MAN SE “Special situation”
In November 2013, I entered a special situation investment with MAN AG, arguing that the proposed compensation payment of Volkswagen might be too low and the court may decide to increase it.
Last week, the Munich court now decided to increase the compensation payment from 80,89 to 90,29 EUR. This is less than some investors hoped for, in the past 100 EUR or more were assumed to be realistic.
In my understanding, together with regulatory required interest and minus the already paid annual amounts, the fair value of the MAN share is around 95 EUR which is where the stock trades at the moment.
At ~95 EUR, this results in a yield of approx. 13,5% over 18 months, not spectacular but with very low risk as we can see in the chart:
I don’t think that there is much further upside although some hedge funds seem to be keen to get even more. I will wait and see but I think I will exit the position rather sooner than later.
Trilogiq is a stock which I bought 2 years ago as a potential “hidden champion” and based on very good historic profitability.
However, pretty soon after I bought, things turned south. The official explanation was that they introduced a new product made out of graphite instead of the metal tubes they used before which should replace most of the existing installations. Sales went down by around -7% in 2014 against 2013 and profit halfed.
Lats week, Trilogiq released 2015 numbers (Year ends at 31.03.).
At a first glance, things seemd to have picked up sligtly. Sales are up slightly and also profit is up from 0,94 EUR per share to 1,06 EUR per share. Cash and Cash equivalents are at a healthy 23,7 mn EUR or ~6,35 EUR per share.
At currently 15 EUR per share, this results in a P/E ex cash of around 8. Still very cheap.
At a second glance however, things don’t look as good. The operating result (EBIT) actually deteriorated by -17% from 4,9 mn EUR to 4,1 mn EUR. Only a swing of +1,1 mn EUR in the financial result driven by FX gains led to a higher EPS.
What irritated me even more was that in they mention in this document that only 7% of sales in FY 2015 were the new graphite products. They way they presented it before one had the impression that more or less the majoriy of sales would have been switched.
Although the second half year looked better than the first, I do think that they have some fundamental problems in their business. Many of their clients (EADS, German automakers) work at full capacity and many automotive suppliers are doing very well.
At Trilogiq however, this is not the case.The US business for instance shrank if one accounts for FX movements. Wages and Salaries increased significantly, not really a sign of tight cost control.
Overall it is not easy to understand what is going on because they don’t provide a lot of information.
My initial thesis relied on the implicit assumption that if their clients are doing well (EADS, automakers), Trilogiq should do well. It looks however that this is not the case and Trilogiq does have individual issues.
As a consequence, I sold the position in the last few days at an average price of 15 EUR per share, realizing a loss of -17,88% against my purchase price as I do not have any visibility on what’s going on at Trilogiq.
It still could be that Trilogiq could be a good value investment as it is still cheap but now it looks rather like a potential turn around case which is very different from the assumed “hidden champion” I was hoping to invest in.