Category Archives: Value Stocks

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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Short cuts: Kuka, Swatch & Silver Chef

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Kuka:

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”

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Waddell & Reed (WDR): “mean reversion” opportunity or potential Value Trap ?

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The company:

Waddell & Reed is a Kansas based Asset Manager (mostly listed equity) & Financial Advisory firm. The company became somehow infamous during the 2010 “flash crash” when they were initially blamed that one of their order had caused the crash. Later, the SEC blamed a guy in London for it.

W&R looks like an interesting “High quality mean reversion” type of value stock.:

Market Cap: 1,4 bn
P/E (2015): 6,9
EV/EBIT: 4,5
Div. Yield: 10,3%
10 year avg. ROE: 33,4%
10 Year avg. NI margin: 14,1%

So we have a high ROE/ROCE, high margin business with significant net cash that trades at a ridiculously cheap level (based on 2015 earnings). There is a relatively recent SeekingAlpha “long” pitch with the following summary:

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DOM Security (FR0000052839)- A Hidden Champion with a “key to unlock” higher profits ?

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Executive Summary:

Dom Security is a small French company specializing in commercial lock systems. The business itself is attractive, the valuation relatively cheap, although the company is a small player. The “kicker” in my opinion is the fact that the largest subsidiary, DOM Sicherheitstechnik Germany, had significant R&D expenses over the last few years, which, if things normalize, could lead to a significant profit increase within the next 2-3 years to the extent of +40-45% which should translate into a similar upside for the stock price.

Additionally, the rebranding in 2015 could lead to better profitability in other units and in turn to potentially higher multiples, which at the moment are only a fraction of the listed larger competitors.

WARNING: This is not investment advice. Do your own research. The presented stock is very illiquid, so be extra careful.

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Performance review June 2016 – Comment: “Brexit, Excuses and Risk Premiums”

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Performance Q2 2016:

In the second quarter, the portfolio gained +0,6% against -3,5% for the Benchmark (25% EUR Stoxx 50, 25% EUR Stoxx small, 30% DAX, 20% MDAX). YTD the score is -1,4% for the portfolio against -9,5% for the Benchmark. On a rolling 1 year basis, its +1,0% for the portfolio and -8,4% for the bench.

Just for fun, here is the YTD/1 Year performance of some small funds that I follow and where I know the managers (I will track them in future reviews just to see how I am doing against the “Pros”, data from Bloomberg):

Partners Fund TGV: +1,71% / +7,20%
Profitlich/Schmidlin: -3,86% / -4,35%
Squad European Convictions -1,19% / +7,85%

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AQ Group (ISIN SE0000772956) – a 15 year “42- bagger” without a Moat ?

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Would you consider to invest into a company which at every occasion states the following:

AQ possesses no amazing patents or other security, we rely on having the best crew.

For a “Buffett/Munger” style value investor, this would be tough as there is clearly no moat or anything close and according to Buffett, the business economics always win in the long run, no matter how well a company is run.

Welcome to AQ Group, a Swedish “non moat” manufacturing company

 

large

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Hornbach Baumarkt AG revisited- Where are the market share donators ?

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Hornbach Baumarkt is one of my few remaining initial position after almost 5 and a half years.

Looking at the stock chart we can see that compared to the German small cap index, Hornbach looks pretty lame:

 

horni

At the time of writing, within my portfolio Hornbach clearly was a drag on performance with a total performance of 13,7% since 01.01.2011 vs. 109,5% for the portfolio and 73% for the SDAX.

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French update: Installux, G. Perrier & Thermador

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Installux

Installux released 2015 results a couple of days ago. EPS went down slightly from 28,12 to 26,63. With 31,7 mn EUR or 104 EUR per share, at the current share price of 271 Installux trades at an adjusted P/E of 6,3x.

The decrease in profit seems to be attributable to a reserve for a legal dispute in the Roche Habitat subsidiary. Roche Habitat is still the “problem child” and the only subsidiary making losses. The annual report states however that the restructuring is well on track and that sales at the division increased by 13% in 2015. If that division turns around, this could easily add 1-2 EUR per shar in profits in 2016.

Installux is maybe not a great company but a solid and very resilient company and at the current valuation still a very good “hold” in my opinion. Interestingly enough, Installux trades near its all time high:

stal

 

G. Perrier

G. Perrier released its  annual report 2015 some days ago.

2015 EPS was 2,65 EUR per share vs. 2,50 EUR. Cashflow generation was exceptionally good so that they now have 38,8 mn EUR or  ~10 EUR per share in Cash. At a current share price of 35 EUR per share, this means that adjusted for cash the P/E is below 10.

The first quarter looks pretty Ok as well. Overall, this quality (boring) company is still very reasonable priced and will remain a core position of my portfolio.

Thermador

Thermador released 2015 numbers and the 2015 annual report already some weeks ago. Stated EPS were 4,55 EUR vs. 4,47 in 2014. This includes two companies (Mecafer and Nuair France) that Thermador acquired in 2015. Without the acquisitions, EPS would have gone down by a low single digit percentage.

As Thermador is highly geared towardsFrench construction activity, the performance itself is quite good, the business seems to be very resilient.

Adjusting for around 4,50 EUR cash per share, the trailing P/E is now around 15,5 which clearly is not that cheap anymore. The current share price clearly implies EPS growth in the next few years (Bloomberg estimates are ~10% EPS growth for 2016 and 2017). This is something one will need to watch. 2015 earnings were still below the 2007/2008 level despite higher sales. If they actually grow earnings like estimated, the price is pretty OK, if not, the stock would be more or less fully priced in my opinion.

 

 

 

 

 

 

Silver Chef (ISIN AU000000SIV4) – The “Better Grenke” from Down Under ?

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Following my previous posts on Australian stocks and Australian leasing companies in particular, it is not a big suprise that my first Australian investment is an Australian leasing/financing company called Silver Chef.

The company / the business

Print

Silver Chef is an Australian company which according to the website “delivers equipment funding solutions that help small businesses reach their full potential.”

The company went public in 2005. Some key figures (at 9,20 AUD/stock)

Market cap: 323 mn AUD
P/E 2014/2015: 15,2,
P/B 3,11
Div. Yield 5,7%EV/EBIT 20,2
EV/EBITDA 4,9

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