perceived insider trading, as they occurred during an active takeover process, near the end of a trading quarter, and amid an imminent board challenge.

Jeremy questions whether the company’s securities trading policy was properly followed, including whether the required prior notice was given and whether the Audit and Risk Committee chair formally approved the trades. Finally, the letter demands on-the-record answers and warns that, if the current board renewal succeeds, a full retrospective governance review will be conducted and disclosed to the market.

The Catalyst: The Upcoming EGM

The activists and corporate governance protagonists organizes a general meeting to be held the 19th of February with 6 resolutions on the agenda:

1. Appointment of Mr. Jeremy Michael Kersten Raper

2. Appointment of Mr. Garry Roy Sladden

3. Removal of Mr. Andrew Abercrombie as a Director

4. Removal of Mr. Robert Hines as a Director

5. Removal of Mr. Andrew Darbyshire as a Director

6. Removal of any other persons as a Director

This makes the case a perfect activists and special situations’ investment as Garry and Jeremy seems to be the solution to the governance overhang:

Garry Sladden
Garry Sladden is an experienced non-executive director and chairman with more than 20 years’ board experience across private and ASX-listed companies. A former senior executive at Consolidated Press Holdings, he has extensive experience navigating complex governance situations, founder-led businesses, and corporate turnarounds. He is currently Non-Executive Chairman of Ignite Ltd (ASX: IGN) and has led multiple successful restructurings and growth strategies across diverse sectors.

Jeremy Raper
Jeremy Raper is the third-largest shareholder in Humm, holding 5.8% of the company, with interests closely aligned with other shareholders. He manages Raper Capital, a single-family office, and has over 20 years’ experience across buy- and sell-side investing, including a strong track record of constructive shareholder engagement in small-cap companies. He holds a cum laude degree in History from Harvard University.

As promised in the letter to shareholders, they will work towards an immediate return of capital through a fully franked special dividend of at least A$15 million and a 10% on-market share buy-back, alongside a clearer dividend policy targeting a payout of at least 75% of underlying earnings. Further, to seek decisive action on underperforming assets, including a restructuring or exit from the loss-making Canadian business. In addition, they will conduct a comprehensive review of the prior board’s decisions over the past year, and engage the former non-executive director Rajeev Dhawan as a strategic board adviser to support the turnaround. I assume this refers to the Canadian loss-making division among others. Restructured, it will boost earnings / cash profit to the A$60 to 75m area as also mentioned in the valuation part.

The upcoming EGM represents a clear inflection point: either the governance discount persists, or the conditions are finally created for a rerating.

The Asymmetric Bet

Let us be honest: Humm is under-valued and dirt cheap for a reason. It is in need of a corporate governance overhaul and I think Jeremy Raper along with fellow activists and shareholders may achieve this.

If they succeed, Humm should set up for a decent re-rating to a price of 1.08 to 1.91 Australian dollar per share - or an upside of 47 to 159%. This is our upside optionality not even considering further execution and operational performance.

The re-rating should originate from the following avenues:

• Ordinary re-rating from market appreciation

• Shareholder yields: buybacks and dividends from the large unrestricted net cash level

• Other avenues to maximize shareholder value in the near- and medium-term, like engaging with Credit Corp (and any other third-party) in good faith i.e. a clear and ordinary M&A process where materially higher hostile bids may emerge

The downside will reflect the situation where EGM resolutions are not to be materialized, although I think there will be a good chance. For instance, past voting suggests that shareholders have not been satisfied - a good recent example was the latest remuneration report, where more than 50% of the votes were against.

Further, Jeremy and the other activists have taken necessary steps to call out all shareholders through ‘‘Humm Board CleanOut’’ and other gateways.

Still, in the scenario where the resolutions are not met, I still think the downside should be protected from:

1. The already low multiple paid

2. The offer from Credit Corp at A$0.77 a share, although non-binding

3. Lessons learned for the existing Humm board, including Mr. Abercrombie, increasing the likelihood of a higher management buyout bid or more constructive engagement with Credit Corp and third-party acquirers.

Do Not Forget to Vote

At current levels, Humm presents a highly asymmetric opportunity. If the activists succeed at the upcoming EGM, the removal of the governance overhang alone should unlock a meaningful re-rating, with additional upside from capital returns and strategic optionality, including a properly run M&A process.

If they fail, the downside appears limited by an already depressed valuation, tangible asset backing, and an existing third-party indicative offer.

In short, this increasingly resembles a rare “heads I win, tails I don’t lose much” situation - but the upside optionality only materialises if shareholders make their voices heard.

Do not forget to vote at the EGM as Humm trades at a distressed multiple compared to peers. With activist-driven governance reforms, the company shows significant upside potential and a rare risk-reward asymmetric investment opportunity.

I hold shares in the security mentioned and may transact in the shares at any time, including prior to or following the publication of this article. Always do your own due diligence. This writeup does not constitute personalized investment advice, a recommendation, or a solicitation to buy or sell any security.

The Bargain Ticker is a publication and only for informational and educational purposes.

An Almost Risk-Free Bet

One day, my girlfriend asked me: ‘‘Isn’t there always some risk when you invest?’’

I told her: ‘‘Not necessarily. Occasionally, there are rare and obscure situations where you can earn attractive returns while taking almost no risk at all.’’

She smiled and pushed back: “You said ‘almost’ - so there must still be risk.”

I replied: ‘‘The investment itself can be risk-free. What remains is counterparty risk - the chance that one party in a transaction fails to perform. And that risk, my love, is about the same as the risk of not getting your deposit back if your bank defaults.”

In other words, the structure can be safe even when life is not.

I care far more about protecting my principal than chasing growth for its own sake. And when people think of Warren Buffett’s greatest investments, their minds usually jump to Coca-Cola, Apple, or American Express. Rarely does British Columbia Power make the list of his early deep value investments.

It should.

The investment did not deliver a multi-bagger. But it did deliver something far more important: a very high return relative to no risk taken and thus a VERY high risk-adjusted IRR achievable.

British Columbia Power is a reminder that Mr. Market occasionally offers near risk-free opportunities in obscure deep value stocks. The discipline lies in recognizing them - and the conviction lies in sizing up when they appear, just as Charlie Munger did.

I wrote this note about being a “know-something” investor, and British Columbia Power is a perfect case study in that mindset: betting heavily on asymmetrical outcomes. Or, in Buffett’s words, a classic workout - a special situation investment firmly within his circle of competence.

Investing in Outcomes, Not Stories

In Buffett’s early partnership letters, investments were grouped into three buckets:

• Generals

• Controls,

• Workouts.

A workout is a special situation investment where the return does not depend on business performance or market optimism, but on a specific corporate event being resolved. These events could include liquidations, mergers, restructurings, or legal settlements among others. The key feature of a workout relates to the value which in turn is unlocked by time and process, not by growth or multiple expansion.

In Buffett’s words, the outcome was largely independent of whether the stock market went up or down. What mattered was whether the event played out as expected. Workouts therefore offered a different type of risk: not economic risk, but event risk - a classic setup for deep value and risk arbitrage investors. And when the odds were favorable, they allowed capital to compound without needing a bullish market.

The Corporate Event: A Utility Being Taken Over

This workout originated from a dispute between British Columbia Power and the newly formed British Columbian government of William Andrew Bennett. It all started when the province took steps in relation to expropriating British Columbia Power’s primary asset and subsidiary - British Columbia Electric.

British Columbia Electric was a regulated electric and gas utility company providing electricity to residents of B.C. and the largest electricity generator at that time. The Bennett government had a vision for hydro power generation, however. They wanted to expand the hydro power-generation and therefore sougt to construct dams along the Peace River.

Bennett’s idea was to harness both the Peace River and the Columbia River at the same time in order to secure long-term hydroelectric supply for the province. The plan, later referred to as the “Two Rivers Policy,” would generate more electricity than domestic demand required, making it possible to export surplus power to the United States.

A little historic gem on Bennett’s visions for B.C.’s hydroelectricity future can be found in this clip from 1961 (thanks for the vivid internet).

The dominant electricity and gas provider in the province, British Columbia Electric was the natural counterparty for purchasing the output from the Peace River project. A separate private entity, the Peace River Power Development Company, needed a long-term supply agreement with the utility in order to raise the capital required to construct the dams. British Columbia Electric refused to commit, which effectively stalled the project.

After months of growing frustration and increasing political pressure, Bennett decided to act. In August 1961, following persistent takeover rumors, he introduced the Power Development Act in the provincial legislature. The law authorized the government to expropriate British Columbia Electric for C$111 million. It also included an offer to acquire the remaining shares of British Columbia Power (the holding company) for C$68.6 million, with interest accruing until the offer expired in July 1963. In total, the transaction implied a combined value of approximately C$179.6 million.

The Revised Offer And The Duo Steps In

Eight months after the initial takeover, the British Columbian legislature enacted two new laws. One of them amended the Power Development Act by increasing the compensation paid to British Columbia Power for British Columbia Electric by an additional C$60.8 million. At the same time, the amendment withdrew the government’s earlier offer to purchase the remaining assets of the parent company.

At this point in time, British Columbia Power had net cash deducted all liabilities of around C$19 per share. The stock traded at a price around C$16-17 a share. That is a dollar at 80 to 90 cents.

Further, British Columbia Power held around C$2 a share in additional assets and had a free call option on possible continued upside from the ongoing litigation related to additional compensation. It was at this point that Munger, with his newly formed partnership, and Buffett made their move.

Munger put in not just his whole partnership, but all the money he had, and all that he could borrow into the arbitrage on this single investment. Maybe Munger felt even more within his circle of competence, as he used to be a lawyer and understood the legal mechanics behind this special situation investment and hence sized the position up compared to Buffett.

The Debentures Issued By Electric

There was still one technical loose end that Buffett and Munger had to get comfortable with before leaning into the position.

British Columbia Electric, the main operating asset of British Columbia Power, had previously issued debentures that were convertible into shares of the parent company. Bondholders had the right, at their own choice, to exchange their debt for common stock in British Columbia Power. This setup made sense as long as British Columbia Power fully owned British Columbia Electric. Once the subsidiary was expropriated, however, the logic collapsed. A conversion would now wipe out debt tied to an entity the parent no longer controlled, while forcing British Columbia Power to issue new equity in return.

The courts therefore had to decide two things: whether these debentures still carried valid conversion rights into British Columbia Power shares, and whether any newly converted shareholders would be entitled to a large cash distribution that had already been paid out in December 1961. To guard against an unfavorable outcome, the Supreme Court of British Columbia required British Columbia Power to retain C$20 million in cash in case debenture holders were ruled eligible and chose to convert en masse.

In practice, this risk was far smaller than it appeared. First, the provincial government explicitly assumed responsibility for the debenture debt as part of the expropriation, making it clear that the liability no longer sat with British Columbia Power. Second, the issue largely resolved itself after the passage of the Amending Act, when the British Columbia Hydro and Power Authority called the debentures in May 1962.

By the end of June, roughly C$39.8 million of the original C$40 million issue had already been redeemed. Only about C$0.2 million remained outstanding by the time the court eventually ruled in 1963.

Even if the court had tried to unwind the redemptions, doing so would have been administratively chaotic. Despite how threatening the situation looked on paper, it was effectively a non-event for common shareholders.

The Court Decides - And The Optionality Materializes

The legal uncertainty finally broke in the summer of 1963. On July 29, Chief Justice Sherwood Lett ruled that the government’s original seizure of British Columbia Electric had been unlawful and contrary to the constitution. He also concluded that the province had underpaid for the asset. Based on his assessment, compensation should have been set at C$192.8 million rather than the C$171.8 million already paid, using a multiple of roughly 17.5 times earnings and adding a modest premium to account for lost income.

Notably, the ruling stopped short of ordering the utility to be returned to British Columbia Power. That left the practical outcome unclear and forced both sides back to the negotiating table. Especially, if Bennett’s endeavours should not turn out to be pure illusionary.

British Columbia Power moved quickly. Management sent word to Premier Bennett that they were prepared to settle at a fair price. In the meantime, two procedural matters were scheduled before the court in early August: one request from the government to suspend proceedings while an appeal was considered, and another from British Columbia Power seeking to regain control of British Columbia Electric. Neither ended up being decisive. The hearings were postponed as negotiations between the province and the company gained momentum.

Rather than continue fighting, the two sides agreed to set boundaries for a settlement and to let Justice Lett determine the final amount within those limits. His decision came on September 27, 1963. He fixed total compensation for British Columbia Electric at C$197.1 million - roughly C$25 million more than what British Columbia Power had already received, or about C$5.30 per share. The difference between this figure and his earlier valuation was largely attributable to accrued interest.

Payment was made immediately, bringing the dispute to an end. As part of the settlement, the province also agreed to reimburse British Columbia Power for any debentures that might be presented for conversion, which effectively removed the last technical risk from the structure.

Liquidation: Turning Structure Into Cash

With the government payment in hand, British Columbia Power no longer had an operating business. It became a pool of cash with a winding-up plan - the purest form of a deep value liquidation investment. The company began distributing the proceeds to shareholders over several installments, with most of the money returned in the first liquidating distribution.

An investor who had bought shares around April 1962 at roughly C$16–17 received a sequence of cash flows that added up to a very respectable outcome: a modest dividend in late 1962, followed by a large liquidating distribution in early 1964, and smaller residual payments in the years that followed. In total, the investment generated a return of just over 50% in Canadian dollars, and just under that in U.S. dollar terms.

It was not a ten-bagger, but it was structured and low risk.

Why This Mattered for Buffett and Munger

For Charlie Munger, this was an especially meaningful result. His partnership was newly formed, and British Columbia Power became one of its defining early successes. The position alone produced several hundred thousand dollars of profit and contributed materially to returns in both 1962 and 1963. He was off to a good start!

Munger was comfortable using leverage in this case, not because the situation was riskless, but because the downside was supported by arbitrage buyers who would step in if the price weakened. In effect, the market itself created a floor. He later remarked that he had not even known the term “risk arbitrage” at the time - he simply recognized that the odds were heavily skewed and so he made his fat pitch.

Buffett approached the situation with the same framework he used elsewhere. Whether the investment was a workout, a general stock, or a control situation, the process was identical: protect the downside, and demand an attractive payoff if things went right. British Columbia Power happened to fit that mold unusually well.

We do not know the exact day Buffett bought his shares, but we do know he owned them by the end of 1962, making it a very successful investment.

Closing the Loop

British Columbia Power ended the way workouts are supposed to end: not with a story, but with a cheque. It was not based on a operational turnaround, a decent management team or multiple expansion.

Just a sequence of legal steps, political compromises, and arithmetic.

It is easy to forget these kinds of investments because they leave no famous brand behind. But in terms of discipline and structure, this one is almost a textbook case of early Buffett deep value investing. It shows how mispricing can exist not because the future is unknown, but because the outcome is boring, technical, and hidden inside documents most people do not read.

And that is exactly why Buffett and Munger pursued this obscure workout and special situation investment.

Investments with no risk do exist, and I plan to publish one soon, which I believe fits the bill. One that found its way to my partner’s portfolio as well to close on the prologue.

Today’s stock is a company in which I have built a meaningful position since November 2025 (another security firm). I initially identified the opportunity through bottom-up screening (fishing) for low EV/FCF stocks in Asia where I also stumbled upon Secura. While working on this write-up, it has become clear that the story is gradually gaining attention. For example, I later discovered that had independently profiled the company prior to me - highly recommend following him, as he consistently uncovers overlooked opportunities and approaches the work with both rigor and humility. I became aware of his work only after he engaged with my Secura article, at which point the overlap became apparent.

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Summary

Secura Group Ltd. is a Singapore-listed integrated security provider with legacy businesses in physical security and security printing, now undergoing a strategic transformation toward higher-…

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My Background

My name is Anders and I have been investing for close to 15 years. I have a fairly academic background with two master degrees within auditing, law and economics.

I have used my academic merits to work in the auditing industry (Big 4) and the private equity industry (something equivalent to SKion Gmbh). As of currently, I work with risk management in the financial industry.

Now I am launching a newsletter, reflecting my investing journey. I actually used to run a blog, but that was about fly fishing and in my younger days.

In the following, I will give some color on my background story. I will also inform you about what you should expect from this newsletter which is about uncovering high-conviction cheap bargain stocks to be found obscure places. The kind of stocks an early Buffett would look for.

I hope you will read along.

An Unconventional Way Into Value Investing

Back in high school, I was selected for a concentration in physics, mathematics and astronomy. One day, I found myself a little lost in a physics class revolving around particle or high-energy physics. I remember, I thought … damn … this is hard stuff, how am I going to perform for the exam.

While at class, I figured out I had a winning betting ticket on some ended football matches. I am not a football fan and it was only a tiny bet on a suggestion from one of my good friends, who played soccer professionally.

Anyway, I had that winning ticket. Not a big amount but I recall it was around $1,000 to 2,000. I kept thinking what I would do with the money while in class. At last, I figured out it would be a good starting point for accumulating and kick-starting my investment portfolio. This made my day, even though I felt mentally exhausted from the class and from my frustrations about the exam. It made my day because I thought I might instead excel in investing and might one day be able to amaze a larger sum of money which I always could fall back upon, should certain things in life not turn out as expected. Hence, after class I hurried to the local bank for redemption of the betting ticket so I could get started investing.

Lessons Learned From Short-Term Trading

When you are young and receptive, you are also very sensitive to what the internet throws at your way. And I was not spared in this regard as I had an early time experiencing more frequent trading, but I actually met a mentor who really did earn his living this way - Flemming Kozok. He actually had amassed close to DKK 30-40 million in trading gains from primarily short-trading activities in relation to washouts in small- and nano-cap stocks. There have been writings on him in several books (e.g. the Danish book ‘‘Spekulanterne’’).

Although I really tried to chug along, I never really got familiar with the methods he used and his repertoire. Trading just was not for me.

I do not have contact with Flemming as of today, but I read that he used to help the Danish SØIK (Danish State Prosecutor for Serious Economic and International Crime) with localizing the defrauded 12,3 billion DKK from the Danish Government in relation to the CumEx-trade and the dividend scandal, primarily involving the notorious mr. Sanjay Shah.

The Pick Up of Graham’s Intelligent Investor

After my short ‘‘profession’’ as a fancy day trader, I began to elevate towards Warren Buffett and other prominent value luminaries.

One day, I ordered the ‘‘Intelligent Investor’’ by Graham as I quickly found out that this was the place to start and together with ‘‘Security Analysis’’ by the same author was the bible within the value investing community. The book took some time to find its way to my door.

Eventually and finally, the book found its way and I just jumped into it. I recall, I just felt - this is it - this makes sense fundamentally, logically and above all it was time-tested. Especially, the net net way of compiling a portfolio. It just made sense, you would do well by buying securities trading below their conservative measures of their liquidation values on a group basis.

From Net Nets To a More Sophisticated Value Investor

You might have guessed that it all started out with net nets. And so it did. I compiled the best global cigarbutts, I could find. Preferably with a catalyst, low burn-rates and with positive earnings. I tried to implement Joel Greenblatts original forgotten magic formula, i.e. a portfolio of stocks selling for 85% of NCAV with a PE of less than 5 times. This strategy has been tested to deliver 42% in annual returns after all.

With time, my investment portfolio grew. Contrary to the opportunities, which dried up a little. I naturally evolved and graduated to also invest in other companies than the plain vanilla NCAV-type of stock, partly due to the net net supply drying up, the level of funds that could be allocated to individual names and because many of the companies morphed into perennial net nets, especially in Japan. I began looking into opportunities with more value accretive business execution, which ought to inflect the businesses and drive returns.

I thus also began to source ideas from corporative events like right offerings, spinoffs, divestitures etc., which I found out to be good hunting grounds after reading ‘‘You Can Be a Stock Market Genius’’ by Greenblatt. It was also at this point in time I met my second and right mentor and really expanded upon my network.

Later, I was also accepted for membership at MicroCap Club. Still working for the perfect pitch for the application for the majors (VIC, or Value Investors Club) hosted by mr. Greenblatt himself.

How I Invest Today

The one common trait that can be attached to me would be - bargain hunter. I love the game of uncovering bargains hidden in plane sight. This is so closely embedded in my nature as I am from a classic middle-class family with two hard-working parents. We would always be savvy and shrewd about our money, especially from my mothers private business endeavours which has made me very prudent and skeptical of banks and one’s dependence on them.

I am that guy who truly feel that price is what you pay and value is what you get. It’s in my dna. Therefore, I am also very flexible in my idea flow and very independent of specific ways of investing. To me, growth and value are joined at the hip and there is no such thing to differentiate between growth and value stocks. Growth is an element in the valuation of a business and the same goes for returns of invested capital, capital allocation and the like.

What I will say though is that growth and on-going business execution with decent returns on capital is in favour of time and the longevity of holding a stock. The wonderfull business should thrive and do well in time, contrary to the usual net net stock, where the waiting is in the one-off price appreciation to fair value. Hence, I am often willing to pay up for the superior business, but I almost never buy something above 15 times earnings as I would always be well-protected from a high margin of safety reflected in a low price paid, if my expectations should turn out wrong.

What to Expect From This Newsletter

I hope this gives you an idea of my background and my investing style. The past seven years have been remarkable, delivering returns in the high 20s—not to boast, but to give context. My largest regrets have been in relation to alternative costs in terms of companies I have ended up not investing in and not ordinary losses.

With time I have found out that I enjoy shooting my ideas out there and like to discuss with fellow and like-minded investors. I already have met some amazing people, but I hope to meet many more. While being contrarian and independent often makes a good and rational value investor, swarm intelligence also do its trick from time to time.

You should expect articles and write-ups on specific companies, with no limits as to country nor size (although I usually rotate in the micro-cap sphere). I can’t guarantee a certain frequency on my posts, as I don’t want to sacrifice quality for the sake of meeting a publishing cadence.

I will search for bargains, the early Buffett Partnership used to aim for in their pursuit of compounding at 50% a year, which Warren himself has confirmed as achievable as of today if he were to manage smaller sums.

The securities mentioned usually are to be found in obscure places, like on minor exchanges and with low float ratios or minuscule market capitalizations. Do not expect the stocks to be mentioned on Seeking Alpha, Twitter or in your local business magazine like Bloomberg or the Financial Times.

You should therefore subscribe if you would like to be informed about bargains up for grabs in today’s market which have not found their ways to the ordinary investor. In other words stocks that are flying way below the radar in their pre-discovery phases.

I try to be authentic and will primarily write about securities, I hold in my own portfolio or from a result of my research on prospective portfolio companies.

Thank You For Now

I hope you will follow along and read my posts. Some will be paywalled, primarily due to the stocks mentioned which may be very illiquid, but I also expect to publish a lot of free content.

And on another note, I passed my physics exam with a good outcome. I guess, we all may feel ourselves a little lost at times.

Remember to subscribe, if you want updates sent directly to your email.

Until next time. All the best,

Anders

Legal Disclaimer

The Bargain Newsletter is a publication and only for informational and educational purposes and does not constitute personalized investment advice, a recommendation, or a solicitation to buy or sell any security.