Discount To NAV Mean Reversion
Van Der Mandele ARAR Fund has shared a ‘discount mean reversion’ pitch on PEUG, a France-listed investment company with a primary asset a stake in Stellantis (previous Fiat Chrysler, ticker STLA), along with other investments/cash. While large discounts to NAVs are not uncommon for holding companies, PEUG stands out from the crowd with its 60% discount to liquidation value. Historically, the valuation gap has been much narrower and PEUG and STLA have generally traded in tandem. Discount has started widening only over the last 12 months as Peugeot Invest stock did not match the 50% increase in STLA share price.
For each euro in Peugeot Invest, shareholders are getting:
- €1.4 in STLA stock;
- €0.36 in other publicly traded stocks;
- €0.8 in (co-)investments;
- €0.36 invested in Private Equity;
- €0.04 in cash
- less €0.4 in debt.
There is plenty of cheap STLA borrow to have a hedged trade on discount mean-reversion. While there is no clear catalyst, the wide discount might put pressure on PEUG management to either spin off their stakes to stockholders or repurchase shares.
Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I might not actively follow the developments of these ideas, so there might be limited updates or follow-ups in the comments section.
Discount to NAV chart on page 3 may be helpful to some: https://peugeot-invest.com/en/download/1204
In case anyone’s interested, here’s the most recent presentation with NAV from 6/30/23 – does not have a discount to NAV chart like above though:
https://peugeot-invest.com/en/media/publications/1027
I did my own quantitative analysis of Peugeot Invest and Stellantis’ return spread, to rule out the possibility that PEUG’s other company holdings are negating Stellantis’ stellar returns (the Van der Mandele ARAR Fund investor letter did not cover it).
Here are the two plots and accompanying code in a Google Colab file: https://colab.research.google.com/drive/1wYjSrqhUXhAyulQAvpQx8unT1PNTNX0I?usp=sharing
From the plots at the end (PEUG’s NAV with and without Stellantis), it seems that the spread is truly entirely due to an unreflected gain in Stellantis and none of PEUG’s other holdings (which it actually tracks fairly closely).
Thank you for sharing! I wanted to like this case. However, no catalyst is a very big issue. As I see, since 2018 the company has pretty much always traded at a similar discount to NAV (a bit closer to 40% though). Many other holdcos trade at similarly large discounts (e.g. Porsche, Exor at 40%+).
Yes, PEUG has a bit higher discount, but as I understand , the management (the founding family) is not great. Doesn’t care about shareholders, the dividend is tiny, no buybacks ever, etc. Pretend to be great investors, yet NAV CAGR since 2017 is 6%. Large part of NAV has very limited visibility and questionable quality of the assets. PEUG has been touched by 2 huge scandals recently – SIGNA in 2022 (was a pretty large holding of PEUG that turned into the largest RE bankruptcy in Europe) and Orpea in 2023 (also was a pretty large holding, one of the largest nursing homes operator in Europe, hit by a huge fraud scandal and bankruptcy).
Thesis of buying STLA at a discount is kind of interesting, but again, I’m not excited due to the lack of a catalyst, indefinite timeline, and exposure to other assets of PEUG.