Exor stock (EXXRF): comments on the results of the second quarter

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Two days ago, Exor (OTCPK:EXXRF) released its half-year report. Since April, our internal team had an outperformance rating on the holding company. The summary of purchase cases from Mare Evidence Lab was based on the following:

  • Given our analysis of Ferrari, Ivecoand Stellantide (all rated buy), we are positive on Exor’s portfolio (excluding PartnerRE, the three companies represent 60% of the company’s total investment). In addition, in 2022, our internal team initiated coverage on many fashion companies in the world, and we see Christian Louboutin as a positive catalyst;
  • With our recent update, we are bullish on Exor’s latest healthcare acquisition;
  • We view the pending redemption as a positive incentive to reduce the current NAV discount.

Exor gross NAV (first semester)

Exor’s gross net asset value (first half (Exor’s corporate website))

Before analyzing the performance of the second quarter, it should be mentioned that Exor will exit the Italian Stock Exchange and align the company’s stock exchange with its Dutch legal holding structure. Thus, the delisting of Piazza Affari is expected at the end of September, precisely on the 27th. On the other hand, the listing on the Amsterdam Stock Exchange has been planned since mid-August.

Commentary on half-year performance

Starting from the bottom, the Dutch holding company posted a net profit of 265 million euros against 838 million euros a year earlier. Behind the net drop of almost 70%, hide the unrealized capital losses of the bond portfolio of PartnerRe which amount to around 1 billion euros. This negative result was only partially offset by the good performance of the Ferrari and Stellantis subsidiaries. The balance sheet appears even more alarming if we consider that the profit recorded in the first half of 2021 included a non-recurring loss of 507 million euros resulting from the deconsolidation of the former FCA, following the merger with PSA. Debt increased by 15% compared to year-end results. This was due to various reasons: 1) payment of 746 million euros to the Italian tax authorities, 2) new investments, 3) payment of a dividend of approximately 100 million euros, and 4) ongoing share buyback for an additional 100 million euros. This was partially offset by the dividend received. Even though Juventus represents only a tiny part of Exor’s portfolio, the football club closed the half-year performance in negative territory (-119 million euros) and the management expects a worse result in the second. semester.

In total, the NAV is down 17% compared to the year-end results, reaching 25.5 billion euros against 31 billion euros recorded at the end of last year.

Evolution Exor NAV

Change in net asset value of Exor (change in net asset value per share)

Conclusion and evaluation

The half-year figures only partially tell the truth. 2022 is an eventful year. Indeed, over the past few months, Exor has carried out a series of operations that will reshape the company’s portfolio. From the completion of the sale of PartnerRe, this positive capital gain will only be visible in the next quarter’s account, and it comes with a net gain of $3.2 billion. This money is already used to invest in big companies (like the main philosophy of Exor). Besides the recent healthcare investment, Exor acquired a minor stake in an Indian startup called Ultraviolette Automotive. This company develops electric motorcycles with a battery-powered moped. According to local media, after the capital increase, Exor will hold approximately 3.5% of Ultraviolette’s capital (for a total investment of $10 million), which suggests that its valuation exceeds $300 million. A high value for a startup still at zero in the revenue position, but justified by the great growth prospects of two-wheeled electric mobility in India (and also 65 thousand orders). Ultraviolette’s goal is to make electric motorcycles accessible to a wide audience of Indian consumers while maintaining high performance. As expected, Exor’s fund will be used by the company to increase production and finance expansion into foreign markets.

Regarding the valuation, the NAV per share stands at €109.41 compared to €132.41 recorded in December 2021. The discount to the revalued net assets is higher than the historical average of Exor (25% compared to 40% ). Given our recent Volkswagen tracking, it must be said that the German automaker is also trading at a 36% discount, in line with Exor. However, even if we apply this discount, Exor is still a buy. With the ongoing macroeconomic challenges, we are not surprised to see this negative share price reaction, however, Exor’s portfolio and its latest diversification are positive catalysts that will support the share price move. .

Sallie R. Loera