Short cuts: Kuka, Swatch & Silver Chef


This is something that ran over the ticker today with regard to the Kuka case:

CFIUS Likely to Challenge Midea-Kuka Deal, Height Says

By Kasia Klimasinska

(Bloomberg) — CFIUS will likely challenge this deal “because Kuka has a direct relationship as a primary robotics supplier to Northrop Grumman,” Height analyst Nils Tracy says.

  • “At a minimum, we expect the transaction will face an extended CFIUS review timeline and a number of divestures”

However, looking at the stock price, this seems to be already priced in. My assumption is that the Chinese will be fully committed to close the deal and accept whatever they need to dispose. But the timing clearly will not be within the next few days.


Already a couple of days ago Swatch released 6 month figures including a press conference. People seem to have been spooked  by the bad results as well by the comments of Nick Hayek. He explicitly said that he will not make any staff redundant as he expects business to pick up again at some point in the future.

I am a little bit torn between a certain admiration (it is not easy to say that) and on the other hand the fact that Hayek clearly didn’t see the current problems coming a few months ago.

Looking back at my valuation exercise some months ago, the current share price at 257 CHF clearly looks more attractive. This was my old valuation table:

2015 2016 2017 2018 2019 2020
EPS 22,8 23,94 25,137 26,39385 27,7135425 29,09921963
P/E 16 16 16 16 16 16
Target price 364,80 383,04 402,19 422,30 443,42 465,59
3 year 15% 277,67
5 year 15% 231,48
3 year 12,5% 292,68
5 year 12,5% 252,70  


On the other hand, 2016 earnings will clearly be not 24 CHF per share but rather more like 14 CHF or so. At the moment I still don’t know what to do about Swatch. The drop is clearly lower than I expected but there is good mean reversion potential… be continued.

Interestingly, the once hyped smart watches seem to have pretty similar problems with a -32% decline yoy.

Silver Chef

Silver Chef issued a “Business update” last week after which the stock dropped some 15% or so. Some people ask me why that was the case. I honestly have no idea, however I had also no idea why the stock went up +20% since I wrote my post. Including a 1 mn loan “break” charge they seem to have earned between 22-23 mn AUD or ~ 0,65 AUD per share. That compares with 18,7 mn AUD or 0,60 AUD per share the year before. Some people seem to have expected more. In Bloomberg for instance for some reason the expectation was 0,75 AUD per share. MAybe they forgot to adjust for the capital increase ??

In my opinion there were little surprises. The 2015/2016 result includes a special effect that will result in a slightly lower GAAP profit growth projection for the next year.

Maybe some investors were irritated by this sentence:

In setting the FY17 budget, the Company has also taken a more conservative position in respect of provisioning for bad debts in the GoGetta business given its significant growth and stage of maturity..

But based on the projection, SIlver Chef still seems to be able to strongly grow its profits at least for the time being and for the amount of growth it is still pretty cheap at a trailing P/E of 15.

Macquarie did downgrade the stock right afterwards (after an upgrade in January):

(Bloomberg) — Silver Chef Ltd (SIV AU) was downgraded to “Neutral” from “Outperform” at Macquarie Research by equity analyst Jennifer Kruk. The 12-month target price is A$9.53 per share.

Macquarie had the stock on neutral since the beginning of 2014 when the stock price doubled, so it doesn’t look like that they have a crystal ball with ragrd to Silver Chef.

What I found much more interesting and unexpected was the last sentence:

The investment being made in Canada is expected to support high rates of EPS
growth for the Group into the medium term.

This is a pretty strong statement in my opinion.

All in all, following the results I am rather motivated to add to my position although I would want to see the annual report first.




  • Swatch nearing CHF400 , go figure.

  • Sold my Kuka shares today. They will drop out of the MDAX on Agust 11th. There might be an opportunity to get them cheaper if forced sales occur.

  • well, first of all I think that they are different businesses.

    Secondly I am not sure if leasing IT hard ware is such good business going forward. If the development goes further in the direction of the cloud, you pretty soon need mabye only a little box connecting to the cloud, a screen and mobile phone. So this means that pretty much all of the hard ware could become obsolete and IT leasing itself as well…

    Wheras food still needs to be cooked …….

    • Very good point. The usage of Cloud Software and Virtual Machines makes powerful hardware more or less obsolete (at least on the client side). So users don’t really need new machines as often as before.

  • Sorry for repeating my previous comment but I would like to know what you is your opinion.

    When comparing Grenke with Silver Chef, I thought that Grenke could be a better business (but I don´t know if such a difference in valuation is justified) because once Grenke acquires a new customer they can lease new IT hardware once it becomes obsolete while Silver Chef because of the nature of the leased asset (kitchen equipment) can´t have such a long term relationship with the their customers (except franchise customers)

    May be this is compensated because Silver chef leased assets can be lease several times, its a niche market with less competition that allows to charge higher rates and also my reasoning does not seem to be supported by actual ROE (Grenke ROE< Silver Chef ROE) although this can be just a temporary side effect of greater investment in growth (higher employee expenses as Grenke creates new structures in new countries) by Grenke.

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