Tag Archives: Sky Deutschland

Short cuts: Sky Deutschland, Rhoen Klinikum, Bilfinger, Vossloh

Sky Deutschland

A short quiz: Can you spot the day when the 6,75 EUR offer expired ?

My initial strategy obviously didn’t work out. Now however I am wondering why I didn’t short Sky Deutschland instead before the offer expired. It seems to be clear now that the price didn’t move above 6,75 EUR during the offer period, because most people attach a fundamental value of less than 6,75 EUR to the shares. That would have been second level thinking, but I missed it.

I read somewhere that you should only sell a stock from a portfolio if you are ready to short it. That would have been the best approach here.

Rhoen Klinikum

Looking at the chart, my decision to take a profit at 23,15 EUR looks stupid:

The mechanics of the current “listed transferable tender rights” are the following: The less people who want to actually sell there shares, the lower the price of the tender rights and the higher the share price. As for now, it seems that not so many people want to sell. I have to confess that I got nervous when the price of Rhoen dropped after I bought on the first day ex rights.

In the future, I think it makes sense to wait longer and see how these special situation plays out. I think I waisted some “intrinsic optionality” by taking the small profit much too early.

Bilfinger

In August I looked at Bilfinger for the first time. My arguments against an investment back then were the following:

– some of the many acquisitions could lead to further write downs, especially if a new CEO comes in and goes for the “kitchen sink” approach
– especially the energy business has some structural problems
– fundamentally the company is cheap but not super cheap
– often, when the bad news start to hit, the really bad news only comes out later like for instance Royal Imtech, which was in a very similar business. I don’t think that we will see actual fraud issues at Bilfinger, but who knows ?

Yesterday, Bilfinger released Q3 numbers.

For me, it was therefore no big surprise that they had to write down in total of ~230 mn EUR. The market however seems to have been expecting other things as the extreme drop in the share price shows:

I think Bilfinger is now approaching the “very cheap” area and I will look at them a little closer in the next weeks.

Vossloh

Vossloh, another potential “turn around” story also released Q3 numbers a few days ago. Similar to Bilfinger, investors seemed to have been spooked by the numbers.

In my opinion, two issues might have irritated investors:

– new orders in Q3 were very weak (new orders in the first 6 months were very strong)
– management basically said that a “full” recovery can only be expected for 2017

Interestingly, the whole press release had a very negative tone, they make no attempt to strip out the one offs etc. etc. Maybe it is coincidence, but if I would want to talk the stock down in order to maybe buy the company cheaply, I would do it exactly that way…..

This is what I said in September:

Looking at the chart, this might not be unrealistic as the stock price is still in free fall and any “technical” support levels would be somewhere around 39 EUR per share if one would be into chart analysis. In any of those “falling knife” cases, patience is essential anyway.

Vossloh will therefore be “only” on my watch list with a limit of 42 EUR where I would start to buy if no adverse developments arise.

So we are now very close to my potential entry point. I will watch this as closely as Bilfinger. Both for Bilfinger and Vossloh, Iit will be interesting to see if there will be some year end tax loss selling.

“Bonus savings account” with Sky Deutschland (ISIN DE000SKYD000) voluntary tender offer

Ruppert Murdoch is reshuffling his empire. Today he announced that BskyB, his British carrier has bought the 21st Century Fox 57% stake in German broadcaster Sky Deutschland.

Under German rules, once you transfer more than 30%, you have to make an offer to all other shareholders as well. This is from the offical web site:

Offer to minority Sky Deutschland shareholders
Following the agreement to acquire 21st Century Fox’s 57.4% stake in Sky Deutschland, BSkyB has announced that it will launch a voluntary cash offer to Sky Deutschland’s minority shareholders at €6.75 per share. There is no minimum acceptance condition as BSkyB believes it can realise the advantages of closer collaboration with Sky Deutschland and support its continued growth and development with the 57.4% stake it is acquiring through this transaction.

Although no details have been published yet, I think the likelihood of this going through is very high. Consequently, the stock now trades at 6,75 EUR.

However I find this quite interesting because if you buy the stock now, you get a free put option, as you will be able to tender the stock into the offer at some point in time. Depending on the time horizon, this option is worth between 4,5-8% (30-90 days). I don’t think that there will be a higher offer or something, but based on the historical volatility there is a good chance that we see slightly higher prices. Effectively it is a 0% savings account (quite attractive these days) with a bonus component.

Of course you cannot sell the option directly, but you can buy the share and make a pretty one sided bet on higher prices until the offer expires. At current prices there is no downside risk. A more sophisticated investor could buy the stock and sell a call in order to monetize the put option.

It is to a certain extent quite similar to the FIAT case but in my opinion with less execution risk.

Just to be on the safe side: I would not buy Sky Deutschland outright, this is a pure “special situation” investment.

For the portfolio, I will allocate a 2,5% position at current prices to this special situation, my return target is 5% within the next 30-90 days.

DISLAIMER: This is not a free lunch, of course there are risks which I haven’t mentioned or though of. But to me it looks like a pretty good risk/return progile.