Stelios Kanakis reports 2016 results, P/E: 8.8x

Stelios Kanakis (KANAK.AT), a Greek distributor of raw materials for confectionery, bakery and ice cream products, has reported results for 2016 yesterday. Stelios Kanakis is the exclusive distributor in Greece for a number of high quality brands, like Fabbri 1905. It also offers demonstrations and training for bakery professionals for using these products from its own gastronomy centers.

Results for the company were very solid once again. Sales were €18.6m, up 2.7% from 2015 and net income was €2.1m, up 19.2%.

Here are some updated figures since the last update:

Share price: €2.45
Shares outstanding: 7.500.000
Market cap: €18.4m
Cash: €6.5m
Total liabilities: €4.7m
Enterprise value: €11.9m
EBITDA: €3.05m
P/E ratio: 8.8x
Price to book: 0.97x

The stock is up 29% since that last post. There have been a couple of capital returns and dividends as well. In terms of business performance, Stelios Kanakis has always been a high conviction holding for me. People will probably keep buying bakery products, no matter how bad the economy gets. That has proven to be true in Greece’s economic depression.

The company has announced it will make a €0.07 capital return to shareholders this year, which is a bit lower than I would have liked to see. The other slight disappointment for me was that cash flow was a bit weak this year, because receivables consumed €1.3m of cash. I don’t think this means much. Over the years the company has been very good at turning earnings into actual cash.

I’ve been a shareholder for more than three years now. The company still looks cheap to me today at 8.8x earnings and with a sizable amount of excess cash on the balance sheet. As long as those Euros in the bank don’t turn into Drachmes, I think shareholders will do fine. One scenario that could unfold is that the founding family, who collectively own 80% of the shares, take the company private.

Disclosure: long Stelios Kanakis

Posted in European Stocks and tagged .

Leave a Reply

Your email address will not be published. Required fields are marked *