At the time of writing, it seems that the worst is over at least for the developing world. Numbers of newly infected persons are shrinking and in the Epicenter, Wuhan, life slowly seems to open up again. Yes, the number of deaths is still rising but this is to be expected as there is at least a 10-14 day delay in deaths compared to new infections.
All in all, it looks that “the hammer” including lock downs seems to have worked for the time being. For me time to think about two areas:
- What did I learn in the last few weeks ?
- What should I focus on going forward ?
2018 was on the surface a solid year for Handelsbanken. According to the 2018 annual report, operating profit increased by +5% and net income by +8%, top line by +5%. ROE was 12,8% which is below my assumed 15% but still a remarkably good number for a large bank.
Just looking at the bottom line, the first quarter of Handelsbanken looks great: Net income up +19%, operating profit up +18%. However top line only grew at +4% (vs. Q1 2018).
However this is solely a function of the fact that the bank reversed their provision into the Oktogonen pension fund for employees which they clearly state in the quarterly report:
Having this blog is nice because I can look back at what my original ssumptions were. I bought Van Lanschot in 2013, almost 5 1/2 years ago.
This was how I “valued” Van Lanschot back then:
A simple, “Berkowitz style” valuation would be: Book value
With ~0.51 times book value, Van Lanschot is one of the cheapest banks in Europe. Even Greek Banks like Piraeus Bank trade higher. The current valuation is on a level with „quality banks“ like Unicredit, Espirito Santo and Credito Bergamesco.
Interestingly, the P/B multiple for listed Private banks is a lot higher. Swiss competitors Julius Baer, EFG and Banq Privee de Rothschild for instance trade on multiples between 1.1-2.0 times book, a clear premium to „normal“ banks.
So with a “normal” result, one could argue for a valuation somewhere at 1.5 x book value. Clearly, this will be a long way, one should not expect exploding profits in the next quarters. But in a time period of 3-5 years, I could imagine that the stock can triple if the turn-around is succesful. Also, when people finally realize that not every Dutch homeowner will go broke, there might be a re-rating of Dutch financial stocks in general. But this might also take time.
It would be easy to come up with a much more complicated valuation method, but I like to keep it simple. If there are no big holes in the balance sheet and costs are kept under control, equity is at a safe level, then book value should be achievable for any bank.
Intro: Why am I looking at this ?
Fintech companies these days are hot. Not many days past that not another big deal is announced. Most of the “action” though takes place in the Venture Capital market which is normally closed for most retail investors.
There is clearly a lot of hype in the sector, on the other hand there are more and more really disruptive business models that might do to traditional finance (Insurance, banking, Asset management) what Amazon has done to retail
As financial services is one of my core interests in investing, I think it will pay of to keep an eye on what is happening in Fintech.
An exception is the German company Creditshelf, which despite being a pretty early stage startup, has just successfully completed its IPO on July 18th.
Dom Security was a French small cap that I discovered 2 years ago. My thesis back then was that the underlying business was attractive, that profits will recover and that I will own this “Boring” stock for a long time.
Well, almost exactly 2 years after I have invested, Dom Security came out with some news a few days ago.
The good part: EUR 75 Tender offer (10%)
Dom is planning a tender offer (share buy back) offer for 10% of the outstanding shares at a price of EUR 75 per share. Free float is currently around 30%.
Paul Hartmann AG is a 200 year old German company active in the healthcare sector, This is how they describe themselves:
A quick update on the Metro case. This is how I ended the Metro post from a few days ago:
For me, it is currently too early to do something. It is not clear to me if the stock price has overreacted or if more trouble is coming along especially from Russia.
Selling now would be clearly an uninformed decision as well as buying more. The next step will be the release of the 6M report next week. I think I will then still wait and see how Russia develops. If, for instance there would be a further profit warning because of Russia, then this would be a clear sell signal.
So let’s quickly check out the half-year report.
- Real, the German Supermarket chain is doing batter than last year. However the improvement in Q2 was smaller than in Q1 and might have been aided by early Easter holidays
- Delivery & Real Online do well, but are small
- Asia stable despite negative FX impact
- Metro Germany is still losing money
- Eastern Europe less profitable despite good growth
- FCF Q2 lower by -130 mn (reason given: Store openings)
- Restructuring charges at Real of up to -40 mn EUR (over 2 years if I understood correctly)
- EBITDA in Russia in Q2 dropped -50%, Like for like sales by almost -9%
It’s no secret that I like French family run companies. TFF Group, G. Perrier, Installux, Dom Security are just the main examples of these kind of companies.
Boiron SA is a French company which Bloomberg lists as “Specialty Pharmaceutical” company. Although “Specialty Pharma” is not exactly what they do. in fact, Boiron SA ist the only listed company that I know that exclusively produces and sells Homeopathic “pharmaceutical” products. The call themselves “World leader” of this field.
A few words on Homeopathy
A couple of days ago, I looked at Softbank more from a strategic point of view. This time I want to focus more on the actual assets and a sum-of-parts valuation
What is Softbank ?
Essentially the company at its core is a Telco company in Japan and US plus a lot of “extra assets” like the Alibaba stake, Yahoo Japan and then all the other stuff including the vision fund. The initial Software distribution business (this is where the name Softbank comes from) doesn’t play a big role anymore.
I will now try to walk through the major Softbank Assets in more detail:
- The Alibaba stake
Let’s start with the largest position first, the now so famous Alibaba stake. From a technical perspective, Softbank doesn’t own the listed shares but this:
A friendly reader had mentioned Trisura as a potential Spin-off opportunity in the comments and the stockspinoffinvesting blog mentioned it a few days ago and linked to a Seeking Alpha write-up.
At first sight, Trisura indeed looks interesting:
- it’s a small cap specialty insurer currently mainly active in Canada
- it hasn’t been “discovered” by sell side analysts yet
- only mini spin-off dividend for Brookfield holders (1 Trisura stock for 170 Brookfield stock(~0,3%)
- the company has been growing very quickly over the last few years
This is from the listing prospectus: