TRE - Treasure ASA

[kab60]

Sounds like you have most of the stuff right, but the issue seems to be that the family with 60 pct of ownership in the family vehicle that controls Wilh. Holding doesn't have any voting rights. And it is not clear if there is a shareholder agreement between the fighting families holding 40 and 60 pct.

Anyway, they hired Carnegie, I know people there, they're smart, they have a good reputation as a corporate finance advisor in the Nordics. So you'd figure they have a shot at changing things. Which this thing need, Wilh. Holding is extremely cheap but I always figured that was in the families' interest due to a wealth tax in Norway. This might be the catalyst that is needed to simplify the structure.

[alwaysinvert]

Another 2.5m share buyback through bookbuilding: https://newsweb.oslobors.no/message/505030 . Again not a huge buyback but nice, at a 40% discount.

 

Also, perhaps interesting to note that there seems to be some sort of rebellion in the Wilhemsen family ( https://finansavisen.no/nyheter/shipping/2020/02/09/7496120/familieoppror-i-wilh.-wilhelmsen-femte-generasjon-vil-fornye-eierstruktur-og-styringsmodell ) . I'm not sure I understand all the nuances through Google Translate, but it seems like a part of the family owning ~60% of the shares of the holdings wants more influence. One family board member resigned. It would be appreciated if some of the Scandi pro's on this forum could share their insights.

 

It's probably not going to have a huge effect on Treasure ASA in the short run though.

 

Tallyman A/S which is the holding company of WWI which in turn also controls TRE has one supervoting share which has been inherited by the son of the "core" Wilhelmsens since founding. Cathrine suddenly resigned from the board, but I haven't seen any clear proposals for reform since.

 

The elder Wilhelmsen, Wilhelm, in the midst of this, and as the corona crisis struck, died. A friend of his revealed in an epitaph that it was a suicide and alluded to it being related to the family feud and some unfair criticism levelled against Wilhelm in the media.

 

In the latest quarterly presentation for WWI Thomas did not take any questions at all, which they usually do. I'm not sure that Cathrine and her allies have much leverage to work with, but maybe the will reconcile.

 

___

 

I still think that Hyundai was ready to make another restructuring move but this was obviously derailed by the crisis. Yet another delay. But the buyback proposal at this point is a pretty bullish indication from the Wilhelmsens that they believe Glovis can weather the the crisis well and perhaps that restructuring is around the corner. Wallenius Wilhelmsen has a murkier outlook than Glovis with the current auto market situation.

[alwaysinvert]

To be clear, Wilhelm Wilhelmsen was in possession of the supervoting share and Thomas, as his son, inherited it when he died. So without knowing the ins and outs of Norwegian law, I think it's really all in the end up to Thomas if he wants to change things and/or relinquish total control.

[writser]

Company still chugging along. H1 results were published a few days ago, nothing special. The company just announced another buyback for 1m shares or ~0.5% of shares outstanding. Small, but better than nothing I guess. Treasure ASA is currently trading at a ~45% discount to NAV, which is close to the top of the range of the past few years. Overhead is minimal.

 

I still think it's a decent idea. Glovis had an impressive double-digit ROE the past decade and through Treasure ASA you are buying it close to 50% of book value. I don't mind that exposure while waiting for the inevitable restructuring of Glovis and / or Treasure ASA. I think both are cheap and if something happens this could be a double whammy. Of course, the tax slippage is unfortunate in the meantime and warrants a discount (but I'd say a smaller one).

[alwaysinvert]

Always pinching the pennies. The last one was launched when a lot of people were looking for liquidity and it was way oversubscribed. I don't know if this one will fill necessarily, but maybe they have had indications from some owner who wants out.

[Scunny Bunny]

Very stingy stuff with maximum bid price of NOK11.25 with market at NOK11.90. Pretty silly really when shares are at ~50% discount to real value pre tax.

[writser]

The offer was open for two days only, below market prices, but was successfully completed and actually oversubscribed. Maybe they are penny pinchers but it seems like they knew what they were doing.

[alwaysinvert]

Decent timing that Glovis rose 11% overnight (back to pre-covid levels). As usual TRE doesn't move as quickly in either direction as the underlying but it has traded +250k shares with latest price paid 12.30. Congrats to the guy who bought a lot at unchanged price from yesterday.

 

I guess there are some new restructuring rumours swirling in Korea again, all the Hyundai affiliates are up a lot with no apparent news items to account for it.

[alwaysinvert]

I'm not sure that this has any direct impact on TRE but since this was discussed here earlier, the family feud has heated up with each party bidding to buy the other out: https://shippingwatch.com/carriers/article12422645.ece

 

 

My guess is that this ends in Thomas buying their shares for a pretty attractive price. Some speculation is that it's possible that he will need some liquidity event to pay for it, which could involve corporate changes in TRE in some way. For example an exit, a partial exit or a recap with a big one-time dividend.

[alwaysinvert]

Glovis up 10% last trading session. Almost 50% discount at 14.50 NOK.

 

There has been some hype around different hydrogen initiatives which seems to have helped the Hyundai stocks somewhat but there is also this:

 

https://en.yna.co.kr/view/AEN20201013008700320

 

Industry insiders said Chung's job will not change much even if he gets promoted, while expecting the automotive group to make quick decisions in reorganizing its business structure and setting future goals.

[writser]

Was just about to post the same. I'm still happy to hold. The current discount is around all-time highs. That alone is nice - ignoring tax slippage you are buying Glovis at a ~6x P/E ratio and 0.66 x book, despite book value growing by 15%+ p.a. the past decade on top of a small dividend.

 

On top of that there are things brewing both at the holding level (the Wilhelmsen family feud / succession, couple of small buybacks so far) and the underlying level (long-term restructuring plans regarding the Hyundai chaebol). I hate getting enthusiast about my holdings but in a best case scenario (which we were close to last year) the Hyundai complex is restructured, Glovis share price goes up a bit and Hyundai buys back its shares from Treasure ASA. It's not that hard to imagine a 100%+ return in that case. Not that that is my base case scenario .. These are no 'hard' catalysts, nothing could happen for a couple of years. But I don't mind owning a decent company at this valuation with the added kicker that something good is likely going to happen in the next 5-10 years.

 

On the flip side the tax slippage is pretty bad so it should trade at a discount.

[Scunny Bunny]

Intercontinental Blind Date: Cathrine (50) and Eui-sun (49)

 

https://www.nsx.com.au/ftp/news/021738756.PDF

 

 

[alwaysinvert]

Glovis seems to be in the process of pricing in a new restructuring effort (approaching death of the elder Chung?), but Treasure is barely keeping pace. If the restructuring is really around the corner the discount should narrow too, due to an increased likelihood of an exit.

 

Of course, the Korean market is prone to random rumour-driven speculative excesses, so it might be that Treasure is pricing more rationally at the moment. I believed a restructuring was imminent just before covid struck too.

[compounding]

Some attention drawn to the situation in the Korean business press today:

 

Hyundai Glovis shares surge on expectations for reorganization

 

https://pulsenews.co.kr/view.php?sc=30800021&year=2020&no=1069304

 

Hyundai mulling over governance overhaul

 

http://www.koreatimes.co.kr/www/tech/2020/10/419_297762.html

[compounding]

Q3 earnings out today. The cyclical recovery continues with sales -23% yoy and +12% qoq, with profitability decreasing/increasing at a higher rate due to operating leverage.

 

The logistics segment has rebounded nicely as auto manufacturing has restarted. Although the shipping/distribution segments are recovering, they still have a long way to go before they recover to pre-covid levels.

 

In other news they have signed loads of MOU's for different projects related to mobility and hydrogen mainly, notably one with the Wilhelmsen group. Presumably all this stuff will lead to some revenue generation at some point, but I have no idea of how to evaluate it, except that is seems to further the duration of the business. My base case is probably that it will be decent business without being spectacular, and with the characteristically low earnings volatility the company normally maintains.

 

The stock is still, even after the run-up, trading at around 10x these trough earnings, which with the discount in the high 40s of course becomes very cheap. It's really too bad Thomas hasn't been more aggressive with the repurchases, which I'm afraid likely will continue.

 

The thesis is still the same here in my view: 1) Glovis could rerate to historical multiples (remember they have traded at 20x earnings for extended periods in the past, and now covid has shown the earnings resilience of the business) 2) reorganization of Hyundai that favors Glovis 3) Glovis continues to improve the fundamentals of the business, or 4) value creation at Treasure via buybacks or NAV realisation

 

As you point out writser, if all of them occur at the same time the upside is in triple digits. We'll see what happens but the odds look good from here in my view.

[compounding]

Two new articles of interest today:

 

https://www.koreatimes.co.kr/www/tech/2020/11/419_298620.html

 

http://www.koreaherald.com/view.php?ud=20201103000833

 

Of particular interest, the government is proposing a new cap on shareholdings in companies benefitting from inter-affiliate trading, which could force Chung's hand:

 

"The government has proposed for the National Assembly to approve a revision on the Fair Trade Act, placing a 20 percent cap on owner families' stakes in a company benefiting from inter-affiliate trading. Currently, the cap is 30 percent for listed company, but the revision will tighten it to 20 percent.

 

So far, Chung and his father, former Chairman Chung Mong-koo, are holding a combined 29.9 percent stake in Hyundai Glovis in order to meet the current regulation level. If the revision passes the Assembly, they will have to sell nearly a 10 percent stake in Glovis within two years, thus the stake will likely be used to foot costs of the group's shareholding structure overhaul.

 

"We believe the appropriateness of a shareholding structure overhaul has heightened, given the changes in circumstances surrounding the group," Kim said."

[alwaysinvert]

Wilhelmsens are now bidding for each others' stocks: https://www.dn.no/marked/wilh-wilhelmsen/thomas-wilhelmsen/m7-gruppen/thomas-wilhelmsens-kusiner-og-tante-avslar-tilbudet-pa-14-milliarder-kroner/2-1-922636

 

Doesn't seem like a deal is very close at the moment.

[alwaysinvert]

Now there is a set deadline, end of 2021.

 

https://www.koreatimes.co.kr/www/tech/2020/12/419_300741.html

[peripatetic]

Finally, the liquidation begins: https://newsweb.oslobors.no/message/520903

 

Only about 8% of their Glovis shares, but it's hard to see how this doesn't lead to a full liquidation, especially in light of the escalating family feud.

[writser]

Yes, very nice. Looks like the sale was around market prices, 39m shares for $62.5m net: $1.60 / share: KRW 175k? Still early here.

[Scunny Bunny]

If WWI borrow a bit or TRE.OL do, US$140m to privatise the 23%. This is nearly half way. Great news. Suspect they may try a discount buy back though.

[alwaysinvert]

Ex-dividend date for Glovis is towards the end of December each year. After that they should probably feel free to go below 10%. Interesting that they didn't end up waiting all the way for the restructuring announcements. Perhaps they just took the plunge as the Chungs have clearly been trying to pump Glovis in advance.

 

Seems to be at a discount to recent market quotes, although nothing out of the ordinary. I wonder if it's an institutional block buyer (NPS?) or if the taker is some Hyundai company. There's a lot of stock left to dispose of, probably going to take some time.

[writser]

That Treasure ASA starts to unload their stake seems like very good news to me. On top of that, everything the company has done the past few years is returning capital. And the family feud also suggests to me that it is likely that the company will continue doing so. This could imply a large tender, a going-private transaction or a dividend yet shares are still trading at a ~38% discount, barely up from where they traded a few weeks ago? That seems way too pessimistic to me.

 

I'm not really enthusiastic about buying more Glovis (indirectly) close to all-time highs but I've been buying a bit more Treasure ASA. There is now a deadline before which _something_ has to happen with Glovis and something is bound to happen with Treasure ASA itself too.

[compounding]

That Treasure ASA starts to unload their stake seems like very good news to me. On top of that, everything the company has done the past few years is returning capital. And the family feud also suggests to me that it is likely that the company will continue doing so. This could imply a large tender, a going-private transaction or a dividend yet shares are still trading at a ~38% discount, barely up from where they traded a few weeks ago? That seems way too pessimistic to me.

 

I'm not really enthusiastic about buying more Glovis (indirectly) close to all-time highs but I've been buying a bit more Treasure ASA. There is now a deadline before which _something_ has to happen with Glovis and something is bound to happen with Treasure ASA itself too.

 

A going-private transaction would explain why they didn't wait for the restructuring at Hyundai to take place; in order to capture the upside from that event in the holding company. It would make some amount of sense to hold the stake in WWI since they have some strategic partnerships. This is probably what I would do if I were him, if there aren't other considerations related to the family feud.

 

A few contrary points on Glovis, would be interesting to hear your response if you still disagree:

 

Glovis traded above 300k/share in 2014 (as a much smaller company), so I guess I don't really understand the argument about all time highs.

 

I think there is a reasonable case to be made that this company has both cyclical and structural upside in the future—why is it a bad bet at below 10x EV/EBIT? This is historically a pretty decent business with ROEs solidly above 10% (above 20% at peaks) without being especially leveraged.

 

Just referencing the stock price seems like anchoring to me, and if the Chungs have "pumped the stock" of a solidly profitable and growing business from 7x to 9x during the time of fundamental improvement of the business, they must truly be the world's least successful stock pumpers.

[writser]

Glovis traded above 300k/share in 2014 (as a much smaller company), so I guess I don't really understand the argument about all time highs.

I was obviously wrong on that, my bad. Wasn't following the story back then.

 

I think there is a reasonable case to be made that this company has both cyclical and structural upside in the future—why is it a bad bet at below 10x EV/EBIT? This is historically a pretty decent business with ROEs solidly above 10% (above 20% at peaks) without being especially leveraged.

I didn't say that it was a bad bet. It's just a bet that I do not know enough about to make. In fact I am inclined to agree with you but I don't think I have an edge in analysing Glovis. You could very well be correct about the anchoring.

 

And yeah, the going-private transaction is a risk. Or Treasure ASA pumping the money in some other venture while shares are trading at a huge discount. Though, a couple of counterpoints:

 

1. Is Treasure ASA mgmt so sure that there even is more upside to capture? Isn't that priced in already in Glovis? And if that upside is really there, wouldn't Treasure ASA be able to borrow some extra money in the holding rather than selling some Glovis shares?

2. The press release is pretty explicit about " the proceeds are available for new investments or distribution to shareholders".

3. As you said, with the family feud going on I think chances are there is some pressure to monetize the Glovis stake rather than buying back a stock they spun off a few years earlier. Of course we aren't sure what is happening behind the scenes, i.e. Glovis maybe wants Wilhelmsen to keep an equity stake for whatever reasons.

4. And finally, both Treasure ASA and Glovis are trading roughly where they were at the time of the spin-off. The whole goal of the spin-off was (correct me if I am wrong!) to simplify the corporate structure and highlight the value of all separate parts of the Wilhelmsen complex. It seems a bit inconsistent to reverse that transaction after five years at more or less the same price.

 

In short, getting shafted by an opportunistic going-private transaction is a risk, but a risk I am comfortable with. And even an opportunistic buy-out will probably be a very decent outcome for current shareholders. I think the biggest risk is nothing happening.