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The automotive industry has rarely be one that has awarded investors with great returns; in fact, the current economic conditions serve as a good example of what I’m talking about. North American constructors are encountering the worst economic environment they have ever faced. European and Japanese brands are faring better, mostly because they were accustomed to building small fuel efficient cars for almost two decades. My main concern is that there is one company that many investors are passing over because its stock is not traded on any North American exchange.
To many people’s surprise, the company I am talking about is Porsche SE (FRA: PAH3), the holding company that owns the Porsche AG constructor and a 51% majority stake in Volkswagen AG. I knew for a while that Volkswagen and Porsche had had a commercial partnership for a while, exchanging various technologies and components for the construction and development of new cars. But it is only recently that it came to my attention that Porsche was the one owning Volkswagen and not the other way around as it is the case for many luxury cars manufacturers to be owned by middle class cars producers.A quick look at the 2008 financial statement led me to think that there was something there to make investors pay attention. With a 24% net profit margin, it seems to me that the company has a competitive advantage strong enough to ensure the sustainability of their profits. They also accomplished a staggering 48% return on shareholder’s equity for the fiscal year, which is very rare for many companies but literally unseen for a car manufacturer! Though it is important to mention that a important part of their earnings come from dividend payments by Volkswagen AG.
The downside is that all the common shares of the company are privately held by the Porsche family. As the illustrate it on their web page, the 87500000 shares traded on the Börse Frankfurt are preferred shares that represent exactly 50% of the number of shares that have been issued by the company and have no voting rights and that about half of those are owned by institutional investors. The main advantage of those shares remains that they pay a slightly higher dividend than the common share and, as many preferred shares, are senior to the common shares on the dividend payment.
For those you might be interested in investing abroad, you can visit the corporate site of Porsche SE for more information: http://www.porsche-se.com/pho/en/
Full Disclosure: The author does not have a position in PAH3 or POAHY.
You said that part of their dividends come from Volkswagen AG.
ReplyDeleteI'm curious 'cause I know that VW has a completly different way of doing things in terms of marketing stragey (double market, trying to difference themself as much as possible by playing with positioning, etc etc) and those are great advantages.
Is Porsche-Volkswagen considered one company on the markets or do they both have their own value?
Porsche owns 51% of Volkswagen and Volkswagen paid a dividend of 1.80 Euros per share in 2008. With 400 million shares outstanding, and about half of them belonging to Porsche, that means Porsche SE made at least around 360 million Euros in 2008 from that single investment! Hence my statement that half of the net income of Porsche comes from the dividend declared by Volkswagen :-)
ReplyDeleteAs you noted Myri, their marketing and management departments are independent because for now Porsche and Volkswagen are two separate companies and trade under different stock symbols, ; but as soon as Porsche SE gets a 75% stake in Volkswagen (which their board of directors intend to do by the end of 2009), Volkswagen will be considered a subsidiary of Porsche according to German GAAP.
Used cars are better to buy than new car. Why? Because used cars are affordable, economical and if you are buying from Japanese auctions you can buy auctioned used cars.
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