2023-12-29 04:15:00 ET
Summary
- Wilh. Wilhelmsen's preferred stocks and nonvoting shares exhibit characteristics of compound mispricings, offering potential opportunities for investors.
- The company's core business, Wilhelmsen Maritime Services, has experienced significant growth, with a return on equity of 23% in 2022.
- Wilh. Wilhelmsen's largest investment, Wallenius Wilhelmsen, has also seen a substantial increase in return on equity and operates in a growing market with high demand.
The following segment was excerpted from this fund letter.
Wilh. Wilhelmsen ( OTC:WLLSF )
Our Korean preferred stocks and the nonvoting shares of Wilh. Wilhelmsen ( OTC:WLLSF ) all feature characteristics of compound mispricings. The thesis for the closing of the voting, nonvoting, and holding company valuation gap includes evidence of better governance and liquidity. We are also looking for corporate actions such as spinoffs, sales, or holding company transactions and overall growth.
Wilh. Wilhelmsen is amongst the fastest growing compound mispricings in the portfolio. Return on equity for the core business (Wilhelmsen Maritime Services) has increased from 6% in 2018 to 23% for 2022 with a return on incremental invested capital (RoIIC) of about 30% laid out below. 2017 was the first year after Wilh. Wilhelmsen contributed its roll-on/roll-off ('RORO') assets to form Wallenius Wilhelmsen and received a 38% stake in the combined entity in return.
WWIB | |||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 30.6% | ||
Capital Invested | 39 | 34 | 23 | 64 | 19 | 56 | 196 | ||||||
2-yr sum | 57 | 87 | 83 | 75 | |||||||||
4-yr sum | 140 | 162 | |||||||||||
CFO | 58 | 61 | 126 | 123 | 118 | 118 | 60 | ||||||
2yr change | 68 | 62 | -8 | -5 | |||||||||
4yr change | 60 | 57 | |||||||||||
5-yr avg | |||||||||||||
2-yr ROIIC | 119.3% | 71.3% | -9.6% | -6.7% | 43.6% | ||||||||
4-yr ROIIC | 42 9% | 35 2% | 39.0% | ||||||||||
Equity | 194 | 380 | 353 | 489 | 521 | 432 | |||||||
RoE | 49.0% | 5.5% | 51.8% | 20.4% | 19 0% | 22 9% |
Wilh. Wilhelmsen’s largest investment (representing 33% of Wilh. Wilhelmsen’s NAV), Wallenius Wilhelmsen ( WAWIF ), which Wilh. contributed its RORO fleet to in 2016, also has increased its return on equity from 7% in 2017, to 44% in 2022, with a cyclically driven RoIIC of 140% over the past five years as laid out below. The RORO market that WW competes in has seen steadily increasing demand from auto and high and heavy (H&H) exports from China and supply which is moderately growing and returning to long-term trend growth of 3% by 2025. WW is currently generating 17% RoICs in an oligopolistic industry with modest supply growth and robust demand growth. The current ship utilization is highly evidenced by fixed asset turnover increasing from 0.7 in 2019, to 0.98 currently. WW is the largest of the RORO carriers in a six-player market.
Wallenius Wilhelmsen | ||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 136.8% | |
Capital Invested | 221 | 33 | 20 | 147 | 136 | 359 | 183 | 144 | 127 | 136 | 78 | 668 |
2-yr sum | 53 | 167 | 283 | 495 | 542 | 327 | 271 | 263 | 214 | |||
4-yr sum | 336 | 662 | 825 | 822 | 813 | 590 | 485 | |||||
CFO | 259 | 199 | 233 | 213 | 190 | 538 | 563 | 840 | 456 | 825 | 1452 | 914 |
2yr change | -26 | 14 | -43 | 325 | 373 | 302 | -107 | -15 | 1452 | |||
4yr change | -69 | 339 | 330 | 627 | 266 | 287 | 889 | |||||
5-yr avg | ||||||||||||
2-yr ROIIC | -49.1% | 8.4% | -15.2% | 65.7% | 68.8% | 92.4% | -39.5% | -5.7% | 678 5% | 158.9% | ||
4-yr ROIIC | -20.5% | 51.2% | 40.0% | 76.3% | 32.7% | 48.6% | 183 3% | 76.2% | ||||
Equity | 535 | 508 | 543 | 630 | 505.2 | 2622 | 2647 | 2678 | 2391 | 2539 | 3153 | |
RoE | 7% | 33% | 39% | 10% | 11% | 7% | 14% | 26% | 14% | 27% | 44% |
Below is an intrinsic value for Wilh. Wilhelmsen based on the value of the underlying subsidiaries they hold.
Wilh Wilhelmsen ('NOK') | ||||||||||
NOK/$ | 9.831 | WW | ||||||||
EBITDA | Mutliple | Value | % of NAV | Mkt Cap | % Owned | Value | ||||
WMS Ops | 1,415.7 | 7.0 | 9,909.6 | 33% | ||||||
New Energy | 479.2 | 2% | 1,864.7 | 25.7% | ||||||
WWL ASA | 15,369.9 | 51% | 40,650.3 | 37.8% | 15,369.9 | |||||
Treasure | 4,101.9 | 14% | 5,919.1 | 77.0% | 4,557.7 | 10% | Hold Co Disc to FMV | |||
NorSea | 552.9 | 6.0 | 3,284.2 | 11% | 3,317.4 | 99.0% | 3,284.2 | |||
Net Cash | -3,116.4 | -10% | Cash less debt at Holdings & WMS & Investments | |||||||
Net Asset Value | EPS | Multiple | 22,521.4 | 25% | Hold Co Disc to FMV | |||||
Shares | 46.5 | |||||||||
NAV/Share | 114.9 | 484.3 | Discount | |||||||
A Shares | 3.0 | 340.0 | -29.8% | 1.424501 | ||||||
B Shares | 2.9 | 330.0 | -31.9% | |||||||
Book Value/Share | 430.03 | 77% | ||||||||
Expected Dividend | 45.97825 | 13.9% | ||||||||
Hold Co Discounts | ||||||||||
Est | Current | |||||||||
Disc | Exp | ER | Discount | Earnings Yield | 35% | |||||
WWI | 2% | 41.29 | 0.2% | 48.9% | Bond Yield | 8% | NIBOR + 3.25% | |||
Treasure | 1% | 3.14592 | 0.1% | 27.7% | Spread | 27% | ||||
10-yrs | 5-yrs | |||||||||
BV & Div Growth | 6% | 6% | ||||||||
WWIB Share | 5% | 17% | ||||||||
NI growth | 55% | |||||||||
WWI NI growth | 4% | 26% |
What makes Wilh. Wilhelmsen and WW interesting is their high returns on equity of 30–40%, and the factors that have driven these returns—namely Chinese exports and modest increases in fleet size—are expected to continue over the next few years. The RORO market benefits from oligopolistic competition to the point that participants have even settled on price fixing charges in the past. These factors are likely to persist and should allow for high returns on equity for the next few years, if not longer. The price for entry into this oligopoly is currently only 3x EPS.
DisclaimerThis letter does not contain all the information that is material to a prospective investor in the Bonhoeffer Fund, L.P. (the “Fund”). Not an Offer: The information set forth in this letter is being made available to generally describe the philosophies of the Fund. The letter does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services. Such an offer may only be made to accredited investors by means of delivery of a confidential private placement memorandum, or other similar materials that contain a description of material terms relating to such investment. The information published and the opinions expressed herein are provided for informational purposes only. No Advice: Nothing contained herein constitutes financial, legal, tax, or other advice. The Fund makes no representation that the information and opinions expressed herein are accurate, complete or current. The information contained herein is current as of the date hereof but may become outdated or change. Risks: An investment in the Fund is speculative due to a variety of risks and considerations as detailed in the Confidential Private Placement Memorandum of the Fund, and this letter is qualified in its entirety by the more complete information contained therein and in the related subscription materials. No Recommendation: The mention of or reference to specific companies, strategies or instruments in this letter should not be interpreted as a recommendation or opinion that you should make any purchase or sale or participate in any transaction. |
For further details see:
Bonhoeffer Capital - Wilh. Wilhelmsen: A Fast Growing Compound Mispricing