Pargesa Holdings (OTCPK:PRGAF $81, PARG.SW) is a Swiss based holding company with six major mid- and large-cap investments. In a recent interview with Barron’s, Mr. Matthew McLennan, First Eagle Management, briefly outlined why Pargesa is one of his value holdings.
Pargesa holds substantial positions in six diverse global European companies, offering investors both pass-through dividends and exposure to a few of the more respected companies in Europe. Their holdings include (Euro:USD 1:1.32):
Total (NYSE:TOT) – 28% of portfolio, 4% ownership; oil and gas exploration
LaFarge (OTCPK:LFRGY) – 21% of portfolio, 24% ownership; cement
GDF Suez (GDFZY.PK) – 23% of portfolio, 5% ownership; energy
Imerys (OTC:IMYSF) – 21% of portfolio, 56% ownership; minerals and mining
Pernod Richard (OTCPK:PDRDY) – 12% of portfolio, 9% ownership; alcoholic beverages
Suez Environmental (OTCPK:SZEVY) – 4% of portfolio, 7% ownership; water and waste treatment
Others – 3% of portfolio
Long Term Debt - $1.85 billion – (14%) of portfolio
Pargesa is intriguing as it provides investors the ability to gain exposure to various global economic sectors through a significant ownership investment in each of these companies.
Total – A leading integrated international oil company with operations in 130 companies. Market capitalization of $116 billion
LaFarge – A major producer of cement, aggregates, concrete and gypsum, positioned as one of the top three global leaders in each category. Market cap $17.5 billion
GDF Suez – Electric and natural gas utility. Market cap $80 billion
Imerys – Global leader in mineral processing with more than 240 mining and processing sites in 47 countries. Market cap $5 billion
Pernod Richard - Leading wine and spirits firm with 15 well known brands. Market cap $23 billion
Suez Environmental – International water and waste water utility servicing 78 million customers. Market cap $8 billion.
Pargesa pays a dividend of $3.60 annually, usually in May. While there was no increase in 2010, distributions increased an average of 6.4% annually since 2004. There are 84 million shares outstanding, of which 57 million are closely-held, and Pargesa has a market cap of $6.8 billion.
Shares trade in Europe on various exchanges and in the US as a non-bank sponsored ADR. Although the company carries a $6.9 billion market cap, shares are virtually unknown in the US. The large risk is the illiquid nature of the US pink sheet trading with a daily average volume of just 300 shares. Multiple limit orders will be required to buy a position of any size and it may be difficult to exit in a timely fashion if needed. For longer term investors, these issues may not be as critical, but the liquidity risks must by acknowledged.
According to McLennan, Pargesa is trading at a 20% discount to the value of its holdings. In addition, its current price yields a 4.4% dividend, with the potential for increases down the road as each investment position increases their respective distributions. Investors looking for international exposure using a diverse portfolio of well managed companies should spend a few moments researching Pargesa.
Latest reported earnings 1st half 2010: pdf
Latest investor presentation May 2010: .pdf
As always, investors should conduct their own due diligence, should develop their own understanding of these potential opportunities, and should determine how it may fit their current financial situation.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.