Hans D’Haese Holding & portfolio companies Sell-side equity analyst Benelux What is the added value? Luxembourg, 14/06/16 Holding & portfolio companies Added value Diversification – Risk – Return Luxembourg, 14/06/16 Added value of holding & portfolio companies Sector peculiarities Universe. What does this sector look like? Valuation. What is it worth? What’s the risk? How did it perform? What to do? 3 Luxembourg, 14/06/16 Holding & portfolio companies 1. Sector peculiarities Luxembourg, 14/06/16 1 Added value of holding & portfolio companies Sector peculiarities Control • Economic interest leverage • Execute control with a diluted participation Diversification • From very well diversified… • … to single-asset companies Taxes • Exempt on capital gains • Most of dividends: no with-holding tax • Related costs to shareholdings fully tax deductible 5 Luxembourg, 14/06/16 Holding & portfolio companies 2. What does the sector look like? Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe 7 Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe Holding company Industrial group Portfolio company Singe-asset company control diversification investment company anchorage 8 Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe Holding companies GBL / CNP / … Sofina / Henex / … Compagnie du Bois Sauvage • Business segments are organised within an independent firm (< > conglomerate) • Gradually shifting from controlling structure to investment company 9 Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe Diversified industrial groups Ackermans & van Haaren Floridienne • Financial vehicle, separate valuation of underlying businesses • Unrelated activities • Strategic view 10 Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe Portfolio companies Luxempart Brederode Gimv Quest for Growth • Financial point of view • Diversification • Private equity 11 Luxembourg, 14/06/16 2 Added value of holding & portfolio companies Universe Single-asset companies Financière de Tubize Heineken Holding KBC Ancora Pargesa Solvac • Often family controlled • No diversification • Passive 12 Luxembourg, 14/06/16 Holding & portfolio companies 3. What is it worth? Luxembourg, 14/06/16 3 Added value of holding & portfolio companies Valuation ASSETS = EQUITY + LIABILITIES (Financial) Assets Equity Cash Liabilities / Debt 14 Luxembourg, 14/06/16 3 Added value of holding & portfolio companies Valuation Gross Asset Value: Sum-of-the-Parts analysis with separate valuations per asset, mix of: • DCF • sector relative multiples method • (adjusted) book value, (+ retained earnings…) • acquisition value • share price • target price • EVCA rules … 15 Luxembourg, 14/06/16 3 Added value of holding & portfolio companies Valuation Net asset value models GAV: adjustment for debts, cash, cash-equivalents • Discount • Fair value Recommendations • Changes in NAV forecasts • Management quality / track record / communication • Investment strategy • Valuations 16 Luxembourg, 14/06/16 3 Added value of holding & portfolio companies Valuation – discount/premium • Competing private equity Listed PE • Active investment approach Active management track-record • Equity stories Private equity investments • NAV enhancing strategies Improving disclosure – neutralisation of costs • Control multipliers Control vehicles – weak discounts 17 Luxembourg, 14/06/16 3 Added value of holding & portfolio companies Valuation – creating shareholder value • Investment strategy • Discount to reported NAV • Spot NAV estimate • Target NAV estimate • Dividend yield 18 Luxembourg, 14/06/16 Holding & portfolio companies 4. What is the risk? Luxembourg, 14/06/16 4 Added value of holding & portfolio companies Risk Versus “the market” Beta < 1 Example for largest 3 Belgian • (Ackermans & van Haaren, GBL, Sofina) • and 2 Luxembourg cies (Luxempart and Brederode) 20 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 4 Added value of holding & portfolio companies Risk Liquidity Company name Listed % NAV Net cash % NAV Ackermans & van Haaren 42% 1% Bois Sauvage 32% -8% Brederode 51% 1% Financiere de Tubize 107% -7% GBL 94% -1% Gimv 4% 26% Heineken Holding 100% NA KBC Ancora 110% -10% Luxempart 58% 12% Quest for Growth 60% 15% Sofina 45% 8% Solvac 103% -3% TINC 0% 18% 21 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 4 Added value of holding & portfolio companies Risk Diversification vs. asset concentration Company name Largest sector exposure in % NAV Largest asset exposure in % NAV Ackermans & van Haaren Financials 63% Delen Inv. 31% Bois Sauvage Consumer goods 45% UBCM-Neuhaus 46% Brederode Health Care 10% Sofina 6% Financiere de Tubize Health Care 107% UCB 100% GBL Basic Materials 24% Imerys 18% Gimv Financials 15% itho daalderop 5% Heineken Holding Consumer goods 100% Heineken 100% KBC Ancora Financials 110% KBC Group 100% Luxempart Financials 38% SES 17% Quest for Growth Technology 26% Kiadis Pharma 5% Sofina Financials 41% Danone 9% Solvac Industrials 103% Solvay 100% TINC Financials 82% NA NA 22 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data Holding & portfolio companies 5. What is the return? Luxembourg, 14/06/16 5 Added value of holding & portfolio companies Return Economic return + gross dividend reinvested Company name 1 year 3 years 5 years 10 years 1990-now Ackermans & van Haaren 5% 21% 13% 9% Bois Sauvage 9% 7% 7% 3% Brederode 3% 16% 15% 8% Financiere de Tubize * -2% 18% 17% 8% 13% GBL -8% 6% 5% 2% 9% Gimv 9% 9% 4% 5% Heineken Holding * 19% 18% 17% 12% KBC Ancora * -13% 25% 16% -4% Luxempart 4% 15% 11% 11% Quest for Growth 1% 13% 8% 4% Sofina -1% 13% 9% 7% 10% Solvac * -34% -8% -2% 2% 6% TINC 2% Holding companies (average) 3% 12% 9% 6% 9% Single-asset companies (average) * -7% 13% 12% 4% 10% 24 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Share price return + gross dividend reinvested Company name 1 year 3 years 5 years 10 years 1990-now Ackermans & van Haaren -4% 22% 14% 10% 13% Bois Sauvage 11% 17% 13% 5% 10% Brederode 8% 20% 17% 7% 10% Financiere de Tubize * -2% 17% 17% 5% 13% GBL 5% 12% 8% 3% 9% Gimv 27% 16% 9% 8% Heineken Holding * 19% 20% 18% 13% KBC Ancora * -6% 30% 21% -6% Luxempart 4% 13% 12% 10% Quest for Growth 2% 19% 15% 5% Sofina 18% 20% 13% 8% 11% Solvac * -25% -2% 1% 1% 8% TINC 4% Holding companies (average) 8% 17% 13% 7% 11% Single-asset companies (average) * -3% 16% 14% 3% 10% DJ EuroSTOXX50 Return Index -13% 5% 6% 2% N.A. 25 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Average return per annum: selection vs. the market (Europe) 3 BEL & 2 LUX 26 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Average excess-return per annum selection vs. the market (Europe) 3 BEL & 2 LUX 27 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Average excess-return per annum selection vs. the market (Belgium) 3 BEL & 2 LUX 28 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Cumulated historical share price return, gross dividend reinvested – in % GBL Until \ In 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 11% 2007 -2% -12% 2008 -24% -31% -22% 2009 -12% -21% -10% 16% 2010 -13% -22% -11% 14% -1% 2011 -26% -33% -25% -3% -16% -15% 2012 -9% -18% -7% 19% 3% 4% 23% 2013 5% -5% 7% 38% 20% 21% 42% 16% 2014 16% 4% 18% 52% 31% 33% 56% 27% 10% 2015 34% 20% 36% 75% 52% 53% 80% 47% 27% 16% 2016 34% 20% 37% 76% 52% 54% 81% 47% 27% 16% 0% 29 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Cumulated historical share price return, gross dividend reinvested – in % Brederode Until \ In 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 22% 2007 18% -3% 2008 -29% -42% -40% 2009 -6% -23% -21% 33% 2010 5% -14% -11% 48% 12% 2011 12% -8% -5% 59% 20% 7% 2012 32% 8% 11% 87% 41% 26% 17% 2013 41% 16% 20% 100% 51% 35% 26% 7% 2014 73% 41% 46% 145% 85% 65% 54% 31% 22% 2015 99% 63% 69% 183% 113% 90% 78% 51% 41% 15% 2016 114% 76% 81% 204% 129% 105% 91% 63% 51% 24% 7% 30 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 5 Added value of holding & portfolio companies Return Cumulated historical share price return, gross dividend reinvested – in % Luxempart Until \ In 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 5% 2007 39% 33% 2008 38% 32% -1% 2009 47% 40% 6% 6% 2010 61% 53% 15% 16% 9% 2011 64% 56% 18% 19% 11% 2% 2012 81% 72% 30% 31% 23% 13% 10% 2013 97% 87% 41% 42% 34% 22% 20% 9% 2014 137% 125% 70% 71% 61% 47% 44% 31% 20% 2015 163% 150% 88% 90% 78% 63% 60% 45% 33% 11% 2016 178% 164% 99% 101% 89% 73% 69% 53% 41% 17% 6% 31 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data Holding & portfolio companies 6. What to do? Luxembourg, 14/06/16 6 Added value of holding & portfolio companies Why? To do: GBL • Portfolio mutation • Shift from yield to growth • Increase private equity exposure • Re-rating ongoing Professional shareholder with focused portfolio 33 Luxembourg, 14/06/16 Source: Degroof Petercam, Bloomberg, Company data 6 Added value of holding & portfolio companies To do: Key market data Market cap, EUR bn 12.21 Local index BEL20 GBL Free float 46% BEL20 member Yes figures Free float Mcap, EUR bn 5.64 Next AGM Apr-17 Daily avg. no. trad. sh. 12 mth 114,179 Velocity 25.9% Daily avg.