Dear copiers, More Good NEWs! I added $PAH3.DE (Porsche Automobil Holding SE) to our Strategy: The Investment thesis is a bit complicated to explain but I'll do my best to Keep it Simple: ๐—ก๐—˜๐—ช This will be a Special Situation (Hidden Asset) that should be unlocked by the Partial IPO of Porsche AG ๐—–๐—ข๐—ก๐—ง๐—˜๐—ซ๐—ง Making the Long Story Short: -> $PAH3.DE has a Stake in $VOW3.DE (Volkswagen AG) of 31.9% (over the total subscribed capital). -> Volkswagen AG has a 100% ownership over Porsche AG -> This means, Porsche SE has an indirect stake of 31,9% in Porsche AG ๐—–๐—จ๐—ฅ๐—ฅ๐—˜๐—ก๐—ง ๐—ฆ๐—œ๐—ง๐—จ๐—”๐—ง๐—œ๐—ข๐—ก At a price of โ‚ฌ150 -> $VOW3.DE has a Mkt Cap of โ‚ฌ87billions At a price of โ‚ฌ68 -> $PAH3.DE has a Mkt Cap of โ‚ฌ21billions (+NO Net Debt) This is just a 24% of VW Mkt Capt. At first glance it could seem like it's already trading at a Discount (Fair Value should be equal to it's stake in VW ~31,9%). But the truth is that, $PAH3.DE still has some Legal Issues to be solved that could cost the company around ~7billions (KapMuG Issue + Diesel Issue) So the Market is really Discounting this 7billions from $PAH3.DE Mkt Cap... If the resolution is favorable for PAH, this could be an extra upside (but I'm not counting with it) ๐—ฃ๐—ข๐—ฅ๐—ฆ๐—–๐—›๐—˜ ๐—”๐—š ๐—ฃ๐—”๐—ฅ๐—ง๐—œ๐—”๐—Ÿ ๐—œ๐—ฃ๐—ข Porsche AG share capital will be divided into 50% ordinary shares and 50% preference shares (no voting rights) Approximately 25% of the preference shares (25% of the 50% = 12,5% of total shares) would be placed on the capital market (Partial IPO) Also $PAH3.DE would acquire 25% of the ordinary shares (12,5% of total) from $VOW3.DE for the placement price + 7,5% premium This means, $PAH3.DE will increase its stake in Porsche AG from 31,9% to 36,5% (12,5% directly + 24% via $VOW3.DE ) Finally $VOW3.DE will propose to its shareholders to pay out a special dividend equivalent to 49% of the total gross proceeds of the placement of the preference shares (partial IPO) and the sale of the ordinary shares (to PAH SE) ๐—”๐—™๐—ง๐—˜๐—ฅ ๐—œ๐—ฃ๐—ข ๐—ฃ๐—ข๐—ง๐—˜๐—ก๐—ง๐—œ๐—”๐—Ÿ ๐—ฆ๐—œ๐—ง๐—จ๐—ง๐—”๐—œ๐—ข๐—ก So... let's put all this information together to reach to a Potential Valuation (I'll will make a Sum of Parts, assuming PAH stake in Porsche AG + PAH stake in VOW deducting Porsche AG Operations) ๐Ÿญ) ๐—ฃ๐—ผ๐—ฟ๐˜€๐—ฐ๐—ต๐—ฒ ๐—”๐—š ๐—ฉ๐—ฎ๐—น๐˜‚๐—ฎ๐˜๐—ถ๐—ผ๐—ป ๐—ฎ๐—ป๐—ฑ ๐—ฃ๐—”๐—› ๐˜€๐˜๐—ฎ๐—ธ๐—ฒ The IPO is expected to be valued between โ‚ฌ60billions ~ โ‚ฌ85billions Considering that Porsche AG generates around โ‚ฌ4,5 ~ โ‚ฌ5 billions of Cashflow per year, even โ‚ฌ85 looks undervalued already... But we will stick to this conservative values considering current market conditions As mentioned before, PAH will have a 36,5% stake, this is between โ‚ฌ22 ~ โ‚ฌ31billions. But remeber PAH still will have to pay the 12,5% extra ordinary share it will get from VW + the premium. Using the above IPO valuations this 12,5% x 60 x 1,075 and 12,5% x 85 x 1,075 --> โ‚ฌ8,1 ~ โ‚ฌ11,4 billions At the same time it will receive the 49% dividend from VW, this is around โ‚ฌ2,6 ~ โ‚ฌ3,7billions (assuming 30% taxes) So... adding all toghether LOW -> โ‚ฌ22 - โ‚ฌ8,1 + โ‚ฌ2,6 + โ‚ฌ0,5 (current Net Cash) = โ‚ฌ๐Ÿ๐Ÿ”,๐Ÿ—๐›๐ข๐ฅ๐ฅ๐ข๐จ๐ง๐ฌ HIGH -> โ‚ฌ31 - โ‚ฌ11,4 + โ‚ฌ3,7 + โ‚ฌ0,5 = โ‚ฌ๐Ÿ๐Ÿ‘,๐Ÿ•๐›๐ข๐ฅ๐ฅ๐ข๐จ๐ง๐ฌ ๐Ÿฎ) ๐—ฃ๐—ผ๐—ฟ๐˜€๐—ฐ๐—ต๐—ฒ ๐—ฆ๐—˜ ๐˜€๐˜๐—ฎ๐—ธ๐—ฒ ๐—ถ๐—ป ๐—ฉ๐—ผ๐—น๐—ธ๐˜€๐˜„๐—ฎ๐—ด๐—ฒ๐—ป ๐—”๐—š (๐—ฒ๐˜…๐—ฐ๐—น๐˜‚๐—ฑ๐—ถ๐—ป๐—ด ๐—ฃ๐—ผ๐˜€๐—ฐ๐—ต๐—ฒ ๐—”๐—š) To keep it simple, VOW generates annually around โ‚ฌ11billions of Cashflow, of which โ‚ฌ4,8 comes from Prosche AG. So excluding Porsche, VOW produces around ~โ‚ฌ7billion in annual Cashflows. Asuming a P/FCF of between 5 ~ 8 (historical Avg) we can value VOW (ex Porsche) at around โ‚ฌ35 ~ โ‚ฌ55billions And PAH 31,9% stake at around โ‚ฌ๐Ÿ๐Ÿ ~ โ‚ฌ๐Ÿ๐Ÿ•๐›๐ข๐ฅ๐ฅ๐ข๐จ๐ง๐ฌ. 3) Putting all toghether Porsche SE should be trading at (in both scenarios I will Discount by 7billions the Mkt Cap for the Legal Issues): LOW -> โ‚ฌ17 + โ‚ฌ11 - โ‚ฌ7 = โ‚ฌ21billions (no upside from current Mkt Cap) HIGH -> โ‚ฌ24 + โ‚ฌ17 - โ‚ฌ7 = โ‚ฌ34billions (63% upside) ๐—–๐—ข๐—ก๐—–๐—Ÿ๐—จ๐—ฆ๐—œ๐—ข๐—ก Considering Porsche Valuation, I believe the IPO would be more close of the โ‚ฌ85billions than the โ‚ฌ60billions, and $PAH3.DE will have an expectacular return over the following months. But, in the case of the โ‚ฌ60billions valuation we still be fairly valued and time will realease the real value. In conclusion, I think this situtation is valued as if all bad could happened (low valuation + legal actions). As an example, you can read about the $RACE (Ferrari NV) situation, when it was spun-off from Fiat Chrysler (now $STLA.MI (Stellantis NV) , $STLA.US (Stellantis NV) ), an it's spectacular rally after the IPO. As a final conclusion, the main thing with Situation is that Prosche, as it is included in a Holding with other low quality brands, it is valued as a normal automaker (5~7 times earnings). While with the IPO, it could be valued independently (for example Ferarri is valued at 35 times FCF) *I'm not planning to keep it for the Long Term, just take advantge of the situation. Porsche now joins the rest of the Stocks in our Portfolio: $STNG (Scorpio Tankers Inc) , $AN (AutoNation) , $RUI.PA (Rubis SCA) , $GNW (Genworth Financial Inc) , $CE (Celanese Corp) , $ALLY (Ally Financial Inc) , $HPQ (Hewlett Packard) , $BABA (Alibaba) , $DBX (Dropbox Inc) , $ESNT (Essent Group) , $NA9 Cheers, JP
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