MIKO BV – Quick comparison with Groupe Guillin SA (FR0000051831)

In my MIKO BV post a few days ago, Winter commented correctly, that the plastics division of MIKO looks similar to what a French company called Groupe Guillin SA is doing.

At a first glance, Group Guillin looks even more interesting with the following valuation metrics (in brackets MIKO):

P/B 1.0 [1.24]
P/E 6.8 [11.8]
P/S 0.3 [0.5]
EV/EBITDA 3.6 [5.5]

So Guillin does almost the same but is much cheaper. Cheaper is always better for value investors, isn’t it ?

Guillin looks also quite OK in my Boss model and even shows better free cashflow so what is not to like ? ROEs look Ok as well as this table shows:

ROE ROIC
31.12.2001 19.3% 9.6%
31.12.2002 27.0% 14.0%
31.12.2003 17.6% 12.6%
31.12.2004 12.0% 11.0%
30.12.2005 15.2% 10.0%
29.12.2006 10.4% 7.3%
31.12.2007 11.5% 8.4%
31.12.2008 7.0% 6.0%
31.12.2009 13.7% 10.4%
31.12.2010 13.4% 7.6%
30.12.2011 7.3% 5.3%
31.12.2012 13.4% na.

However, ROICs don’t look so great as Guillin especially since 2006, when they grew quite quickly after 3-4 years without growth but ROIC suffered significantly

Lets compare this with MIKO’s plastic segment numbers:

MIKO plastics          
  Assets Libailities Net invested assets NI ROIC/ROE
2007 29.3 5.6 23.7 2.40 10.1%
2008 35.1 4.5 30.6 2.16 7.1%
2009 32.4 4.35 28.05 5.17 18.4%
2010 39.4 6.1 33.3 4.55 13.7%
2011 42.9 5.7 37.2 4.04 10.9%
2012 46.7 6.7 40 4.12 10.3%

So we can clearly see that MIKO consistently generates significantly higher ROICs than Guillin (in some years 5-6% more) than Guillin. Guillin uses leverage to achieve OK ROEs, while Miko doesn’t use leverage. Also net margins are on average 2-4% higher for MIKO plastics than for Guillin.

So in my view, the MIKO plastics business looks much better quality than Guillin, despite the fact that the MIKO plastics division is only 15% of Guillins sales. So scale doesn’t seem to be the deciding factor, it looks like that MIKO has found a more profitable niche than the larger Groupe Guillin. As far as I understand, Guillin sells direct to supermarkets while MIKO’s clients in the plastics division are consumer product manufacturers.

I have been looking at Groupe Guillin actually quite often, but the low return on invested capital kept me away. Although one has to say that the stock performed quite well over the past years, also compared to MIKO:

So Guillin is clealry not a bad company, but in direct comparison I think MIKO has greater potential (and a better downside protection) than Guillin.

5 comments

  • Hi mmi,

    Maybe it is time to revisit the investment case in Groupe Guillin (which in hindsight was an excelent multibagger!)

    Take care

    Dave

    • yes, Guilin did better since then (~39% p.a.) than Miko (only 20% p.a.). Guillin hat better EPS growth and was starting at a lowe valuation. It would be actually interesting to find out how and why Guillin could increase their margins so much. Topline growth was rather muted.

      • My intention was not to call for a comparison bt the 2 companies but simply point out the merits of Guillin on itself (sorry this section is what I found on your web when looking for Guillin). I am pretty sure both are very good family-owned businesses.

        Having said this, and pls no expert here, but maybe consolidation (M&A) has played a more fundamental role in Guillin (look at the export “jump” from 2009 onwards. They doubled the revenue by opening new markets). In my opinion –apart from the fact that Miko is not a pure player- scale has played a substantial role. When looking at the gross margin evolution, it seems these guys are continuously being able to improve its purchase power (gross margin: 32% in 2012 vs 38% in 2016), while keeping flat fixed costs (on relative basis vs. revenue, while growing).

        Although both are family owned, Guillin is also run by the head of the family, which happens to be the CEO (which is also an interesting angle to consider).

        This open a really important question almost 5 years later: should you replace MIKO after 5 years by Groupe Guillin (once proved that both co. trade at comparable FCFx multiple)?

        A lot of difficulties related to this question (confirmation bias, anchor bias, a lot of bias :-).

        I am sorry for the question. I think is good for you to get questioned and also good for me to ask.

        Take care.

        • No worries, but for me it is more intetresting to look at the reasons why I didn’t buy Guillin back then. Improving my process will lead to better results in my opinion.

          At the saem multiple I still think Miko is the better company but who knows ? Replacing Miko would cost me a lot of tax so Guillin would need to be much more attractive.

  • Hi MMI,
    from my point of view, your considerations do not really make sense: You buy a higher ROE for a clearly and significantly higher valuation in all ratios. While I understand the point of the ROI/ROE perspective (the compounding), I believe that it does not make sense at all to look at margins: It is simply a relation between pe and ps. For a higher margin, you always have to accept a higher price-to-sales-ratio, and that is the opposite of what I consider as value investing – this is quality, growth investing or whatever. The margins (and also the ROx) have no meaning from a mechanical point of view, nor from a logical one: If margins remain low a Guillin and high at MIKO, then I still have the cheaper stock with Guillin. If they equal some day, than it will be even better. There is no compounding or anything else, just a typical error in reasoning. But that’s just my point of view – it is always interesting to read a qualified other opinion.
    Best regards

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