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08-05-2024 : Peugeot Invest or value-destroying reinvestment

Peugeot Invest, which is 80% controlled by the eponymous family and listed on the stock exchange, has a 5.4% interest in Stellantis, which accounts for 54% of its net asset value. The balance of its assets is made up of minority stakes in listed (SPIE, LISI, etc) and unlisted companies, and in investment funds.

For decades, Peugeot Invest has suffered from a discount to the value of its assets of around 50% (currently 55%). This is the price investors pay for agreeing to be shareholders in a structure that is useful for the Peugeot family, but whose relevance for investors and usefulness for the market are not obvious.

In the Netherlands, it is possible for a pure holding company to be listed on the stock exchange. Heineken Holding, for example, owns 54% of the Heineken group and no other assets. Its discount on net asset value (NAV) is only 17%, Heineken Holding is not forced to diversify. In France, it is unacceptable for a listed holding company, which over time has become a minority shareholder in a major group, to have this shareholding as its only asset. 

To maintain this structure, the Peugeot family has had to invest in other assets. Sometimes brilliantly, like the investments in SEB and Zodiac-Safran; sometimes disastrously (Orpéa, Signa in the German property market). Not everyone can become Warren Buffett. Over the last 5 years, while Stellantis' share price has doubled, the value of its other assets net of debt has fallen by 17%, while the Paris indices have risen by around 30%.

Long-term minority shareholders have tabled resolutions at the forthcoming AGM calling for an increase in the dividend. This is not because they are as thirsty for cash as leeches, but quite simply because one euro paid in dividends is worth one euro in cash for all shareholders; whereas one euro of earnings not paid in dividends at Peugeot Invest only increases the value by 50 centimes, given the discount on the NAV. That's a quick calculation!

As long as the structure and governance remain the same, the discount is unlikely to be reduced. To do this, Peugeot Invest would have to be given a real business by selling its financial assets, including its stake in Stellantis, like Eurazeo which is becoming an asset manager (a small Amundi). It is understandable that the Peugeots remain attached to their stake in Stellantis. But in this case, the new generation should consider that having its name synonymous with a 50% structural discount on the stock market is not the best way to honour the name of the founding entrepreneurs, and draw the necessary conclusion by delisting this vehicle that no longer has any place there. 

27-04-2024 : Will New York become TotalEnergies' main stock exchange?

At this stage, it's just a thought, announced yesterday, as managers must have them, without them necessarily materialising.

In this particular case, the difference in multiples between the American and European oil majors is impressive and may tempt managers to think that a main listing in New York could bring TotalEnergie's multiple into line with that of its American peers: Exxon is valued at 6.4x EBITDA 2024, Chevron 6.1x, compared with 4.3x for Total (Shell is at 4.1 and BP 3.2). This gap is all the more striking given that TotalEnergies is one of the best managed majors, if not the best managed. It is therefore understandable that American shareholders, who hold more than 40% of the company's capital, should be pushing the wheel, especially as their percentage is increasing due to the withdrawal of European shareholders who are more sensitive to the challenges of the energy transition. This is not the least of the paradoxes, given that TotalEnergies is the most advanced of the majors in this field, and that it has not reduced its ambitions, unlike Shell and BP.

But the level of multiples does not just depend on the listing market, it also depends on risk and growth characteristics. By this measure, a company listed in the United States, but with a smaller US share of its assets than its competitors, could be at a discount to them. 

The transfer of the main listing cannot be decreed; it is observed on the basis of trading volumes. In order for New York to become its main listing, TotalEnergies would probably have to make a major share placement in the United States, where it is currently only listed in the form of ADRs. A full listing would probably be required. If such a move were to occur, and if TotalEnergies were thus better valued, its cost of capital would fall, since at constant free cash flows, the discount rate required to make these flows equal the value would be lower; and employees would see their profit-sharing and incentive schemes invested in their employer's shares increase in value.

The usual critics of TotalEnergie will no doubt talk of betrayal, while others will regret this development if it comes to fruition. But you can't :

- Refuse to set up pension funds, the creation of which had been voted on at first reading in 1997 before the dissolution of the French parliament sent the text to oblivion, where it never came back despite the political changeover;

- Granting unlimited tax advantages to life insurance euro funds, i.e. debt securities; and limiting them for PEAs invested in equities;

- And lamenting the shallowness of our equity market, resulting in lower valuations in a number of cases.  



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The Letter

Number 155 of February 2024

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