Carson Block is betting against Casino Guichard-Perrachon SA, saying the French supermarket operator is using “financial engineering” to mask a “sharply deteriorating core business.”
 
Block said Casino’s debt burden is dangerously high and is only being managed for the short term. The founder of Muddy Waters LLC values the stock at as low as 6.91 euros ($7.50), compared with a close of 48.97 euros Wednesday.

Groupe Casino (CO FP) is one of the most overvalued and misunderstood companies we have ever come across. The basic problem with Casino is that its financial statements are literally meaningless to understanding the company’s (poor) health. They do not distinguish between what Casino owns and what it owes. (Spoiler: we estimate Casino’s LTM leverage ratio at 8.9x.)
 
Casino’s controlling shareholder Jean-Charles Naouri is a genius. He won first prizes in France’s high school Latin and Greek exams, completed his baccalaureate degree at 15, and earned a PhD in math in only one year. Like the geniuses who founded the hedge fund Long-Term Capital Management, which spectacularly collapsed, Mr. Naouri has an affinity for leverage. One would expect Casino to be a relatively boring hypermarket retailer; however, together with its parent, Rallye SA (RAL FP), Casino increasingly resembles a highly levered hedge fund. One example is Casino’s total return swaps on listed equities, which we estimate have a mark-to-market loss of approximately €500 million.
 
Casino and Rallye are now experiencing their version of a “six sigma event”, with emerging markets (80% of consolidated EBITDA) unwinding, currencies selling-off, and a sharply deteriorating core business. Casino obfuscates these problems by (i) adding complexity to its already convoluted structure and financials, (ii) engaging in financial engineering to improve the optics of its financials, and (iii) by hollowing out the productive value of the businesses in order to keep Rallye from collapsing.
 
Our report peels away many layers of the onion to show that Casino is dangerously leveraged, and is being managed for the very short-term. We explain that Casino’s shares are worth as little as €6.91, and correspondingly, the shares of Rallye are likely going to zero. If Casino trades at our estimated value of €6.91, the recovery on Rallye’s bonds should be about €0.15.

Bernstein a réitéré mercredi son opinion 'surperformance' et son objectif de cours de 70 euros sur Casino, estimant que le plan de désendettement présenté hier par le groupe pourrait révéler jusqu'à 12 euros par titre de valeur 'cachée'.
 
Le broker souligne toutefois que le plan ne constitue pour l'instant qu'une déclaration d'intention, sans présentation détaillée des pistes envisagées ni de leur impact financier.
 
Bernstein estime malgré tout que la cession des activités au Vietnam pourrait générer 750 millions d'euros, l'entrée de nouveaux investisseurs dans les activités immobilières en Thaïlande quelque 550 millions d'euros et les changements en Colombie environ 200 millions d'euros.
 
Le courtier rappelle que l'objectif du plan est de permettre à Casino de se désendetter, sachant que S&P a récemment fixé un objectif d'endettement net/Ebitda de 3,3 à 3,6x, niveau qui devrait selon lui être rendu possible par la réalisation du programme dévoilé hier.

This is the first time in our investment careers that we have come across a situation in which a company’s opacity is a reason to buy the stock. Our investment approach is to tackle complex situations, and attempt to understand the economic reality underlying the information (often misinformation). So it is with Bolloré SA (BOL FP), which has a horrifically complex corporate structure. However, through this structure, BOL effectively owns a significant portion of itself. Most of the market seems to take at face value BOL’s reported shares outstanding of 2.5 billion. We estimate that the effective shares outstanding are only 1.1 billion (57.2% lower than reported).
 

• Mr. Bolloré is an outstanding capital allocator, and has grown the share price and book value of BOL over the past 20 years, respectively, by 1,213% and 1,953%.
• We value BOL shares at €8.50, which is 94.6% higher than its current price (février 2015)