Originally from England, I have been living in France since 2017. And with the move comes a difficult job, building a portfolio of shares in France instead of the 'unit trusts' (UCITS) that I would hold in England... In the UK, many investors buy UCITS shares of yield, which invest in shares and pay quarterly or even monthly dividends. It is a way to create additional income, more widespread in the UK than in France, where individuals prefer to invest in real estate to collect rents, or directly, or through SCPI. The UCITS of yield in France being limited for the most part to bonds, I had to target shares. The difficulty: finding a good yield.
Covid helped me a little! In the crash I was able to buy, for example Sanofi with a yield of almost 4%. I took full advantage of the "stock market sales" to load my portfolio. But now that the markets are rising again, yield is becoming harder to find. Instead of looking at the CAC 40, I have to target lesser-known companies, with a slightly lower market capitalization. So, I found Rubis thanks to a mention in Le Revenu.
The Ruby action
Ruby is an oil services company, based in France but with significant international presence. It operates in a niche market, the storage and distribution of gas, fuels, and agricultural products. Its activities produce a generous cash flow, which Rubis has invested in the acquisition of new assets. Although exposed to fuel prices, its net income is not as directly linked to this price as the turnover of an oil company like Total. Its activities are also diversified: 41% of the gross margin comes from LPG, 31% from service stations, and 28% shared between bitumen, lubricants, aviation and other activities. From the point of view of the energy transition, LPG is of particular interest as a step on the path to decarbonization.
From its base of activities in Europe, the company has invested in Africa and the Caribbean, where its activities are experiencing strong growth. Management has been able to increase income through acquisitions such as TEPSA in Spain, KenoKobil in Kenya and Eres NV in Belgium. Storage seems set to grow with ISquared Capital’s investment in Rubis Terminal’s 45%. This investment has created resources to acquire more quickly significant assets in liquid storage.
Rubis stock earnings, cash flow and dividends
Rubis has a history of almost uninterrupted growth in earnings and dividends over the past 20 years: 21% of annual growth over 10 years. 2018 and 2019 saw a dividend increase of 6% then 10%, while reducing the distribution ratio.
|
2017 |
2018 |
2019 |
Dividend |
EUR 1.50 |
EUR 1.59 |
EUR 1.75 |
Growth |
- |
+6% |
+10% |
Payout ratio |
|
60,4% |
55,5% |
Yield @ EUR 32 |
|
|
5,4% |
The company benefits from a very strong cash flow: in 2019 a net cash flow of EUR 524 m, with the need for only EUR 230 million of capital expenditure. It has little debt, with EUR 2,594 million of equity compared to EUR 637 million of net debt at the end of 2019 (the debt was further reduced with the Terminal transaction in 2020). In short, the dividends seem quite stable to me even if the health crisis implies some slowdown in activities this year. (According to the first quarter figures, a drop in 10%'s net income seems possible.)
Conclusion
Despite this good story, Goldman Sachs reduced its target price from EUR 60 to EUR 40, and the price fell to EUR 32. At this price, the yield is now 5.4%. Other analysts at Berenberg and Oddo) had also targeted target prices between EUR 50 and EUR 64. So it seems that now Rubis stock can represent a good buying opportunity. And one thing I really appreciate: Rubis translates its annual report into English! (For comic book fans, the 2019 annual report is a must-read - nice drawings with a sense of humor (of humor) and references to Tintin, Blake & Mortimer, Asterix and even Lucky Luke...)
Discover more from dividendes
Subscribe to get the latest posts sent to your email.
First of all, welcome to you Yieldseeker. I am very happy to welcome a woman among the editors of dividendes.ch, English to boot. Unfortunately, women are underrepresented here and I hope that your arrival will be able to improve things a little. Your Anglo-Saxon culture is obviously also an asset, bringing a different and enriching vision. I also congratulate you on your very good level of French.
Regarding Rubis, I did not know this value at all and thank you for sharing it. It undeniably has many assets, including a generous dividend fairly well covered by profits and current free cash flow. The regular growth of the latter in recent years proves the solidity of this company's business model. Its liquidity is comfortable and also increasing.
Personally, I find Rubis a bit expensive, but I have a reputation for being particularly stingy. Dividinde can confirm this! Also, be careful of Rubis' tendency to issue debt and shares to finance its development. This behavior cancels out the positive effect of the generous dividend in terms of overall shareholder return.
Thanks again for this analysis and I look forward to reading you again, my dear!
Great thanks for this interesting analysis, hoping to have more of this kind!
Quick question: where can we find the target prices recommended by Goldman Sachs (or others)? I'm interested.
I have taken an interest in Rubis again. In the current period, Rubis seems to me to be one of the few quality stocks with a correct stock market valuation.
Hi Laurent,
What makes you say that? The dividend?
Personally I don't find it that cheap and the momentum of the title is not great either.
I made some comparisons based on a "home" application of Peter Lynch's method. On these criteria, I think that Rubis is interesting today, and in any case more interesting than most companies, which often have valuations that I consider excessive. In fact, if Rubis is not the panacea, it is in my eyes a rare opportunity in these times.