I’d like to introduce you to a promising mid-cap company largely unbeknownst by the American investors, hailing from the outskirts of Paris, France: the Bollorè Group (OTCPK:BOIVF). Founded in 1822, it began its activities as a specialized manufacturer of thin papers. In the next two centuries, the company has grown and diversified across different industrial activities and now is a well established conglomerate [I'd like to compare it to Leucadia National Corp. (NYSE:LUK)] that is seeking explosive growth in the exciting African infrastructure sector.
The group is the world leader in manufacturing polypropylene films for capacitors and one of the world leaders in the production of shrink wrap plastic films used to seal consumer goods.
The holding is also engaged in the development of high efficiency lithium batteries for hybrid and electric vehicles; they have engineered their own Bolloré Blue Car, a city car that is being deployed in Paris for a car-sharing program officially launched this month.
Through its subsidiary IER, it is a world leader in the production of automated control equipment for pedestrian and vehicle entrances, implemented in many rail, air and sea travel networks.
Bolloré Energie is the second largest distributor of domestic fuel and petroleum products in France and owns a 634km pipeline for transportation and storage of hydrocarbons. The subsidiary is also active in the energy distribution in Switzerland and in Germany.
Bolloré Group is also one of the top five leaders in Europe for freight forwarding and logistics, present in 90 countries under the trademark Bolloré Logistics.
Logistics is the core business of the group, as it accounts for 66% of overall revenues, and is the segment where they expect the bulk of growth to come from in the following years. As for that, they have recently unified their African operations and established Bolloré Africa Logistics, the leading integrated logistics network in Africa, present in 43 countries with 22,000 employees, eight million square meters of offices and warehouses and a unique continental network. They have concessions to operate most of the ports in West Africa, and to prove their commitment, the recently signed a contract to restore and manage the container terminal at the Libyan port of Misrata on the Mediterranean Sea; they also operate a 1,400 mi. rail network in Cameroon and the Ivory Coast with an aggregate 1,6 million passengers and 2,6 million tons of goods moved in 2010.
With their unparalleled logistics network, the group is well positioned to benefit from an expected 6% to 7% annual growth in GDP that many analysts forecast, mainly thanks to Asian demand for the ore and minerals that abound in African soil.
In addition to all the foregoing, the Bollorè group is also active in the media and advertising business with a 33% stake in Havas, the sixth-largest global advertising and communications group worldwide, and is also developing wireless access services in France.
Finally, the group is a major shareholder in the SocFin Group a large company that manages plantations of oil palm and rubber trees in Africa, and directly owns investments in plantations in Cameroon, 3,000 hectars of farms in the U.S. and two winegrowing estates in France.
Vincent Bolloré, the flamboyant president and chairman of the group, owns a controlling stake in the company, so you can rest assured that his interests are well aligned with yours.
The group’s financial results are encouraging, with operating income up 17% in the first half of 2011 compared to 2010, net earnings up 29% and a debt to equity ratio improving. The Bolloré Group also pays a € 2 dividend, with a 1.3% yield at current prices, but a payout ratio of only 20% leaves plenty of room for dividend increases in the future. At €154 per share, the group is a compelling value play, trading at 80% of book value, with a P/E ratio of 9 and a Debt-to-Equity ratio of 55%. Also consider that the market cap is only €3.3 B ($4.3 B) so many growth years are still to come.
I definitely like this company but one thing that leaves me scratching my head is the fact that Mr. Bolloré keeps committing a significant part of the group profits in publicly traded companies; in fact, according to the most recent half-year report, as at June 30, 2011, almost 2 billion euros ($2,6 B) were invested in public issues (for the most part in Aegis plc, a British communications and marketing group, and Mediobanca, an Italian investment bank) and almost a billion euros in non publicly traded companies; the group has recently sold a stake in Vallourec, a French steel producer, for a capital gain of €140 millions, and has sold their own Direct 8 and Direct Star tv channels to Canal Plus Group, a French tv studio and distributor, in exchange for 22,4 million shares of the giant media conglomerate Vivendi SA (OTCPK:VIVHY), worth 372 million euros at the current market price. While I am confident in Mr. Bolloré’s investing abilities, I doubt he will be able to obtain results that can be compared to what Warren Buffett has achieved investing for Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) and in my opinion he'd better avoid financial speculation and reinvest the retained earnings in infrastructure projects or pay a higher dividend.
If you’d like to invest in The Bollorè Group, the company is listed on the Euronext exchange in Europe as well as on the Pink Sheets in the USA, but in this case beware because it is thinly traded.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCPK:BOIVF over the next 72 hours.