This is an update to an article originally published on 7/02/12. You can read the original article here: http://sumzero.com/news/82.
As predicted, Judge Stefan Puhle did a service to equity markets by throwing out the ridiculous short-selling lawsuits. Shares of Porsche have re-rated to 46 EUR still trading at a massive discount to 76 EUR tangible book comprised simply of 150mm VOW GR shares worth 20.2B EUR today, and 3B in net cash divided by 306mm shares out.
Look for the following catalysts to play out over the ensuing months leading towards an easy double from these prices:
1) Porsche/Piesch families changing the charter of PAH3 to allow for buybacks hopefully putting to work some of that 3B EUR in cash at these levels.
2) Analyst revisions of VOW target prices, coupled with a lower legal liability should lead to significant upgrades of PAH3 shares.
It is important to note that currently analysts model PAH3 by using their long-term VOW target and then applying both a 25-40% holding company discount on PAH3 as well as a 5-10B legal liability reserve.
I am of the strong opinion that both the holding company discount and legal liability (as evidenced today) are unwarranted and both can easily disappear.
I envision a scenario where VOW trades at a more normalized valuation of roughly 175-200 EUR and PAH3 either implementing a share buy back or completing the merger with VOW (which makes sense for all parties once the legal halo is removed) providing a range of between 90-110 EUR on the shares.
To read the original article, follow this link: http://sumzero.com/news/82.