Exmar – Update Q3 numbers: “Thank you for the Tango” & SELL

Exmar was a special situation that I entered in August, following a surprising significant asset sale (a LNG liquification platform called “Tango”)

Yesterday evening, Exmar reported Q3 numbers including the final numbers on the ENI transaction. A few points that I found important:

  • Cash proceeds for the ENI transaction were slightly higher (+13 mn) compared to my base case
  • Net cash at company level however was -23 mn lower than I had calculated
  • Interestingly, Exmar only reported net cash at Group level, not gross cash at Holding level
  • The remaining core LPG business seems to do quite well, with sales up ~6% and EBIT up ~50%
  • They didn’t provide explicit number on how much they earn with the remaining regasification unit that is operating since August. The earnings of the “infrastructure” segment are really hard to read
  • Next week, there will be an extraordinary shareholder meeting declaring a 0,95 EUR dividend per share

The share price has done quite well. At the time of writing, Exmar traded at 10,20 EUR per share, an increase of almost exactly 1/3 vs. when I entered the position and even better in relative terms:

exmar relativ

Here is the updated matrix that I used initially to calculate expected returns. The only thing that I have changed is the current share price and exchanging 2,5 EUR special dividend with 0,95 EUR:

exmar matrix update

We can see that depending on the assumed future discount, the potential is quite limited if 0,95 EUR remains the only special dividend.

To be honest, I am somehow skeptical that they distribute much more. Maybe I am a little paranoid, but not reporting the gross cash number for instance could indicate that they might want to keep a significant portion of the cash.

With regard to the remaining business, one could argue that this might be worth more than a few months ago, as profitability is increasing significantly, on the other hand, this special situation was never about the the remaining business as such, but that the gap between “fair value” and price would narrow, driven by the closing of the Tango deal and a special dividend.

As I mentioned in the initial post, I don’t think that Exmar is a great company, but rather that Exmar got very lucky with how things developed for anything that was LNG related.

Therefore I decided to say “thank you for the Tango” to Exmar and sold my position at 10,20 EUR per share with a profit of ~33%. 


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