Wilhelm Wilhelmsen Holding Q1

Following the Q1 report I have updated my Excel sheet numbers: wwib-presentation-excel2017q1133. The discount currently stands at slightly above 35%. Assuming a conglomerate discount of 20%, fair value of WWIB sits at 305 NOK – an upside of about 25%. The discount was at 45% three months ago but there is still plenty of upside left and the margin of safety is considerable.

On top of this you could argue that both Treasure ASA and WWL ASA trade at a discount to their underlying value providing a ”discount on discount”-effect not accounted for above.

Nordea recently put fair value of WWIB at 450 NOK. They use their own estimates of values for Treasure and WWL rather than those of the market which means they arrive at much higher figures than I do. They also value WMS at higher multiples than I and are putting the conglomerate discount at only 10%, rather than my 20% (20% has been the norm in markets across the board for the last decade or so).

On the same subject it is curious that the discount for Swedish conglomerates and investment companies have, as of late, come down drastically and trade around 0% on average, which means that many actually trade at a premium rather than a discount, http://investmentbolag.net/investmentbolag-substansvarde/

Headlines

WWL (The newly formed entity Wallenius Wilhelmsen Logistics): Slightly disappointing Q1 sales. However, High & Heavy guidance was much more aggressive than has been the case for the last 3-4 years, which is almost certainly the reason the market rewarded the stock with a 4% increase following the WWL report on May 9th.

According to industry reports shown in the Q1-presentation both mining and agriculture machinery are expected to increase very significantly in the coming years after a prolonged slump: Screen Shot 2017-05-11 at 00.56.21

A more aggressive dividend policy of 30-50% payout ratio was presented. If we assume an average of 200 MUSD in profit after tax in the coming years for WWL this would equal 1.2-2.0 NOK per share in dividends. The stock is currently traded at 46 NOK = 3-5% dividend yield.

WMS: Significant EBIT-margin decline. However, from the report it is difficult to ascertain the extent to which this is due to M&A restructuring costs or whether underlying weakness in operations plays the larger role – regretably they don’t quantify it. Were it the latter it would be bad news. On a positive note they noted an uptake in the last part of the quarter, so perhaps a new trend is taking shape.

No additional info on the 400 MUSD aquisition of Drew Marine Technical Solutions was given in the report which is disappointing given the size of the aquisition.

Brief summary

The actual sales numbers and margins were a disappointment in my view, while the outlook from the company was uncharacteristically upbeat – especially so for the high margin segment High & Heavy.

3 thoughts on “Wilhelm Wilhelmsen Holding Q1

  1. Good work and good information again, Ham. Thank you a lot. I was also a little disappointed to se such weak Q1 results, but as you and so many other investors I try to see a whole picture and am focusing in to coming next years, which start to look brighter and lighter month after month. I agree with you nearly in everything. Just I am not so sure, whether the commodity prices are still going upwards.

    Do you or anyone else know, what is wrong with Treasure? It has gone down almost 40% in euros since the beginning. Still if you look for example Hyundai car export numbers here, they give you different kind of trend.

    https://www.hyundai.com/content/hyundai/ww/data/ir/salesPerformance/data/0000000082/files/hmc-export-by-region-y2017.xls

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    1. Thanks for the props, Erkki! Nothing wrong with Treasure as far as I am concerned. The market is simply not pricing it correctly… Especially now that the date of the sale of the Glovis shares has come closer, given the new shareholder agreement meaning they can sell down from 12% to 7% ownership without prior consent from the Hyundai owner. Why go to the lengths of securing that deal if selling isn’t in the cards in the near future?

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      1. Do you know, what is the impact of crue oil price changes for Wilhelm Wilhelmsens profits? Usually for the most shipping companies lower oil price means also lower costs, but somehow I dont remember wilhelmsens to mention about that matter in their latest quarter reports.

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