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IDSUD: an excessive discount

The holding company’s participation in La Française des Jeux represents three times its market capitalization.

by Bruno Kus

A little late, the IDSUD company has just published its accounts for the 2019 financial year. Despite a 17.5% increase in operating income, enabled in particular by the good dynamics of the exchange and precious metals activities, the result net fell slightly to 0.7 million euros from 0.72 million a year earlier. As usual, most of the result comes from financial products and in particular from the dividend received from La Française des Jeux. The main feature of IDSUD is indeed to hold a 2,626% stake in the capital of the newly privatized gaming company. Last year, its dividend contribution decreased from 4.1 to 3.3 million euros for the portion accruing to IDSUD. A good part of this contribution is however reduced by the expenses linked to the other activities. In addition to the travel agency, exchange and gold operations trades, IDSUD is interested in the renewable energy sector by supplying or operating for own account photovoltaic production plants and storage systems for ‘energy. This is the umpteenth diversification of the group, the previous ones having had very mixed success.

FDJ dividend down this year

The profitability of renewable energy activities therefore remains to be demonstrated over time, but this is not the main interest of the dossier. This mainly lies in the value of the assets. Indeed, the only 2.626% stake in the FDJ is worth around 145 million euros on current price levels while the IDSUD company capitalizes only 54 million euros. This asset is therefore not valued correctly by the markets, especially as the financial structure of IDSUD remains solid with more than 15 million euros of equity and slightly positive net cash.

Of course, the results for fiscal year 2020 will not be good, given the stopping of travel agency and foreign exchange activities for several weeks following the confinement. The FDJ has also decided to reduce its dividend by 30%, which will represent almost 1 million euros less in profit. In the end, even if the renewable energy activities are not sensitive to the health crisis or the economic situation, the exercise could even become loss-making.

But the FDJ’s distribution capacity will return to normal next year and participation in the gaming company remains a major asset for IDSUD.

Our advice: buy IDSUD at 59 euros to target 75 euros. Isin code: FR0000062184.

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