Special situation: Innogy Tendered Shares (IGYB) -(very) Cheap Optionality ?

Background:
The guys from Paladin AM have outlined the Innogy case very nicely on their blog (in German): Intro & Update

I’ll try to summarize it in my own words:

Innogy, the renewable energy spin-off of RWE is in the process of being taken over by competitor E.ON. E.ON in 2018 had announced to purchase the 77% stake of RWE and has offered on a voluntary basis 36.74 EUR per share which, plus the upcoming dividend adds up to a total consideration of 38,14 EUR per share before tax. The closing of the transaction is subject to a relatively complex regulatory approval process which is already facing some delays. Most experts however think that the transaction will be ultimately approved.

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Position review: Van Lanschot (SELL) plus some thoughts on Unbundling /Rebundling in Banking

Background:

Having this blog is nice because I can look back at what my original ssumptions were. I bought Van Lanschot in 2013, almost 5 1/2 years ago.

This was how I “valued” Van Lanschot back then:

Valuation:

A simple, “Berkowitz style” valuation would be: Book value

With ~0.51 times book value, Van Lanschot is one of the cheapest banks in Europe. Even Greek Banks like Piraeus Bank trade higher. The current valuation is on a level with „quality banks“ like Unicredit, Espirito Santo and Credito Bergamesco.

Interestingly, the P/B multiple for listed Private banks is a lot higher. Swiss competitors Julius Baer, EFG and Banq Privee de Rothschild for instance trade on multiples between 1.1-2.0 times book, a clear premium to „normal“ banks.

So with a “normal” result, one could argue for a valuation somewhere at 1.5 x book value. Clearly, this will be a long way, one should not expect exploding profits in the next quarters. But in a time period of 3-5 years, I could imagine that the stock can triple if the turn-around is succesful. Also, when people finally realize that not every Dutch homeowner will go broke, there might be a re-rating of Dutch financial stocks in general. But this might also take time.

It would be easy to come up with a much more complicated valuation method, but I like to keep it simple. If there are no big holes in the balance sheet and costs are kept under control, equity is at a safe level, then book value should be achievable for any bank.

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Some links

Jeff Bezos’ letters to Amazon shareholders are the Berkshire letters of the Digital Age

According to its IPO prospectus, Uber isn’t so sure about these self driving taxi fleets

John Kingham (UK Valueinvestor) likes Rightmove

Paladin with an update of their Innogy case and TomTom (German)

Great article from Forbes on Venture Capital all star Andreesen Horowitz (A16Z)

A great story on Rich Barton, the founder of Expedia, Glassdoor and Zillow

Don’t miss: Rob Vinall sharing his thought on the importance of management:

Performance review Q1 2019

In the first Quarter 2019, the Value & Opportunity portfolio gained 8,3% (including dividends, no taxes) against 11.9% for the Benchmark (Eurostoxx50 (Perf.Ind) (25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%)).

Links to previous Performance reviews can be found on the Performance Page of the blog.

Some other funds that I follow have performed as follows in Q1 2019:

Partners Fund TGV: 10.63% *

Profitlich/Schmidlin: +8,45%
Squad European Convictions +6,44%
Ennismore European Smaller Cos +6.09% (in EUR)
Frankfurter Aktienfonds für Stiftungen +0,37%
Evermore Global Value  +6,54% (USD)
Greiff Special Situation +2,56%
Squad Aguja Special Situation +6,56%

*Since inception (01.01.2011), this translates into +173,2% vs. 86,4%  for the Benchmark.

Q1 2019 transactions

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Some links

Good analysis from the UK Value Investor why Interserve was taken over by its creditors.

Lyft, the new hot ride sharing IPO is to a large extent actually an insurance company

Interesting thoughts on Aviation Economics by Greenwood

Deep thoughts on Banks, Fintechs, Open Banking etc.

Naspers is (somehow) spinning of its Internet assets

FTAlphaville with a great post on cloud software stocks

Clark Street Value looks at Howard Hughes and Oncomed Pharmaceuticals

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