Wilhelm Wilhelmsen Holding Q4

The Q4 report was released yesterday evening and the main headlines are:

On the negative side:

  • Another 31 MUSD provision for anti-trust, adding to the 200 MUSD already provisioned for. I had expected the initial 200 to be more than enough. On a positive note, the specificity of the number (31) could indicate that the whole anti-trust case is finally about to be wrapped up and that the company has received an indication of the size of the fine and that they will accept it.

Neutral:

  • The company’s outlook: Continued pressure on rates, but margins are improving and they expect the topline to have bottomed in all segments.

On the positive side:

  • WMS underlying EBIT-margin improving and close to 10% once again after the dip down to 6% earlier in the year.
  • Dividend increased to 6 NOK up from 5 NOK (which was the dividend for the last three years). The payout ratio is still only about 15% as earnings was 36 NOK per share (P/E: 5,5).
  • Merger synergy guidance now at the upper end of the 50-100 MUSD interval. (Apparently analysts have been fed this information some time ago. This ought to have been communicated to the market!)

Near term share price implications

I expect WWASA to take a slight hit tomorrow, while WWIB NAV discount has increased 5% since the beginning of the year so I expect the already extremely wide gap to narrow and the stock price to increase.

The market will probably view the increased dividend in a positive light though the increase is very marginal.

Net Asset Value Excel sheet update

I have updated the Excel sheet that I created for a post back in May: wwib-presentation-excel2017

It may look a bit messy but it is very easy to use. Simply plug in the values in the yellow fields after each quarterly report to arrive at 1) Net Asset Value (NAV), 2) Fair value, 3) Discount to NAV and 4) Upside to fair value.

Conglomerate discounts usually fall in the 15-25% range so the current 44% discount is very generous and creates reasonable upside potential as well as a very comfortable downside cushion.

Also worth noting is that my estimate of the value of Wilhelmsen Maritime Services (cell C12, the only subjective estimate in the sheet) is quite a bit more conservative than what the only two analysts I am aware of use. I use 6 x EBITDA, while one uses 8 x EBITDA and the other 10 x EV/EBIT (which would add about 25-35 NOK to NAV).

If anyone out there has information on what other players in WMS’ industry have been selling for recently I am all ears. From what I have been able to gather the main competitors in that space are Maersk Line and Mitsui OSK Lines and they are both very far from pure plays so they cannot be used as valuation guidelines.

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