TRE - Treasure ASA

[compounding]

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.

 

That's very fair—was just interested in poking around at your reasoning since you seemed to be hesitant around the valuation.

 

On 1) I would personally argue that there is upside that is not priced in (the argument being the fundamentals/future of the business in relation to below 10x multiple, with the ability to take on more leverage plus the anticipated restructuring ... is cheap), which was kind of my argument in the last post so maybe we'll get stuck on this point. I agree that borrowing money is the rational thing to do in that case, but on the other hand they haven't borrowed a dime (e.g. for buybacks) in the last couple of years when the underlying at times was trading at 5x and the holding company was at a 50% discount so it wouldn't be inconsistent with past irrationalities, so to speak.

 

Longer term, I think the bear case for Glovis stock at this price is that the restructuring of Hyundai ends up minimally different from today, and that you are long a pretty decent company in South Korea that will prioritize it's employees, and things like government relationships above shareholder returns. Cheap companies in non-sexy where insiders aren't acting to capitalize on the opportunity in their stock usually have the tendency to stay cheap. Now, in the short term we have the Chungs motivated to capitalize on the cheapness so that's mainly a problem longer term if the restructuring doesn't change the corporate structures.

 

The press release would say that though, wouldn't it? Since the take-private would be to WWI, Treasure could have the stated plan of special dividend/buyback, and before they are able to execute on that plan WWI makes an offer. On this topic, why hasn't Treasure announced more specific plans? Why would they need to wait until the annual meeting to announce that they intend to make a special dividend with the proceeds? Or if the plan is buybacks, why handcuff yourself for three months?

 

3) Yes, this is complicated. There could be pressure from the Chungs to keep the stake until they have resolved their restructuring problem. On the Wilhelmsen side, they would need to monetize Glovis, make a dividend from Treasure to WWI, and then pass on that dividend to shareholders of WWI to be able to use that money to restructure Tallyman. From the reporting in the Norwegian press they don't seem to be close to coming to an agreement; Thomas is lowballing the others, and it just seems unlikely to me that Thomas will be bought out and leave his public role as the leader of the complex.

 

The spinoff of Treasure was from the shipping company (now Wallenius-Wilhelmsen), prior to their merger with the Wallenius shipping company. At the time I thought Thomas was acting to highlight values in the complex (they did a few other things at the holding company around the same time), but over time I downgraded my views of his capital allocation skills and think it more likely that they just wanted to simplify the structure ahead of the merger (which was executed as a merger of equals), as alwaysinvert mentioned earlier in this thread.

 

I agree with your conclusions though—a buyout would still produce a premium for exiting shareholders while preserving a discount for WWI. To further elaborate the earlier argument on Glovis, and add to your comments on the biggest risk; if management teams of both companies simply do nothing to capitalize on the cheapness, who knows how the market will value that? The discount could go wider and Glovis could rerate lower at a faster pace than they grow earnings.

 

It seems like we agree on what this means for the Treasure equity, but perhaps differ on some of the particulars regarding the likely paths and/or the valuation of Glovis. Thanks anyway for putting forth your thoughts in response to my post, this back-and-forth helped clarify my thoughts.

[writser]

Yeah, I think we're more or less on the same page (boring!). You probably have a bit more faith in the future of Glovis whereas I am a bit more agnostic about that as long as Treasure ASA trades at a 40% discount with upcoming catalysts. I do actually think Glovis is a very decent company but I try not too assign too much weight to that. Who knows what these chaebols are up to and how the market will value Glovis going forward. In terms of corporate governance and shareholder friendliness I'd say South Korea isn't terrible like Japan or Russia but it is not exactly the US either.  So I'm a bit hesitant to look at the financials, slap a double digit multiple on it and say "this is where it should trade" and my base assumption is that the market is somewhat efficient.

 

Regarding the press release: I agree, of course that is something that they will say. Perhaps they have to wait for the AGM because they need shareholder permission for a buyback program / share cancellation / special dividend? Maybe the board is in possession of material non-public information? The fact that they wait for a few months doesn't really worry me.

 

Another thing that alwaysinvert pointed out (thanks) is that in Norway, for a corporate investment outside the EEA tax exemptions for participations apply if you own >10% of a company. So, Treasure ASA can sell a little bit more but after that dividends and capital gains are taxed at 22% in Norway, if I am correct. So probably they stay just above 10% and when they go under it probably implies a complete liquidation.

 

Thanks for your thoughts all. Some good discussion in this thread.

[alwaysinvert]

The Chungs were wise when putting the hydrogen stuff in Glovis.

 

https://www.nasdaq.com/articles/plug-power-to-receive-%241.5-bln-investment-from-sk-group-stock-surges-2021-01-06

 

Next something more to really highlight it before the final restructuring proposal?

[alwaysinvert]

By the way, the LG story is something to keep an eye on: https://www.ft.com/content/d0e8c905-9008-4da8-b07b-a402348c29ad

 

The other chaebols are probably watching if the family can pull through with it.

 

The idea that LG would be the chaebol famous for *good* corp gov and still be devising that transaction is hilarious.

[alwaysinvert]

Does anyone know why Glovis popped so much?

[writser]

Glad you are asking, I thought I was the only one who had no clue ..

[Janeo]

Can't find any news other than this: https://moneys.mt.co.kr/news/mwView.php?no=2021012110528036756

 

Per google translate:

Hyundai Glovis is on the rise in the morning. It is interpreted as reflecting investors' expectations for Hyundai Glovis' new businesses such as electric vehicle battery lease and hydrogen logistics.

 

 

EDIT: probably this

https://www.mk.co.kr/news/stock/view/2021/01/69526/

 

[compounding]

There's also this:

 

Further segmented, auto exports were +15.7% vs January 2020.

[writser]

When I bought Treasure ASA it was never part of my thesis that I'd be able to profit from a future EV stock market bubble. Seems likely that that is now happening though.

[alwaysinvert]

And the god damn discount is still not closing. Why don't the dumbass Norwegians realize that they have an ESG goldmine on their hands here?

[writser]

:D . Maybe we should suggest a name change for the upcoming meeting. Treasure ASA? Nah .. Electric Vehicle Development Holding ASA.

[Scunny Bunny]

@writser is on the money. Treasure discount now back out to 40%. Crazy stuff. Thomas should be buying back stock like no tomorrow. But he's just sat bitching with his cousins.

[Scunny Bunny]

Glovis now KRW227,500. Treasure NAV theoretically ~NOK35.68. Shares are NOK21.60. What does one say?

[alwaysinvert]

The thing with this one that it seems like the Treasure stub holders don't understand is that the higher the price of Glovis, the closer a restructuring bid is. So, even if you could argue that this sounds a bit like bubble thinking, as Glovis rises then the discount should also narrow. If we assume that Glovis is priced efficiently of course (big if!).

 

I increased my size a lot early last year at 13-14 and haven't touched it since. Now I am buying some bits and pieces again, though.

[alwaysinvert]

I suppose that Treasure were restricted from selling stock until Glovis reported today/last night. Will be interesting to see if there are additional sales coming up shortly or what happens next. Will the long awaited restructuring proposal finally arrive before the AGM?

 

http://www.businesskorea.co.kr/news/articleView.html?idxno=59285

 

Meanwhile, the possibility of changes in major shareholders’ equity stakes and its position in the group’s governance structure are serving to drive up uncertainty towards Hyundai Glovis’s share price. However, we note that its current P/E sits far below that seen over 2013~2014 (above 20x) when expectations were in play for governance structure improvement.

[Janeo]

Annual report 2020 is out, alongside dividends of NOK 1.50 per share declared.

[alwaysinvert]

The 1.50 is about 320 million NOK total, as compared to about 540 million held in cash plus another 110 million or so of dividend incoming from Glovis (before tax).

 

The pay-out does seem a bit meagre if the idea is to keep selling down Glovis shares and eventually wind it up. What are they saving all that money for? It's not like they have run it with a substantial cash pile before. Hopefully no additional investments, fingers crossed for buybacks.

[Scunny Bunny]

The annual report is desperate. They have no intention of winding it up. The best investment they can make is themselves at 40% gap to NAV but they wont.  This board is truly hopeless.

[alwaysinvert]

There isn't a lot of new language around strategy in this AR compared to last year, so I wouldn't necessarily draw huge conclusions from that. It's mostly worked out from a template. But they surely are frustrating.

 

If they aren't going to exit Glovis, I can't see why they won't just use their remaining cash to start folding this thing into WWI by TRE tendering shares until WWI gets over 90% for a squeeze-out. This could probably easily be done at a 10-15% discount for the last shares and way more than that for earlier ones. It's free money for them, makes things more cost-effective and if they wanted to they could fill the company with new investments later. Still, my only rationalization for why they haven't done something like this yet is that they have been awaiting the restructuring moves from Hyundai all along.

 

Remember, if or when Glovis gets merged, TRE is likely forced below 10% and by then there are significant tax incentives to change things up. I haven't seen any recent buzz around this - Hyundai seems to have been completely consumed by the Apple thing lately. However, there's probably still a decent chance that there will be some plan forthcoming before their AGM.

 

 

[writser]

The annual report is desperate. They have no intention of winding it up. The best investment they can make is themselves at 40% gap to NAV but they wont.  This board is truly hopeless.

 

I get it, it's frustrating, but I think you also have to dampen your expectations. This is a family controlled investing vehicle that has been trading at a large discount for years. The parent company has also been trading at a discount for years. If you invest in this your base scenario should be that nothing is going to change. If this was a decent company ran for minority shareholders it would not be trading at a 40% discount in the first place.

 

All things considered, last year was about as good as you could expect. Glovis is up, Treasure ASA managed to sell a decent chunk, did a couple of tender offers and is paying out a large dividend. Shares were up 43%. Overhead is minimal. If that is not good enough for you then I don't know what you were expecting. Perhaps you should not have invested in this in the first place.

 

FWIW the dividend is tax-inefficient in the first place. I'd rather have them buying back shares. I'm hoping that's what they will do with the remainder.

[alwaysinvert]

Yeah, large dividends suck pretty hard for the minority even if they are an improvement over the current discount to NAV.

 

I agree that big-picture there has been clear incremental improvement for the case. It doesn't make sense to expect perfection here, or else this market pricing would never have occurred in the first place, like writser says.

 

What we are getting paid for - hopefully - is the ability to watch the paint dry, something which is in short supply these days. But admittedly, the line between rational patience and being a stupidly stubborn "bearded value guy" (copyright John Hempton) is not always very clear.

 

At least in this case we have a relatively neat business underlying which has historically been heavily favoured by insiders in Glovis. Insiders who need to somehow take their shareholding down from 30% to 20% by year-end due to new regulation. There are worse setups for watching a wall of paint.

[Scunny Bunny]

@Writser has offended me slightly given I've been in this thing for five years and the 43% LTM return was off a shockingly low base! I'm well aware that Thomas Wilhelmsen is so hopeless, even parts of his (disenfranchised) family want him out. I've been a shareholder in WWI in the past. Hence, happy to watch @alwaysinvert's paint dry. But when the Jackmans have their first buybacks in forever and the math is utterly compelling, you expect at least a comment in the annual report as to why the big dividend and not a buy back. (Yes, I know why. The parent needs the cash). For an Australian, the dividend is very tax inefficient. Instead of a 7% one off GROSS yield, using US$50m on a buyback at NOK25/share (to make sure you got some) would retire nearly 17mn TRE.OL shares & enhance NAV by >10% for the folks who stay (including me).  Would take WWI up to 81%. Hoping the AGM is on-line. 

[writser]

I did not mean to offend you :) . All I was trying to say is that with a 40%+ discount saying that Thomas Wilhelmsen is a clueless idiot and that nothing is going to change is basically the consensus view. It is priced in. And, I hope that this makes sense, but given the consensus view I'm actually quite pleased by what happened last year. The company is liquidating their position and returning capital - that's excellent and it bodes well for the future. Sure, the distribution could have been larger and more tax-efficient for minority holders but I never expected Treasure ASA to be the holy grail of capital allocation and shareholder-friendliness.  For me it was always a shitty, cheap company. Slightly more cheaper than shittier.

 

I'm actually really content with what is happening. I used to own a tiny stake, given the above logic, but I've been adding a lot last year. Given what has been happening I don't think the consensus view is correct. You don't sell and distribute the proceeds if you want this to be a strategic investment forever or if you are trying to build a shitty business empire. And I want to be a shareholder when this becomes abundantly clear to everybody. And if that doesn't happen and I am wrong? Well, no big deal, it will probably just peddle along at a 40% discount as it has been doing for years.

 

On top of that you have potential stuff happening at Glovis. All in all I am actually quite content with where we're at, given the current discount. Over the years it has traded at a smaller discount with no catalyst in sight nor any indication that Glovis was to be sold whatsoever. Or at least, as far as I understood at the time.

 

A squeeze-out is only mandatory > 90% ownership in Norway AFAIK so there is indeed room for a larger tender offer. To be fair, it would not surprise me if they do a larger tender offer with some of that cash in the near future.

[writser]

This week Glovis released a notice for their AGM. I had a miserable time trying to browse the Korean regulatory repository. There appears to be an English repository online: https://englishdart.fss.or.kr/ but I can't find anything Glovis-related in there. I guess Glovis doesn't file in English? Or am I an idiot? The Korean website is very slow and I have to translate everything manually, annoying. If anybody has a better alternative I'd love to hear it.

 

In any case, this seems to be the agenda with some explanatory notes here. As far as I can see there is nothing special in there with regards to a restructuring.

 

The buyback authorization in the Treasure ASA is the same as last year too: a maximum of 10% of s/o with a max price of 30 NOK (below actual NAV .. ). So, it seems like there are no big plans on that front either, though I expect a couple of buybacks this year, same as last year.

 

In any case, all a bit disappointing. We shall see how the Glovis restructuring story develops during the year but nothing spectacular seems to be imminent. I guess the good thing remains that not much is priced in either.

[alwaysinvert]

The only news yet seems to be that the elder Chung is stepping down from Mobis, which was his last engagement.

 

The convening notice should be up in English any day now - Samsung has already posted theirs and the AGMs for the chaebols are always tightly clustered around the same dates. But there likely won't be anything significant in terms of restructuring there.

 

I guess we will have to look towards further sales of shares, some buybacks and the deadline for the Chungs at the end of the year.

 

As for the level of the buyback authorization, I think that's the legal limit in Norway too, so it's just standard. They have to call an EGM and cancel shares if they, against all odds, hit 10% and want to buy more. I don't know why they stipulate a price range, though, but it could also be a legal thing, seeing as it looks the same as last year. 0.10 is the nominal share value, who knows about 30 - might just have been a very high number earlier and now isn't as high. We are after all talking about a company that last year forgot to send in the documents so the share cancellations had to be postponed.