Acanthe Developpement: Paris bargain with 57% dividend yield

Acanthe Developpement: Paris bargain with 57% dividend yield

In December 2016, a French real estate firm with locations in central Paris traded at 43 cents. Two years later, its assets were worth 97 cents per share. The discount exceeded 50%. The company, Acanthe Developpement, paid dividends of up to 30% and accumulated a 50% revaluation in the year. The P/E ratio was 1.5. The price-to-book ratio was 0.4. The numbers seemed like a brochure. And that’s where the problem began.

Numbers that look like a keyboard error

The initial appeal was hard to ignore: P/E 1.5, trading at less than half its book value, ROE and ROA of 20%, and debt representing barely 16% of equity. The company had 82.7 million euros in cash against 45.46 million in loans. With those credentials, anyone would sign.

The dividend was the final hook. In 2016, it paid 30 cents per share alone in the November advance, after paying the same in July and December, according to data circulating in the thread. The dividend yield was calculated at 57%. A yield like that is not seen even in the best years of the Ibex.

But there was a trap. Earnings per share were 0.30 euros and the announced dividend was 0.42, according to a calculation circulating in the thread. It distributed more than it earned. That is not a bargain: it is a liquidation disguised as generosity.

Why does a company pay more dividend than it earns?

The answer lay in its strategy. Acanthe sold real estate assets and distributed the cash to shareholders instead of reinvesting it. It was not a sustainable dividend: it was a distribution of cash from sales. In 2014, it had cut the dividend to 0.03 euros to reduce debt, which went from 120 million in 2013 to 78 million in 2015. Afterward, it resumed strong distributions.

This explains the volatility. Each dividend payment was reflected as a 30% drop in the chart. The plunge was the dividend, not a collapse. Those who did not understand sold in panic. Those who understood, bought the bounce.

The French withholding tax added another layer of complexity. Dividends were subject to withholding at source and destination, although a refund could later be claimed. A procedure that discouraged more than one.

Liquidation value that never came to trade

In 2018, the liquidation value per share was 0.84 euros and the stock traded at 0.62. In 2019, the liquidation value rose to 0.975 euros with the stock at 0.43. The discount exceeded 55%. The property portfolio was valued at 163.2 million euros.

Net profit for 2018 was 10.7 million euros, compared to 39.4 million the previous year. The drop was notable, but the discount on assets remained. For defenders of the thesis, the market simply did not recognize the value of Parisian real estate.

Skeptics pointed out that the real ROA was 4% and ROE 5%, far from the initial 20%. One thing is to own valuable assets, and another is to generate cash flow with them. A real estate firm that does not rent at a good price is a lot with paperwork.

Liquidity: the risk no one mentions

Average volume was 120,000 shares daily, about 70,000 euros. Sufficient for orders of two or three thousand euros, insufficient for large positions. A true penny stock, with the volatility that entails.

The warning was clear: do not put 100% of your portfolio into such a value. Lack of liquidity amplifies moves and can trap anyone who needs to sell quickly. The revaluation potential was high, but so was the risk of seeing a -30% in a single session without apparent explanation.

In 2020, with the stock at 0.43 euros and assets at 0.97, the question remained unanswered: how long can the market ignore a 55% discount? Sometimes, the answer is 'forever'. Other times, the market wakes up suddenly.