Category Archives: Anlage Philosophie

“All German Shares” series – Part 1

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This is part 1 of the “All German Shares” series. As mentioned in the intro a few days ago and as a reminder:

  • I will look at the shares in random order, so it doesn’t makes sense to propose specific shares to me
  • the first round analysis will be very high level

Ok, so let’s start:

 

Nr. 1: DEMIRE (Deutsche Mittelstands Real Estate) AG – ISIN DE000A0XFSF0

DEMIRE is a listed real estate company focusing on “secondary” location commercial real estate objects, i.e. locations that are not “Prime”. The company has a market cap of 530 mn EUR and is stating an NAV of ~5,85 EUR compared to its latest stock price of around 4,90 EUR.

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The “All German Shares Series” – Intro

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Background:

My roots as an investor are domestic German stocks. For the first 10-15 years of my investing “career” I would only look at German stocks (with minor exceptions during the Dot.com boom), only after some time I moved on to a more international focus. Even at the beginning of this blog in December 2010, the majority of our shares back then were still German.

These days, I only have a relatively small domestic stock allocation left (P. Hartmann, Draeger, Innogy) and mostly screen for international stocks.

One interesting thing happened in the meantime: I kind of lost my comprehensive knowledge about German shares. A lot of companies have newly been listed or disappeared and somehow I never ket track of what was happening. Also I didn’t follow the good ones very closely.

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Some links

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Good writers seem to be better (Hedge-) fund managers

The Valuesque Blog with a great deep dive on the GE/Baker Hughes accounting and the Markopolis Report

Another new Langfrist fund with its initial report: Compound Interest

Yetanothervalue blog with its August roundup post (dieting, short selleng etc.)

A good collection of Stock spin-off links

Broyhill half year letter to investors

A nice investment check list from the UK value Investor

My 10 Cents on the WeWork IPO – The “AWS of Commercial Real Estate” or a “Double Hype” ?

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WeWork as the AWS of Commercial Real Estate

A lot has been written in the past few days about the upcoming WeWork IPO. I had linked to a few articles on Saturday and FTAlphaville has some pretty sarcastic but good coverage as well.

Yesterday then the always brilliant Stratechery came out with in interesting post. Ben Thompson thinks that WeWork could develop into something like AWS (for real estate) which now is repsonsible for most of Amazon’s profits. But he clearly acknowledges there are a lot of governance issues etc. etc.  The “WeWork is like AWS” story is nothing new and is mostly pushed by WeWork itself and combined with what they think is the adressable market (hint: all commercial real estate globally) could justify almost any valuation.

WeWork’s actual product: Open Plan offices (for start-ups and wannabes)

What I have been missing in the whole discussion so far is a look at WeWork’s actual product which in my opinion is the following:

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Some links

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Very nice post: Investment lessons from 3 weeks of fatherhood

Should value investors look at money losing companies ?

Is Coporate Debt the weak link in a potential market downturn ?

Will the WeWork IPO maybe mark the peak of the current Unicorn mania ?  Despite the valuation, there are many red flags in the S-1 prospectus.

Harry Markopolos, main Madoff critic, issued a 170 page attack on GE. John Hempton has a different view (part 1, part 2)

Interested in knowing more about Venture Capital ? Then the free Venture Deals online course  the best opportunity

Must Read: Deep thoughts on the current Venture “Funding bubble” for loss making companies

Quick update: Osram Special situation

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Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH.

Ouch, another day, another problem. Yesterday, one of my Special situation stocks Osram lost around -7%.

What happened: The largest shareholder  Allianz Global Investors (AGI) announced that they do not support the offer as they consider the price of 35 EUR per share as too low.

A few observations from my side:

  1. AGI had purchased more Osram shares in the past few months. Beginning in July they announced that they crossed the 10% threshold
  2. However in their press release they talk about >9% stake so they have sold shares in the past 4 weeks, clearly at a price of lower than 35 EUR. So while AGI is critisizing Osram managment for not believing in their company, AGI (or parts of them) also seems to have some problems in believing their own investment thesis.
  3. The press release reads like a marketing pitch for their “active management approach” with high fees which clearly is under threat from passive startegies
  4. They state that “at the moment they would not accept the offer” which in my opinion is not a super hard statement and we are relatively early in the acceptance period
  5. Although AGI states that that they are investors since the initial listing (which is natural if you had owned Siemens shares which they surely had), in various articles it has been mentioned that AGI’s average purchase price is much higher than the 35 EUR offered as they seemd to have increased their position significantly when the stock still went up.
  6. As the basis for their current opinion they use an “independent fairness opinion”. Why do they need that ?

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Quick updates: Vostok New Ventures, Majestic Wine and Cars.com

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Another headline for this post could have been “The good, the (not so) bad and the (very) ugly…

Let’s start with “the ugly” right away: Cars.com

Yesterday was a pretty bad day anyway but Cars.com decided that it is a good day to tell investors that a potential sale of the company will not materialize. The whole bidding process has been described in details by the company. In summary, 29 parties looked at the company but no “actionable” bid could be obtained. This alone might not have triggered the -36% share price reaction taht happened yesterday,

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Special situation Quickie: Acacia/Cisco & Grandvision/ EssilorLuxottica

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First of all thanks to the readers that mentioned these two potential M&A arbitrage situations.

Acacia/Cisco

Acacia, a US based received a take over offer from Tech Giant Cisco valuing the company at 2.6bn or 70 USD per share. The offer price included a 46% premium on the undisturbed price. The stock traded at the time of writing at 64,75 USD, indicating a 5,25 USD or a 8,1% premium.

The transaction is expected to close at the end of Cisco’s Q2 FY 2020 which if I have read it correctly translates into January 2020.

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Metro take over – quick assesment

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After reading “Merger Masters” I decided to practice my new found knowledge a little bit and apply it to Metro. My long time readers know that I bought Metro as a spin-off and exited with a pretty painful loss.

The Czech billionaire Daniel Kretinsky, who became Metro shareholder a year ago, made a voluntary offer of 16 EUR per Metro common share and 13,80 EUR per pref share. Little is known how Kretinsky actually became a bilionaire, as he is now only 45 years old. Maybe it helped that he married the daughter of another Czech billionaire, Petr Keller. Some call him a Czech “oligarch”. Up until now, he mostly invested in the energy space, most notably buying coal assets in Germany.

 

Metro Management has already rejected the offer as too low, so the deal is clearly a “hostile” one.

From the Merger Masters book, I use the initial checklist to quickly assess the opportunity:

  1. What is the srpead ? What is the annualized return ?
    –> 0%, stock price trades at offer price at the time of writingm the pref share even above the offer price
  2. What are the regulatory issues/hurdles
    –> Most likely no big hurdles. Acquirer is not active in this industryy
  3. What are the conditions of the agreement
    –> unlcear. Unspecified “Minimum acceptance” level
  4. What is the strategic rational of the deal
    –> unclear. Buyer has no experience in retail. Most likely “opportunistic” and/or real estate driven
  5. What is the downside if the deal breaks ?
    –> – 10 to -15% (my estimate)

So based on this first assesment, the situation doesn’t look very interesting. For a hostile deal one should expect some sort of premium which doesn’t exist. The major issue is clearly that there is little information about the acquirer and his motives.

On the other side, the market seems to expect clearly a higher bid, otherwise the current price makes no sense. However I cannot think of any other bidder for Metro but maybe I am wrong.

So my assesment here is clear: At this price the risk/return profile for Metro is not worth it and I’ll pass.

P.S.: Does any reader know how the current legal situation is for German Prefs ? WIll an acquirer need to pay the same price as for the common shares

 

 

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