WilhelmWilhelmsenHoldinganalysis(Part2)
July10,2016InthisfinalpartIwillbediscussingthetopicsbelow:
1) Postspin-offfromWWASA2) WilhelmsenMartimeServicesdivestment3) TheWilhelmsen’scapitalallocationrecord4) Acloserlookatshareholder’sequityinthebalancesheet(nerdwarning!)5) Acloserlookatcurrentearnings
WWIBsharepricecurrently:147,5NOKWWIBmarketcap:6,8billionNOK(800MUSD)USD/NOK:8,52Excelcalculationsfrompart1:https://hammerinvesting.files.wordpress.com/2016/05/wwib-presentation-excel1.xlsx
Postspin-offfromWWASA
- TreasureASAtradesatalargediscount,approx.40%- Possiblereasons:
o Bigchunkofshareso Bondliabilityo Vesseldebtnot100%ruledout
- Fairvalue:15%discounttounderlyingGlovisshares?- ArbitrageopportunityforSouthKoreanplayers- WilhelmsenHoldingmaybuyupdiscountedTreasuresharesatsome
point
WMSdivestment
- 1/5ofWMSsoldtoindustryplayer,Survitec- 110MUSDincash+20%shareinSurvitec,accountinggainof60MUSD- SalesuggestsoverallWMSvalueofapprox.6,5billionNOK- SalehighlightsthatbookvalueinWMSisprobablyunderstated
Wilhelmsen’scapitalallocationrecord
- Lowdividendratio=capitalallocationbecomesespeciallyimportant- Canhistorybeaguidetothefuture?
Trackrecord:
- HyundaiGlovis.Investmentof100MUSDin2004.Return977MUSD11yearslater=9,8x,23%annualizedreturn.(Dividendsexcluded!)
- CallenbergTechnologyGroup.Investmentof55MUSDin2007.Return:Unknown-stillavailableforsalebutrevenuegrowthfrom130MUSDin2007to220MUSDtoday.
- QubeHolding.Investmentof134MUSDin2011and2016.Returntoday176MUSD(dividendsandsalesincluded).32%in5years.5%annualizedreturn.(Australiandollardepreciated30%vsdollarinthattimeframe.)
- NorSeaGroup.Investmentof87MUSDin2012andin2014.Value2015yearendplusdividendsreceived84.(Exposedtotheoilsector).
- VehiclesServicesAmericas,CAT-WWLacquiredin2016(owned50%inbothbeforetransaction).SoldVehiclesServicesEurope.Gainof80MUSD.Notsurewhattomakeofthis,notmuchinformationreleasedbutpositivethattheyincreaseinvestmentsincompaniestheyalreadyownandknow.Conclusion:1homerun,3moreorlessawash,nomines.Positivethatallinvestmentsarewithintheircircleofcompetence(althoughNorSeaislessrelated).Iftheystarttostrayintounrelatedfieldsthatwouldbeawarningsign.Verdict:ComfortablewiththeirchoicesandIbelievethatwillcontinuegoingforward.
Shareholder’sequityadjustment
- Adjustmentstostatedequity:Excludegoodwill&depreciatevesselvaluemoreaggressively.GainfromsurvitecdealandGlovissharescarryingvaluetoolow.
- Result(inmyopinion):1885–216–94+60+140+165=1940MUSD.(Currentmarketcap:800MUSD)
- 1940MUSDdividedby46,5millionoutstandingshares=41,7USD/share=355NOKpershare.(Currentmarketprice=147,5NOK)
Currentearnings
- Q1resultslookgoodonthesurfacebutarescewedbyonetimegains- UnderlyingEBIT-marginsunderpressurecomparedtopreviousquarters
Sothethreemainthingstolookforinthecomingcoupleofquarters:
- WastheEBIT-margindeclineinWMSaonetimeevent?Troublesomeifitcontinuestobearound6%
- OperatingrevenuefromWWASAQ22016vsQ22015willthiscontinuetodeclineasitdidinQ12016vsQ12015?
- H&Hdevelopmentandthecartransportationdevelopment