was more profitable than ever in the first quarter. Investors will have to wait until the fall for its initial public offering, but there are indirect ways to get in early.
which has controlled the sports-car brand since 2012, reported full quarterly results Wednesday. Headline numbers prereleased last month were boosted by big hedging gains. Nickel’s wild ride on the London Metal Exchange was likely the dominant driver, given VW’s investments in the supply chain for electric vehicles, but Chief Financial Officer
Arno Antlitz
declined to give details on a media call Wednesday “for competitive reasons.”
Wednesday’s detailed report included the breakdown of Volkswagen’s operating profits by brand, including an 18.6% operating margin for Porsche that had nothing to do with hedging. If this number is sustained, it would mark the brand’s most lucrative year since the 2012 takeover. Still, the consistency of Porsche’s profitability over the past decade, even as revenue has more than doubled, is the real draw for investors. The lowest the margin has fallen annually was 15.4% in pandemic-stricken 2020.
This record puts Porsche ahead of its German premium peers, but not at the level of Ferrari, which reported a first-quarter operating margin of almost 26% Wednesday. Whether investors perceive Porsche as another German car maker or a unique luxury brand like Ferrari will make a huge difference to its valuation.
ma
shares trade for 5.5 times forward earnings, compared with almost 40 for those of the Italian sports-car maker.
Assuming Porsche’s stock trades at a very rough midpoint between these two extremes, its market value might be around €80 billion, equivalent to roughly $84 billion, based on calculations by brokerage
Volkswagen itself has a market value of just €92 billion. The comparison underlines the value that could be unlocked for investors through the minority IPO, which the company continues to plan for the fourth quarter. Unfortunately, the proposed deal is structured in a way that won’t give VW investors anything like full access to the gains. Instead they will get a special dividend equivalent to roughly half the proceeds of VW’s selling 25% of Porsche’s shares—a little over $10 billion in total if the subsidiary is valued at $84 billion.
The good news is that this special dividend doesn’t appear to be baked into VW’s more widely traded so-called preference shares, which are at a 12-year valuation low of 4.6 times expected earnings. There is room for hope to build as the IPO approaches. VW’s “ordinary” shares, which are held mainly by anchor shareholders but also tracked by an American Depositary Receipt popular among U.S. individual investors, remain overvalued versus historical levels and the preference shares. Both instruments will receive the special dividend.
VW’s own controlling shareholder, which is confusingly called Porsche SE, offers an alternative way into the deal. This listed investment vehicle, run by VW Chairman
Hans Dieter Pötsch,
will perform a special role in the proposed IPO by buying a slug of Porsche voting shares from VW at a 7.5% premium—much lower than the 38% premium at which VW’s voting shares trade. Whatever the fiddly details, it may be safe to assume Porsche SE ends up winning in a complex transaction with a company that it controls.
The bottom line with the Porsche IPO is that the VW conglomerate discount that could be partially unwound is very large indeed. Even with an approach that is far from ideal, outside investors should end up enjoying some benefit.
Tusi i Stephen Wilmot at [imeli puipuia]
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Appeared in the May 5, 2022, print edition as ‘Investors Must Wait for Porsche’s IPO, but There Are Ways to Get In Early.’
Source: https://www.wsj.com/articles/how-to-hitch-a-ride-on-the-porsche-ipo-11651672272?mod=itp_wsj&yptr=yahoo