Tag Archives: Special Situation

Sapec SA – follow up

Annual Report 2016

So now Sapec is out with their annual report for the last year (or 15 months).

The report is in French, so I am not sure if understood everything by 100% but I try to summarize the relevant issues:

  • Book value per share at year-end was 191,6 EUR
  • The operating result of the business ex the sold business is slightly negative
  • The Agro business was sold at 318,4 mn equity value, resulting in a gain of 226 mn EUR
  • They provisioned the full 36 mn Novo Bank guarantee.

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Special situation: Liquidation of KANAM Grundinvest fund (ISIN DE0006791809)

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

Background:

This investment is not an original idea, but rather a “me too” investment. Ben from Wertart has a very good write up from November last year, so I spare myself to go into too much historic description.

Just the short version: Kanam Grundinvest is one of several formerly open real estate funds in Germany which have been put into liquidation. The major difference to almost all other funds is that in the Kanam case investors actually didn’t lose any money over the lifetime of the fund as the real estate seems to have been relatively high quality. As of December 31st 2016, the fund has sold 95% of its real estate and is now effectively a cash box with some remaining real estate exposure.

So let’s focus on what has changed since Ben wrote his post:

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Special situation: Stada Arzneimittel AG – swimming with the sharks (again)

Disclaimer: This is not investment advice. please do your own research !!!

Stada is a company I had been looking at many times in the past. A business which in principle is quite good (Generics and OTC drugs) but the company was run by a long time CEO who acted as it was his own company without owning a single share. He paid himself huge salaries, employed his son in a non-sensical but highly paid job, the company afforded itself a huge corporate center and so on. As a result, the company created little to no shareholder value in the 10 years up to mid 2016. As a comparison, the 10 year return of Stada until 03/2016 was only around 1,8% p.a. compared to 7,5 % p.a. for the MSCI Europe health care index, a significant underperformance.

Then however something happened which is still very rare in Germany: A local activist investor (Active Ownership Capital) and some other funds acquired a significant stake in the company and pushed for change.

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Spin-offs: Uniper – Goal for Einhorn, Metro AG/Ceconomy – complicated but maybe interesting ?

Uniper /E.On Spin-off

In David Einhorn’s latest letter to investors he mentions the following:

We purchased E.ON (Germany: EOAN) in the fourth quarter of 2015. When EOAN spun out Uniper (Germany: UN01) in September, we kept the UN01 shares we received at €10.02 in thetransaction and sold the balance of our EOAN stake at a modest loss to redeploy that capital into additional UN01 shares. We believe the market does not appreciate the earnings stability o fUN01’s power generation and natural gas logistics assets. Further, the incoming management team is incentivized and has committed to cost-cutting, which will create a powerful cash flow profile. We own the company at 6x our 2017 earnings estimate.

So looking back this was a smart move. Although Uniper’s stock price came back a little bit, Einhorn is still up like 35% and has done clearly better than holding on E.On:

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SAPEC SA (ISIN BE0003625366) Still an attractive Special Situation despite +350% YTD ?

Disclaimer: This is not investment advice. The stock mentioned is relatively illiquid and potentially risky. Please do your own research !!!!

Management Summary:

SAPEC SA, despite having gained already 350% YTD is in my opinion still a highly attractive special situation. The company is in the process of selling its main business which will result in around 230 EUR net cash per share compared to a share price of 135 EUR. Deal closing is very likely and management promised to distribute a “significant amount” of the proceeds. For me this is very attractive as I expect this to happen in the first half of 2017.

SAPEC is a somewhat strange company. Although the company is listed in Belgium, business activities are almost exclusively in the Iberian Peninsula (Portugal & Spain). This is how the company describes itself:

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

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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Short cuts: Installux, Kuka, Aixtron

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.

 

 

 

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