Monthly Archives: May 2016

The return of the “Watch series”: Richemont (ISIN CH0210483332) – Better than Swatch ?

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Within my “Watch series” last year (Swatch part 1, Swatch part 2, Hengdeli, Fossil part 1, Fossil part 2, Movado) I left out one company which also is one of the major players in the Watch space: Richemont.

Some might ask: Why didn’t you already buy Swatch ? I argued that 300 CHF would be a good entry point and the stock is now at 292. Well, at the time of writing the Swatch post, I implicitly assumed that 2015 would be the low point. As we can see now, this is most likely not the case. Sentiment at Swatch is clearly more negative than for Richemont but still not rock bottom.

Additionally, I think one should not overestimate the moat of expensive Watch brands. One example is a (German) article 2 weeks ago in Handelsblatt about luxury watch brand Richard Mille. Founded in the early 2000’s they went from zero to almost 600 mn EUR in sales of super luxury watches with a new brand. So the market entry seems to be possible, at least at the very top.

 

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Background/Business

Originally founded in South Africa by Anton Rupert,  Richemont has a quite colorful history.The Group among other activities was into Tobacco, Pay TV and jewelery. Then, in the early 2000s, they focused on luxury and increased their exposure to watches.

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French update: Installux, G. Perrier & Thermador

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Installux

Installux released 2015 results a couple of days ago. EPS went down slightly from 28,12 to 26,63. With 31,7 mn EUR or 104 EUR per share, at the current share price of 271 Installux trades at an adjusted P/E of 6,3x.

The decrease in profit seems to be attributable to a reserve for a legal dispute in the Roche Habitat subsidiary. Roche Habitat is still the “problem child” and the only subsidiary making losses. The annual report states however that the restructuring is well on track and that sales at the division increased by 13% in 2015. If that division turns around, this could easily add 1-2 EUR per shar in profits in 2016.

Installux is maybe not a great company but a solid and very resilient company and at the current valuation still a very good “hold” in my opinion. Interestingly enough, Installux trades near its all time high:

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G. Perrier

G. Perrier released its  annual report 2015 some days ago.

2015 EPS was 2,65 EUR per share vs. 2,50 EUR. Cashflow generation was exceptionally good so that they now have 38,8 mn EUR or  ~10 EUR per share in Cash. At a current share price of 35 EUR per share, this means that adjusted for cash the P/E is below 10.

The first quarter looks pretty Ok as well. Overall, this quality (boring) company is still very reasonable priced and will remain a core position of my portfolio.

Thermador

Thermador released 2015 numbers and the 2015 annual report already some weeks ago. Stated EPS were 4,55 EUR vs. 4,47 in 2014. This includes two companies (Mecafer and Nuair France) that Thermador acquired in 2015. Without the acquisitions, EPS would have gone down by a low single digit percentage.

As Thermador is highly geared towardsFrench construction activity, the performance itself is quite good, the business seems to be very resilient.

Adjusting for around 4,50 EUR cash per share, the trailing P/E is now around 15,5 which clearly is not that cheap anymore. The current share price clearly implies EPS growth in the next few years (Bloomberg estimates are ~10% EPS growth for 2016 and 2017). This is something one will need to watch. 2015 earnings were still below the 2007/2008 level despite higher sales. If they actually grow earnings like estimated, the price is pretty OK, if not, the stock would be more or less fully priced in my opinion.

 

 

 

 

 

 

Some links

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Tom Ward (Chesapeake and Sandrigde) has no good words for the oil E&P business.

Bill Gates recommends 5 books to read this summer.

Interesting chart how bank profits and interest rates are correlated (or not..)

Thanks to a comment I discovered a relatively new but promising blog: Valuetradeblog

Nils has two updates, one on Hargreaves Services, the other on Vitec

There is  a new biography out about the founder of Iscar (bought by Berkshire some years ago)

Frank has a good post on our pilgrimage to Mecca ahhh Omaha this year

 

 

Book review: “Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future”

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I have to admit that before I read the book, I had a deep dislike for Elon Musk. I am not a big fan of egomaniac super star CEOs to put it mildly.

Over the years I followed Tesla but not in much detail, I always thought it is just a big hype. But recently I had the chance to catch a ride with a Model S and was very positively surprised. So as part of my vacation book package I downloaded the Elon Musk biography.

What did I learn from the book ?

1. Elon Musk was not the founder of Paypal. He was the founder of X.com which merged with Paypal. This turned him into a big shareholder and he made a lot of money but technically Paypal was not his idea.

2. His goal for life is to bring people to Mars because he is afraid that the Earth at some point in time is uninhabitable. That’s why he founded SpaceX. Tesla and SolarCity are more like an “accident”. Hi heart is in SpaceX.

3. At work level, he seems to be a real Axxxxxx, he fired his 10+ years personal assistant because she wanted a pay raise. I am not sure if you need to be such an idiot to be successful. However after Steve Jobs’ success many tech founders seem to think so.

4. He does scientific mindset and understands a lot of the technology. He never accepts the status quo similar to Steve Job’s “reality distortion” ability. For some reason, reality often follows his wishes. One example for instance is his insistence to use normal, uncertificated tech for SpaceX rockets instead of expensive, certificated stuff. Everyone said it wouldn’t work but it did.

5. Reading the book, it is clearly that he is a very dedicated guy who got much farther than anyone else thought, both with SpaceX and Tesla. In both cases he challenged fundamentally how things are done.

6. Nevertheless I would still never invest in one of his ventures. He always moves “on the edge” and the financial crises almost killed everything he had. There is little “margin of Safety” in what he does.

Overall, after reading the biography I still think that Elon Musk is still an egomaniac and also narcistic founder/CEO but I do now have much more respect of his achievements. And if he comes up

The book itself is written quite well. It starts slow with a lot of (in my view not very interesting) childhood stuff but then gets much better. Overall I definitely can recommend it as one of the better CEO biographies I have read over the years.

 

 

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Silver Chef (ISIN AU000000SIV4) – The “Better Grenke” from Down Under ?

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Following my previous posts on Australian stocks and Australian leasing companies in particular, it is not a big suprise that my first Australian investment is an Australian leasing/financing company called Silver Chef.

The company / the business

Print

Silver Chef is an Australian company which according to the website “delivers equipment funding solutions that help small businesses reach their full potential.”

The company went public in 2005. Some key figures (at 9,20 AUD/stock)

Market cap: 323 mn AUD
P/E 2014/2015: 15,2,
P/B 3,11
Div. Yield 5,7%EV/EBIT 20,2
EV/EBITDA 4,9

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