Laurent-Perrier (LPRRF, Financial) is a French champagne distiller. Its stock may be undervalued on a tangible book value basis depending upon what its vineyards are worth.
The company has 5.945 million shares and trades at a market cap of €397 million ($441 million). It takes $1.11 to buy one euro. Earnings per share were €4.30, and the stock trades at a price-to-earnings ratio of 15.5. The dividend was €1.10, and the dividend yield is 1.64%.
Sales were €244.8 million ($272 million) and up 5.6% from 2014. Operating margins are 18.2%. After the market crash of 2008-2009, sales were down to €171 million ($190 million) in 2010 and have really rebounded. EPS were €1.81 in 2010.
Major brands include Demi-Sec, Ultra Brut, Alexandra Rose, Grand Siecle, Cuvee Rose, Brut and Brut Millesime. According to last year’s Annual Report, Laurent’s global brand value is No. 3 in champagne. The company exports 68.9% of its product from France. Global sales of champagne collapsed from €4.44 billion ($4.88 billion) in 2008 to €3.7 billion ($4.1 billion) in 2009. As one might imagine, champagne sales are tethered to the global economy.
The balance sheet shows €55.7 million ($62 million) in cash, €497.28 million ($552 million) in inventory and €58 million ($64 million) in accounts receivables. The liability side shows €322 million ($357 million) in debt and €81 million ($90 million) in accounts payable. Free cash flow was €11.22 million ($12.45 million) so the free cash flow yield was 2.8%. There are times when capex is pretty low and free cash flow high so this yield varies from year to year.
The Nonancourt family owns 60.27% of the capital and 74.64% of voting rights. I don’t like dual share classes, but the Nonancourts control the company any way you look at it. First Eagle owns over 10% of shares. A 594,000-share buyback will be announced this year at the annual meeting. They probably should be using that money to pay down debt or increase the dividend.
The annual report states that Laurent holds 35,000 hectares of vineyards, which is 94,850 acres. According to a Bloomberg article, a hectare goes for €2 million ($2.22 million) in the Champagne region. According to my math, this would make the vineyards owned by Laurent worth €70 billion ($7.77 billion). I have no idea if that’s even close. I know enough about ag to know that lands differ so some of their acreage is better than other land. Still, it makes me wonder if the stock is undervalued. I’d make a very rough guess that tangible book value is worth way more than the market cap.
If there ever was a reason that the Nonancourt family wanted to start liquidating assets, the stock could become very intriguing. Having stated that, there is zero indication of that happening.
I’m not going to buy shares but will watch the stock. No doubt Champagne is tied to the overall economy. After a six-year run, it’s probably time for things to slow down. There is point at which I might find this stock tantalizing, but it would have to be when the economy slows down.
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