Is it Germany’s Berkshire Hathaway? | news

There must be an agreement per month are mutated (WKN: A2NB65). At least that’s what investment manager Johannes Laumann says. What an announcement! And investors appreciate the courage. Since October 2019, the share price has increased by 80.5% to EUR 16.20 today (all data as of 30 August 2022).

How does Mutare make money?

The private equity investment company focuses primarily on the automotive and mobility, construction and mechanical engineering and goods and services segments. However, Mutares does not take time for organic growth. That is not what they specialize in. What Mutares is trying to do is to transfer business areas to a separate GmbH to be spun off from a larger group and to stabilize these or ailing medium-sized companies and make them profitable.

Management has skin in the game

I really like that. In 2021, board members and board members bought shares for DKK 21.8 million. EUR. Founder and CEO Robin Laik is still the main shareholder with 25% of the shares.

Most recently, Laik has passed on larger blocks of shares to his children. Perhaps he is already planning to pass on the baton in the long term. There is at least a little bit of flair in a family business.

At first glance, the yield is attractive

At 9.3%, the dividend yield is very attractive. For me, however, it is crucial that the payment is made from the cash flow, i.e. mainly from the operating profit of the subsidiaries and does not take away from the substance of Mutares. It worked recently, but not in previous years.

Mutares has a problem with its exits

They don’t really seem to work. At least that’s what the cash flow statement says. There is a lot of money in the coffers when companies are acquired. Mutares often receive a dowry in the form of cash on hand and often only pay low prices for the distressed businesses. In the operational business, however, significantly less money is earned. The cash flow here has always been negative for more than ten years.

Management openly admits that it sees the holdings more as short-term investments and wants to sell them again after no more than seven years. But there is also a problem with the outputs as far as I can see.

The IPO of the Bavarian commercial vehicle supplier is repeatedly cited as a good example STS (WKN: A1TNU6) in 2018. It brought in 55 million euros. 2.3 million shares were placed at EUR 24 each. Of the proceeds from the IPO, 24 million euros went to the company itself, while the rest went to Mutares. Today, the STS share is only 4.75 euros. A breakdown of more than 80%. Mutares ultimately raised significantly more money from the IPO than the company is worth on the stock exchange today. Financially, this partial exit can therefore be described as a success. But in terms of reputation, a blemish remains.

The next major exit should be Donges. But after a lot of noise in the spring of this year, you hear little about it now. After all, it should be the biggest exit in the company’s history. It will definitely not be an IPO anymore. Otherwise, we fools would have known the details long ago.

Mutare’s share: Buy or not?

Private equity companies like Mutares are difficult to value. However, the price-to-sales ratio is only 0.1, the price-to-earnings ratio is 1. I still don’t dare to invest. The focus on purchasing surplus and the negative cash flow in the operating area discourages me too much for that.

The article Is it the German Berkshire Hathaway? first appeared on The Motley Fool Germany.

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Henning Lindhoff owns none of the shares mentioned. The Motley Fool does not own any of the stocks listed.

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