A bargain in a spin-off: Havas NV

This is my first special situation position! And I wrote this at 15 December but I decide to publish today as my first post in this blog.

Why Vivendi SE split their divisions?

Vivendi decided to spin off three divisions, including Havas NV, with two main goals:

• Unlock potential: Let each division spread its wings and fly (or at least try to).
• Improve valuation: Sometimes, the sum of the parts is worth more than the whole.

Havas NV (my focus)

Havas NV started trading on December 16, 2024, and while the market’s initial reaction was a big sell-of (commonly on the spin-off), I think there’s more to this story. Let’s dig in.

Founded in 1835 in Paris, Havas is one of the largest marketing and communications groups in the world in terms of revenue. It currently has more than 23,000 employees.

They have three division on Havas:

• Havas Creative: Advertising, branding, digital transformation and social media
• Havas Media: Division responsible for optimizing advertising investment through the use of data.
• Havas Health: Division responsible of communication and advertising of health sector.

At first glance, Havas NV might not seem like the most exciting company to own. But here’s the thing: it’s a stable, cash-generating business with minimal CAPEX requirements. And at this price, it’s looking like a bargain.

The company has done a great job in a stable sector over the last 3 years:

• Revenue: +7% annually
• Net Income: +10% annually
• EBIT: +9% annually
• Cash Conversion Rate (CCR): 89% (that’s almost every euro of profit turning into cash!)

Low level of debt in balance BUT they have an off-balance debt of 300 millions how they expose in their spin-off prospectus

Valuation

The stock started trading at €1.80 but quickly fell to €1.45. At this price, Havas NV looks cheap. But is it too cheap? Let’s look at it:

Metric	2024E
EBITDA	447M
FCF	236M
EPS	0,19
Shares Outstading	991M
Net Debt	448M
Share Price	1,45
Market Cap	1436M
Enterprise Value	1884M

Using this we get the following valuations:

Metric	Value
EV/EBITDA	~4x
MC/FCF	~6x
PER	~7x

If we compared this valuation metric to similar companies:

Comapany	EV/EBITDA	MC/FCF	PER	Market Cap
Publicis Groupe SA	~8x	~13x	~11x	25B
Omnicon Group	~8x	~10x	~10x	16B
Interpublic Group of Companies	~8x	~10x	~10x	14B
Havas	~4x	~6x	~7x	1.4B

We can see that at this price the company looks a bit cheap, and I think it is because of the sales force of a spin-off, a not-known company and the factor of being a small/mid cap.

Valuing the company with some reasonable multiples (with a discount of 20% from similar companies because it’s smaller) and including their dividend policy of 40% of net income attributable to the group (rounding to 4% dividend yield) that they put in the prospectus, we get:

	Multiplo	Intrinsic Value	Upside from 1.45
EV/EBITDA	6x	2,2	51%
MC/FCF	8x	1,91	31.72%
PER	8x	1,54	9%

Using these multiples (with a 20% discount because Havas NV is smaller than its peers), the company looks undervalued.

Havas NV is a stable, cash-generating business with a proven track record. It’s not the funniest stock out there, but sometimes the boring ones are the most profitable. Plus, at this price, the downside seems limited, and the upside? Well, let’s just say I’m optimistic.

I started with a small of 3.5% in my portfolio. Just dipping my toes in before diving in. If Havas NV performs as I expect, I will add more over time.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I hold a material investment in the issuer’s securities.