market folly

We're posting notes from the Sohn London investment conference 2016.  Next up is Ivan Martin Aranguez of Megallanes Value Investors who pitched a long of Sonae (ELI:SON).


Ivan Martin Aranguez's Sohn London Conference Presentation

Long Sonae (ELI: SON) 

Sonae is a mid-cap diversified holding company with assets in Portugal. It is run by the Azevedo family who own 52%. Sonae has a good track record, it has 28 years of annual book value growth at an average of 6.5%.

Sonae has a complex structure. It is a largest player in food retail in Portugal (66% of the business) and the second largest telecoms operator in Portugal (33% of the business).  It also has a real estate arm (9%) and an investment business (3%). The share price has de-rated since 2015. There is now a 45% discount to NAV. Only two analysts cover the company.

Sonae’s largest business, food retail, has achieved good margins of 6-7% in recent years. This is at a time when there has been a price war in groceries in Portugal. Sonae is the lowest cost producer and well placed to resist competition. It has some good brands including Warten and Sports Zone. A sum of the parts valuation gives Euro 1.45 per share, a discount to NAV of 45%.

Be sure to check out the rest of the Sohn London conference presentations here.