Belgium-based Groupe Bruxelles Lambert (OTCPK:GBLBF) is the second largest holding company in Europe and trading at a steep discount to net asset value. The discount is an unjustified 25%. The stock is a buy because of this discount and its dividend yield.
There are 161.4 million shares and the market cap is €13.9 billion ($14.9 billion). The net asset value is €114.45. The stock trades at €86.31, so it's trading at a discount to NAV of 24.6%. Very interesting. The dividend is €2.93 and the dividend yield is 3.39%. Pretty healthy dividend yield. The dividend was increased from €2.86 last year. It takes $1.07 to buy one euro.
In 2016, GBL increased its net assets by 12% to €17 billion ($18.2 billion). It made €1.6 billion ($1.7 billion) in investments and €2.5 billion ($2.68 billion) in divestments. Major divestments included €2.287 billion ($2.45 billion) of Total (NYSE:TOT) and ENGIE (OTCPK:ENGIY). It made purchases in adidas, Ontex, SGS, and Umicore for €1.055 billion ($1.13 billion). The capital gain on Total was €428 million ($458 million). That idea worked out. It lost €11 million ($11.77 million) on ENGIE.
At the end of 2016, GBL owned: 7.5% of adidas (OTCQX:ADDYY) worth €2.4 billion, 17% of Umicore worth €1 billion, 16.2% of SGS (OTCPK:SGSOF) worth €2.4 billion, 2.95% of Burberry (OTCPK:BURBY) worth €230 million, 9.4% of Largfarge/Holcim (OTCPK:HCMLF, OTCPK:HCMLY) worth €2.857 billion, 7.5% of Pernod Ricard (OTCPK:PDRDF, OTCPK:PDRDY) worth €2.048 billion, 53.9% of Imerys worth €3.088 billion, and an incubator investment worth €423 million. The company made €457.6 million in dividends. There was €1.375 billion in cash and €1.150 billion in debt.
Recently, GBL bought a 15.0% in Parques Reunidos Servicios Centrales for €208 million. Parque manages leisure parks in Europe. The stock is traded in Madrid.
50% of the common stock is held by Pargesa (OTCPK:PRGAF) and 52% of the voting rights. I've written on these companies in the past. It is quite a web of holding companies spread across the francophone world. Pargesa is in turn controlled by the Desmaris family and Albert Freres. These families control entities through Canadian based Power Corp. (OTCPK:PWCDF) (OTCPK:POFNF).
Back in 2008, the NAV fell from €19.746 billion to €12.811. That's a 35% drop. No doubt the company is not immune to financial crisis. The dividend has grown from €2.09 in 2008 to €2.93 in 2016. The dividend has grown at 5.7% since 2000. I'll take that rate of return!
Since I've been following the stock, GBL has gotten out of energy and engineering projects and into clothing and venture capital/private equity. I can understand why management chose to sell energy. With new drilling technology, the price of oil and natural gas is difficult to estimate. I am a little leery about clothing. There are so many brands of shoes and coats the shopper has to choose from, though adidas and Burberry no doubt has strong brand names.
What's strange is how little the stock is followed in the U.S. GBL isn't a small company. Go to Google News and you'll see my article from Seeking Alpha ON THE FIRST PAGE. That's how little attention the stock gets in the USA.
The weak euro is something to consider. This has put pressure on shares for the U.S. holder. I don't have an opinion on the dollar/euro exchange rate. Another issue is that the stock is very thinly traded in the U.S. You will pay a little bit extra on the bid/ask spread.
The stock is probably worth about 15% more than where it is trading. It does not justify such a steep discount. The NAV and dividend yield make it too attractive. The biggest risk is that GBL owns a portfolio of very expensive stocks like Burberry and adidas. Still, with a discount to NAV like this, you don't want to over think it.
Disclosure: I am/we are long GBLBF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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