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Ticker: BUR:PAR
Share price: EUR 317.5
Price target (NAV per share): EUR 615.54 (+94% upside)
Disclosure: Long Burelle.
Burelle, A Growing Euro for 50 Cents
Burelle: A Growing Euro for 50 cents
Analysis of Burelle SA, a French holding company trading for half its NAV.
Ticker: BUR:PAR
Share price: EUR 317.5
Price target (NAV per share): EUR 615.54 (+94% upside)
Disclosure: Long Burelle.
Burelle, A Growing Euro for 50 Cents
Ticker: BUR:PAR
Share price: EUR 317.5
Price target (NAV per share): EUR 615.54 (+94% upside)
Disclosure: Long Burelle.
Burelle, A Growing Euro for 50 Cents
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Alejandrovazqu - 1 month ago
Hi Kjelllandsberg,
Thanks for the comment. I also like to look at companies in an EV basis but I think there is a flaw in the calculation of the EV in Burelle.
In my opinion, you are effectively double-counting the debt as Plastic Omnium is consolidated in Burelle. In reality, Burelle as a parent company is only financed by equity and has the stake in Plastic Omnium, Sofiparc and the private equity firm as its only assets. It does not guarantee Plastic Omnium’s debt.
If the stake in Plastic Omnium was 49.9% and not consolidated, Burelle would not have Plastic Omnium's debt on its balance sheet and the whole picture would look much clearer. The fact that the stake is 56.1% and not 49.9% does not change the economic rationale.
Please let me know your thoughts as I think it was a very interesting comment.
Thanks.
Hi Kjelllandsberg,
Thanks for the comment. I also like to look at companies in an EV basis but I think there is a flaw in the calculation of the EV in Burelle.
In my opinion, you are effectively double-counting the debt as Plastic Omnium is consolidated in Burelle. In reality, Burelle as a parent company is only financed by equity and has the stake in Plastic Omnium, Sofiparc and the private equity firm as its only assets. It does not guarantee Plastic Omnium’s debt.
If the stake in Plastic Omnium was 49.9% and not consolidated, Burelle would not have Plastic Omnium's debt on its balance sheet and the whole picture would look much clearer. The fact that the stake is 56.1% and not 49.9% does not change the economic rationale.
Please let me know your thoughts as I think it was a very interesting comment.
Thanks.
Kjelllandsberg - 1 month ago
Hi Alejandrovazqu,
you are right, I was not familiar with the accouting principles of holding companies. As long as Burelle hasn´t co-signed on the debt, they are not liable for the debt. And in case of bankruptcy of Plastic Omnium Burelle would only have to write off their equity stake.
But do we know that Burelle hasn´t co-signed the debt?
Kind regards
you are right, I was not familiar with the accouting principles of holding companies. As long as Burelle hasn´t co-signed on the debt, they are not liable for the debt. And in case of bankruptcy of Plastic Omnium Burelle would only have to write off their equity stake.
But do we know that Burelle hasn´t co-signed the debt?
Kind regards
Alejandrovazqu - 1 month ago
Sure, they don't guarantee the debt. On top of that, the stake in Plastic Omnium makes up for most of Burelle's assets so in case of Plastic Omnium defaulting, there wouldn't be much value in it.
In reality, buying Burelle is buying Plastic Omnium with a huge discount
Thks
In reality, buying Burelle is buying Plastic Omnium with a huge discount
Thks
RSS
EV Plastic Omnium:
Mkt Cap: 1826
Total Debt: 823
Cash: 227
EV= 1826+823-227= 2421
EV Burelle SA:
Mkt Cap: 614
Total Debt: 792
Minority Interest: 309
Cash: 232
EV= 614+792+309-232= 1483
As Burelle owns 56% of Plastic Omnium, that makes an proportionate Enterprise Value of 0,56*2421= 1355
+ 70 Mio Book Value of the Real Estate component, Sofiparc
+ 35 Mio Private Equity Firm
in total: 1355+70+35= 1460
so there seems to be no undervaluation.