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Our short case on the car dealer Asbury Automotive.
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Strictly Confidential September 2014
Point Frederick CapitalPoint Frederick Capital
Point Frederick Capital
Management, LLC
Asbury Automotive: Car Dealers Are Now Where U.S.
Home Builders Were In Mid-2008 And Asbury May Be The
Most Cyclically Vulnerable In The Space
Chand Sooran & Anand Kalola
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
Important Information
2
This material has been prepared by Point Frederick Capital Management, LLC (the “Investment Manager” or “Point Frederick”). The information in this material is for illustration and
discussion purposes only. It is not intended to be, nor should it be construed or used as, investment, tax or legal advice, any recommendation or opinion regarding the
appropriateness or suitability of any investment or strategy, or an offer to sell, or a solicitation of an offer to buy, an interest in any security, including an interest in the private fund
described herein (the “Fund”) or any other private fund or pool advised by the Investment Manager or any of its affiliates. This information is qualified in its entirety by the
information contained in the Fund’s confidential offering documents (the “Offering Memorandum”). Any offer or solicitation o f an investment in the Fund may be made only by
delivery of the Offering Memorandum to qualified investors. Prospective investors should rely solely on the Offering Memorandum in making any investment decision. The Offering
Memorandum contains important information, including, among other information, a description of the Fund’s risks, investment program, fees and expenses, and should be read
carefully before any investment decision is made. This material does not take into account the particular investment objectives, restrictions, or financial, legal or tax situation of any
specific investor. An investment in the Fund is not suitable for all investors.
No representation is made that the Investment Manager’s or the Fund’s investment process, investment objectives, goals or risk management techniques will or are likely to be
achieved or successful or that the Fund or any underlying investment will make any profit or will not sustain losses. An investment in the Fund involves risk, as disclosed in the
Offering Memorandum. The Investment Manager may engage in investment practices or trading strategies that may increase the risk of investment loss and a loss of principal may
occur. The risk management techniques which may be utilized by the Investment Manager cannot provide any assurance that the Fund will not be exposed to risks of significant
trading losses.
Any descriptions involving investment process, investment examples, statistical analysis, investment strategies or risk management techniques are provided for illustration purposes
only, will not apply in all situations, may not be fully indicative of any present or future investments, may be changed in the discretion of the Investment Manager and are not
intended to reflect performance.
Any opinions, assumptions, assessments, statements or the like (collectively, “Statements”) regarding future events or which are forward-looking, including regarding portfolio
characteristics and limits, constitute only subjective views, beliefs, outlooks, estimations or intentions of the Investment Manager, should not be relied on, are subject to change due
to a variety of factors, including fluctuating market conditions and economic factors, and involve inherent risks and uncertainties, both general and specific, many of which cannot be
predicted or quantified and are beyond the Investment Manager’s or the Fund’s control. Future evidence and actual results (including actual composition and investment
characteristics of a portfolio) could differ materially from those set forth in, contemplated by, or underlying these Statements, which are subject to change without notice. In light of
these risks and uncertainties, there can be no assurance and no representation is given that these Statements are now, or wil l prove to be accurate, or complete in any way. The
Investment Manager undertakes no responsibility or obligation to revise or update such Statements. Statements expressed herein may not necessarily be shared by all personnel
of the Investment Manager and its affiliates.
This material is not complete, is subject to change and does not contain material information regarding the Fund, including specific information relating to an investment in the Fund
and related risks factors. Certain information has been provided by and/or is based on third party sources and, although believed to be reliable, has not been independently
verified. The Investment Manager is not responsible for errors or omissions from these sources. No representation is made with respect to the accuracy, completeness or
timeliness of information and the Investment Manager assumes no obligation to update or otherwise revise such information.
This information is confidential, is the property of the Investment Manager, is intended only for intended recipients and their authorized agents and representatives and may not be
reproduced or distributed to any other person without prior written consent.
2
Strictly Confidential September 2014
Point Frederick CapitalPoint Frederick Capital
INVESTMENT THESIS AND CONCLUSION
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
4
Asbury Automotive Has Had A Terrific Run But Faces A
Number Of Cyclical Challenges And One Structural Risk
Recommendation: We contend that Asbury Automotive Group, Inc. is a compelling short investment
for its pronounced and industry-leading exposure to the peaking North American new and used car
cycles, and for its growing reliance on ancillary revenue, the most profitable of which is derived from
marketing financial transactions to its customers on behalf of third party lenders and insurers.
Industry Challenges Abound
• Autos have made full V-shaped recovery from the post-2008
trough, erasing any pent-up demand for cars
• US auto OEMs have pulled forward demand from subsequent
periods, as they seek to justify their expansion of manufacturing
capacity
• Credit became steadily easier with longer lease terms, higher
loan-to-value, inflated residual values, and a return to lending to
subprime borrowers, taking consumer auto finance to peak
levels
• Higher interest rates, reduced/toppy credit availability, and
persistent anemic economic growth weigh on future prospects
• Easy financing led to bigger car purchases ; tighter financing
suggests a move to less expensive auto purchases
• Used car prices have started falling with greater supply
coming off lease and may be the leading edge of broader price
declines
Company-Specific Issues
• ABG is exposed to the recent decline in luxury / full-size used
car pricing as 85% of the Company’s car sales are luxury / mid-
line imports
• 25% of ABG’s new financing arrangements are for subprime
customers, much higher than peer auto dealers , suggesting the
exhaustion of the buyer base in its geographies
• The Company obtains a large and growing part of its gross
margin from its financial services business, which may be
restricted by potential CFPB proposals to cap all markups in a
move to contain disparate impact
• Any downturn in unit volumes has pronounced pejorative
implications for its parts and service and financing gross profit
• Margins have been declining steadily in new and used car
sales
• Lack of new dealer acquisitions at an attractive cash flow
multiple may limit future growth
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
5
-
100.00
200.00
300.00
400.00
500.00
600.00
9/12/2008 9/12/2009 9/12/2010 9/12/2011 9/12/2012 9/12/2013 9/12/2014
Axis
Tit
le
Post-Lehman Share Price Performance: ABG vs. Index Of Auto Dealers
Auto Dealers
ABG
Reference: Bloomberg, Point Frederick Capital
Asbury Automotive Stock Has Markedly Outperformed Its
Peer Group In The Past Twelve Months
Strictly Confidential September 2014
Point Frederick CapitalPoint Frederick Capital
BUSINESS AND BUSINESS MODEL
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
7
Asbury Automotive Is One Of The Largest Auto Dealers In
The US, Concentrated Principally In The US Southeast & NJ
Company Description:
Asbury Automotive Group (“Asbury”, “ABG”, or the “Company”) is the 7th largest U.S.-based franchised automotive
retailer, operating 102 franchises with 81 dealership locations. Asbury sells and services 29 vehicle brands with
85% of new vehicle sales comprising luxury / mid-line imports. The Company has developed its dealership
portfolio via acquisition of large, locally-branded dealerships, primarily in the South and Southeastern U.S. During
fiscal year 2013, ABG sold over 150,000 retail vehicles and generated over $5.3 billion in sales. ABG has a market
capitalization of $2.0 billion as of 9/22/2014.
Reference: Company, Point Frederick Capital
Business Model:
Asbury has four business units: (i) sale of new cars; (ii) sale of used cars; (iii) finance and insurance; and (iv) parts
and service. To become an authorized dealer, Asbury obtains franchise agreements from OEMs or acquires
existing dealership franchises. The sale of new and used cars is typically a low margin business which allows the
Company to establish a relationship with the customer as well as get the chance to arrange financing. As part of
the finance and insurance unit and at the time of a sale of a vehicle, Asbury arranges financing and other prepaid
services/guarantees (for roughly ¾ of auto sales) in partnership with OEM and non-OEM lenders. Asbury typically
earns a marketing fee, net of a chargeback for contracts terminated or cancelled (usually within 90 days).
Chargebacks amount to anywhere between 9-14% of financing revenue. The marketing fee may include spread
income participation in excess returns on assets backing guarantees. The Company’s parts and service division
provides replacement parts, collision repair services, or vehicle maintenance for cars it has sold and for other cars
with whose owners they can establish relationships.
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
8
Reference: Company
The Business Model Is Co-Dependent: New/Used Vehicle
Sales Lead to Incremental, Higher Margin Parts & Service
and Finance & Insurance Revenue
New Vehicle Sales:
• 55% of total revenue and 21% of total gross profit
→ low margin business
Used Vehicle Sales:
• 26% of total revenue and 14% of total gross profit
→ low margin business
Parts and Service:
• 12% of total revenue and 42% of total gross profit
→ high margin business
Finance and Insurance:
• 4% of total revenue and 24% of total gross profit
→ high margin business
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
9
New Vehicle Sales Are A Gateway To More Lucrative
Ancillary Revenue
Acquire Dealership
Purchase of existing
dealership
Utilize Floor-Plan /
OEM-Provided
Financing
Purchase New Car
Inventory Sale to Customer
• New Vehicle Sales includes the arrangement of fixed-term leases
• Leases give ABG dealership first option to purchase vehicles upon lease expiration (to
build used car inventory)
• Provides incremental parts & service and finance & insurance revenue
• Customers who lease historically return to dealerships more often than purchasers of
new vehicles
Start-Up via New
Franchise
Agreement
Incremental Parts
& Service
Revenue
Arrangement of
Finance &
Insurance
Reference: Company
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
10
Used Vehicle Sales Are Another Gateway To More Lucrative
Ancillary Revenue
Build Used Car
Inventory
Purchase Trade-Ins,
Off-lease Vehicles or
At Auctions
Utilize Floor-Plan
Financing
Inventory
Management Sale to Customer
• Used vehicle inventory is typically sold as wholesale via auction if a vehicle is not sold at retail
within 60 days
Incremental Parts
& Service
Revenue
Arrangement of
Finance &
Insurance
Reference: Company
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
11
Parts And Service Is The Highest Gross Margin Segment
And Caters To A Potentially Broader Population Of Drivers
Car Owner In Need
of Repair /
Maintenance
ABG Provides
Maintenance,
Collision Repair, or
Replacement Part
Bill to Customer
or OEM
Billed to OEM if
Car is Under
Warranty
Customer Pays
Cash If Not
Covered by
Warranty
• 59% of divisional gross profit is customer pay
• The customer does not need to be a pre-existing customer acquired through a car sale
Reference: Company
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
12
Finance And Insurance Is A Pure Margin Business Segment
Sale of New / Used
Vehicles
ABG Arranges
Financing and Other
Prepaid Services /
Guarantees
ABG Earns
Marketing Fee,
Including Spread
Income
Participation
Service Contracts
May Lead to Parts
& Service Work
Financing
Provided by OEM
Financing
Provided by
Third-Party
Lender
• Approximately 25% of financing arrangements are for subprime customers
Reference: Company
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
13
Reference: Asbury Automotive Shareholder Presentation 04/16/14
Asbury Is Primarily A Southern Auto Dealer, Centered On
Florida And Georgia
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
14
Reference: Asbury Automotive Shareholder Presentation 04/16/14
The Company Has A Mix Of Domestic And Foreign Brands
Offering Luxury And Mid-Level Cars
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
15
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
The Company Opened Its First “Q Auto”, A Standalone
Dealer Focused Exclusively On Used Cars
There are 40 million used cars sold annually in the US.
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
16
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
Auto Sales Margins Are Much Lower Than The Lucrative
Parts and Services and Financing and Insurance Lines
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
17
The Bulk Of The Parts And Service Gross Profit Comes From
Commoditized Routine Maintenance Activities
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
18
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
In Addition To Revenues From Arranging Financing, ABG
Earns Revenue By Selling Other Services And Guarantees
Other products include extended service contracts, guaranteed asset protection, prepaid maintenance,
and credit life and disability coverage.
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
19
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
Asbury Owns Roughly 60% Of Its Facilities And Looks To
Increase That Ratio To 75% In The Current Environment
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
20
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
The Dealer Market Is Fragmented And Asbury Plans To Grow
By Acquisition, Adding $500m Of Revenue From 2014-2017
The Company argues it has the systems to deal with complexity independent dealers do not have.
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
21
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
The Asbury Board Recently Approved An Increase In The
Buyback Program To $100m From $30m
Strictly Confidential September 2014
Point Frederick CapitalPoint Frederick Capital
INDUSTRY OVERVIEW
The auto industry has fully recovered from the devastating trough conditions in the aftermath of the
financial crisis. Numerous secular changes in the factors that drive auto demand suggests trend demand
should be lower than the previous peak. These include weak scrappage, lower driver growth, and fewer
miles driven. The combination of a large number of cars coming off-lease, increasing North American
manufacturing capacity, and a weaker Japanese Yen only exacerbate this problem. Subprime lending
has recovered to prior peak levels; it is becoming more and more difficult to find the incremental buyer.
These factors translate to potentially significantly lower volumes and prices in the auto dealer industry.
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
23
Reference: Morgan Stanley, “Auto Credit,” 8/21/14
Supportive Credit Conditions Since 2009 Have Pulled
Forward Demand Through Low Monthly Payment Math
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
24
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Generous Loans Via Higher Loan-to-Value Balances….
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
25
…Longer Loan Terms…
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
26
…And Increased Subprime Lending…
Roughly 25% of Asbury’s new financing arrangements are for subprime customers. This compares to
16% for CarMax and 12% for Lithia in their most recent quarters.
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
27
Reference: Manheim Used Car Report - Annual 2013
…Have Returned Auto Credit Issuance Close to Prior
Peaks…
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
28
...Driving A Full V-Shaped Auto Recovery
Autos recovered earlier than expected but may also peak earlier than expected
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
29
Reference: Manheim Used Car Report - Annual 2014
Consumer Debt Remains At Low Levels
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
30
Reference: Manheim Used Car Report - Annual 2014
Credit Default Rates Remain At Low Levels
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
31
Reference: Manheim Used Car Report - Annual 2014
While At Low Levels, Repossessions Are Expected To Rise
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
32
Reference: Manheim Used Car Report - Annual 2014
Gasoline Prices Remain In Check
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
33
Reference: Equifax, "Not Yesterday's Subprime Auto Loan," Economic Trends Commentary 08/26/14
Auto Originations Remain At High Levels With Subprime
Taking a Larger Portion of New Loans
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
34
Reference: Equifax, "Not Yesterday's Subprime Auto Loan," Economic Trends Commentary 08/26/14
Within New Subprime Loans, Credit Quality Is Holding Up
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
35
Reference: Equifax, "Not Yesterday's Subprime Auto Loan," Economic Trends Commentary 08/26/14
Subprime Auto Loan Write-Offs Remain Low
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
36
Reference: Equifax, "Not Yesterday's Subprime Auto Loan," Economic Trends Commentary 08/26/14
Low Subprime Write-Offs Will Lead to More Aggressive
Lending
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
37
Easy Credit And Inflated Residual Values Lower Monthly
Affordability, Sending TTM SAAR Values To Prior Peaks
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
38
Reference: Credit Suisse, "Sentiment on Auto Stocks Appears Cautious," 09/12/14
North American OEMs Are Running At Close To Maximum
Capacity…
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
39
…But That Is Not Stopping Them From Adding Even More
Manufacturing Capacity
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
40
Reference: Manheim Used Car Report - Annual 2013
New Vehicle Sales Have Recovered Much Faster Than New
Home Sales, On A Relative Basis
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
41
Reference: Manheim Used Car Report - Annual 2013
Pent Up Demand Has Led Both New and Used Vehicle Sales
Higher Since 2009
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
42
Reference: Manheim Used Car Report - Annual 2014
Used Vehicle Sales Have Benefited Both Franchised and
Independent Dealers
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
43
Reference: Manheim Used Car Report - Annual 2013
Used Vehicle Sales As A Percent of Total Vehicles in
Operation Continues to Fall
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
44
Reference: National Auto Dealers' Association - Used Car Guide - September 2014.
Vehicle Forecasts Remain Bullish, As Light Vehicle Sales are
Assumed to Decrease Only Slightly
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
45
However, Weak Scrappage, Driver Growth, and Miles Driven
Suggest Trend Light Vehicle Demand Actually May Fall
Weak light vehicle demand drivers suggest longer-term trend may be mid-15m or less
Reference: Credit Suisse, "Sentiment on Auto Stocks Appears Cautious," 09/12/14; Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
46
Reference: Manheim Used Car Report - Annual 2013
Miles Driven Have Steadily Contracted
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
47
Reference: Manheim Used Car Report - Annual 2014
Scrappage Remains Relatively Low
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
48
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Demand May Fall As The Incremental Light Vehicle Buyer Is
Getting Harder to Find
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
49
The Manheim Used Vehicle Price Index Has Topped Out And
Started to Fall – A Leading Indicator?
The combination of rising used car supply from maturing post-crisis leases, aggressive new car
incentives, and a potential crackdown on subprime lending may put pressure on used car pricing
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
50
Used Vehicle Prices Have Fallen for Four Consecutive
Months
Reference: Morgan Stanley, "Used Prices Drop Four Months Straight," 09/09/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
51
Importantly For Asbury, Used Luxury and Full-Size Cars
Have Been Hit Disproportionately…
Reference: Morgan Stanley, "Used Prices Drop Four Months Straight," 09/09/14
Point Frederick CapitalPoint Frederick Capital
No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
52
…While Used Truck Pricing Has Held Up
Reference: Morgan Stanley, "Used Prices Drop Four Months Straight," 09/09/14
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Since The Crisis, Strapped Consumers Have Been More
Likely To Lease Than To Buy, A Secular Change
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
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54
Reference: Manheim Used Car Report - Annual 2013
High Leasing Activity Will Flood Used Car Market Upon
Lease Expirations, Pressuring Prices
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A Higher USD/JPY Will Enable
Japanese OEMS To Be Aggressive On New Car Pricing
Reference: Morgan Stanley, "Cutting U.S. Autos to Cautious," 09/08/14
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Reference: National Auto Dealers' Association - Used Car Guide - September 2014
New Car Incentives Remain High and Continue to Grow at a
Rapid Rate
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Post-Crisis, Used Car and New Car Inflation Have Tracked
One Another
Reference: Morgan Stanley "Used Prices Drop Four Months Straight" 09/09/14
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Reference: Manheim Used Car Report - Annual 2013
Used Vehicle Retail Gross Margins Have Been Steadily
Declining
Strictly Confidential September 2014
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RISKS
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ABG Is Exposed To Both Industry and Company-Specific
Risks
Go-forward auto sales
fall more than expected
due to demand
exhaustion
Geographic
concentration in
Florida, Georgia, and
Texas
Used car prices start to
fall at a rapid rate due
to oversupply, leading
to gross margin
compression
Aggressive new car
incentives further
pressure used car
pricing
Lack of new dealer
acquisitions at an
attractive cash flow
multiple may limit
future growth
Reduced credit
availability and higher
interest rates weigh on
new car demand
Large exposure to
luxury / mid-line
imports, categories that
have seen recent
pricing pressures
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The CFPB Seeks To Contain The “Disparate Impact” Of
Mark-Ups On Minorities And May Forbid All Mark-Ups
“To prevent discrimination from recurring at these
lenders, the CFPB has identified at least three
possible ways institutions can limit their fair
lending risk:
• Conduct internal monitoring for
discrimination…;
• Limit discretionary markups…;
• Eliminate dealer discretion for markups …”
[Emphasis added]
Implication: As finance and
insurance represents 24% of total
gross profit, a significant portion
of Asbury’s high margin business
could be in jeopardy.
Reference: “CFPB Proposes New Financial Oversight Of Nonbank Auto Finance Companies,” 9/17/14
http://www.consumerfinance.gov/newsroom/cfpb-proposes-new-federal-oversight-of-nonbank-auto-finance-companies/
Strictly Confidential September 2014
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VALUATION AND REWARD/RISK ANALYSIS
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Our Analysis Implies A Reward/Risk Ratio of 2.6x With A
Downside Per Share Price Of $32
($ in M, except for per share data)
Base Upside Downside
Lease-Adjusted EV $2,790 $3,192 $1,738
Less: 2015E Lease Expense @ 7x (210) (210) (210)
Enterprise Value $2,580 $2,982 $1,528
Less: Net Debt (542) (542) (542)
Less: Preferred SH - - -
Less: Noncontrolling Interest - - -
Equity Value $2,039 $2,440 $986
Per SH $66.84 $80.00 $32.34
2015E EBITDAR $331 $353 $306
2015E EBITDA $301 $323 $276
2015E EPS $4.54 $5.00 $4.04
Adj EV/2015E EBITDAR 8.4x 9.0x 5.7x
EV/2015E EBITDA 8.6x 9.2x 5.5x
P/2015E EPS 14.7x 16.0x 8.0x
Consensus 2015E EBITDA $323
Consensus 2015E EPS $4.74
Reward/Risk 2.6x
Target % Return -51.6%
Strictly Confidential September 2014
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FINANCIALS – BASE CASE
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Base Case New Vehicle Economics
NEW VEHICLES
New Vehicle - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 18,663 14,248 16,371 16,712 19,429 21,994 23,330 24,377 25,245
Mid-line Import 48,435 38,766 42,431 40,560 48,136 51,632 52,354 53,506 55,173
Mid-line Domestic 9,277 7,234 8,181 9,353 10,147 11,082 11,141 11,237 11,237
Total New Vehicle Retail Units - SS 76,375 60,248 66,983 66,625 77,712 84,708 86,825 89,121 91,656
Plus: New Vehicle Units - Acquisitions 3,086 1,785 2,451 2,679 2,365 1,258 2,831 1,573 1,573
Total New Vehicle Units 79,461 62,033 69,434 69,304 80,077 85,966 90,173 91,893 94,428
New Vehicle - Units - Mix % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 23.5% 23.0% 23.6% 24.1% 24.3% 25.6% 25.9% 26.5% 26.7%
Mid-line Import 61.0% 62.5% 61.1% 58.5% 60.1% 60.1% 58.1% 58.2% 58.4%
Mid-line Domestic 11.7% 11.7% 11.8% 13.5% 12.7% 12.9% 12.4% 12.2% 11.9%
Total New Vehicle Retail Units - SS 96.1% 97.1% 96.5% 96.1% 97.0% 98.5% 96.3% 97.0% 97.1%
Plus: New Vehicle Units - Acquisitions 3.9% 2.9% 3.5% 3.9% 3.0% 1.5% 3.1% 1.7% 1.7%
Total New Vehicle Units 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
New Vehicle - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -23.7% 14.9% 2.1% 16.3% 13.2% 10.8% 3.6%
Mid-line Import -20.0% 9.5% -4.4% 18.7% 7.3% 3.6% 3.1%
Mid-line Domestic -22.0% 13.1% 14.3% 8.5% 9.2% 1.4% 0.0%
Total New Vehicle Retail Units - SS -21.1% 11.2% -0.5% 16.6% 9.0% 5.2% 2.8%
Plus: New Vehicle Units - Acquisitions -42.2% 37.3% 9.3% -11.7% -46.8% 25.0% 0.0%
Total New Vehicle Units -21.9% 11.9% -0.2% 15.5% 7.4% 6.9% 2.8%
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Base Case New Vehicle Economics
New Vehicle - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 46,938$ 46,722$ 48,665$ 49,569$ 49,596$ 49,891$ 53,292$ 50,330$ 49,352$
Mid-line Import 24,747$ 24,408$ 25,140$ 26,159$ 26,392$ 26,805$ 27,068$ 26,400$ 25,608$
Mid-line Domestic 32,036$ 34,241$ 37,673$ 37,507$ 36,888$ 36,735$ 38,549$ 39,059$ 39,059$
Total New Vehicle Retail Units - SS 31,055$ 30,866$ 32,420$ 33,624$ 33,564$ 34,098$ 35,379$ 34,542$ 33,797$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 29,849$ 29,978$ 31,391$ 32,324$ 32,572$ 34,341$ 36,081$ 33,946$ 32,805$
New Vehicle - Units - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -0.5% 4.2% 1.9% 0.1% 0.6% 0.9% -1.9%
Mid-line Import -1.4% 3.0% 4.1% 0.9% 1.6% -1.5% -3.0%
Mid-line Domestic 6.9% 10.0% -0.4% -1.7% -0.4% 6.3% 0.0%
Total New Vehicle Retail Units - SS -0.6% 5.0% 3.7% -0.2% 1.6% 1.3% -2.2%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total New Vehicle Units 0.4% 4.7% 3.0% 0.8% 5.4% -1.2% -3.4%
NEW VEHICLES
New Vehicle - Gross Profit - $ per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 3,461$ 3,530$ 3,763$ 3,812$ 3,778$ 3,615$ 3,897$ 3,647$ 3,455$
Mid-line Import 1,652$ 1,656$ 1,402$ 1,585$ 1,411$ 1,381$ 1,425$ 1,443$ 1,408$
Mid-line Domestic 2,167$ 2,322$ 2,726$ 2,555$ 2,483$ 2,391$ 2,463$ 2,396$ 2,246$
Total New Vehicle Retail Units - SS 2,156$ 2,179$ 2,141$ 2,280$ 2,143$ 2,093$ 2,203$ 2,166$ 2,075$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 2,073$ 2,117$ 2,070$ 2,192$ 2,079$ 2,109$ 2,242$ 2,124$ 2,014$
New Vehicle - Gross Profit - $ per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 2.0% 6.6% 1.3% -0.9% -4.3% 0.9% -5.3%
Mid-line Import 0.3% -15.3% 13.1% -11.0% -2.1% 4.5% -2.4%
Mid-line Domestic 7.2% 17.4% -6.3% -2.8% -3.7% 0.2% -6.2%
Total New Vehicle Retail Units - SS 1.1% -1.8% 6.5% -6.0% -2.3% 3.5% -4.2%
Plus: New Vehicle Units - Acquisitions
Total New Vehicle Units 2.1% -2.2% 5.9% -5.1% 1.4% 0.7% -5.2%
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Base Case New Vehicle Economics
New Vehicle - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 65 50 62 64 73 80 86 89 87
Mid-line Import 80 64 60 64 68 71 74 77 78
Mid-line Domestic 20 17 22 24 25 27 27 27 25
Total New Vehicle Retail Units - SS 165 131 143 152 167 177 187 193 190
Plus: New Vehicle Units - Acquisitions - - 0 - - 4 6 2 -
Total New Vehicle Units 165 131 144 152 167 181 193 195 190
New Vehicle - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 7.4% 7.6% 7.7% 7.7% 7.6% 7.2% 7.8% 7.2% 7.0%
Mid-line Import 6.7% 6.8% 5.6% 6.1% 5.3% 5.2% 5.3% 5.5% 5.5%
Mid-line Domestic 6.8% 6.8% 7.2% 6.8% 6.7% 6.5% 6.7% 6.1% 5.8%
Total New Vehicle Retail Units - SS 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.3% 6.1%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.3% 9.6% 5.1% 0.0%
Total New Vehicle Units 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.3% 6.1%
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Base Case Used Vehicle Economics
USED VEHICLES
Used Vehicles Retail - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 44,241 39,373 46,329 54,009 57,434 67,768 69,859 70,702 70,702
Used Vehicle Retail Units - Acquisitions - - 144 - - 1,686 2,892 1,206 -
Total Used Vehicle Retail Units 44,241 39,373 46,473 54,009 57,434 69,454 72,751 71,908 70,702
Used Vehicles Retail - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -11.0% 17.7% 16.6% 6.3% 18.0% 4.3% 0.0%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Used Vehicle Retail Units -11.0% 18.0% 16.2% 6.3% 20.9% 3.5% -1.7%
Used Vehicles Retail - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 17,843$ 18,251$ 18,930$ 18,923$ 19,187$ 19,778$ 20,790$ 19,824$ 18,833$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ -$ 20,522$ 33,689$ 18,408$ -$
Total Used Vehicle Retail Units 17,843$ 18,251$ 18,936$ 18,923$ 19,187$ 19,796$ 21,103$ 19,800$ 18,833$
Used Vehicles Retail - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2.3% 3.7% 0.0% 1.4% 3.1% 0.2% -5.0%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 2.3% 3.8% -0.1% 1.4% 3.2% 0.0% -4.9%
Used Vehicles Retail - Revenue 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 719 877 1,022 1,102 1,340 1,409 1,402 1,332
Used Vehicle Retail Units - Acquisitions - 3 - - 35 57 22 -
Total Used Vehicle Retail Units 719 880 1,022 1,102 1,375 1,466 1,424 1,332
Used Vehicles Retail - Revenue - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -9.0% 22.0% 16.5% 7.8% 21.6% 4.6% -5.0%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -9.0% 22.5% 16.1% 7.8% 24.8% 3.6% -6.5%
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Base Case Used Vehicle Economics
Used Vehicles Retail -Gross Profit per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2,029$ 2,001$ 1,881$ 1,819$ 1,769$ 1,818$ 1,717$ 1,536$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ 1,305$ 2,254$ 1,327$ -$
Total Used Vehicle Retail Units 2,029$ 2,003$ 1,881$ 1,819$ 1,758$ 1,829$ 1,710$ 1,536$
Used Vehicles Retail - Gross Profit per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 0.1% -1.4% -6.0% -3.3% -2.8% -3.0% -10.5%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 0.1% -1.3% -6.1% -3.3% -3.4% -2.7% -10.2%
Used Vehicles Retail - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 90 80 93 102 105 120 123 121 109
Used Vehicle Retail Units - Acquisitions - - 0 - - 2 4 2 -
Total Used Vehicle Retail Units 90 80 93 102 105 122 127 123 109
Used Vehicles Retail - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.7% 8.2%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 11.0% 7.2% 0.0%
Total Used Vehicle Retail Units 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.6% 8.2%
Used Vehicles Retail - Gross Profit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -10.9% 16.0% 9.6% 2.9% 14.7% 1.2% -10.5%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -10.9% 16.5% 9.1% 2.9% 16.8% 0.7% -11.7%
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Base Case Financials
FINANCIAL RESULTS
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Total Revenue 4,093 3,406 3,936 4,141 4,642 5,335 5,623 5,617 5,562
Growth % yoy -16.8% 15.6% 5.2% 12.1% 14.9% 5.3% -1.0%
EBITDA 150 123 153 155 211 250 278 296 301
Margin % 3.7% 3.6% 3.9% 3.7% 4.5% 4.7% 4.9% 5.3% 5.4%
Growth % yoy -18.0% 23.9% 1.2% 36.2% 18.8% 18.1% 1.6%
EBIT 129 101 132 132 188 226 252 270 275
Margin % 3.2% 3.0% 3.3% 3.2% 4.1% 4.2% 4.5% 4.8% 4.9%
Growth % yoy -21.7% 30.2% 0.4% 42.3% 20.1% 19.5% 1.7%
NOPAT 240 65 88 83 118 142 158 168 172
Margin % 5.9% 1.9% 2.2% 2.0% 2.6% 2.7% 2.8% 3.0% 3.1%
Growth % yoy -72.8% 35.6% -6.3% 42.9% 19.6% 18.3% 2.6%
PF Net Income 198 31 55 48 86 108 124 135 139
Margin % 4.8% 0.9% 1.4% 1.2% 1.8% 2.0% 2.2% 2.4% 2.5%
Growth % yoy -84.5% 79.7% -12.0% 76.9% 26.1% 25.0% 3.0%
PF FD EPS 6.24$ 0.93$ 1.65$ 1.48$ 2.72$ 3.47$ 4.08$ 4.41$ 4.54$
Growth % yoy -85.1% 77.6% -10.1% 83.0% 27.7% 27.2% 3.0%
Cash Flow from Operations 529 111 10 (181) (21) 51 107 204 198
Margin % 12.9% 3.3% 0.3% -4.4% -0.4% 1.0% 1.9% 3.6% 3.6%
Growth % yoy -79.0% -91.1% -1930.3% -88.6% -344.9% 90.9% -2.8%
CapEx 69 8 30 22 56 50 65 46 30
Margin % 1.7% 0.2% 0.8% 0.5% 1.2% 0.9% 1.2% 0.8% 0.5%
Growth % yoy -88.0% 262.7% -26.9% 156.4% -11.5% -7.2% -35.2%
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Base Case Financials
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Levered Free Cash Flow 460 103 (20) (204) (78) (1) 40 157 168
Margin % 11.2% 3.0% -0.5% -4.9% -1.7% 0.0% 0.7% 2.8% 3.0%
Growth % yoy -77.7% -119.7% 907.9% -61.7% -99.4% -31459.8%
Total Debt 600 538 544 459 466 554 549 549 549
Less: Liquid Assets (92) (85) (21) (11) (6) (5) (7) (112) (272)
Net Debt 508 453 523 447 460 549 542 436 277
Total Debt/EBITDA 4.0x 4.4x 3.6x 3.0x 2.2x 2.2x 2.2x 1.9x 1.8x
Net Debt/EBITDA 3.4x 3.7x 3.4x 2.9x 2.2x 2.2x 2.2x 1.5x 0.9x
Total EBITDA/Interest Expense 2.2x 2.2x 2.9x 2.8x 4.0x 4.6x 5.2x 5.7x 5.7x
ROE % 0.0% 12.56% 19.16% 14.82% 21.25% 21.99% 25.38% 22.63% 18.89%
RNOA % 0.0% 9.37% 10.93% 10.71% 13.73% 13.63% 15.16% 15.65% 16.64%
Strictly Confidential September 2014
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COMPARABLE ANALYSIS AND HISTORICAL
TRADING RANGES
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ABG Trades In-Line With Auto Dealer Comparables On A
FWD P/E and EV/EBITDA Basis
SUMMARY AUTO DEALER COMPARABLES
($ in M) LTM
Market Cap.
Enterprise
Value(1) Revenue EBITDA FCF Yield % EBITDA % P / 2014E
EV / 2014E
Revenue
EV / 2014E
EBITDA 2014 PEG
Asbury Automotive Group, Inc. $2,039 $2,580 $5,404 $267 1.9% 4.9% 15.5x 0.4x 8.5x 94.2%
Lithia Motors Inc. $2,097 $2,340 $4,237 $235 (2.8%) 5.5% 15.9x 0.5x 8.6x 62.9%
CarMax Inc. $11,954 $11,758 $13,013 $973 (8.9%) 7.5% 21.9x 0.9x 11.7x 159.7%
Penske Automotive Group, Inc. $3,867 $4,912 $15,768 $543 1.5% 3.4% 13.1x 0.3x 8.5x 93.0%
Sonic Automotive Inc. $1,274 $2,069 $8,763 $300 0.5% 3.4% 12.5x 0.2x 7.1x 96.5%
AutoNation Inc. $6,113 $7,927 $17,238 $845 3.0% 4.9% 15.0x 0.4x 9.0x 94.2%
MEDIAN (excl. ABG) $3,867 $4,912 $13,013 $543 0.5% 4.9% 15.0x 0.4x 8.6x 94.2%
2014E Growth 2015E Growth
Rev EBITDA Rev EBITDA
Asbury Automotive Group, Inc. 13.8% 24.3% 6.2% 6.4%
Lithia Motors Inc. 33.2% 29.0% 44.9% 32.1%
CarMax Inc. 10.9% 7.1% 12.0% 11.1%
Penske Automotive Group, Inc. 18.7% 15.0% 6.8% 9.5%
Sonic Automotive Inc. 8.4% (2.7%) 4.3% 12.2%
AutoNation Inc. 12.4% 6.6% 5.6% 8.5%
MEDIAN (excl. ABG) 12.4% 7.1% 6.8% 11.1%
(1) Excludes floor plan financing.
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On A FWD P/E Basis, ABG Is Currently Trading Toward The
High End Of Its Historically Range Of 7x – 16x
Strictly Confidential September 2014
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DEBT MATURITY SCHEDULE
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The Company Has Pushed Out Its Debt Maturity Schedule
Reference: Asbury Automotive Investor Presentation 06/03/14-06/04/14
Strictly Confidential September 2014
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DOWNSIDE FINANCIALS
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Downside Case New Vehicle Economics
NEW VEHICLES
New Vehicle - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 18,663 14,248 16,371 16,712 19,429 21,994 23,330 24,076 23,626
Mid-line Import 48,435 38,766 42,431 40,560 48,136 51,632 52,354 52,998 52,401
Mid-line Domestic 9,277 7,234 8,181 9,353 10,147 11,082 11,141 11,141 10,960
Total New Vehicle Retail Units - SS 76,375 60,248 66,983 66,625 77,712 84,708 86,825 88,214 86,987
Plus: New Vehicle Units - Acquisitions 3,086 1,785 2,451 2,679 2,365 1,258 2,831 1,573 1,573
Total New Vehicle Units 79,461 62,033 69,434 69,304 80,077 85,966 90,173 90,986 89,759
New Vehicle - Units - Mix % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 23.5% 23.0% 23.6% 24.1% 24.3% 25.6% 25.9% 26.5% 26.3%
Mid-line Import 61.0% 62.5% 61.1% 58.5% 60.1% 60.1% 58.1% 58.2% 58.4%
Mid-line Domestic 11.7% 11.7% 11.8% 13.5% 12.7% 12.9% 12.4% 12.2% 12.2%
Total New Vehicle Retail Units - SS 96.1% 97.1% 96.5% 96.1% 97.0% 98.5% 96.3% 97.0% 96.9%
Plus: New Vehicle Units - Acquisitions 3.9% 2.9% 3.5% 3.9% 3.0% 1.5% 3.1% 1.7% 1.8%
Total New Vehicle Units 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
New Vehicle - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -23.7% 14.9% 2.1% 16.3% 13.2% 9.5% -1.9%
Mid-line Import -20.0% 9.5% -4.4% 18.7% 7.3% 2.6% -1.1%
Mid-line Domestic -22.0% 13.1% 14.3% 8.5% 9.2% 0.5% -1.6%
Total New Vehicle Retail Units - SS -21.1% 11.2% -0.5% 16.6% 9.0% 4.1% -1.4%
Plus: New Vehicle Units - Acquisitions -42.2% 37.3% 9.3% -11.7% -46.8% 25.0% 0.0%
Total New Vehicle Units -21.9% 11.9% -0.2% 15.5% 7.4% 5.8% -1.3%
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79
Downside Case New Vehicle Economics
New Vehicle - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 46,938$ 46,722$ 48,665$ 49,569$ 49,596$ 49,891$ 53,292$ 50,006$ 49,067$
Mid-line Import 24,747$ 24,408$ 25,140$ 26,159$ 26,392$ 26,805$ 27,068$ 26,595$ 26,101$
Mid-line Domestic 32,036$ 34,241$ 37,673$ 37,507$ 36,888$ 36,735$ 38,549$ 38,345$ 38,348$
Total New Vehicle Retail Units - SS 31,055$ 30,866$ 32,420$ 33,624$ 33,564$ 34,098$ 35,379$ 34,468$ 33,882$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 29,849$ 29,978$ 31,391$ 32,324$ 32,572$ 34,341$ 36,081$ 33,869$ 32,835$
New Vehicle - Units - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -0.5% 4.2% 1.9% 0.1% 0.6% 0.2% -1.9%
Mid-line Import -1.4% 3.0% 4.1% 0.9% 1.6% -0.8% -1.9%
Mid-line Domestic 6.9% 10.0% -0.4% -1.7% -0.4% 4.4% 0.0%
Total New Vehicle Retail Units - SS -0.6% 5.0% 3.7% -0.2% 1.6% 1.1% -1.7%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total New Vehicle Units 0.4% 4.7% 3.0% 0.8% 5.4% -1.4% -3.1%
NEW VEHICLES
New Vehicle - Gross Profit - $ per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 3,461$ 3,530$ 3,763$ 3,812$ 3,778$ 3,615$ 3,897$ 3,584$ 3,309$
Mid-line Import 1,652$ 1,656$ 1,402$ 1,585$ 1,411$ 1,381$ 1,425$ 1,415$ 1,305$
Mid-line Domestic 2,167$ 2,322$ 2,726$ 2,555$ 2,483$ 2,391$ 2,463$ 2,381$ 2,234$
Total New Vehicle Retail Units - SS 2,156$ 2,179$ 2,141$ 2,280$ 2,143$ 2,093$ 2,203$ 2,129$ 1,966$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 2,073$ 2,117$ 2,070$ 2,192$ 2,079$ 2,109$ 2,242$ 2,087$ 1,905$
New Vehicle - Gross Profit - $ per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 2.0% 6.6% 1.3% -0.9% -4.3% -0.8% -7.7%
Mid-line Import 0.3% -15.3% 13.1% -11.0% -2.1% 2.5% -7.8%
Mid-line Domestic 7.2% 17.4% -6.3% -2.8% -3.7% -0.4% -6.2%
Total New Vehicle Retail Units - SS 1.1% -1.8% 6.5% -6.0% -2.3% 1.7% -7.7%
Plus: New Vehicle Units - Acquisitions
Total New Vehicle Units 2.1% -2.2% 5.9% -5.1% 1.4% -1.0% -8.7%
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80
Downside Case New Vehicle Economics
New Vehicle - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 65 50 62 64 73 80 86 86 78
Mid-line Import 80 64 60 64 68 71 74 75 68
Mid-line Domestic 20 17 22 24 25 27 27 27 24
Total New Vehicle Retail Units - SS 165 131 143 152 167 177 187 188 171
Plus: New Vehicle Units - Acquisitions - - 0 - - 4 6 2 -
Total New Vehicle Units 165 131 144 152 167 181 193 190 171
New Vehicle - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 7.4% 7.6% 7.7% 7.7% 7.6% 7.2% 7.8% 7.2% 6.7%
Mid-line Import 6.7% 6.8% 5.6% 6.1% 5.3% 5.2% 5.3% 5.3% 5.0%
Mid-line Domestic 6.8% 6.8% 7.2% 6.8% 6.7% 6.5% 6.7% 6.2% 5.8%
Total New Vehicle Retail Units - SS 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.2% 5.8%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.3% 9.6% 5.1% 0.0%
Total New Vehicle Units 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.2% 5.8%
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81
Downside Case Used Vehicle Economics
USED VEHICLES
Used Vehicles Retail - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 44,241 39,373 46,329 54,009 57,434 67,768 69,859 70,130 70,130
Used Vehicle Retail Units - Acquisitions - - 144 - - 1,686 2,892 1,206 -
Total Used Vehicle Retail Units 44,241 39,373 46,473 54,009 57,434 69,454 72,751 71,336 70,130
Used Vehicles Retail - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -11.0% 17.7% 16.6% 6.3% 18.0% 3.5% 0.0%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Used Vehicle Retail Units -11.0% 18.0% 16.2% 6.3% 20.9% 2.7% -1.7%
Used Vehicles Retail - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 17,843$ 18,251$ 18,930$ 18,923$ 19,187$ 19,778$ 20,790$ 19,955$ 19,556$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ -$ 20,522$ 33,689$ 18,408$
Total Used Vehicle Retail Units 17,843$ 18,251$ 18,936$ 18,923$ 19,187$ 19,796$ 21,103$ 19,929$ 19,556$
Used Vehicles Retail - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2.3% 3.7% 0.0% 1.4% 3.1% 0.9% -2.0%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 2.3% 3.8% -0.1% 1.4% 3.2% 0.7% -1.9%
Used Vehicles Retail - Revenue 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 719 877 1,022 1,102 1,340 1,409 1,399 1,371
Used Vehicle Retail Units - Acquisitions - 3 - - 35 57 22 -
Total Used Vehicle Retail Units 719 880 1,022 1,102 1,375 1,466 1,422 1,371
Used Vehicles Retail - Revenue - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -9.0% 22.0% 16.5% 7.8% 21.6% 4.4% -2.0%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -9.0% 22.5% 16.1% 7.8% 24.8% 3.4% -3.5%
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82
Downside Case Used Vehicle Economics
Used Vehicles Retail -Gross Profit per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2,029$ 2,001$ 1,881$ 1,819$ 1,769$ 1,818$ 1,673$ 1,467$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ 1,305$ 2,254$ 1,327$ -$
Total Used Vehicle Retail Units 2,029$ 2,003$ 1,881$ 1,819$ 1,758$ 1,829$ 1,667$ 1,467$
Used Vehicles Retail - Gross Profit per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 0.1% -1.4% -6.0% -3.3% -2.8% -5.5% -12.3%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 0.1% -1.3% -6.1% -3.3% -3.4% -5.2% -12.0%
Used Vehicles Retail - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 90 80 93 102 105 120 123 117 103
Used Vehicle Retail Units - Acquisitions - - 0 - - 2 4 2 -
Total Used Vehicle Retail Units 90 80 93 102 105 122 127 119 103
Used Vehicles Retail - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.4% 7.5%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 11.0% 7.2% 0.0%
Total Used Vehicle Retail Units 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.4% 7.5%
Used Vehicles Retail - Gross Profit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -10.9% 16.0% 9.6% 2.9% 14.7% -2.2% -12.3%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -10.9% 16.5% 9.1% 2.9% 16.8% -2.6% -13.5%
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83
Downside Case Financials
FINANCIAL RESULTS
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Total Revenue 4,093 3,406 3,936 4,141 4,642 5,335 5,623 5,559 5,382
Growth % yoy -16.8% 15.6% 5.2% 12.1% 14.9% 4.2% -3.2%
EBITDA 150 123 153 155 211 250 278 288 276
Margin % 3.7% 3.6% 3.9% 3.7% 4.5% 4.7% 4.9% 5.2% 5.1%
Growth % yoy -18.0% 23.9% 1.2% 36.2% 18.8% 15.2% -4.3%
EBIT 129 101 132 132 188 226 252 263 250
Margin % 3.2% 3.0% 3.3% 3.2% 4.1% 4.2% 4.5% 4.7% 4.7%
Growth % yoy -21.7% 30.2% 0.4% 42.3% 20.1% 16.3% -4.8%
NOPAT 240 65 88 83 118 142 158 163 157
Margin % 5.9% 1.9% 2.2% 2.0% 2.6% 2.7% 2.8% 2.9% 2.9%
Growth % yoy -72.8% 35.6% -6.3% 42.9% 19.6% 15.0% -4.0%
PF Net Income 198 31 55 48 86 108 124 130 124
Margin % 4.8% 0.9% 1.4% 1.2% 1.8% 2.0% 2.2% 2.3% 2.3%
Growth % yoy -84.5% 79.7% -12.0% 76.9% 26.1% 20.7% -5.2%
PF FD EPS 6.24$ 0.93$ 1.65$ 1.48$ 2.72$ 3.47$ 4.08$ 4.26$ 4.04$
Growth % yoy -85.1% 77.6% -10.1% 83.0% 27.7% 22.9% -5.2%
Cash Flow from Operations 529 111 10 (181) (21) 51 107 207 200
Margin % 12.9% 3.3% 0.3% -4.4% -0.4% 1.0% 1.9% 3.7% 3.7%
Growth % yoy -79.0% -91.1% -1930.3% -88.6% -344.9% 94.3% -3.7%
CapEx 69 8 30 22 56 50 65 46 30
Margin % 1.7% 0.2% 0.8% 0.5% 1.2% 0.9% 1.2% 0.8% 0.6%
Growth % yoy -88.0% 262.7% -26.9% 156.4% -11.5% -7.2% -35.2%
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Downside Case Financials
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Levered Free Cash Flow 460 103 (20) (204) (78) (1) 40 160 170
Margin % 11.2% 3.0% -0.5% -4.9% -1.7% 0.0% 0.7% 2.9% 3.2%
Growth % yoy -77.7% -119.7% 5.8%
Total Debt 600 538 544 459 466 554 549 549 549
Less: Liquid Assets (92) (85) (21) (11) (6) (5) (7) (112) (264)
Net Debt 508 453 523 447 460 549 542 437 285
Total Debt/EBITDA 4.0x 4.4x 3.6x 3.0x 2.2x 2.2x 2.2x 1.9x 2.0x
Net Debt/EBITDA 3.4x 3.7x 3.4x 2.9x 2.2x 2.2x 2.2x 1.5x 1.0x
Total EBITDA/Interest Expense 2.2x 2.2x 2.9x 2.8x 4.0x 4.6x 5.2x 5.5x 5.2x
ROE % 0.0% 12.56% 19.16% 14.82% 21.25% 21.99% 25.38% 22.03% 17.28%
RNOA % 0.0% 9.37% 10.93% 10.71% 13.73% 13.63% 15.16% 15.22% 15.21%
Strictly Confidential September 2014
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UPSIDE FINANCIALS
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Upside Case New Vehicle Economics
NEW VEHICLES
New Vehicle - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 18,663 14,248 16,371 16,712 19,429 21,994 23,330 24,696 27,533
Mid-line Import 48,435 38,766 42,431 40,560 48,136 51,632 52,354 53,896 56,808
Mid-line Domestic 9,277 7,234 8,181 9,353 10,147 11,082 11,141 11,237 11,237
Total New Vehicle Retail Units - SS 76,375 60,248 66,983 66,625 77,712 84,708 86,825 89,829 95,577
Plus: New Vehicle Units - Acquisitions 3,086 1,785 2,451 2,679 2,365 1,258 2,831 1,573 1,573
Total New Vehicle Units 79,461 62,033 69,434 69,304 80,077 85,966 90,173 92,601 98,349
New Vehicle - Units - Mix % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 23.5% 23.0% 23.6% 24.1% 24.3% 25.6% 25.9% 26.7% 28.0%
Mid-line Import 61.0% 62.5% 61.1% 58.5% 60.1% 60.1% 58.1% 58.2% 57.8%
Mid-line Domestic 11.7% 11.7% 11.8% 13.5% 12.7% 12.9% 12.4% 12.1% 11.4%
Total New Vehicle Retail Units - SS 96.1% 97.1% 96.5% 96.1% 97.0% 98.5% 96.3% 97.0% 97.2%
Plus: New Vehicle Units - Acquisitions 3.9% 2.9% 3.5% 3.9% 3.0% 1.5% 3.1% 1.7% 1.6%
Total New Vehicle Units 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
New Vehicle - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -23.7% 14.9% 2.1% 16.3% 13.2% 12.3% 11.5%
Mid-line Import -20.0% 9.5% -4.4% 18.7% 7.3% 4.4% 5.4%
Mid-line Domestic -22.0% 13.1% 14.3% 8.5% 9.2% 1.4% 0.0%
Total New Vehicle Retail Units - SS -21.1% 11.2% -0.5% 16.6% 9.0% 6.0% 6.4%
Plus: New Vehicle Units - Acquisitions -42.2% 37.3% 9.3% -11.7% -46.8% 25.0% 0.0%
Total New Vehicle Units -21.9% 11.9% -0.2% 15.5% 7.4% 7.7% 6.2%
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Upside Case New Vehicle Economics
New Vehicle - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 46,938$ 46,722$ 48,665$ 49,569$ 49,596$ 49,891$ 53,292$ 50,601$ 51,363$
Mid-line Import 24,747$ 24,408$ 25,140$ 26,159$ 26,392$ 26,805$ 27,068$ 26,595$ 26,108$
Mid-line Domestic 32,036$ 34,241$ 37,673$ 37,507$ 36,888$ 36,735$ 38,549$ 39,242$ 41,204$
Total New Vehicle Retail Units - SS 31,055$ 30,866$ 32,420$ 33,624$ 33,564$ 34,098$ 35,379$ 34,777$ 35,158$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 29,849$ 29,978$ 31,391$ 32,324$ 32,572$ 34,341$ 36,081$ 34,179$ 34,167$
New Vehicle - Units - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury -0.5% 4.2% 1.9% 0.1% 0.6% 1.4% 1.5%
Mid-line Import -1.4% 3.0% 4.1% 0.9% 1.6% -0.8% -1.8%
Mid-line Domestic 6.9% 10.0% -0.4% -1.7% -0.4% 6.8% 5.0%
Total New Vehicle Retail Units - SS -0.6% 5.0% 3.7% -0.2% 1.6% 2.0% 1.1%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total New Vehicle Units 0.4% 4.7% 3.0% 0.8% 5.4% -0.5% 0.0%
NEW VEHICLES
New Vehicle - Gross Profit - $ per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 3,461$ 3,530$ 3,763$ 3,812$ 3,778$ 3,615$ 3,897$ 3,695$ 3,728$
Mid-line Import 1,652$ 1,656$ 1,402$ 1,585$ 1,411$ 1,381$ 1,425$ 1,454$ 1,430$
Mid-line Domestic 2,167$ 2,322$ 2,726$ 2,555$ 2,483$ 2,391$ 2,463$ 2,503$ 2,634$
Total New Vehicle Retail Units - SS 2,156$ 2,179$ 2,141$ 2,280$ 2,143$ 2,093$ 2,203$ 2,201$ 2,234$
Plus: New Vehicle Units - Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$
Total New Vehicle Units 2,073$ 2,117$ 2,070$ 2,192$ 2,079$ 2,109$ 2,242$ 2,158$ 2,171$
New Vehicle - Gross Profit - $ per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 2.0% 6.6% 1.3% -0.9% -4.3% 2.2% 0.9%
Mid-line Import 0.3% -15.3% 13.1% -11.0% -2.1% 5.3% -1.6%
Mid-line Domestic 7.2% 17.4% -6.3% -2.8% -3.7% 4.7% 5.3%
Total New Vehicle Retail Units - SS 1.1% -1.8% 6.5% -6.0% -2.3% 5.2% 1.5%
Plus: New Vehicle Units - Acquisitions
Total New Vehicle Units 2.1% -2.2% 5.9% -5.1% 1.4% 2.3% 0.6%
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Upside Case New Vehicle Economics
New Vehicle - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 65 50 62 64 73 80 86 91 103
Mid-line Import 80 64 60 64 68 71 74 78 81
Mid-line Domestic 20 17 22 24 25 27 27 28 30
Total New Vehicle Retail Units - SS 165 131 143 152 167 177 187 198 213
Plus: New Vehicle Units - Acquisitions - - 0 - - 4 6 2 -
Total New Vehicle Units 165 131 144 152 167 181 193 200 213
New Vehicle - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Luxury 7.4% 7.6% 7.7% 7.7% 7.6% 7.2% 7.8% 7.3% 7.3%
Mid-line Import 6.7% 6.8% 5.6% 6.1% 5.3% 5.2% 5.3% 5.5% 5.5%
Mid-line Domestic 6.8% 6.8% 7.2% 6.8% 6.7% 6.5% 6.7% 6.4% 6.4%
Total New Vehicle Retail Units - SS 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.3% 6.4%
Plus: New Vehicle Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.3% 9.6% 5.1% 0.0%
Total New Vehicle Units 6.9% 7.1% 6.6% 6.8% 6.4% 6.1% 6.5% 6.3% 6.4%
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89
Upside Case Used Vehicle Economics
USED VEHICLES
Used Vehicles Retail - Units 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 44,241 39,373 46,329 54,009 57,434 67,768 69,859 70,702 72,470
Used Vehicle Retail Units - Acquisitions - - 144 - - 1,686 2,892 1,206 -
Total Used Vehicle Retail Units 44,241 39,373 46,473 54,009 57,434 69,454 72,751 71,908 72,470
Used Vehicles Retail - Units - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -11.0% 17.7% 16.6% 6.3% 18.0% 4.3% 2.5%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Used Vehicle Retail Units -11.0% 18.0% 16.2% 6.3% 20.9% 3.5% 0.8%
Used Vehicles Retail - Revenue per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 17,843$ 18,251$ 18,930$ 18,923$ 19,187$ 19,778$ 20,790$ 20,557$ 21,071$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ -$ 20,522$ 33,689$ 18,408$
Total Used Vehicle Retail Units 17,843$ 18,251$ 18,936$ 18,923$ 19,187$ 19,796$ 21,103$ 20,521$ 21,071$
Used Vehicles Retail - Revenue per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2.3% 3.7% 0.0% 1.4% 3.1% 3.9% 2.5%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 2.3% 3.8% -0.1% 1.4% 3.2% 3.7% 2.7%
Used Vehicles Retail - Revenue 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 719 877 1,022 1,102 1,340 1,409 1,453 1,527
Used Vehicle Retail Units - Acquisitions - 3 - - 35 57 22 -
Total Used Vehicle Retail Units 719 880 1,022 1,102 1,375 1,466 1,476 1,527
Used Vehicles Retail - Revenue - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -9.0% 22.0% 16.5% 7.8% 21.6% 8.4% 5.1%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -9.0% 22.5% 16.1% 7.8% 24.8% 7.3% 3.5%
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90
Upside Case Used Vehicle Economics
Used Vehicles Retail -Gross Profit per Unit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 2,029$ 2,001$ 1,881$ 1,819$ 1,769$ 1,818$ 1,784$ 1,791$
Used Vehicle Retail Units - Acquisitions -$ -$ -$ -$ 1,305$ 2,254$ 1,327$ -$
Total Used Vehicle Retail Units 2,029$ 2,003$ 1,881$ 1,819$ 1,758$ 1,829$ 1,776$ 1,791$
Used Vehicles Retail - Gross Profit per Unit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 0.1% -1.4% -6.0% -3.3% -2.8% 0.8% 0.4%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units 0.1% -1.3% -6.1% -3.3% -3.4% 1.0% 0.9%
Used Vehicles Retail - Gross Profit 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 90 80 93 102 105 120 123 126 130
Used Vehicle Retail Units - Acquisitions - - 0 - - 2 4 2 -
Total Used Vehicle Retail Units 90 80 93 102 105 122 127 128 130
Used Vehicles Retail - Gross Profit - Margin % 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.7% 8.5%
Used Vehicle Retail Units - Acquisitions 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 11.0% 7.2% 0.0%
Total Used Vehicle Retail Units 11.4% 11.1% 10.6% 9.9% 9.5% 8.9% 9.2% 8.7% 8.5%
Used Vehicles Retail - Gross Profit - Growth % yoy 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Used Vehicle Retail Units - SS -10.9% 16.0% 9.6% 2.9% 14.7% 5.2% 2.9%
Used Vehicle Retail Units - Acquisitions
Total Used Vehicle Retail Units -10.9% 16.5% 9.1% 2.9% 16.8% 4.6% 1.6%
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91
Upside Case Financials
FINANCIAL RESULTS
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
Total Revenue 4,093 3,406 3,936 4,141 4,642 5,335 5,623 5,719 6,043
Growth % yoy -16.8% 15.6% 5.2% 12.1% 14.9% 7.2% 5.7%
EBITDA 150 123 153 155 211 250 278 300 323
Margin % 3.7% 3.6% 3.9% 3.7% 4.5% 4.7% 4.9% 5.2% 5.3%
Growth % yoy -18.0% 23.9% 1.2% 36.2% 18.8% 19.9% 7.5%
EBIT 129 101 132 132 188 226 252 275 297
Margin % 3.2% 3.0% 3.3% 3.2% 4.1% 4.2% 4.5% 4.8% 4.9%
Growth % yoy -21.7% 30.2% 0.4% 42.3% 20.1% 21.5% 8.2%
NOPAT 240 65 88 83 118 142 158 170 186
Margin % 5.9% 1.9% 2.2% 2.0% 2.6% 2.7% 2.8% 3.0% 3.1%
Growth % yoy -72.8% 35.6% -6.3% 42.9% 19.6% 20.2% 9.0%
PF Net Income 198 31 55 48 86 108 124 138 153
Margin % 4.8% 0.9% 1.4% 1.2% 1.8% 2.0% 2.2% 2.4% 2.5%
Growth % yoy -84.5% 79.7% -12.0% 76.9% 26.1% 27.6% 10.9%
PF FD EPS 6.24$ 0.93$ 1.65$ 1.48$ 2.72$ 3.47$ 4.08$ 4.51$ 5.00$
Growth % yoy -85.1% 77.6% -10.1% 83.0% 27.7% 29.8% 10.9%
Cash Flow from Operations 529 111 10 (181) (21) 51 107 188 143
Margin % 12.9% 3.3% 0.3% -4.4% -0.4% 1.0% 1.9% 3.3% 2.4%
Growth % yoy -79.0% -91.1% -1930.3% -88.6% -344.9% 76.0% -23.7%
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Upside Case Financials
Financial Results 2008 2009 2010 2011 2012 2013 LTM 2014 2015
CapEx 69 8 30 22 56 50 65 46 30
Margin % 1.7% 0.2% 0.8% 0.5% 1.2% 0.9% 1.2% 0.8% 0.5%
Growth % yoy -88.0% 262.7% -26.9% 156.4% -11.5% -7.2% -35.2%
Levered Free Cash Flow 460 103 (20) (204) (78) (1) 40 141 113
Margin % 11.2% 3.0% -0.5% -4.9% -1.7% 0.0% 0.7% 2.5% 1.9%
Growth % yoy -77.7% -119.7% -19.5%
Total Debt 600 538 544 459 466 554 549 549 549
Less: Liquid Assets (92) (85) (21) (11) (6) (5) (7) (107) (251)
Net Debt 508 453 523 447 460 549 542 442 297
Total Debt/EBITDA 4.0x 4.4x 3.6x 3.0x 2.2x 2.2x 2.2x 1.8x 1.7x
Net Debt/EBITDA 3.4x 3.7x 3.4x 2.9x 2.2x 2.2x 2.2x 1.5x 0.9x
Total EBITDA/Interest Expense 2.2x 2.2x 2.9x 2.8x 4.0x 4.6x 5.2x 5.7x 6.1x
ROE % 0.0% 12.56% 19.16% 14.82% 21.25% 21.99% 25.38% 22.99% 20.32%
RNOA % 0.0% 9.37% 10.93% 10.71% 13.73% 13.63% 15.16% 15.91% 17.85%
Strictly Confidential September 2014
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Red Team Analysis
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What Does The Red Team Analysis Suggest How This Could
Go Wrong?
ABG is sold to a strategic buyer as part of a larger
dealer roll-up strategy.
Continued, unprecedented demand for high quality
used vehicles results in the stabilization of used car
pricing.
ABG successfully completes a leveraged
recapitalization, using excess cash proceeds for
additional stock buybacks.
ABG is able to consistently locate and acquire mildly
underperforming independent dealerships at attractive
cash flow multiples, thereby adding value to the
enterprise.
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What Is The Market Missing?
The price of used cars could come under severe
pressure, the result of four years of extremely strong
new car sales and leasing volumes as well as easy
credit conditions.
The market may be overestimating management’s
ability to build enterprise value through small tuck-in
acquisitions.
With newly added car manufacturing capacity and a
weak Japanese Yen, OEMs will maintain aggressive
new car incentives.
The market may be overlooking ABG’s exposure to
subprime customers. As 25% of new loan originations
are to subprime customers, ABG’s F&I and new/used
car business would be materially impacted if U.S.
regulators impose tighter lending standards as a
preemptive measure to stem excessive lending.
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Fall in New Car
Demand
Used Car Over-
Supply
New Car Incentives
Stricter Financing
Negative Industry
Dynamics
Increased Rates
End of Easy Credit
Downside
ABG Tremendous Downside Despite Fantastic Recent
Performance
Strictly Confidential September 2014
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BIOS
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98
Biographies
Chand Sooran, Chief Investment Officer
Chand has broad and deep experience investing across the capital structure. Most recently, he helped start up the
distressed value team at CQS as the #2 with positions across the capital structure, eventually running a parallel
long/short value equity book independently. His role as Portfolio Manager included membership in the HoldCo
creditors’ committee in the Six Flags Chapter 11 case and membership in the steering committee and the
creditors’ committee for Nell noteholders in the LyondellBasell Chapter 11 case. Prior to that, he worked as a
Senior Analyst at Columbus Hill Capital Management, a high profile value fund, covering Airlines, Telecoms, Media
and Technology in equities and in credit. Notably, he was a member of the ad hoc creditors’ committee in Delta
Airlines. Before joining Columbus Hill, Chand was a research analyst for five years in an internal multi-strategy
hedge fund at Lehman Brothers where he worked on a variety of strategies including distressed debt, deep value,
special situations, long/short equity and emerging markets. This included work as an unsecured creditor in the
UAL Chapter 11 case, special situations driven by litigation and other general value investing. Prior to going to
business school at MIT Sloan, he spent approximately six years trading foreign exchange, principally as a market
maker for foreign exchange options. In addition to being a graduate of MIT, Chand is a graduate of the University
of Toronto Schools, the Royal Military College of Canada and Queen’s University, as well as being a CFA
Charterholder and being certified as a Financial Risk Manager by the Global Association of Risk Professionals.
After graduating from RMC, Chand was a commissioned officer in the Royal Canadian Navy.
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Biographies
Anand Kalola, Senior Analyst
Anand Kalola has over seven years of finance industry experience. Most recently, Anand was a Senior Associate
at Prospect Capital where he was responsible for originating, executing, and managing middle-market
investments. Prior to Prospect, he worked as a Senior Associate at Chanin Capital Partners/Duff & Phelps
Restructuring with a focus on executing financial restructurings. Anand began his career as a Financial Analyst
with the leveraged finance group at CIBC World Markets in Los Angeles. He holds a BS in Economics and a BA in
Biological Basis of Behavior from the University of Pennsylvania. He is also a CFA Charterholder.
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No representation is made that the Investment manager’s or the Fund’s investment process, investment strategies, goals or risk management techniques will or are likely to be achieved or be successful. See Important Information on Page 2.
Presentation for: Chand Sooran
Contact Information
100
Chand Sooran
Chief Investment Officer, Manager & Founding Member
646.380.6675
100