Quick Look - Esso SA
A cheap gas station
Welcome back to another entry in the “Quick Look” series, today we’re going to be taking a quick look at a french refiner and distributor that operates refineries and gas stations in France
What is “Esso SA”
As per Stockopedia:
Esso Societe Anonyme Francaise SA is a France-based company engaged in the petroleum industry. Its main activity is refining and domestic distribution of oil products sold under the Esso and Mobil brands.
Its portfolio is divided in two main product lines: motor and other fuels, engaged in the production and distribution of fuels, such as gas, gasoline, kerosene, diesel and other petroleum products; and lubricants and specialties, responsible for the manufacture and sale of lubricants, paraffin, and bitumen.
In short, they have a couple of refineries and they operate a bunch of gas stations all over France.
Pretty simple business, and if you live in france you’ve probably seen their gas stations around.
Why its interesting
Honestly? It’s super cheap.
The company is trading at a PE below 1, and under their NCAV.
To be clear here, last year this company generated 719 million euros in net income, and they have a Net Current Asset Value of 910 million euros.
Their market cap is around 600 million euros today.
This is an incredible undervaluation that is likely a result of 2 things:
The company is majority owned by Exxon XOM 0.00%↑ resulting in little chance for outsider control
The company is wildly cyclical with huge negative/positive cashflows swings
The Opportunity
Ultimately the company doesn’t pay regular dividends, with only 2 payments in the past 5 years (2017, 2022), returning only 3.5€ to shareholders.
They also don’t conduct share buybacks either, and given their ownership structure this history of shareholder neglect is likely to continue more or less indefinitely.
That said, the fact that they “could” return gobs of cash to shareholders means that there might be some play here in terms of buying in to wait for a large special dividend, or to wait for the value gap is smaller.
Whatever the case may be, and while I think it’s certainly an interesting prospect, I don’t think I want to be a part of it.
The incentives are not in the right place, I don’t see any catalysts coming and it’s difficult to judge the likelihood that the company will return to fair value.
Still, if you’re interested in this, it might be worth a deeper look.
Thanks