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Consumer Brands & Retail
Global luxury goods – Equity
March 2013
abc
Christian Dior
Dior’s discount to our estimated restated net asset value (RNAV)
is now 20%, in line with its historical average of 20%
Lowering target price to EUR144 from EUR147 on the back of the
decrease in our LVMH target price to EUR147 (from EUR150)
Remain Neutral as the potential return is limited (12.6%)
Discount to RNAV in line with
its historical average of 20%
20% discount to RNAV
Christian Dior is the main holding company for
LVMH, controlling 40.9% of the shares and
57.5% of the voting rights. As well as its stake in
LVMH (89% of assets), Dior’s only operational
entity is the Dior Couture brand (10%).
In 2012, Dior shares gained 40% vs 27% for
LVMH shares and are flat vs -7% y-t-d in 2013.
Dior’s discount to our estimated restated net asset
value (RNAV) is thus now 20%, in line with its
historical average. There is nothing surprising
here as conglomerate/holding discounts to RNAV
tend to fall during bull market phases and vice
versa. The below-mentioned press speculation
(see Risks section, next page) may also have
played a role.
As evidenced by the chart on the next page, the
discount to RNAV has moved within a 6%-34%
range (average 20%) since 2005. Note that higher
levels of discounts were witnessed in the 1995-
2005 period, but we would discard them from the
analysis since the LVMH control structure was
much more complicated and moreover the French
tax regime back then (taxation on capital gains)
implied a higher discount for most French
conglomerates.
We are Neutral on LVMH with a EUR147 target
price – see our detailed LVMH investment case
on page 88. As we base our sum-of-the-parts
target price for Dior on LVMH reaching our new
target price of EUR147 (vs EUR150 previously)
and a Dior-targeted discount to RNAV of 20%,
our new Dior target price is EUR144 – see our
detailed assumptions on page 63.
Under our research model, for stocks without a
volatility indicator, the Neutral band is 5
percentage points above and below the hurdle rate
for eurozone stocks of 9.0%. Our target price of
EUR147 provides a potential return of 12.6%,
which is within the Neutral band of our model;
therefore, we remain Neutral on Christian Dior
stock. Potential return equals the percentage
difference between the current share price and the
target price, including the forecast dividend yield
when indicated.
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