Exor EXO
July 17, 2021 - 11:14am EST by
finn520
2021 2022
Price: 66.14 EPS 0 0
Shares Out. (in M): 244 P/E 0 0
Market Cap (in $M): 16,160 P/FCF 0 0
Net Debt (in $M): 3,251 EBIT 0 0
TEV ($): 19,411 TEV/EBIT 0 0

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  • Discount to NAV
  • 2nd grade book report
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Description

Overview

Exor is an Turin, Italy-based holding company with an easily calculated NAV of 102 EUR per share that trades for 66 EUR per share, or 65% of NAV.  NAV has grown at 19% over the 11 years of Exor's existence.  The main components are either publicly traded or easily valued, see table below, and almost all have either earnings or produce FCF.  The company is very modestly levered and there is no incentive override that would support a large discount to NAV.

John Elkann, age 45, is the family leader and has been in charge since 2008 at age 32.  He has thus far proven to be a good  capital allocator and operator and is poised to have a long run ahead.

Exor assets as of 12/31/20, in EUR millions

 

Stake

Value in EUR millions

Per share value

Notes

Ferrare (RACE)

7,784

32

24% of public company

Stellantis (STLA)

7,198

29

14% of public company

Partner RE

6,734

28

100% wholly owned

CNH Industrial (CNHI)

4,985

20

43% of public company

Juventus

625

3

64% of public company

Other investments

838

3

 

Cash

859

4

 

Debt

(4,110)

(17)

 

Total

25,081

102

 

Fully diluted shares

 

244 million

 

Stock price

 

66.14

 

Value as % NAV

 

64.9%

 


I think that the company is likely to grow NAV per share at reasonable rates going ahead and I think there is little reason the company should trade at a discount to NAV.  The company's stated goal is to grow NAV per share in excess of the MSCI World index while maintaining low leverage, and it has done so by a very wide margin during Elkann's tenure.  From 2009-2020, Exor NAV per share had an 18.7% CAGR vs MSCI World Index 11.4% CAGR.  Exor stock price CAGR has been north of 21% as the discount to NAV has narrowed over that period.  That return is not super front-loaded, NAV CAGR the last 5 years is 18%.  The company provides good historical NAV information on its website.

If you short out the RACE stake (which I think trades at a high valuation), you are then creating the position for 34 EUR per share with an NAV of 70 EUR per share, or 49% of NAV.  This is how I hold the position.  It is also possible to short out the other large public stakes.

The discount to NAV has varied in the the last 5 years between 15-40%.

Company History

Exor is majority-owned and controlled by the Agnelli family.  Giovanni Agnelli was the founder of Fiat Automobile (Fiabbrica Italiana Automobili Torino) in 1899.  Fiat was an Italian industrial giant throughout the 20th century and has been managed by the family since its founding, with forays into a range of industries over time.  The company's dominant figure during the 20th century was Gianni Agnelli, the grandson of the founder, who lived from 1921-2003 and headed the company from 1966-1996

In 1997, after Gianni Agnelli's death, his grandson John Elkann was selected as the future leader of the company at age 22 .  Elkann, by all accounts a smart and focused young man, worked in various jobs at the company before being named Vice Chairman of Fiat and the Agnelli family holding company in 2004.  In 2008, the Agnelli family holdings were reorganized into Exor.  Elkann was named CEO and Chairman of Exor in 2011 and has been in control since.

For detailed background, I recommend the book Mondo Agnelli, written by a WSJ reporter in 2011 that covers the family and company history in detail.

https://www.amazon.com/Mondo-Agnelli-Chrysler-Power-Dynasty/dp/1118018524

Elkann History

When Elkann took control, the company was in rough shape, with a large debt load, high uncertainty, and tough conditions at a number of the industrial companies in the face of the financial crisis.

Elkann has been terrific.  The company's stated financial goals are to achieve strong growth in value per share value and to "Build Great Companies".  He is a good capital allocator and manager (or rather, selector of managers) and is not wedded to any specific asset in the portfolio.  He writes an excellent annual letter that spells out his decision-making process.

The company will hold, buy, spin-off, and sell wholly-owned businesses, will partner, and will make minority investments in publicly traded companies and private companies.

The most important decision was selecting Sergio Marchionne as CEO of Fiat in 2004, who served the company brilliantly until his death in 2018.

During Elkann's tenure, Exor has acquired Chrysler in a great deal with the U.S. government, spun off Ferrari and CNH Industrial from Fiat, merged Fiat with Peugot to create Stellantis and make it easier for the company to exit the business if it chooses, acquired Partner RE for EUR 6.3 billion in 2016 (they had a contract to sell it for EUR 7.5 billion in 2020 to Spanish insurer Covea that was scuttled by Covid), made a number of smaller investments in media and luxury businesses, and invested intelligently in public equities and venture capital type investments.

Recent Events

CNHI is currently planning to spin off its truck, bus, and engines business in early 2022.

In March 2021, Exor invested EUR 541 million for a 24% stake in Christian Louboutin, a very high end luxury goods company most famous for its woman's footwear.

There have been various news reports that Exor has been looking to enter the luxury goods market more actively, most recently a report that Exor is looking to acquire Armani.  This is consistent with management statements and actions and it would not surprise me if in 5-10 years the company had a much smaller position in its legacy industrial companies and a larger footprint in luxury.  Those can be fantastic businesses, and companies like LVMH and Kering have outstanding long-term returrns.  That is an industry where heritage and relationships matter and Exor is well-positioned in both areas.  The Christian Louboutin investment is likely just an opening move and I expect the company to make further opportunistic acquisitions.

Notes

The company has been holding biennial Investor Days, the last held in November 2019.  Transcripts are available and helpful in understanding the company and how management thinks.

2019 Investor Day presentation:

 

https://www.exor.com/sites/default/files/presentations-documents/2019/EXOR%20Inv%20Day%202019_VFinal.pdf

Elkann letters:

https://www.exor.com/sites/default/files/2021/page-documents/Letters%20to%20Shareholders_First%2010%20years.pdf

https://www.exor.com/pages/investors-media/letter-shareholders

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

Various corporate actions and future acquisitions.

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