Magix Sixes – Quick Check Esso S.A.F. (ISIN FR0000120669)

Another “New Entry” in the Magix Sixes Screen (P/B < 0.6, P/E 6%) is Esso S.A.F.

The company is described by Bloomberg as follows:

Esso S.A.F. refines, distributes and sells petroleum products such as gasoline, heating and other fuels, distillates and asphalt. The Company’s subsidiaries include Esso REP and Esso Raffinage.

Esso is a 82% subsidiary of Exxon Mobile, market cap is around 800 mn EUR (12.9 mn shares at 63.4 EUR)

Current “traditional” valuation metrics are:

P/E: 5.8

P/E 10: 5.3


P/B 0.5

Div. Yield 7.9%

P/S 0.1

EV/EBITDA /Trailing 12M) ~6.0

Almost no financial debt

Tangible Book /NAV = 95%, almost no intangibles

So at a first glance, the stock looks extremely attractive.

However, a quick look at the Earnings history quickly shows that it is a low margin and highly volatile business:

TRAIL_12M_EPS Profit Margin ROE
1999 -2.36 -0.50% -4.7%
2000 13.76 2.08% 26.7%
2001 13.56 2.08% 22.9%
2002 -2.76 -0.44% -4.7%
2003 5.28 0.84% 9.5%
2004 13.92 1.93% 19.0%
2005 28.82 3.23% 28.1%
2006 18.03 1.88% 15.2%
2007 28.68 3.16% 23.5%
2008 -3.10 -0.27% -2.4%
2009 6.98 0.88% 5.7%
2010 11.48 1.17% 9.3%

The Chart looks interesting, the stock trades at all time lows:

Among the minority investors, only Sparinvest as known Value shop has a small position. The share is only coverd by three bank analysts with infrequent coverage (which is good).

Summary: Based on the very first screening, Esso S.A.F. could be an interesting contrarian and highly cyclical investment, as the comnpany has a very solid balance sheet. However, I need to dig a little bit deeper into the past in order to identify potential structural issues.

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