Two weeks ago today, Porsche went public.

With nearly 300,000 units sold by 2021, a turnover of €30 billion and an operating profit of over €5 billion, the iconic sports car brand is in perfect financial health. It is now valued by investors at €78 billion.
This is the largest IPO in Europe since 2011.

What is overlooked is the fact that Volkswagen, the parent company of Porsche, holds 75% of its capital after the IPO.

In other words, ¾ of the value of Porsche goes to Volkswagen, i.e. almost €60 billion.

Except that Volkswagen is worth €75 billion on the stock exchange. This means that once the stake in Porsche is set aside, the rest of the group is valued at €15 billion, which is not much.

And the rest of the group is large. It's Volkswagen, Skoda, Seat, Audi, Bentley, Lamborghini, Ducati, Traton, etc., with :
- 9 million cars sold by 2021
- 220 billion turnover
- 16 billion in operating income

Volkswagen is the second largest car manufacturer in the world behind Toyota. That's a lot more than the Porsche brand.

So when Olivier Blume, the CEO, believes that his group is greatly undervalued, we share his opinion. Remember that the stock is down 33% over 1 year.

The next logical step
Olivier Blume has clearly understood the potential of this strategy. He is therefore going to replicate the Porsche operation on other brands of the group. Each entity will be listed and valued separately. This will unlock substantial value for shareholders.

The first subsidiary to follow Porsche's lead is PowerCo, Volkswagen's battery production unit.

According to our calculations, this strategy would value the group at over €100 billion.
On the Monocle side, we are therefore buyers (currently 6% of the fund).

To be continued.

To see the replay of our last webinar before tonight's results are published, it is here !

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Market and portfolio focus

Behaviour:

Over the week (from 7/10 to 14/10), the fund remained stable despite the performance of our SAS bond, which is now trading at 20% of par compared with 26% the previous week. The stock, which represents 2% of the fund, is very illiquid, which explains the erratic price variations.
The NASDAQ is down 3% for the week, following the release of US inflation figures on Thursday. Core inflation rose by +0.6% in September. For the time being, the Fed's rate hike is not enough to calm the rise in prices.

Lines: :

– Levi’s 2027 : nous avons renforcé la position dans le titre obligataire à 2% du fonds. Le rendement est très attractif (6% en EUR) pour une société en bonne santé financière et une marque forte.
– Hapag Lloyd 2028 We initiated a position (1% of the fund) in the bond of the world's fifth largest shipping company (yield 5.5% in EUR). The post-covid environment has allowed the company to build an extremely strong balance sheet (10 billion in cash vs. 7 billion in debt).
– Volkswagen We have consolidated the equity line at 6% of the fund, motivated by the elements presented in today's Note.
– Arcelor Mittal 2039 : Yesterday, we started building a line (0.5% of the fund) in the Arcelor Mittal bond (yield 7.5% in USD). The debt and its interest are largely covered and the management has a wealth of experience in terms of debt management (the debt has fallen from €22 billion in 2013 to €8 billion today).

Have a great week,

Pierre