AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
This research has been commissioned and paid for by the company and is deemed to constitute an acceptable minor non-monetary benefit as defined in MiFID II

Chargeurs

CR
Bloomberg   CRI FP
Holding Companies  /  France  Web Site   |   Investors Relation
Carrying on with strategic acquisitions
Target
Upside 95.5%
Price (€) 13.64
Market Cap (€M) 389
Benchmarks Current multiplesWeightValues (€)Upside 
NAV/SOTP per share   55%26.695%
Dividend Yield Peers 6.4% 20%27.3100%
DCF (Edit and simulate)  10%34.0150%
P/E Peers 11.6 x 10%23.673%
P/Book Peers 1.0 x 5%16.722%
Target Price  100%26.796% 
Valuation matters

We regard Chargeurs SA as an industrial conglomerate with a holding company profile as its activities are clearly independent and do not complement each other beyond sharing common central costs and resources despite the fact that they all address high value niche markets. It is for the parent holding company to make sure that the world reach of its subsidiaries is better shared on an ad hoc basis. Recent experience has shown that these industrial businesses, while unrelated, tend to move in synch in rapidly-deteriorating market conditions. There is little prospect of mutually offsetting business cycles in the current spread of assets.

Peer metrics are therefore mostly found within the holding company sector plus the odd reference to specialist chemicals as Protective Films are the dominant business of the small group with half of the sales and 67% of the EBITDA/recurring profits. We used to apply a discount to the peer-based reference P/E to account for the fact that Chargeurs’ businesses are primarily B2B operations but the strong top-line growth combined with considerable agility no longer warrants this.

The DCF is based on fairly modest EBITDA growth of 3.2%, in line with industry expectations. We assume that the well managed net debt situation of the group would warrant a tight spread now at 300bp. This reflects the fact that the firm seems determined to keep a substantial financing buffer. The DCF-based valuation is allowing for an acquisition stream before 2021 to match sales target by that date. It also allows for a necessary rights issue at €100m, assuming it will add 4m shares at a price of €25. We make no allowance for the net present value of the tax assets (see below) beyond what stems from the relatively low tax rate projected from 2020 on (16%).

For the NAV, we stopped using data calculated and provided by the company in the parent company’s financial statements. The more entrepreneurial management since late 2015 warrants the use of sector multiples which leads to the Protective Films business accounting for c. 67% of the gross assets. The €165m net debt position expected by year-end assumes €70m in acquisitions in 2019.

Finally, there is the vexing issue of what to do with the huge tax loss carry forwards resulting from the historical losses. The previous view, that they were unlikely to be used up by operations over the next few years and the French tax rule tightening so that the open-ended portion was unlikely ever to materialise, is probably too cautious now that the earnings delivery of the group has been confirmed for the fourth year in a row. The “evergreen” tax loss carry forwards stand at €200m for the group at the closing of 2018, of which the bulk (€192m) in France. That matters, as Chargeurs will need French profits to make use of tax losses carry forwards. Assuming that post 2021 earnings growth at 3% a year and a 25% tax rate, the NPV of the tax loss carry forward would be c.€40m.

Comparison Based Valuation
Computed on 18 month forecastsMcap (€M]P/E (x)P/Book (x)Yield(%)
Peers ratios 20.1 1.12 3.04
Chargeurs's ratios 11.6 1.00 6.44
Premium 0.00% 10.0% 10.0%
Default comparison based valuation (€) 23.6 16.7 27.3
AkzoNobel 15,905 43.03.051.29
GBL 12,008 18.10.604.51
Hal Trust 10,024 32.81.364.49
Bolloré 8,184 8.140.732.15
Solvay 7,394 36.21.643.77
Ackermans & van Haaren 3,738 11.21.022.09
Wacker Chemie 3,444 ns2.021.93
Sonae 1,201 5.680.587.63
DCF Valuation Per Share Help View DCF history
WACC % 7.89
PV of cashflow FY1-FY11 €M 443
FY11CF €M 77.3
Normalised long-term growth"g" % 2.00
ESG weighted "g" % 2.21
Terminal value €M 1,362
PV terminal value €M 638
PV terminal value in % of total... % 59.0
Total PV €M 1,080
Avg net debt (cash) at book v... €M 150
Provisions €M 16.7
Unrecognised actuarial losses... €M 0.00
Financial assets at market price €M 19.3
Minorities interests (fair value) €M 0.00
Equity value €M 933
Number of shares Mio 27.4
Implied equity value per share 34.0
Assessing The Cost Of Capital Help
Synthetic default risk free rate % 3.50
Target equity risk premium % 5.00
Tax advantage of debt financ... % 30.0
Average debt maturity Year 5
Sector asset beta x 0.89
Debt beta x 0.60
Market capitalisation €M 374
Net debt (cash) at book value €M 126
Net debt (cash) at market value €M 107
Company debt spread bp 300
Marginal Company cost of debt % 6.50
Company beta (leveraged) x 1.07
Company gearing at market v... % 33.6
Company market gearing % 25.2
Required return on geared eq... % 8.84
Cost of debt % 4.55
Cost of ungeared equity % 7.95
WACC % 7.89
DCF Calculation Help
  12/19A 12/20E 12/21E 12/22E Growth 12/23E
Sales €M   626 643 887 974 3.00% 1,003   
EBITDA €M   60.0 60.6 97.2 111 3.00% 114   
EBITDA Margin %   9.58 9.42 11.0 11.4 11.4   
Change in WCR €M   -13.3 -11.5 0.00 -19.0 2.50% -19.5   
Total operating cash flows (pre tax) €M   40.2 41.1 89.2 83.8 94.6   
Corporate tax €M   -4.92 2.23 -5.98 -5.87 2.50% -6.02   
Net tax shield €M   -3.45 -3.84 -5.04 -6.24 2.50% -6.40   
Capital expenditure €M   -25.3 -17.0 -18.0 -18.0 5.00% -18.9   
Capex/Sales %   -4.04 -2.64 -2.03 -1.85 -1.88   
Pre financing costs FCF (for DCF purposes) €M   6.55 22.5 60.2 53.7 63.3   
Various add backs (incl. R&D, etc.) for DCF... €M   0.00 0.00 0.00 0.00 0.00   
Free cash flow adjusted €M   6.55 22.5 60.2 53.7 63.3   
Discounted free cash flows €M   6.55 22.5 55.8 46.1 50.4   
Invested capital   322 411 485 578 607   
NAV/SOTP Calculation
 % ownedValuation technique Multiple used Valuation at 100%
(€M)
Stake
valuation
(€M)
In currency per share
(€)
% of gross assets
Protective Films 100% EV/EBITDA 15 497 497 18.1 56.6%
Fashion Technologi... 100% EV/EBIT 9 167 167 6.08 19.0%
Museum Solutions (... 100% EV/EBIT 12 132 132 4.82 15.1%
Luxury Materials (e... 100% Adj. historical price 42.0 42.0 1.53 4.79%
Tax loss carryforwa... 100% AlphaValue valuation 40.0 40.0 1.46 4.56%
Other
Total gross assets 877 32.0 100%
Net cash/(debt) by year end -149 -5.43 -17.0%
Commitments to pay
Commitments received
NAV/SOTP 728 26.6 83.0%
Number of shares net of treasury shares - year end (Mio) 27.4
NAV/SOTP per share (€) 26.6
Current discount to NAV/SOTP (%) 48.7 View history

Changes to Story : 17/04/2020, Changes to Forecasts : 17/04/2020.