Sold some Daejan, bought some Exor

Daejan Holdings is a UK real estate holding I was planning to hold on to for the rest of my life.

I increased my position through the years, mostly when they were trading at around 50% of NAV. What I like about them is the fact that they are family owner-operators, with conservative financial reflexes, ideally positioned to benefit from any sort of crisis.

The controlling family are orthodox jews. Therefore they don’t allow women to sit on their board.

Now that practice has met with some criticism, they decided to take Daejan private with a buyout of 8050/share or 55% above the listed price at the moment.

Price surged.

Screen Shot 2020-02-28 at 10.07.53

Am I not pleased with this, to say the least. Actually, I am a bit enraged. 80,50 per share is well under the NAV of 120 per share. A NAV I saw growing in the foreseeable future at a nice clip of about 7 to 9% – as they did historically.

This is no way to to treat your loyal minority shareholders…

I rather see a safe 100% growth in a couple of years, then a short time 55% jump – but feeling screwed in broad daylight.

I am still hoping most of the shareholders of Daejan are sensible and refuse to pay out at these prices.

Still, I sold half of my Daejan. Why is that ?

Timing. Opportunity.

Just when Daejan surged, another princess appeared on the horizon because of the global sellof.

EXOR

Exor is a Italian family investment holding, under the guidance of John Elkann. They own automakers Fiat Group and Ferrari ; re-insurer Partner Re ;  agricultural equipement maker CNH industrial, known for the brand New Holland and a few “smaller” vanity (?) projects like football club Juventus and The Economist.

Growing up as the son of a potato merchant, I know New Holland equipment all to well.

Right about now they trade under 65/share.

Screen Shot 2020-02-28 at 10.24.15.png

I reckon that is 50 cents on the dollar.

Right about now they are in talks to sell (or merge) Partner Re for above 9 billion. Fiat is merging with Peugeot and will receive a substantial dividend payment. And they will split CNH up in two parts, that should create more visibility to the underlying value.

They are also buying back shares.

As of today, back of the envelope this gives me something like this:

Screen Shot 2020-02-28 at 10.42.37.png

Although I don’t like automakers besides Ferrari (capital intensive and commodity like products), I do think Fiat is undervalued.

And I do think NAV will be higher then 130/share in the nearish future.

I even like them when a global crisis would hit us , since Elkann has proven to be a great deal maker and capital alocator.

NAV has grown at 20% per year since he took over.

I have been following Exor since it was in it 20ies per share. Been pounding myself over the head ever since. Bought some in its fifties.

Happy to buy more when a crisis hits the world and build this one into a 10% position.

 

 

 

 

 

 

6 reacties

    • I don’t really have an idea what is fair. And don’t really understand the motivation behind the discount, either. Corporate expenses at the holding level? Double taxation of dividends? The Italian stock market? Single Person vulnerability? Some holdings list at a premium, some at a discount. Most of the time, I can’t find a rational reason why.

      What matters to me is a conservative look at their future ; their capital flexibility to react to a crisis ; their culture of capital allocation ; skin in the game ; dedication to the long term and an attractive price.

      I do wonder: will I be able to see a 15% compound return on this one in the coming 5 years or decade? When the odds are in my favour…I pull the trigger.

      Most holdings feel comfortable growing 8% per year. So yeah, that’s what I think Exor will do. Anything better is golden.

      What has held me back in the past is that I don’t really like all the legacy holdings in Exor. I do like Elkann.

      But at one point it is just too cheap, whether Fiat works out or not, whether Juventus is too capital intensive or not.

      And in 10 years time, those legacy holdings will be less and less relevant.

      Also, when they feel like the stock is undervalued – they buy the stock back in troves.

      Those are the guesses I take. But I have no idea what the sellers are thinking. And I have no idea what is fair.

      Geliked door 1 persoon

  1. I think you used the wrong marketcaps. I get their stake in Ferrari at ~6.5B based on a 28B MC. FCA ~5.3B on a ~18.6B MC and CNHI at ~3.2B on a ~12B MC. Did you use =Googlefinance by any chance?

    Like

    • Hey DavidW.

      Hmm. Let’s have a second look. Things are moving fast.

      When I use the numbers from the USA Market, as published by Gurufocus, today I get :

      Ferrari MC 38,76 = 8,88
      Fiat MC 23,55 = 6,75
      CHN MC 12,17 = 3,27 B
      JUVE MC 1,25 = 0,79 B

      Anyhow, NAV/share might be closer to 110 today ? Or when your number are more correct (which I certainly believe) we even dive under 100/share?

      I did make a mental note to myself that EXOR is cheap under 65/share. With their culture of buybacks and all the good news that should come out in the next few months, I don’t think you will do to bad under 65/share? What do you think ?

      Like

      • Gurufocus has 248M shares outstanding for Ferrari. While other sources like Bloomberg/Google have 185M shares outstanding. This is because there are voting shares. I am unsure if the Ferrari voting shares also share in the earnings of the company, I’m inclined to think this isn’t the case.

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