Rallye SA (ISIN FR0000060618) – another Holding company at a discount ?
Rallye SA, France is the holding company for 49.97% of Casino Guichard, one of the big French retail chains.
In their annual report they present the company as follows:
Their major assets are:
– 49.93% of Casino Guichard Perrachon SA (ISIN FR0000125585)shares (61.24% of voting rights)
– 72.86% of Groupe Go Sport SA (ISIN FR0000072456)(78.73% of voting rights), another small listed French company
– “investment portfolio”.
There is some qualitative description of the “investment portfolio” on page 19 of the report, it seems to be a quite divers collection of participations and real estate.
Rallye’s investment portfolio was valued at €365 million as of December 31, 2011, compared to €435 million as of December 31,
2010. At the end of 2011, the portfolio consisted of financial investments with a market value(1) of €272 million (vs. €295 million
at end-2010) and real estate developments measured at historical cost(2) of €93 million (vs. €140 million at the end of 2010).
Net external debt stands at 3 bn as of year end 2011. Other than that i did not see major positions.
The trickiest part of Rallye’s balance sheet is the 2.5 bn EUR receivables position the show in their single entity balance sheet.^2.3 bn of that seem to be receivables against Group companies:
The current account advances made by Rallye to its subsidiaries are part of the Group’s centralized cash management system. They are
due within one year.
The point I am struggling with most is the following:
If those receivables are against Casino, then one would add those assets for the Rallye evaluation. If those receivables are against their various subholdings which also hold Casino shares, then one would need to fully eliminate them.
I have quickly checked the 2011 Casino annual report, but didn’t find any liability against Rally SA. So we should assume that those internal Rallye receivables are a technical position which is financing the Casino stack and should therefore not be counted extra. Only the “external” part (~200 mn) should be used).
So with that assumption we can now calculate the “sum of part” or intrinsic value of the Rallye SA share:
|Casino Guichard (50%)||4,112.3|
|Receivables, other assets||220.0|
|Net Assets at market||1,622.1|
|Number of shares||47.2|
|Value per share||34.37|
|Current market price:||25.80|
Overall, a 25% “discount” seems to be quite normal for such a slightly in transparent structure including extra financial debt. However if one thinks Casino is a great investment, then investing through Rallye might be a good idea:
Casino Guichard itself is not uninteresting. Although it is not cheap, they are growing pretty strongly. Especially interesting is the fact that 60% or more of their sales are now in LatAm (Brazil and Colombia), two markets which seem to be the most interesting retail markets at the moment.
On the other hand, I am not a big expert on retail chains, so from that point of view I will not analyze Rally/Casino further.
If my assumptions are correct, the current “discount” of Rallye vs. its sum-of-parts as a holding of 50% Casino Guichard is only 25%. Considering the extra leverage and the lack of visibility, it does not look greatly undervalued.