Short cuts: Rhoen Klinikum, Hornbach, Vivendi

Rhoen Klinikum

KABOOM !! After a lot of corporate boardroom chess, Rhoen Klinikum and Fresenius today cam out swinging and announced that Rhoen will sell the mAjority of its business for 3.07 bn EUR to Fresenius.

Among other (and subject to regulatory approvals), Rhoen plan s to:

- pay a 13.80 EUR special dividend (this translates into ~1.9 bn EUR)
- and/or repurchase shares
- they will keep hospitals (mostly university hospitals) with an annual turnover of 1 bn where they expect an EBIDTA margin of ~15% in 2015
- the purchase price is cash, but Rhoen will use part of it to pay back debt
- the purchase price is priced at 12x EV/EBITDA

The stock price jumped initially today to 22 EUR and something but came back to ~ 19.50, giving Rhoen a current EV of around 3.5 bn (Net debt 800 mn)

The “stub” (remaining business) is currently then priced at around 500 mn EV but expected to earn 150 EBITDA in 2015. If we assume a Forward EV/EBITDA of around 6-8x, then a fair value of the current Rhoen shares (pre tax etc.) would be the current 19,50 plus 3,50 to 5 EUR per share or so. Slightly higher than the 22,50 Fresenius was ready to pay two years ago.

So for the time being I will not sell the shares and watch what is going to happen. At some point in time, the stub itself coul dbe an interesting situation in itself, as it will most likely drop out of the index etc. Sow I guess I will sell before the extra dividend is actually paid.


Quite a surprise: Kingfisher representatives, which owns 25% of the holding votes and 5% of the Baumarkt shares are actually leaving the supervisory board and planning to enter the German market.

They seem to target the “professional” market, not the retail sector. Clearly this is also the sector where Hornbach is strongest.

I am not sure how to interpret this. Clearly, it would be better if Praktiker (and MAx Bahr) would just disappear. I do not really understand why Kingfisher wants to enter the German market. Kingfisher is a great company, but in their major markets, UK and France they are number 1 with a clear size advantage. In Germany, they are a small fish and I would claim that the German retail market in general is one of the most brutal markets in teh world. Even WalMart didn’t have a chance here.

I am wondering if somehow now Hornbach enters the French market ? As far as I know, they so far operate some shops along the border which draw a lot of French people because prices are a lot lower in Germany.


Some 18 months ago, I had a quick look at Vivendi because Seth Klarman bought a stake.

Subsequently, he sold out again a large part at a loss. Now however, there seems to come some actual change. French “raider” Bolloré became vice chairman and the company announced the following:

Bowing to investor pressure to overhaul its structure, Vivendi will begin a formal study to separate its French phone unit SFR and assemble the rest of its businesses into a new international media group based in France, it said yesterday. Billionaire shareholder Vincent Bollore will become deputy chairman, as Vivendi ends its search for a new chief executive.

This is quite interesting. Thinking loud, Vodafone with all its Verizon Cash might be interested in the telephone part (after cashing out their minority participation to Vivendi some years ago….).

Nevertheless, I still hesitate to buy Vivendi. 2012 was a very bad year for them. Under my metric the made a loss, increased the share count and have 1 EUR per share more debt despite showing positive free cashflow.

Note to myself: Put Bolloré on my watch list. This guy seems to know what he is doing in France.

Short cuts: Praktiker/Hornbach, Thermador, Portfolio transactions


Yesterday, Praktiker gave notice that also the “healthy” subsidiary Max Bahr is insolvent and will seek creditor protection. In my opinion this coul simply the following:

1. an even lower recovery for the Praktiker Bonds. I had read a couple of analysis where people thought that Max Bahr could be sold for hundreds of millions with the proceeds covering the bond partly. Under current circumstances, Praktiker Bond holders in my opinion would be lucky if they get even 5% of nominal back. There will be nothing left.

2. It will be much harder to keep Max Bahr as a fully functional competitive entity. So this improves the outlook a lot for the other DIY chains. If for instance Hornbach could get 10-20% of Praktikers business, this might turn into nice growth. I am therefore quite surprised that the Hornbach shares didn’t react on this news. I personally think that there is a good chance to see a “Schlecker” effect. Schlecker had a higher market share compared to Praktiker, but according to this article, competitors DM and Rossmann saw sales jumping +14 to +16%. A lot of this increase is sales per existing square meter, so I assume with a nice profitability.

I think Hornbach at the moment provides a good risk/return relationship. The had a rather bad last quarter due to the ugly weather. Based on personal observations, I assume that the made up for that in the current quarter plus tailwinds from the Praktiker bancruptcy make me positive about the shares.


Thermador issued half year numbers a few days ago, here and here.

Clearly, 2013 will be a difficult year for them. But as the already mentioned after Q1, Q2 was already relatively seen much better than Q1 (sales down -5.2% against 2012 vs. -8.7% in Q1). Profitability is clearly lower, but all in all I think they are still doing quite well. I would have hoped that the stock price might go down a little bit in order to add to my half position, but it seems not to be the case right now.

Portfolio transactions

I sold the second half of the Dart position today at ~2.45 GBP. On the other side, I am adding to Hornbach Baumarkt as I think there is a very good chance for a positive medium term surprise despite all the issues. I will increase from currently 3.7% of the portfolio to a “full” 5%.

Magic Sixes meets Boss Score: Mr. Bricolage (ISIN FR0004034320)

As some might remember, I kind of like the Magic Sixes Screen (P/E < 6, P/B 6%) initially mentioned by Peter Cundill.

Many of the “Magic Sixes” companies are declining and/or cyclical companies which do not score well on my Boss Screen which is looking for stable companies.

The exception at first sight seems to be French DIY chain Mr. Bricolage.


Portfolio updates & ManU short

Draeger Genußscheine

After the dramatic increase in the Draeger Genußscheine, the portfolio weight of this position increased to aropund 11%. As 10% is my maximum treshold, I will sell down to 10% of portfolio weight from today on.

Manchester United short

Manchester United is now avaliable to short at Interactive Brokers. Therefore I will start with a 1% portfolio weight short position as of today as discussed in the post.

On the third trading day, the stock showed already a similar pattern to Facebook after the IPO, with the banks supportiung now at 13,40 USD after the IPO price didn’t hold.

Rebalancing: Total Produce, Hornbach, Vetropack

Due to differences in performance and paid out , some of my core holdings dropped significantly below the 5% target thresholds, among others:

- Total Produce (~4.2%(
- Hornbach (~4.5%)
- Vetropack (4.16%)

For those 3 companies, I will add to a full 5% over the next days depending on volume.


By the way, please do not forget that I might own or buy or sell the mentioned securities privatley and read the disclaimer.

Praktiker Bond (ISIN DE000A1H3JZ8) – Scenario analysis & crazy hedging idea

I already wrote a lot of posts about Praktiker in the past.

My previous summary was something like this : I don’t understand the motivation behind the recent events especially asking senior bond holders for a cut first before shareholders contribute , why they didn’t do any capital increase when the stock price was higher etc. etc.

After thinking about this the most likely possibility in my opinion is the following thesis:

Current Management doesn’t work in the interest of the current shareholders and bondholders but in the interest of potential future investors.

The result of this is relatively clear: It would be suicide to invest into the shares, as you can take a massive dilution at some point in time for granted. However, a new investor might prefer a “non-bancrupt” company, so for the bond things might look better from a risk/return perspective.

With this in mind, I think one can now try to analyse the different possible scenarios for bondholders, which in my opinion are

1) No bankruptcy – (unrealistic) best case: Take over within 1-2 year and early full pay out of bond
2) No bankruptcy – normal case: Bond pays out as scheduled
3) No bankruptcy – bad case: coupon gets reduced in second round of bondholders vote
4) bancruptcy – normal case: bond gets “fair” share of liquidation value 40% in 2016
5) bancruptcy – bad case: “DIP” financing reduces liquidation value significantly , value 10% in 201

Then we have to do 4 more steps:

First, assign probabilities to each scenario and the second, “model” cashflows.In a third steps we then can calculate “weighted” total cashflow and then calculate an internal rate of return based on current market prices.

In the following table, I have made a first try:

Bankrupt Prob. in % 2013 2014 2015 2016
Best Case No 5.00% 5.88 105.88 0.00 0.00
Normal Case No 60.00% 5.88 5.88 5.88 105.88
bad case No 10.00% 1.00 1.00 1.00 101.00
Normal Case Yes 12.50% 0.00 0.00 0.00 40.00
bad case Yes 12.50% 0.00 0.00 0.00 10.00
Weighted CF   100% 3.91875 8.91875 3.625 79.875

This scenario would give the bond at the current price of 40% an implicit IRR of 28%, which would be attractive. If we would change for instance the “normal non bancruptcy” probability to 35% and increase the two bancrupty scenarios to 25% each, we would end upwith a 17.6% IRR.

Bankrupt Prob. in % 2013 2014 2015 2016
Best Case No 5.00% 5.88 105.88 0.00 0.00
Normal Case No 35.00% 5.88 5.88 5.88 105.88
bad case No 10.00% 1.00 1.00 1.00 101.00
Normal Case Yes 25.00% 0.00 0.00 0.00 40.00
bad case Yes 25.00% 0.00 0.00 0.00 10.00
Weighted CF   100% 2.45 7.45 2.16 59.66

An analysis like this can help to understand better the sensitivities of such a rather complicated special situation investment.

Of coure, the probability of bankruptcy is the single most important driver, so let’s discuss this shortly:

On the positive side we have the fact that Praktiker survived the year end and the restocking of inventory for the spring 2012 season. Further, I think at the moment no one has a real advantage if Praktiker goes bankrupt. The biggest problem, the leases for the real estate, could be better reduced if Praktiker would be bancrupt but on the other hand they might have much more problems getting merchandise delivered even if bankruptcy would only be short term.

Additionally, I think the “year end accounting blood bath” makes more sense on a going concern basis than if one would prepare a “prepackaged” bancruptcy.

Potential Catalyst:

In my opinion, something with regard to financing has to happen this year. So there might be a good chance that the bond reacts positively within a limited time frame if the refinancing package is hopefully finalized.

Stand alone risk / return and portfolio view

If I compare Praktiker with the sucessful WestLB Genußschein investment, the Praktiker bond looks more risky, both from the potential downside and time horizon. However, also the potential upside is a lot higher at current levels.

However, on a portfolio level, things look differently. With special situations, I try to make “bets” as long as they are company specific and not directly correlate with each other or “normal” portfolio companies.

With Praktiker, we have the interesting situation that the bond ecoonomically is even negatively correlated with one of my core holdings, Hornbach.

This is something we can clearly see in current company news. In 2011, the German DIY segment showed around 3% growth, Praktiker lost almost 10% in slaes whereas Hornbach and OBI gained significantly above the market growth with 5-6% growth each.

If Praktiker really goes bancrupt, Hornbach among other will profit even more, either through taking over some of the better locations or just gaining more customers. On the other hand, if Praktiker manages the turn around or even gets a startegic shareholder, they might win back a lot of customers from the competition and hurt them significantly.

So one could argue (and I know this sounds a little crazy) that the Praktiker bond combined with the Hornbach shares creates a kind of “hedged” position.

Just for fun I loked at correlations between the Praktiker share, the Praktiker bond and the Hornbach Baumarkt Aktie. And, surprisingly we see the following based on 12 months and daily observations:

Over the last 12 months, the Praktiker share was slightly positively correlated with the Hornbach share (+0.03) whereas the bond was slightly negatively correlated with -.002. Not much but. nevertheless interesting. Again, for instance the last 4 months shows a small positive correlation between the shares (0.05) and a slightly negative correlation (-0.02) between Bond and Hornbach. So maybe not that crazy after all….


On a stand alone basis, at current level, the Praktiker Bond is no “sure thing”, but a relatively risky speculation however with a relatively attractive risk/return ratio. In combination with the Hornbach share in my opinion, the combined position has a very intersting risk/return relationship which can greatly increase the expected return of the portfolio by actually reducing risk on an overall level.

I will therefore add a half position (2.5%) of Praktiker 2016 bonds to the portfolio at current prices (limit 41% of nominal value).

Updates: As Creation, Hornbach & Frosta

A very busy day:

AS Creation

As Creation reported a significantly lower profit for 2011 plus a dividend reduction. The stock price remeined relatively flat, which in my opnion is driven by the “Russian option”. For the normal business it is clear that risiong costs are an issue and pricing power is limited.


Frosta, which is sold a couple of weeks ago, reported also relatively weak numbers. Very similar to AS Creation, costs rose faster than prices.


Core Value stock Hornbach however showed very strong preliminary numbers today. Increasing same store sales, increasing market share and increasing profits. It is still a joke, why such a business tardes at book value and a single digit P/E.

Hornbach Q3 update

Just right before Christmas, Hornbach Baumarkt issued its Q3 report.

Hornbach again showed an outstanding quarter:

As well as substantially boosting its sales, Germany’s fourth-largest DIY group also achieved disproportionate earnings growth in the first nine months of the 2011/2012 financial year (March 1 to November 30, 2011). While the Hornbach Group increased its ninemonth sales by 6.6 percent to Euro 2,581.9 million, operating earnings (EBIT) for the same period grew by 12.8 percent to Euro 191.2 million. The DIY megastores with garden centers in Germany were once again the key growth driver. With cumulative like-for-like sales growth of 6.0 percent, these continued to outperform their sector by a clear margin.


Portfoliotransaktionen – Update & Aufstockung Magyar Telekom

Kleiner Update zu den angekündigten Transaktionen:

Hornbach: Kauf (0,25*1.200)= 300 Aktien zum VWAP 52.78 EUR
Total Produce: Kauf (0.25* 134.694) = 33.517 Aktien zu VWAP 0.39 EUR

Hornbach: Kauf (0,25*195)= 48 Aktien zum VWAP 52.95 EUR
Total Produce: Kauf (0.25* 328918) = 82.229 Aktien zu VWAP 0.395 EUR

Hornbach: Kauf (0,25*566)= 141 Aktien zum VWAP 53.00 EUR
Total Produce: Kauf (0.25* 96.560) = 24.140 Aktien zu VWAP 0.404 EUR

Hornbach: Kauf (0,25*3.658)= 914 Aktien zum VWAP 52.94 EUR
Total Produce: Kauf (0.25* 1.052.645) = 263.161 Aktien zu VWAP 0.398 EUR

Hornbach: Kauf (0.25* 10.737)= 2.694 Aktien zu VWAP 53,70 EUR
Total Porduce: Kauf (0.25*292.999) = 73.249 Aktien zu VWAP 0.395 EUR

Bei Hornbach haben wir damit mit gut 5% es Portfolios die Zielgröße erreicht, bei Total Produce (aktuell 2,7%) stocken wir weiter auf

Zusätzlich erhöhen wir ab heute den Anteil an Magyar Telecom sukzessive auf einen Zielwert von ebenfalls um die 5% des Portfolios. Grund ist der wie schon erwähnte positive Ausblick auf ein Absinken der Ungarischen Sondersteuer,

Effiziente Kapitalmärkte – Hornbach & Sixt Aktiensplit Edition

wenn die Theorie sagt, dass Bonusaktien oder Aktiensplits keinerlei Auswirkungen auf den Kurs haben sollten, zeigt die Realität häufig etwas anderes.

Bei den Hornbach Baumarkt Aktien schiesst der Kurs nach dem heute erfolgten Split fast 10% nach oben. Letzter Kurs gestern: 53,70 , heute um die 29 EUR, macht 58 EUR.

Etwas ähnliches konnte man Anfang Juli auch bei Sixt beachten, als die Gratisaktien eingebucht worden sind.


Wirklich verstehen kann ich diese Kursauschläge nicht, insbesondere warum der Kurs nicht reagiert hat als man den Aktiensplit angekündigt hatte. Das wurde immerhin schon am 24.05. bekannt gegeben.

Man müsste nur überlegen, ob man zukünftig solche Tage mal zum “traden” nutzt, also in die Übertreibung verkauft und nachher billiger zurück kauft.