WWI & WWASA (Oslo Exchange) - Wilh. Wilhelmsen Companies

[Radio Free Cash Flow]

I thought the board might be interested in two posts I did on the Wilh. Wilhelmsen companies in Norway.

 

Wilh. Wilhelmsen ASA (Oslo: WWASA) is the world's largest operator of car carrier ships. Profits have been quite strong as worldwide auto sales increase, and the sector is not suffering from the same overcapacity issues the rest of the industry faces. WWASA also owns a large stake in a South Korean logistics company. The stake is worth almost half of WWASA's market cap, yet the market is not giving WWASA credit for it. WWASA also has significant logistics operations.

 

Wilh. Wilhelmsen Holding Group ASA (Oslo:WWI) is WWASA's parent company, owning 72.73%. WWHG also has a large marine services and logistics segment and various other assets. WWHG is even cheaper than WWASA, trading at less than the value of its public shareholdings, excluding the value of WWHG's other profitable operations.

 

Both companies are controlled by members of the the Wilhelmsen family.

 

Wilh. Wilhelmsen Companies Part 1 - http://otcadventures.com/?p=899

 

Wilh. Wilhelmsen Companies Part 2 - http://otcadventures.com/?p=908

 

 

 

 

 

[kab60]

Anyone following this company? I initiated a position today. Not much has changed since these writeups except that book value has increased approx. 50 percent and share price has gone down. It's trading at around 1/2 BV I believe and expected 2015 PE of less than 5. Dividend has been hiked a bit and stronger USD and lower bunker costs should be a tailwind. There are some litigation issues, but they've been known for a couple of years. Apparently Wilh. Wilhelmsen participated in price rigging/car shipping cartels from 2008-2012.

[kab60]

I don't see any catalysts if you're into those things, but they're growing equity at a nice clip and there's a 3,9% dividend while waiting. Book value almost doubled from 2010 to 2014. The whole company structure is somewhat of a mess, but Daves writeup (as well as the comments) gives you a pretty good idea about the business. It's family owned so interests should be aligned.

[NewbieD]

https://gcaptain.com/wilhelmsen-and-wallenius-agree-to-merger-deal/

 

“The markets in which the jointly owned entities operate are going through rapid change and require a more agile and efficient business model. In addition to establishing one common owner and governance structure, the proposed merger is expected to enable synergies between $50m-100m by combining the assets and harvesting economies of scale, including more optimal tonnage planning, and administrative, commercial, and operational efficiencies between the entities,” Jan Eyvin Wang, president and CEO of Wilh. Wilhelmsen, said in a release.

 

 

[wachtwoord]

Thanks for the heads up.

[wachtwoord]

Blog posts about the merger (a little old by know but this topic is quite dead):

 

https://hammerinvesting.wordpress.com/2016/09/19/takeaways-from-the-wilhelmsen-capital-markets-day/

https://hammerinvesting.wordpress.com/2016/09/05/wilhelmsen-on-todays-merger/

 

I like it and will continue to hold. Still very undervalued in my opinion and a high quality business and management.

[John Hjorth]

I'm interested in this thing - the holding company.

 

The per share metrics are appealing.

 

wachtwoord and kab60,

 

Are you still invested here? [i mean, it makes no sense talking to my self in this topic].

[wachtwoord]

I am (since June only though). I recently spend a couple of hours looking at it again because of the merger and the run-up to decide whether it's still considerably undervalued and I believe it is (it is still well below book).

 

An important change (?) is that it looks like Wilhelmsen isn't scared to give up majority at all. They have 20% ownership after the WMS merge and 40% in the holding level merger with Wallenius. I like both mergers.

 

Radio Free Cash Flow is the guy behind otcadventures btw.

[John Hjorth]

Thanks wachtwoord,

 

Just a personal question here, if you will allow it. I have read quite some of your posts io this board, from your board handle/alias and a certain post of yours I get the impression that you are Dutch. Is this assumption right? [it's for this topic of some kind of relevance based on if we share functional currency or not. I consider DKK and EUR basically the same - they are closely related]

 

As already mentioned I'm only looking at WWI.

 

I'm thinking about why it is so cheap - cheap stocks are to me either hairy in them selves, or there is a "catch" related to them, or both. So here, pure speculation from my side so far, but I'll mention it anyway here without having dived into it by now. I agree with you, that it still seems cheap, despite the runup lately.

 

It's about the Norwegian tax system. In Norway there is a wealth tax in place. If you are a wealthy Norwegian person and tax payer, basically you get confiscated 0.85 percent of your net worth every year, no matter what your income is. If your net assets aren't in it's components well performing, you could actually end up with an effective tax rate above 100 percent, measured on your income.

 

This can create pressure on the yield of the stock, because of the wealth tax burden the Wilhelmsen family members is subject to. It might also create an incentive for the Wilhelmsen family to keep the values in the listed group down [hidden] to avoid - or at least partly avoid - personal wealth taxes, meaning this could actually be an "anti-catalyst" for other shareholders, ref. kab60's comments about shareholder aligment of interests earlier in this topic.

 

As already mentioned, I'm just speculating here, and if even the case, this could or would still be good investment  going forward, despite of that.

 

Please also note that in the notes in financials, there is mentioned a privately held company as the major shareholder, but as the controlling shareholder is mentioned a specific person, being a member of the Wilhelmsen family. I consider this special, bordering to weird.

 

I have found out the existence of a whole spiders web of privately held holding companies above WWI, and I will try to map it, to try get some kind of understanding the whole setup for the family.

 

It will take some time, and I'm in no hurry with this. It will be a 2017-thing for me to do. Personally, for me, this could be a 3% position for me or something in that area going forward.

 

Attached are the 2015 financials for Tallyman AS.

Annual_Report_Tallyman_AS_2015.pdf

[alwaysinvert]

There have been considerable movements towards abolishing/lowering/reforming the wealth tax in Norway. I don't think this is completely unrelated to the restructuring moves in Wilhelmsen.

 

See for example: http://www.aftenposten.no/okonomi/Jensen-vil-sjekke-delt-formuesskatt-9942b.html

 

There is no question that the wealth tax has historically been the main reason for opaque Norwegian company structures, cross shareholdings and so on.

[John Hjorth]

Thanks for your input, alwaysinvert,

 

It seems that is needed to study the dynamics of the Norwegian political sentiment with regard to wealth tax as well.

 

Oh well.

[kab60]

I no longer have a stake. I did a total make over of my portfolio a year ago when I bought an apartment, and Wilh didn't return. The wealth tax was a big part of the reason, because I feared no value unlocking actions. But clearly I was wrong (Treasure etc). Seems like they're where Maersk were a couple of years ago.

[John Hjorth]

Thanks for info, kab60.

[wachtwoord]

@John: I am indeed Dutch and we have a higher wealth tax than the Norwegians. It used to be a flat 1.2% years (30% tax on a fictive 4% return on your wealth). From 2017 the fictive return will move up to 5.39% for wealth above 1 million Euro, so that's even higher. So if you believe the wealth tax has a large impact on investments apply this to your Dutch investments (if any) as well. Of course you can avoid direct wealth taxation through company structures (but then you pay corporate taxes).

 

Regarding the implications for this investment: I do think (and thought when I bought this) that the family would try to keep this undervalued and I am completely fine with that as I think this could be a long term compounder. Historically this seems to have been run very well. If the price does run up I'm also fine with that and will simply sell my stake if it moves up to what I consider fair value or slight overvaluation (depending on my assessment at the time plus what other ideas I have).

 

Like you said, undervalued stocks usually have a reason why they're undervalued. A family purposefully trying to keep the price down to lower their personal taxes is one of the more beneign reasons and will not hinder you from getting a good return as long as you have a long term focus. Having said this they do seem to be taking some actions which can unlock value.

 

For a good overview of the corporate structure please see the blog posts I linked. If you manage to create an overview of the structure above WWI I'd be interested as well. (for the record own the B shares).

[John Hjorth]

Thanks wachtwoord,

 

I will share the chart in this topic when it is done, and as far as I can get with it. I might end up with black boxes or holes/blind spots in it.

 

I understand the way you look at this position of yours. It makes a lot of sense to me.

 

- - - o 0 o - - -

 

I'm surprised reading about the Dutch wealth tax in place for you. Here in Denmark, the wealth tax was at about 1% of anything above approx. DKK 1 M [in 1996], if I rember correctly, and it was abolished in 1997.

[wachtwoord]

I'm surprised reading about the Dutch wealth tax in place for you. Here in Denmark, the wealth tax was at about 1% of anything above approx. DKK 1 M [in 1996], if I rember correctly, and it was abolished in 1997.

 

I'm not a fan (I'm against taxing wealth or income derived from wealth) but I assume they tax capital gains and dividends in your jurisdiction while they don't here (and I can subtract foreignly withheld taxes).

[John Hjorth]

I'm not a fan (I'm against taxing wealth or income derived from wealth) but I assume they tax capital gains and dividends in your jurisdiction while they don't here (and I can subtract foreignly withheld taxes).

 

wachtwoord, yes, that's correct.

[rtvinvest]

http://www.newsweb.no/newsweb/search.do?messageId=412391

 

2 months old but relevant for this discussion. Spin-off TRE is now allowed to sell down Hyundai Glovis stake to 7% from 12.04% without consent from the Chung family. Still trading at 30% discount (43% upside) to NAV (Glovis stake + cash)

[Scunny Bunny]

Things are happening at a bit of a pace in shipping partly due to the bankruptcy of Hanjin Shipping, a Korean container player at the end of August 2016.  (refer you to an article in The Economist Sep 10,2016) The biggest player in container shipping AP Moller Maersk is effectively separating the two businesses of container shipping (and associated activities) and oil; the oil is a hedge against fuel costs in shipping.  In addition, APMM is buying Hamburg Sud to bring costs down even further and force the unprofitable Japanese lines to do something and ensure a more rational market.  APMM report quarterly - go to their IR site.  APMM "B" shares have rallied sharply since early November from ~DK8475 to DK11380.  At the other end of the spectrum are WWI and WWASA who are much more into vehicle logistics, ro-ro and all the associated services. There are three listed companies in the group: WWI the holding company with a voting and non voting share, WWASA the "operating company" and Treasure, spun off in June 2016. WWASA is merging with Wallenius lines as they have numerous JV's; WWASA shares trade at NOK 34.40 against NTA of NOK45.20 but up from a low in the 20's mid year.  WWI has 160m WWASA shares (73%) but this will dilute to 38% when the merger completes. There will be more free float in WWASA as Wallenius will sell down to 38% leaving 24.4% of 422.5m shares in hands of public. 

 

On an asset backing, pre tax at market value viewpoint, WWI (46.5million shares total) is comprised of 7 parts, based on Q3 report (US$1 = NOK8.705):

 

160m shares WWASA at NOK 34.40 = NOK 5504m

160m shares Treasure ASA at NOK 16.40 = NOK 2624m (but as pointed out are at 30% discount to NTA based on mv of its sole investment being 12% of listed Hyundai Glovis)

100% WMS (marine services) - bits of this (Callenburg Tech been sold off) - value residue at 5.5xEV/EBITDA and deduct debt of US$157m less $64m for asset sale = NOK3212m

70m shares of Australian listed Qube (QUB:AU) at A$2.41 = NOK 1056m

US$51m of cash = NOK444m

US$82m of "Nordic equities and bonds" = NOK714m

US$38m of debt = (NOK331m)

 

Add it all up gets you NOK13223m (~US$1.519billion) = NOK284/share versus current price ~NOK195.  Stated NTA at Sept 30, 2016 was NOK326/share.

 

Key is that things are happening to free up value, increase liquidity etc which should serve to close the gap between intrinsic value and market price. Disclosure is very good and lost of deconsolidated stuff to help you.

 

I am long both WWI and Treasure ASA (happy to accept being part of Hyundai octopus)

 

Interesting transitions in one of the few industries trading close to lows and modest valuations.

 

 

[SnarkyPuppy]

Has anyone done work to determine whether this constitutes a PFIC for tax purposes?  Increasingly attractive at these levels but don't want to spend significant time doing work just to later find out its a PFIC

[compounding]

Tender offer for 2m shares announced today: https://newsweb.oslobors.no/message/485853

 

"the Company hereby launches an offer to all shareholders in the Company to buy back up to 2.000.000 shares in Wilh Wilhelmsen Holding ASA, with the intention to buy up to 1.500.000 A-shares and up to 500.000 B-shares.

 

[...]

 

The offer will be carried out by means of a book building process which starts on 24 September 2019 09:00 and ends on 26 September 2019 at 16:30.

 

[...]

 

Pricing and allocation will follow before 18:00 on 26 September, the trade date will be 26 September with settlement date 30 September."

 

 

[Maple Fun]

Jump in the boat...

any speculation about the result of the book building?

[compounding]

I have no information, but my guess would be that they received interest for an exit from one of the larger shareholders, and that they sized up the offer enough to make room for others to exit if they wish to do so.

 

Reasonable numbers for that scenario would mean that they have something like 500k shares or more lined up, and the rest depends on if any of the others bite.

[Packer16]

The estimated range is from NOK 143 to NOK 148 with no difference in pricing between the A & B shares per Bloomberg.

 

Packer

[Maple Fun]

They bought back ~1.8m shares @144 NOK

 

Wilh. Wilhelmsen Holding ASA: Share buy-back

26.09.2019 17:58

https://newsweb.oslobors.no/message/486087

 

 

Reference is made to the notice issued on 24 September 2019, where Wilh

Wilhelmsen Holding ASA launched an offer to all shareholders to buy back up to

2.000.000 shares, through a book building process.

 

The Company has today bought 537.097 A-shares and 1.286.732 B-shares. The price

paid for both share classes was 144,00 NOK per share.

 

Pursuant to the transaction, Wilh Wilhelmsen Holding ASA owns 537.097 A-shares

and 1.286.732 B-shares.