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Good cash earnings growth GBL posted FY 2021 cash earnings of EUR474m, up 8% thanks to a sharp increase in Sienna Capital interest income, well contained holding costs and good yield enhancement activity, while dividends received from participations were slightly up. Sienna Capital contribution was said to be likely to continue to increase in the coming years. NAV continues to show above average discount NAV at end of December stood at EUR144/s up 10% YOY and +3% vs. end of Q3 21, mostly driven by value uplift at private assets (now accounting for notably Webhelp, on the back of earnings growth and re-rating) and Sienna Capital (thanks to fund revaluation). This shows a 32% discount to NAV compared to 25% for the historical average. The direct impact from the current context was said to be limited owing to low exposure of portfolio companies to Russia / Ukraine. The group indicated that it should continue buying back and cancelling shares (one third of the EUR500m program was executed) as long as NAV discount stays elevated. Room for further capital deployment - TP adjusted to EUR103 We have left our cash earnings estimates unchanged. With LTV of 4.3% (down from 7.3% last year) and liquidity of EUR4.4bn, management indicated that current market conditions would create opportunities to further build up the portfolio on both private and listed assets. Our Spot NAV in figure 1 points to EUR137, showing 35% discount. We have revised our valuation (based on a return to the NAV discount its historical average of 25%) to take into account the recent correction in equity markets. We maintain our Outperform.
Groupe Bruxelles Lambert SA Groupe Bruxelles Lambert SA
After having reshaped and diversified its listed investments, GBL has shifted the portfolio towards private assets (now c.25% of published NAV) creating potential for hidden value. There is also optionality in asset management, although the business is in its early stages. NAV discount stands 5 points above historical average. We keep our Outperform rating and adjust our TP to EUR107. Outperformance driven by a pickup in asset rotation Over the past 12 months GBL outperformed the market despite soft performance from the listed portfolio and a widening discount to NAV. This was thanks to a pick-up in asset sales and deployment towards private assets (now accounting for c.25% of published NAV) driving an uplift in the 9-month NAV bridge. Share of private assets set to grow The share of private assets is set to grow with management targeting 40% of NAV in the medium term. This should create good potential for hidden value, already evidenced through the company''s stakes in Webhelp and Canyon, which have significantly surpassed GBL''s expectations compared to when those assets were acquired. Optionality in alternative asset management The group recently made inroads in alternative asset management with three announced acquisitions that look promising in the medium to long term. We have nevertheless not ascribed any value to these, as they are in their very early stages. Valuation adjusted for listed assets - Outperform maintained We have adjusted our TP from EUR108 to EUR107 to account for a mark-down in the listed portfolio, though this is largely offset by an uplift in the unlisted assets. Our target price is based on a 25% discount to NAV, consistent with the historical average. With EUR4.6bn of firepower (gross cash and credit facilities), the group is in a good position to deploy more capital on private assets, thus creating more potential for hidden value. We maintain our Outperform rating.
NAV progression driven by private assets GBL posted a NAV of EUR143 at end Q2 21 up 12.5% YTD and up 9% vs. end of Q1 21 level. Most of the progression was driven by revaluation of non-listed assets notably WebHelp (customer care) and Canyon (bike designer) that saw their earnings and valuation multiples expand during the first half. Steady asset rotation During H1 21, GBL disposed of EUR2.37bn of assets (reduction in Holcim, Umicore and GEA stakes) and acquired EUR901m (Canyon, MOWI and increase in commitment at Sienna Capital). Private assets now account for c. 20% of group''s net asset value. Discount to NAV remains above historical average With our spot NAV of EUR144, GBL''s current share price points to a 32% discount to NAV compared to 25% for the historical average. While holding companies show a wider discount during market turmoil, they generally tend to return to their historical average once equity markets recover. This has yet to be the case for GBL despite the outperformance of its portfolio (NAV progression in Q2 was 600bps above Eurostoxx 50 performance). Room for re-rating - Outperform maintained We have cut our earnings estimates to factor in the impact on dividends received from portfolio rotation. The higher share of private assets should be a good reservoir for hidden value and with 2.3% loan to value (vs. 7% at end 2020), the group has significant room to continue deploying capital. We have lifted our valuation from EUR101 to EUR108 to reflect the increase in gross asset value. The TP is based on a return of the NAV discount to its historical average of 25%. We maintain our Outperform rating.
Cash earnings impacted by lower dividends GBL posted FY 2020 cash earnings of EUR440m, down 26% affected by a decline in dividends received from its participations (all except SGS had to reduce or halt dividend payments as a result of the Covid-19 crisis). This was partly offset by well-contained holding costs and good yield enhancement activity. Cash earnings are expected to grow again in 2021 as dividend payments in most of the group''s participations should resume. Exacerbated discount to NAV Spot NAV at end December stood at EUR127/s up 14% compared to end Q3 thanks to re-rating at virtually all listed participations and re-valuation of non-listed assets (Sienna Capital private equity funds and Web Help going from transaction price to DCF/peer multiples). This points to a 35% discount to NAV compared to 25% for the historical average. While holding companies show a wider discount during market turmoil, they generally tend to return to their historical average once equity markets recover. This has yet to be the case for GBL despite the outperformance of its portfolio (NAV progression in Q4 was 580bps above Eurostoxx 50 performance). Room for re-rating and capital redeployment - TP lifted to EUR101 We have cut our cash EPS estimates by 8% this year and 9% next year to factor in the impact on dividends received from portfolio rotation. With LTV of 7.3% at the end of 2020, GBL has room to continue deploying capital while management indicated that asset rotation should pick up in 2021. Our Spot NAV in Figure 1 points to EUR135, showing a 36% discount to yesterday''s closing price. We have lifted our valuation from EUR84 to EUR101 which is based on a return of the NAV discount to its historical average of 25%. We maintain our Outperform rating.
