Saturday, September 15, 2012

Passat SA -- Household Products

Passat S.A. is a marketer of consumer products – beauty products, household goods, DIY supplies, kitchen utensils, gardening tools, toys and the like. It has them made in China and sells them on, directly and indirectly, in Europe and North America. It sells Euro 55 million of this stuff. The company was founded in 1987 and its shares have been listed on the French exchanges since 1994. 

It won't surprise you to learn that it's family owned. 

I have nothing useful to say about this business.

40% of its profits are derived from North America where it is reliant on Walgreens as its customer/distributor. France accounts for approximately 53% of profits, and its sales there are not overly concentrated on any set of customers -- it uses its website, video display kiosks in hypermarkets, and direct mail catalogues as its sales channels there. Portugal, Spain and Italy account for the remainder, and sales (and profits) there have been growing there over the last year.

At the current share price, it's selling at an enterprise value of 3.5x EBITDA and, more meaningfully, it is yielding 18.8% on an after-tax profit/EV basis. As you can see from the tables above, the numbers suggest that it is a quality business -- it earns good returns on capital, converts earnings into free cash, pays out its free cash, and wasn't laid low by the recession.

And yet, I'm not yet convinced by it. 

Disclosure: No position

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