AS Creation (DE000A1TNNN5) Half year report 2013 – SELL
AS Creation was on my watch list for a potential sale quite some time.
The initial investment casé was as follows:
At the time of writing in 2010, AS Creation was trading at around 29 EUR. We thought at that time that either “reversion to the mean” of net margins of around 5% and/or the Russian JV could give earnings and of course the stock price a nice boost. Our overall fair value at that time was estimated at around 38 EUR, a weighted average of good/medium/weak scenario.
In the meantime however, both assumptions were not reached. Net margins went down to 2.4% in 2011 and back to 3.6% in 2012. So far away from the 5% we assumed for the good case.
Additionally, based on the 6 month report issued on Monday, the Russian JV seems to develop rather dissapointing. The second quarter alone brought an additional “at equity” loss of 1.5 mn EUR after 0.5 mn loss in Q1. The reasons for this disappointing developement were “unforeseeable” difficulties in getting their stuff into the sales channels. This sounds like a quite weak explanation. Additionally they mention declining demand in Russia which fits into my “Gorilla” thesis.
So our old “best case” seems hard to reach. I mean if they don’t earn their margin now, with parts of Germany in a real estate bubble, then I highly doubt that they can do that ever again.
Combined with some other issues, like a non-explained general waiver for management in connection with the ongoing cartel investigations, I do not see a lot of upside in the stock for the next couple of years.
As the current share price is way above the estimated “Mid case” valuation, the only possible consequence is to sell the AS Creation position completely.
This further increase the cash pile, so I have to work hard on new ideas….