Another EU Value Investment : Tikehau Capital (TKO.PA)

I've seen quite a few people here looking for value on the EU markets, and I believe this company represents one of the best value opportunities currently available. I found TKO while looking for companies which might benefit from the push towards the "Savings and investment union", as I think that despite the lack of competitiveness in Europe, the trustworthiness and stability of their financial markets is unmatched. It is an alternative asset manager that is bound to benefit from this, but that's not actually what really makes them stand out as I think other companies (eg. DB1) are better positioned to take advantage of this push. Indeed, what makes this company special is the outstanding value it represents. First, their P/B is around 0.9, as they have about €3.1 billion in shareholder equity (cash + investments in their own funds) on the balance sheet. Their market cap is roughly €2.8 billion. So you're basically getting their portfolio of investments at a discount, and on top of it you're getting the asset management business for "free" : * €51 billion AUM growing steadily every year (compounding at 21% annually since IPO), targetting €65 billion for FY 2026. * €130 million FRE for the last full fiscal year (2024), and aiming for €250 million in 2026 (other asset managers tend to trade at higher than 20PE, so the asset management revenue by itself at current levels is profitable enough to justify their current valuation) * 5% dividend They're also quite well positioned to benefit from the EU sovereignty trend, as they launched an "European Sovereignty Fund", and are invested in Defense and Cybersecurity, which used to be criticised from an ESG standpoint, but is now a positive. They also have partnerships with some large insurers to get retail investors into private credit, which aligns with the goal of democratization of private assets. In addition, the management and founders own a lot of shares, and have been buying back aggressively, as the current price feels irrationally low. Now obviously it's not like there are no reasons why the stock trades at a discount, but the reasons seem light given how cheap the stock is. Unlike other asset managers which keep light balance sheet, TKO invests in their own funds, which makes their valuation more complex as they are an investment holding in addition to an asset manager. This is exacerbated by the fact that around a quarter of their portfolio was in real estate, which is usually punished by the market (they argue that their assets are high quality, but obviously hidden write-downs that haven't hit the books yet are always a possibility), and another smaller part is in private equity, where valuations may be impacted by the economic slowdown without it being written down yet. However, the majority of their holidngs are in private debt, with a remarkably low default rate, so the fears of their assets being massively overvalued seems exagerated, especially given the fact that their exits have increased recently, so they're able to convert their assets to cash without losing value. And well, the stock is also French, so that's probably another reason for it to be discounted. Overall, it's a play with a lot of downside protection, significant upside (especially if they do benefit from the sovereignty/unified capital market trends), and the constant revenue/profit increase will eventually lead to a rerating.