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Wendel sold 40.5m shares or 9% of Bureau Veritas bringing its stake to about 26.5% and proceeds of about EUR 1.1bn.We expect proceeds to be used to fund the growth of the asset management business.Timing-wise we believe Wendel is selling at an attractive price. We also expect the market to be pleased with this news as it will allow Wendel to diversify its portfolio more.We expect a positive share price reaction but in our view the key challenge will be the reinvestment of proceeds. Recent track record in capital allocation was mixed as the company likely overpaid for CPI and
Wendel Wendel SE
FY23 NAV at EUR 160.2 p/s, down slightly YoY (-2.7%)Proposed dividend EUR 4 p/s, up a whopping 25% thanks to new policy. Shareholders seem pleased with it, while we prefer reinvestment in NAV.Overall portfolio results came in roughly in line with our estimatesWe estimate today's NAV at EUR 170.2 p/s implying a discount of 47.6%. Wendel's share price is up >10% since the new strategy. We will fine tune our estimates in the coming days. For now Hold and TP of EUR 95 reiterated.
The Diversified Financials sector has seen some mixed performance in 2023. Higher rates are a headwind for most stocks we cover, but a milder rates environment could offer opportunities for next year. The sector is broad with different exposures to this theme and others. We update our ''playbook'' to our best ideas across the range of sub-sectors. Alternative asset managers: turning point ahead? European managers still trade below average valuation levels (c.15x fwd P/E) despite returning 30% in 2023 (ex. Antin). By contrast, the US managers returned 60% in 2023 and now trade close to peak valuations again. With industry fundamentals improving into 2024 we have a clear preference for the European managers who offer valuation upside and accelerating growth. With improvements in the market environment and the prospect of peak rates being behind us now, we expect a recovery in 2024 driven by a step up in deal activity. This should create a virtuous cycle of growth as exits return capital to LPs, thus supporting fundraising and performance fees. Our top picks are Antin (+), EQT (+) and in the US KKR (+). All offer a combination of growth at attractive valuations. We are also Outperform on Bridgepoint and Intermediate Capital who also have good growth prospects at attractive valuations but are not as neat as our top-picks. We are Outperform on Eurazeo (+) which still trades on cheap levels (50% implied discount on the balance sheet and 10x 2025 FRE multiple for AM business) and where we see a transition to becoming a more capital light alternative manager as an attractive catalyst. Exchanges: safe havens in the event of a sell off The sub-sector tends to come into vogue in choppy markets: reflective of the positive gearing to volatility through volumes and data-based revenues that are recurring and have pricing power. Our preference is for Deutsche Boerse (+) where...
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Wendel hosts its CMD with an increased focus on shareholder remunerationIt aims for generating double-digit IRR on existing portfolio and 15% for future assetsGoal of recurring, predictable dividends with a new target of 2.5% of NAV for 2024 increasing up to 3.5% of NAV in the medium term.Based on last reported NAV of September, this would imply a FY24 dividend yield of >5%We believe the high dividend yield will definitely be a boost for the share price. Over the medium to long term, a fixed 3.5% dividend on NAV may result in lower NAV growth over time (less compounding effect)
Although the NAV declined slightly during the quarter (-0.7%), Wendel made strong progress in its new strategic directions, actively rotating its portfolio and adding a new dimension to third-party asset management with the signature of an agreement to purchase IK Partners. While the widening in the discount to the NAV and the recent share price performance suggest otherwise, the 51% discount to NAV as of September 2023 is compelling.
Q3 23 NAV came in at EUR 162 p/sBureau Veritas punished hard despite ‘OK' print, rest of private portfolio sees challenging marketWe estimate today's NAV to be EUR 148 p/s, implying a discount of 54%.This is quite elevated compared to the LT average of ~30%. The issue is that we do not see major catalysts in the short which can change this trend. Hold reiterated. TP goes down slightly to EUR 95 p/s (vs. EUR 100 before).
Wendel had a modest quarter on the NAV front (down 0.7% qoq and 3.5% YTD) despite a slightly-better operational performance (+5.7% organic growth yoy over 9m). With the portfolio rotation under way and the desire to establish itself as a player in third-party asset management, it is clear that Wendel is determined to live up to its promises. That said, the widening NAV discount and the share price are saying otherwise: investors are not on board.
Wendel confirmed the speculation surrounding its possible acquisition of IK Partners. The terms have been given: Wendel intends to acquire IK Partners, a company managing €11.8bn AuM, in two steps for an enterprise value of around €751m, i.e. 12.5x the fee-related earnings target of 2024. Through this transaction, Wendel intends to diversify its sources of income with recurring flows, and gain a foothold in the world of third-party asset management.
Wendel announced exclusive negotiations to acquire a controlling stake in IK Partners for EUR 383m (51%)This would be Wendel's first entry in the alternative asset management sector, a sector where peers are struggling at the momentThe price paid seems quite attractive for Wendel. However, we are not yet convinced by the new strategic direction and await more information on the strategy going forward. Hold maintained
The strategic turnaround unveiled by Laurent Mignon last March does not seem to have won over investors, with the Wendel share price down by 17% YTD. It has to be said that Wendel’s conversion to third-party appears behind schedule, as the private equity golden age is a distant reality. On Friday, Bloomberg reported that Wendel is negotiating the acquisition of the private equity firm IK Partners. Although this move makes sense from a strategic standpoint, investors are unlikely to be particularly enthusiastic.
Rumour that Wendel is looking to buy PE firm IK PartnersWendel would certainly have the means to do so following the sale of Constantia Flexibles although we are not convinced by the new strategyDifficult sector at the moment with other asset management companies like Eurazeo, Tikehau Capital and GBL (Sienna) struggling as wellHold rating reiterated
One Rock Capital Partners will buy Constantia Flexibles at EUR 1.1bn, roughly in line with our estimate of EUR 1.2bnWe estimate a generated IRR of 8.6%, which we deem as too low for an investment company like WendelWe are not sure why Wendel wanted to sell Constantia Flexibles in the current environment as it may not receive the best possible valuation. Maybe this is related to the acquisition of ScalianWith Constantia Flexibles out of the portfolio, we see no significant (positive) catalysts in the short term which could drive a rerating. Hold reiterated
Wendel posted lacklustre H1 23 results, marked by a 3.6% contraction in its NAV qoq and a 2.9% drop in the companies’ contributions to net income. Notwithstanding these shaky results, Wendel deserves credit for delivering on its strategic objectives set in March, with an active rotation of its portfolio. Indeed, Wendel has announced that it has acquired 82% of the French leader in digital transformation consultancy, Scalian, and is in the process of selling the flexible packaging manufacturer, Constantia Flexibles.
H1 23 NAV at EUR 163.2 p/s, flat YTD, down 3.6% QoQ (DPe EUR 165.2).Constantia Flexibles received several binding offers already included in NAV which implies it will not be the catalyst that was hoped for.We estimate the binding offer to be EUR 1.2bn for Wendel's stake.We estimate today's NAV to be EUR 165.8 p/s implying a discount of 43%. Although elevated, with one of the only catalysts in the portfolio (Constantia) turning out to have a minor impact, we see few options that may cause a significant rerating. Hold reiterated.
Wendel seems determined to deliver on its strategic objectives. The family holding company has announced that it has completed the acquisition of 82% of the French leader in digital transformation consultancy, Scalian, and is in the process of selling the flexible packaging manufacturer, Constantia Flexibles. Although the group’s strategic reorientation is well under way, the results remain shaky, with NAV down 3.6% in Q2 and net income from operations down 1.9% yoy.
Wendel is poised to deliver on its strategic objectives announced last March. The beginning of the year is shaping up well for the HoldCo, which has recorded a 2.8% growth in NAV and sound operating performance of its portfolio companies, Constantia Flexibles, CPI, and BV. The exclusive negotiations to acquire Scalian, a leading engineering consultant in France, kicks off the HoldCo’s new roadmap, which is becoming more growth-oriented.
• Q1-23 NAV at EUR 172.5 p/s, up 2.7% over the first quarter but quite a bit below our estimate of EUR 182.5 mainly because of lower than expected valuation of the private portfolio• Performance of portfolio companies was mixed with extremely strong results of Constantia Flexibles (+21.8% revenue, DPe +5%) but a weak Stahl (-8.6%, DPe +6%)• We estimate today's NAV to be EUR 174.3 p/s implying a discount of 42.3%. That is in line with our target discount of 40%. TP of EUR 100 reiterated as well as our Hold rating.
Laurent Mignon has marked his territory by making a major strategic shift in the family holding company through plans to develop the third-party management activity, notwithstanding Wendel’s apparent reluctance to include outside investors. While the HoldCo posted solid 2022 figures thanks to the good performance of its portfolio companies, the capital gains from the sale of Cromology and the increase in NAV over Q4, we remain sceptical as to the change in strategy in an unfavourable context for private equity.
FY22 EUR 167.9 p/s, down 10.7% vs. EUR 188.1 last year, but in line with our estimateFY22 dividend at EUR 3.2, up 6.7% (FY21: EUR 3)New strategy announced including: EUR 2bn of investments over next 2 years, tickets of EUR 300-600m in EU or US, priority for majority stakes in private assets, ambition to develop asset management business and a new dividend policyWe believe the majority of the strategic proposals will be well received by the market. Whereas the asset management business is an attractive concept, we have seen with GBL and Sienna that scaling up and making the business
Yesterday, Wendel held its 21st investor day, marking the handover from André François-Poncet to Laurent Mignon at the helm of the group. During the day, Wendel reaffirmed its leading position in several sectors and its resilience in a particularly challenging environment. No statement was given regarding the strategy of the group under the new CEO, but Laurent Mignon presents himself as a change impeller rather than a continuator.
Wendel reported a good Q3 22 from an operational point of view, with growth in consolidated revenues of 21%, including 12% organic growth to €2.3bn. The same cannot be said in terms of NAV with a 4.5% decline in Q3 bringing the YTD decline to 16%. Nevertheless, while Wendel’s NAV may be in a worrying downtrend, the increasing discount of the stock to the NAV of as of September 2022 (c.51%) is definitely worth snapping up.
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