Monthly Archives: October 2012

Bouygues again: How deep does one have to dig into Telco, sell side analysts & comparable Eiffage SA

So to conclude my “Bouygues week”, a final post about the company.

In my recent post about Bouygues, a commentator said if I can’t correctly project future profitability levels for the French mobile phone market, then investing into Bouygues is not a good idea.

As I call myself a fundamental investor, I have to admit that I do not have any extra knowledge about the french mobile market at the moment.

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A few more thoughts on Bouygues (Telecom) – O2 IPO

Recent news
After my buy decision two days ago, the share price jumped immeadiately 3%, but this was not the result of my blog but of some interesting news from the French Government, which was interpreted as positive for Bouygues Telecom.

The French Government seemed to have clarified that Illiad SA wil not be able to rely on cheap roaming contracts forever, but has to build out their own network rather sooner than later.


Another, in my opinion even more interesting story is the currently planned IPO of Telefonica’s German mobile business O2. According to the FTD (German), Telefonica is looking for an EV/EBITDA multiple of 6.5-7.

One has to keep in mind that this is only the number 4 operator in Germany and they are offering a minority stake only.

So I would say my 6.5x EV/EBITDA for Bouygues is not that far off from reality.

What I found even more interesting is the fact that at least in the second quarter, O2 managed to earn 333 mn EBITDA based on 789 mn EUR sales. This is an EBITDA margin of 42% against ~20% for Bouygues. This is really interestign becaues for me it shows the potentail for Bouygues if O2 manages to earn such margins in such a tough market as Germany which has already 4 carriers.

I will have to reread Bruce Greenwalds “Competition demystified”, but I am pretty sure that if at some point in time Iliad has etsablished itself, there is a good chance that margins might “mean revert”.

In any case, if the IPO goes through, O2 will be a very good comparable for Bouygues, much better than Vodafone or France Telecom.

Boss score harvest Bouygues family – back to Bouygues SA (FR0000120503)

After looking at one of the main subsidiaries Colas in the last post, let’s have a quick look back at Bouygues, the holding company itself.

Sum of part valuation

As I have mentioned in the initial post, Bouygues has 3 listed subsidiaries, Colas, TF1 and Alstom as well as 3 unlisted major subs which are Bouygues Construction, Bouygues real estate and Bouygues Telecom.

To get a feeling for a “sum of parts” valuation, we should start with the listed subs and then make assumption for the unlisted ones.

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Boss Score harvest: Bouygues “family” (Bouygues SA, Colas SA, Alstom SA, TF1) part 1

When I published the 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%
TF1            43.59%

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Performance September 2012 & Comments

Again, September has been a surpisingly strong month against the Benchmark. The Benchmarl (50% Eurostoxx, 30% Dax and 20% MDAX) gained +1.3% resulting in a YTD perfromacne of 18.2%. The portfolio returned however +3.3% in September, resulting in a YTD performance of 28.7% or 10% better than the benchmark.

Full performance overview:

  Bench Portfolio Perf BM Perf. Portf. Portf-BM
2010 6,394 100      
2011 5,510 95.95 -13.8% -4.1% 9.8%
Jan 12 5,972 99.27 8.4% 3.5% -4.9%
Feb 12 6,275 105.90 5.1% 6.7% 1.6%
Mrz 12 6,330 107.22 0.9% 1.2% 0.4%
Apr 12 6,168 108.02 0.8% -2.6% -3.3%
Mai 12 5,750 108.90 -6.8% 0.8% 7.5%
Jun 12 5,969 110.17 3.8% 1.2% -2.6%
Jul 12 6,229 112.15 4.4% 1.8% -2.6%
Aug 12 6,428 119.48 3.2% 6.5% 3.3%
Sep 12 6,510 123.48 1.3% 3.3% 2.1%
YTD 12 6,510 123.48 18.2% 28.7% 10.5%
Since inception 6,510 123.48 1.8% 23.5% 21.7%

Top performers in September were Total Produce, SIAS, Buzzi and KAS Bank, although most of the positions were positive.

There were no big changes to the portfolio apart from the two new shorts (Prada, Focus Media) and the 1% Rhoen Position. Piquadro has been completely sold down. As discussed, Cranswick has been “upgraded” to a full position.

Portfolio as of Sep. 30th 2012:

Name Weight Perf. Incl. Div
Hornbach Baumarkt 4.6% 2.6%
Fortum OYJ 3.4% -23.8%
AS Creation Tapeten 3.9% 9.5%
EVN 2.7% -5.5%
WMF VZ 3.9% 51.2%
Tonnellerie Frere Paris 5.1% 27.0%
Vetropack 4.8% -3.1%
Total Produce 5.5% 28.1%
OMV AG 2.1% -6.2%
SIAS 6.0% 35.8%
Installux 2.9% 1.4%
Poujoulat 0.7% 10.2%
Dart Group 2.5% 12.6%
Cranswick 5.2% -0.4%
April SA 3.3% 15.3%
Mapfre 0.7% 44.2%
KAS Bank NV 5.2% 12.6%
Drägerwerk Genüsse D 9.7% 94.0%
IVG Wandler 2.1% 13.4%
DEPFA LT2 2015 2.9% 39.2%
HT1 Funding 4.4% 21.1%
EMAK SPA 5.0% 26.3%
Rhoen Klinikum 1.0% 4.0%
Short: Kabel Deutschland -2.2% -52.2%
Short: Focus Media Group -1.0% 2.4%
Short: Prada -1.0% 1.7%
Short Ishares FTSE MIB -2.3% -3.0%
Terminverkauf CHF EUR 0.2% 5.1%
Tagesgeldkonto 2% 13.9%  
Summe 100.0%  
Value 67.4%  
Opportunity 25.1%  
Short -6.3%  
Cash 13.9%  


The portfolio now has a certain “tilt” towards the Euro crisis.  Although the direct percentage of PIIGS is only around 18%, a couple of the other positions (HT1, IVG, April) do show correlation with the developement in the Eurozone. 

I do not have a problem with this as I think all those stocks are cheap based on “bottom of the cycle” valuations. As indicated in my “boss Score” posts, I will prioritize to a certain extent French stocks going forward, as I find them exceptionally cheap as well.

Regarding the macro picture, I have nothing new to add.  BRIC’s look relatively weak if you look through the hype and the US is not doing that well either. So I find no reason to go “hunting” for value outside Europe for the time being.

Cash is  with 13.9% still comfortably high, I could add one position and still maintain my minimum threshold of 10%.

All in all I try to prepare myself for some months of underperformance as the current status seems to be “too good to be true”.  Past experience  however shows that such “hated rallys” have really long legs and it usually doesn’t pay to time the market.

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