Compagnie du Bois Sauvage is €550 million Belgian investment holding company listed on Euronext Brussels (COMB BR): it aims to invest in just a limited number of holdings, mostly unlisted and mainly in the industrial sector. Its stated mission is:
“In the interests of its own shareholders, the Company requires a regular income from its investments in order to provide a steadily growing dividend, if possible.”
COMB has indeed a stable family as principal shareholder: it is controlled by Madame Nicole Thys, widow of Guy Paquot, with a 50.1% stake via two holding companies (the “missing” 0.1% in the chart below is owned directly by Madame Thys).
Guy Paquot was the mastermind behind the creation of COMB, which is the result of grouping together 19 companies with diverse activities whose origins were sometimes centuries old: some were too small to survive on their own, others had as their object an irrevocably outdated activity, and still others were in liquidation and doomed to disappear. The name "Bois Sauvage" (“Wild Wood”) derives from the place where the company's head office is located in Brussels.
As better described below, it has a long-term but active investing approach, as shown by the various acquisitions and disposals carried out over the last few years, including the stakes in Bank DeGroof and Recticel. [Note: COMB does publish its annual and semi-annual reports in English as well, but just an abridged version: for all details you must use the French version.]
Today, the group is organised along three areas:
Strategic equity investments in the financial, industrial and food sectors
Real estate, with investments both in Europe and in the US
Treasury, which manages liquidity and investments in non-strategic listed companies
Strategic segment (~77% of investment portfolio)
The biggest asset (45%) is United Belgian Chocolate Makers (UBCM), which includes the main brands Neuhaus and Jeff de Bruges (95% of UBCM's turnover) with the remaining 5% represented by Corné Port Royal and Artista Chocolates. Since 2019 it also holds a 35% stake in the Ecuadorian company Ecuadorcolat, which has more than 1,300 hectares planted with cocoa trees whose production serves almost exclusively to supply its shareholders.
Umicore (15%) is a €8 billion multinational materials technology company, whose strategy is to be an undisputed leader in materials intended for clean mobility and recycling. COMB owns less than 2% of Umicore’s shares.
With roots dating back to 1590, Berenberg Bank (9%) is the oldest private bank in Germany and the second oldest in the world after Banca Monte dei Paschi, founded in 1472: it is also likely the very first modern merchant bank. Today it employs 1,700 people - mainly in Germany - and just recorded its best year ever in 2021 with €170 million in net profits thanks to a strong increase in capital markets and equity transactions. The stake (~12%) was acquired in 2001 from the US First Union Bank, while the remaining shares are owned by German families (63%, including the Berenberg heirs) and Norddeutsche Landesbank (25%): the purchase price was €30 million, which at the time translated into a P/BV of 2x. Overall, Berenberg looks like a high-quality asset.
Noël Group is a US holding company specialised in the extrusion of synthetic and bio-sourced materials; it also includes Vinventions, supplier of the most complete closure solution for bottles and services to winegrowers and present in 5 continents.
Other industrial holdings include Galactic, a Belgian company specialised in natural antimicrobial solutions and in lactic acid for the food and cosmetics industries; Futerro, a Galactic subsidiary which produces PLA, a renewable bioplastic from lactic acid; and Ÿnsect, the world leader in the production of protein and natural insect fertilizers.
During the year COMB disposed of its 27% stake in Recticel, which manufactures polyurethane foams for bedding, insulation and other applications: the transaction amounted to €204 million, with a net capital gain of €95 million. The sale was decided to substantially reduce the activities linked to petro-sourced raw materials and take up new investment opportunities; the cash received was also used to reduce the group’s net debt (today COMB has indeed a net cash position).
Real estate segment (22% of investment portfolio)
COMB owns properties both directly and through joint ventures and dedicated funds.
Eaglestone (30% stake, acquired in 2020) is a real estate group based in Luxembourg and operating in France and Belgium and known for the architectural and technical aspects of its projects, covering the residential, office and shopping segments. Today Eaglestone controls 83 projects in the three countries.
Fidentia BeLux Offices is active in the office and residential sector in Belgium and in Luxembourg, with the objectives, among others, to improve the energy efficiency of the buildings acquired. The fund is now fully invested.
First Retail International 2 NV (FRI²) is a fund active in the development of commercial activity parks across Europe.
Oxygen Development is currently developing a residential building with 89 apartments in Auderghem near Brussels.
Praça de Espanha is a real estate project in two construction phases for a total of 280 apartments in Lisbon (Portugal).
Financial investments (1% of investment portfolio)
The residual portion of the investment portfolio consists of small investments in Belgian and French listed companies: Solvay, Ageas, BNP Paribas-Fortis (the Belgian subsidiary of the French bank), ENGIE (GDF Suez), Orange Belgium and AB Inbev.
Le Groupe Chocolatier
This is the group’s crown jewel: when it comes to high-quality Belgian chocolate, Neuhaus is an icon going back to 1857 with the opening by Jean Neuhaus of the original boutique in the Galerie de la Reine (Brussels), which is still its flagship store today. According to the company and Wikipedia, it was Jean Neuhaus II who invented the Belgian praline.
Neuhaus is present in 40 countries and 50 airports’ duty-free stores: it was a 49% owned subsidiary until 2006, when COMB launched a takeover offer for the remaining shares at an implied valuation of €50 million at the time (today it owns 100%).
Both Neuhaus and Jeff de Bruges are positioned in the high-end range of quality chocolate. If you check Neuhaus’ website you can find special gifts like the one below that sells for €41 for a 500gr box of pralines (so around €80/kg, today equivalent to ~$80):
Similarly, in the US Lindt sells a 14.6 ounces (~400gr), 40 pieces Swiss Luxury Box for $38, equivalent to over $90/kg. Russell Stover (a US brand owned by Lindt) sells something similar for $80, but that is for a 5 pounds (2.27 kilos) box, so the price per kg is around $35.
Just being a Belgian or Swiss chocolatier allows Neuhaus and Lindt to charge more than double the price of their competitors (which Lindt can’t do when selling under a different brand): both companies manage to sell their products at high prices in prestigious locations such as shopping malls and airports.
And we all know how much Warren Buffett likes his long-term investment in See’s Candy: he talked extensively about its pricing power and its high return on capital invested.
“It is a good business. Think about it a little. Most people do not buy boxed chocolate to consume themselves, they buy them as gifts - somebody’s birthday or more likely it is a holiday. Valentine’s Day is the single biggest day of the year. Christmas is the biggest season by far. Women buy for Christmas and they plan ahead and buy over a two or three week period. Men buy on Valentine’s Day. […] Can you imagine going home on Valentine’s Day - our See’s Candy is now $11 a pound thanks to my brilliance. And let’s say there is candy available at $6 a pound. Do you really want to walk in on Valentine’s Day and hand - she has all these positive images of See’s Candy over the years - and say, “Honey, this year I took the low bid.” And hand her a box of candy. It just isn’t going to work. So in a sense, there is untapped pricing power - it is not price dependent. (From a 1998 Lecture at the University of Florida School of Business)
“The economic facts could not be more different. In 1983, See's earned about $27 million pre-tax on $11 million of net operating assets; in 1997 it earned $59 million on $5 million of net operating assets. Clearly See's economic goodwill has increased dramatically during the interval rather than decreased. Just as clearly, See's is worth many hundreds of millions of dollars more than its stated value on our books. (1998 Berkshire annual report)”
COMB does not disclose too many details on the performance of UBCM, but since it invested in 2004 results have been remarkable, with both margins and ROE improving. 2020 was - not surprisingly - a negative year, but in 2021, despite the restrictions to tourism and airport business, the Chocolatier Group recorded a turnover and a net result similar to that of 2019.
Current valuation
The stock looks cheap on “standard” metrics (which are however not too relevant for a holding company):
P/E: 7.5x
P/BV: 0.9x
Div. yield: 1.4%
As most holdings (see for example VNV Global), COMB provides an estimate of its NAV on an annual and semi-annual basis: for the latest complete disaggregation please refer to pag. 29 of the 2021 report.
In the table below I’ve updated the NAV calculation by using the most current prices for the listed companies and also tried to “independently” value the two most important private assets (UBCM and Berenberg Bank): for the other unlisted assets I kept the value reported by COMB.
My current estimate of NAV/share of €496 is below the €509 reported by COMB at 30 June 2022: this is mostly due to recent movements in the price of listed shares, as my valuations for UBCM and Berenberg are in line.
More important, this exercise also allows to check the sensitivity to assumptions. For example: for Berenberg I used a P/BV of 1.5x, which corresponds to a P/E of only 7x calculated using the normalised earnings over the past 5 years (and less than 4x on last year record net income). But this is a bank that registered an average ROE of 27% over the last decade and constantly above 20% despite all the well-known problems in the European banking sector, so it could be argued that it deserves a P/BV of 2x, which is what COMB paid for its stake and would still imply a normalised P/E of just 9x.
Similarly, I “conservatively” valued UBCM at a P/E of 25x: Lindt normally trades at around 35x (currently at 50x!) with both companies having similar returns/margins and growth profiles (given its bigger size, Lindt’s net income margin is better and more stable). A P/E of 30x (and even higher in case of acquisition by a strategic acquirer) for UBCM is not unrealistic.
Using these “upside” multiples, my estimate of NAV/share goes up to c.€550, which translates into a 40% discount at the current €330 price.
With the exception of 2008 (GFC) and 2011 (Euro-crisis), the stock has never traded at the current large discount to reported NAV. However, it is also worth mentioning that the company’s investments have changed over the years and with the sale of Recticel the proportion of unlisted assets has increased.
Conclusions
Compagnie du Bois Sauvage is not an unusual stock among European holding companies.
Cons
A hodgepodge of businesses with little to no synergies: quite diversified but (maybe) without a clear focus or strategy
Some of the holdings are probably long shots (Galactic, Ÿnsect, …) but the company has little control over their fate
Stock price has gone nowhere for 5 years
No buybacks (did exactly €0 in 2021 and only €3m so far in 2022) despite the discount
Pros
Transparent and conservative NAV calculation
Able to strike good deals and hold them for the long term (Neuhaus and Berenberg have been in the portfolio for 15-20 years)
Not doing anything really stupid within capital allocation, so it should not require a significant holdco discount from NAV
Currently a net cash position following the sale of Recticel
Among the curious combination of businesses, there is a prime hidden asset (UBCM) which alone accounts for 65% of current market cap: it’s not directly accessible (the only pure alternative is Lindt, which is way more expensive) and could be a long-term compounder (or sold to a strategic buyer for a much higher valuation than presently implied). Add Berenberg Bank, Umicore and around €40 million in net liquidity and we already have assets worth €600 million (110% of current market cap).
Most of the times saying: “If you buy X at this price you also get its business ABC for free” is naïve, but in this case we don’t need a precise valuation for the unlisted assets (especially real estate) to recognise that we are – in all likelihood – getting more than what we are paying.
I thought I had commented sorry! What is your view now? Discount to NAV is very material and well within a MOS. Neuhaus has done well so the gem remains intact