Boss Score harvest: Bouygues “family” (Bouygues SA, Colas SA, Alstom SA, TF1) part 1
When I published the https://valueandopportunity.com/2012/09/26/publishing-the-boss-score-top-25-france/ Top 25 Boss Score List for France, I was not aware that in the 3 lists, basically all listed subsidiaries including the mother company of the Bouygues Group showed up.
As far as I have seen, Bouygues owns the following percentages in those listed companies:
Colas SA 96.55%
Alstom SA 30.71%
Bouygues only holds 43.6% of TF1’s shares but fully consolidates the company, Alstom is only consolidated “at equity”. So if we look at consolidated numbers for Bouygues, one has to be aware that for instance part of the Cashflow on a consolidated basis belongs to minorities, especially for TF1.
A quick valuation overview:
|P/E 2011||P/B||P/S||div. Yield||EV/EBITDA||10Y Boss||5Y Boss|
All companies look relatively cheap, however Colas stands out with a ridiculous Ev/EBITDA of 2.4 times.
Let’s start with a quick look at the Holding company, Bouygues SA
Historically, Bouygues was a construction company founded in the 1950ies founded by Francis Bouygues. In 1986, Bouygues bought Colas SA, which specializes in road construction. It has since then diversified in the 90ties into Television and Telecom and has built up one of the major French mobile phone networks. The company is currently run by the son of the founder who seems to be well-connected to the French establishment. Among others, he has been “best man” to Sarkozy when he was married to Carla Bruni.
The family controls ~ 25% of the shares, second largest shareholder is Asset Manager Amundi with 10%. Interestingly, US value shop First Eagle is the third largest shareholder with 5%.
Based on the past 10 years, Bouygues really shows very strong Free cash flow generation, fully in line with stated EPS:
Positive is the increasing payout ratio. In August 2011, they executed a huge share buy back for ~10% or 1.25 bn EUR. As the stock chart shows, the effect didn’t last that long.
“Hidden Asset” & “sum of parts”
As I have mentioned in the past, the presence of large “at equity” participation like Alstom in this case leads to an overstatement of the EV/EBITDA ratio. The Alstom participation is clearly an “extra” assets which, if sold for cash would significantly decrease EV/EBITDA.
Why is the stock cheap ?
Clearly, the conglomerate structure is responsible for a certain discount. Plus the issue of a fourth mobile phone license in France and general issues with “traditional” media companies leads to big questionsmarks for Bouygues. Add to this a cyclical construction business and you know why analysts do not love the company.
The consensus rating on Bloomberg is bad (7 buys, 10 holds, 8 sell) which for me is usually a good sign.
At first glance, Bouygues looks much more interesting to me than Vivendi. They seem to be more shareholder friendly and more clever investors than the other frnech conglomerate. Although they clearly have issues, the strong cashflow and relatively cheap valuation is definitely worth a closer look.