Analysis of Orior AG (ORON:SWX)

ORIOR is a Swiss food producer specializing in the processing of fresh foods. The company has many brands in its portfolio, including Rapelli, Ticinella, Nature Gourmet and Le Patron. Although it has only been listed on the stock exchange since 2010, Orior's origins go back a long way, to the 19th century. A little history is necessary to understand some of Orior's current fundamentals and get a better idea of its value.

History

1852: Louis Ormond founded the first tobacco factory in Vevey (VD). In 1930, he merged with Louis Rinsoz, who invented the famous "Meccarillos". The two companies were then among the most renowned Swiss cigarette producers and distributors.

1992: Rinsoz & Ormond Holding SA is transformed into ORIOR Holding SA and strategically aligns itself with the food industry. Several high-end prepared food companies are integrated into the group. In 1993, the company purchases the shares of the Rapelli group (Italian charcuterie) and the Trinca company (pasta).

1996: Participation and purchase of other well-established companies such as Le Patron (pâté and convenience), Pastinella (pasta), Traiteur Seiler (fresh pasta) and airline catering suppliers.

2008: The ORIOR Group takes over the well-known and traditional Grisons company Albert Spiess Holding AG. In 2009, ORIOR / Spiess Europe becomes a European export platform in Haguenau (F) and supplies the German and French markets.

In 2011, acquisition of the Ticino specialist company Salumeria Keller SA. The small, traditional company produces high-quality Ticino charcuterie specialities under its own brand "Val Mara". It is a valuable asset for the Rapelli competence centre and offers considerable growth potential. The company Bernatur, Switzerland's leading tofu producer, is also taken over.

In 2012, ORIOR acquired Möfag, a renowned manufacturer of meat specialities. The family business is well established in the Eastern Switzerland region and serves both the catering and retail sectors.

2014: ORIOR takes over the organic tofu specialist Noppa AG. With this borough, ORIOR further expands its vegetarian expertise.

In 2016, ORIOR took over the Culinor Food Group. ORIOR thus strengthened and expanded its core competencies in the growing market for premium convenience foods, beyond the Swiss border into Europe. The Culinor Food Group is the leading manufacturer of ready meals and menu components for the retail and catering sectors in the Benelux. The innovative group also sells its products in other European countries from the established main market in the Benelux.

Valorization

Orior is trading at an attractive price, at 14 times recurring earnings, 0.77 times sales and 11 times free cash flow. The dividend yield is also attractive, at 2.84%, for a distribution ratio that is nevertheless prudent (40% compared to earnings / 31.2% compared to free cash flow). The company therefore still has room to increase its dividend further in the future, as it has done very regularly, but not quickly, in the past (1.95% per year on average over the last five years).

From the point of view of tangible book value, however, it is clearly less good since the ratio amounts to 19.6. How can we explain that this last ratio seems to indicate an overvaluation while the other four say rather the opposite?

If we look at it from the point of view of the total book value (including tangible and intangible assets), the ratio is clearly better, since it amounts to 1.6. It is therefore consistent with the other valuation coefficients. This therefore means that Orior's non-tangible assets (intangibles and goodwill) are significant. Indeed, the latter represent 2.3 times the tangible assets. Usually I prefer to rely on very real elements, but here there is a bundle of clues that seem to indicate to us that there is real value behind these non-tangible assets.

First of all, as we have seen, the other four ratios show us that the stock is correctly valued, or even slightly undervalued, particularly in relation to sales. On the other hand, if we focus on non-tangible assets, we realize that goodwill is not only higher than tangible assets, and also higher than intangibles, but that it has also been increasing for several years.

When you buy Orior, you also buy the company's portfolio of assets, its many brands and acquisitions. The company's history shows us that it has grown particularly exogenously, by making targeted, intelligent and coherent purchases that allow it to generate both synergies and development opportunities. This explains Orior's growing and significant goodwill and also explains why the stock seems overvalued if we focus solely on tangible assets. Orior is much more than just a food manufacturer.

Starting from a small tobacco factory and knowing how to completely reorient oneself by reinvesting its assets in a diversified portfolio of Swiss and European food companies... in some ways it almost reminds us of a small textile company that transformed itself into an investment company.

Balance sheet & result

Just like the dividend, profits, cash reserves and asset values are growing religiously over the long term. Orior is clearly managing to create value for its owners over time and this is reflected in the share price which is also growing steadily.

Cash reserves are very comfortable, with a current ratio of 2.18 (very slightly down) and a reduced liquidity ratio of 1.32. The gross margin is up very slightly, at 22.2%, for a correct free cash flow margin of 7%. The return on assets is also up, at 5.8%, for an appreciable cash flow profitability of assets of 10.2%. Frankly not bad for a company in the food sector.

The long-term debt-to-asset ratio is certainly quite high, at 23.6%, but it is falling. Moreover, thanks to Orior's fairly significant capacity to generate cash, the entire debt could be repaid in just over three years by using its free cash flow.

It should also be noted that the number of shares in circulation is stable or even slightly downward over the long term, which is obviously good news for its owners.

Conclusion

Orior has an impressive history. It operates in a sector that protects it from market turmoil, which is corroborated by a beta of only 0.05! No risk of technological obsolescence and fairly well-contained overheads, it is the kind of stock that you can buy and forget about in a corner.

I believe that the stock is fairly valued at the moment. It is therefore clearly worth holding and possibly monitoring with a view to buying/increasing.