Author Archives: memyselfandi007

Uniper/E.On Spin-off: Take one ugly duck and transform it into ….. 2 really ugly ducks ?

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Background:

Monday, Sep 12th will be the first trading day for Uniper, the E.On spin-off. E.On shareholders will get one Uniper share for each 10 E.On shares they are holding.

Just to recap: Uniper will contain all the (unwanted) power generation assets of E.on, so all the “fossil fuel” power plants, the Russian assets and the Swedish nuclear plants plus some other stuff. The German Nuclear assets (and the corresponding liabilities) will remain at E.on due to the reasons I mentioned in the last post.

Uniper is clearly an ugly Duck, maybe the “most ugliest spin-off” I have seen since I started the blog. If we look into the most recent investor presentation, it is clear that you have a problem when the 3 listed growth projects are a German Hard Coal Power plant, q Russian power plant closed due to an accident which will reopen in 2018 and some strange dealings around the North Stream gas pipeline (page 9.). It doesn’t help either that Uniper had to take a 3,8 bn EUR pre tax write down in the first 6 months of 2016.That makes the duck still uglier.

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“Luxury update” – 4 years later (Prada, Boss)

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Almost exactly 4 years ago I pondered shorting luxury stocks in 2 posts.

Part 1 – Idea Generation

Part 2- follow up

The only stock I actually shorted was Prada and I gave up 1 year later as the stock strongly went against me.

Back then, I divided (totally arbitrary) a “peer group” of luxury stocks into 2 sub groups, “tier 1” and “tier 2” brands. Let’s look how those stocks performed over the past 4 years:

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Some links

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Deep thoughts on communciation between investors and management of a company (Graham, Buffett, Bezos)

A fine wine Madoff/Ponzi scheme

The farewell post of Motley Fool’s Morgan Housel and why investing is great

How Hormel foods tries to move beyond “Spam”

A good write up on the “new” Dell /VMWare Tracking stock

Andrew Left (Citron) is done shorting Hong Kong stocks

HIGHLY RECOMMENDED: Damodaran’s valuation class starts again  on September 7th.

 

Coface SA (ISIN FR0010667147) : Ultimate death spiral or contrarian opportunity in an attractive industry ?

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Executive summary:

Coface SA  is a relatively simple contrarian “mean reversion” case:

  • the company at the moment has some specific issues which in my opinion can be solved
  • the industry as such is attractive (within the generally problematic insurance space) with significant barriers to entry and little exposure to interest rates
  • Even in a bad case, the downside at current depressed levels is small. A conservative “mean reversion case” would indicate ~75% upside without assuming any growth
  • no hard “catalyst” and fundamentally it could get worse before it gets better
  • For exposure management reasons, NN Group will be sold and replaced by Coface
  • As always the reminder DO YOUR OWN RESEARCH. THIS IS NOT INVESTMENT ADVISE !!!!

The company:

Coface SA is a French “Trade Credit Insurance” company and one of the Big 3 players of this industry which together have 80% market share.

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Greenlight Re & E.On/Uniper update

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Greenlight Re update:

As some readers might remember, I bought shares of Greenlight Re, the Bermuda Reinsurer with investment advise from David Einhorn back in December 2015, but then sold them one month later, triggered by the insight that I don’t really understand his investment criteria. Looking back, the decision to sell doesn’t look very smart, as the stock priced since then increased by around 18% in USD (or 14% in EUR). YTD the stock is up 14,8% in USD.

In early August, Greenlight Re filed their 6M report. Interestingly the NAV per share declined by -4% from 22.20 USD to 21,32 USD per share.

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Some links

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Forget accelerators. Slowing down makes you more creative (TED talk)

Emerging Market bonds are back again and a profile of EM bond guru Michael Hasenstab

Interesting observations on Coach and its brand strategy

Some interesting facts about the Swedish stock market

A few weeks old but still interesting: Bronte Capital on UK banking (and RBS)

Be carefull when peer-to-peer lenders report “returns”

 

 

Metro Bank Plc – “The Apple of Banking” or “One-trick Pony” ?

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Readers of my blog know that I do like “outsider” like financial companies and that I do like UK banking (Handelsbanken Lloyds).

pf-metro_1684191c

Therefore it was highly interesting to read about Metro Bank, a recently listed “UK Challenger bank” in a letter of an investor I greatly respect. I had a look at “online only” UK challenger Bank Aldermore but didn’t like it too much, but as Metro Bank runs a “Branch strategy”, I decided to look into them.

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Short cuts: Installux, Kuka, Aixtron

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Installux:

Installux is surprisingly one of my best performing stocks this year, including dividends the stock is more than 30% and is at an all time high.

installux

I did not fully understand why until I read the 6 month report.

Sales are up ~7% yoy, 6M earnings per share are 17,16 EUR vs. 14,37 EUR, an increase of almost 20%. Profit improvements happened across most of their sectors, so it doesn’t look like single special effects or so. Despite the recent run-up, the stock remains exceptionally cheap.

Kuka & MDAX exit

For those who did follow my comments on the original Kuka post, they might have noticed that I sold the stocks 2 days ago and bought them back yesterday slightly cheaper.

The reason was that in the meantime, the tendered shares were kicked out of the MDAX, the popular German MID Cap index.

As I was not sure how the shares would react I decided to manage the risk by staying out.

At the end of the day not much happened:

mdax kuka

Nevertheless I was able to cheapen my purchase price from ~107,5 to 106 EUR. As the deal now is more attractive, I invested a total of 4% of the portfolio.

 

Aixtron – another special situation (with a Chinese buyer)

Aixtron, a former TECDAX star has fallen on hard times. However a few weeks ago, a Chinese buyer showed up and finally made an offer for the company at 6 EUR per share.

With a share price at currently 5,53 EUR, the discount is similar to Kuka at around 8,5%.

The situation differs slightly from Kuka:

  • the buyer is a financial buyer, not a strategic one (more opportunistic ?)
  • The purchase price is “optically” not as rich as the one for Kuka (below book)
  • they require at least 60% acceptance as closing condition (vs. 30% for Kuka)
  • within the offer they have a “put” if the index (DAX or TEcDax) goes down more than 30%

On the plus side, there is little risk that anyone complains about the deal as Aixtron was not doing well anyway and they are not deemed “strategically important”. The time horizon here should be shorter than for the Kuka deal.

The offer runs until October 7th. So far, the acceptance is low, as of today, only 1,64% of the shares have been tendered.

I think the risk is slightly higher than in the Kuka case as they might not reach their threshold, on the other hand there might be a chance for a better offer.

Although the situation is less clear for me as in the Kuka case, I start here with a 1% position at 5,53 EUR and will monitor it closely.

 

 

 

SportsDirect (SPD) – Bad PR but maybe good Capital Allocation ?

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Already some days ago, I linked to an interesting write up from Wertart on UK retailer SportsDirect.

sportsdirect-com_logo

In general, I liked a lot of things at SportsDirect from a share holder perspective:

+ It is kind of “Owner operated” with an experienced management
+ Aldi/Lidl like business model (Some brands, own brands, “hard discount”)
+ good growth track record since IPO
+ very good profitability
+ looks cheap based on past performance

Of course there are a couple of issues as well:

  • it is retail after all
  • Brexit / GBP issues (higher import prices, potential issues with consumer confidence)
  • Bad PR (low wages, zero hour contracts, incidents)
  • some governance issues (related party dealings etc.)

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