Chilean holding company Quiñenco S.A. seems to be quite a bargain right now. In fact, being a publicly-traded holding company and trading for book value at $ 4.2 billion, the company has shed more than 10% of market value within the current year and consequently, quite a bargain right at this point in time. Moreover, although a sizable number of Chilean stocks have suffered this year in part due to market corrections, Quiñenco S.A. is at a crossroads for anyone wishing to add a hammered stock with vast upside potential to his or her portfolio. Likewise, we have to take into account that this stock is a holding company for various investments belonging to the wealthiest clan in the country known as the Luksic family. As a consequence, the stock is more or less their private investment vehicle and right now, this investment vehicle fetches more than $ 12 billion in NAV while being valued by the market for roughly one third of that and thus in turn, trading at a steep discount. In other words, the sum of the parts is worth three times what the market is valuing the whole. In addition, the price/earnings multiple of the stock at 9 is roughly half of what stocks included in the IPSA index are fetching right now at close to 18. Similarly, I should point out the fact that companies trading in Chile today are the ones carrying the highest market valuations in Latin America according to accomplished fund managers who cover the region such as Gonzalo Pángaro of T.RowePrice. Indeed, Chile as a country already behaves as a developed nation in many aspects such as having a sound labor participation rate in a modern retirement system, a sizable high skilled active labor force, prominent capital markets, a good bancarization ratio defined as outstanding loans in the banking system as a percentage of GDP and other metrics making one think that this narrow country in the Southern Cone is definitely the closest in Latin America to achieve such a feat. What I mean by feat is joining the category of countries that are considered developed by economists today. On the other hand, being a holding company where earnings are nothing more than the collection of dividend payments from the various shareholdings in its portfolio at $ 500 million a year, profits at Quiñenco are not too high but then again, they’re nothing more than dividend payments from substantially larger profits realized at the companies the investment vehicle controls.
To conclude, Quiñenco controls, by itself or with partners, various blue chips in Chile. Accordingly, it is prudent for me to mention these investments as follows:
Banco de Chile S.A.: second largest commercial bank in the country. Quiñenco controls the publicly-traded company in partnership with Citigroup Corporation.
CCU S.A.: largest brewer in Chile with operations in neighboring Argentina and also holder of the rights to bottle Pepsi in Chile. Quiñenco controls the publicly-traded company in partnership Heineken International N.V., the famous listed beer multinational from the Netherlands.
Techpack S.A: industrial manufacturer with products ranging from copper wire to brass profiles and flexible packaging. Quiñenco owns the entire company.
Invexans S.A.: investment vehicle that happens to be the single largest shareholder in the French multinational and prominent fiber optic cable manufacturer known as Nexans S.A. Quiñenco owns the entire company.
Compañía Sudamericana de Vapores S.A.: single largest shipping company in Latin America specialized in containers, car carriers, bulk and refrigerated cargo with sales exceeding $ 5 billion a year. Quiñenco owns about 37% of the company’s common stock having grabbed the shareholding when Jaime Claro Valdés, who inherited the empire his deceased brother Ricardo Claro Valdés built, decided to cash out liquidating some of the holdings accordingly.
Sociedad Matriz SAAM S.A.: biggest seaport operator in Latin America. Moreover, Quiñenco owns 37% of the company’s common stock and the investment represents another crown-jewel that used to belong to the late Ricardo Claro Valdés.
Enex S.A.: holder of the rights to use the Shell brand in Chile. The company possesses around 300 Shell gas stations along with some 100 adjacent convenience stores in Chile. In addition, the company is making further investments in the fuel distribution Chilean sector such as having a participation in pipeline operator Sonacol S.A. and various other energy-related investments. Quiñenco owns the entire company.