BVZ Holding AG: Swiss Value

Almost two years ago, I opened a first position in the swiss company BVZ Holding AG. I recently bought more shares so that the stock currently accounts for more than 10% of my portfolio.

BVZ is short for Brig-Visp-Zermatt, three cities in the Swiss alps which are connected by a meter-gauge railway line operated by the Matterhorn Gotthard Bahn, the main subsidiary of BVZ Holding AG. I find the history of the company and its area of operation deeply fascinating and also think that its stock might be valued attractively. In one of my last posts, I already outlined the shareholder structure of BVZ. This post aims to describe and value the operations of the company and summarizes my research findings and why some of the value of this company might only be visible on a second look.

Let’s start with a financial summary:

As of year end 2024, the company had 197,278 shares outstanding. With a current share price of around 1000 CHF this equals a market capitalization of roughly 200 million CHF. Last year’s earnings were 23 million CHF and its equity (without minorities) amounted to around 233 million CHF. Following these numbers, BVZ trades at a P/E-ratio of 8.7 and a P/B-ratio of 0.85.

On the downside, the consolidated balance sheet shows financial liabilities of around 400 million CHF, indicating that the company uses a lot of debt for its financing. But more to this later.

The following list provides an overview of the four operating segments of BVZ Holding:

• Mobility: The company is the majority shareholder in Matterhorn Gotthard Verkehrs AG (MGV) which operates the Matterhorn Gotthard Bahn between Zermatt and Disentis. As its business is public transportation, the company receives support from the swiss state called Abgeltungen for balanced earnings.
• Gornergrat: Gornergrat Bahn AG operates a mountain railway between Zermatt and the Gornergrat. It is one of the main tourist attractions of Zermatt as the mountain top station provides a good view on the world famous Matterhorn.
• Real estate: The company’s real estate subsidiary BVZ Asset Management AG owns several, mainly residential, properties in Zermatt as well as along the railway line of the Matterhorn Gotthard Bahn. The properties have a fair value of 120 Mio. CHF (but are included in the balance sheet at amortised cost).
• Investments and other services: Besides the aforementioned operating segments, BVZ Holding has shareholdings in Zermatt Bergbahnen AG (ZBAG), a cable car and snow lift company, as well as Matterhorn Terminal AG Täsch, which operates a car park in Täsch, a small town adjacent to Zermatt. Moreover, this segment includes two subsidiaries related to the Glacier Express, a tourist train running through the swiss alps.

BVZ groups all but the first segment into the private catgegory, meaning they are for-profit. As the mobility segment recieves money from the state to cover some of its costs it is not allowed to pay out a dividend for the shareholders.

The following chart depicts the structure of the BVZ Holding group and its related entities. The four reporting segments are depicted by different colours:

• Gornergrat: blue
• Real estate: red
• Investments and other services: green
• Mobility: yellow

Bold borders indicate that individual accounts are available, primarily because the entities are listed on the swiss OTC market. The bold lines come in different shapes depicting the different kind of consolidation method applied in the consolidated account of BVZ Holding AG. Please note that, with the exception of the (green) investment segment, all segments are conducted within a seperate subsidiary.

AG Matterhorn Gotthard Bahn (MGM), coloured in grey, is a management company employing the workforce for Gornergrat Bahn AG and Matterhorn Gotthard Verkehrs AG. These costs are charged to the respective entities, leading to a break-even result at AG Matterhorn Gotthard Bahn. The company does not have any assets which is why I ignore it in my valuation.

For the valuation of BVZ Holding AG, the three private segments are the ones to look at. Yet, its consolidated accounts fully include the public transportation and hence asset-heavy subsidiary Matterhorn Gotthard Verkehrs AG.

To pull apart the different segments of BVZ Holding a quick overview of consolidation methods under Swiss GAAP and how they are used within the BVZ group is helpful.

Under Swiss GAAP, three different kinds of consolidation exist: full consolidation, at-equity, and (a method not available under IFRS) partial consolidation. The last one is applied for subsidiaries where a company holds a 50% stake. In such case, imagine that a subsidiary is fully consolidated but before each entry is added to the consolidated account, it is multiplied with 50% to resemble the share of the parent company.

For the case of BVZ Holding AG this has the following consequences: Gornergrat Bahn AG is a 100% subsidiary and thus fully consolidated. BVZ only holds a 22% stake in Zermatt Bergbahnen AG which is why it is accounted for at-equity. AG Matterhorn Gotthard Bahn is a 50% and hence partially consolidated.

These different methods of consolidation become important when looking at the yellow public transport segment. Matterhorn Gotthard Verkehrs AG is a 75% subsidiary which is fully consolidated (generating an thereof interest of minorities in the equity section of the balance sheet). Glacier Express AG and Panoramic Gourmet AG in which Matterhorn Gotthard Verkehrs AG holds a 50% stake are partially consolidated in both the consolidated account of BVZ Holding and Matterhorn Gotthard Verkehrs AG. As the later is OTC-listed it publishes consolidated accounts itself.

After I understood the structure of the BVZ group, I came to the conclusion that for valuation purposes the public transport segment, i.e. Matterhorn Gotthard Verkehrs AG, should be seperated from the rest of the company to examine what value lies in the three for-profit segments.

As the public transport segment receives support from the Swiss state and cantons, it is very unlikely to run a loss impacting the result of the private segments of BVZ. Note that the structure of this support, called Abgeltungen, is somewhat complicated in practice (the support is requested in advance based on estimates on future costs so that the public transport segment might indeed run a profit or loss if costs or revenue turn out to deviate from the estimates) but I choose to put this risk aside for another time.

So if valuing the private segments of BVZ means ignoring MGV, it is necesarry to pull apart the consolidated accounts. While I consider the overall reporting of BVZ (only available in German) to be good and detailed, they only provide a breakdown of revenue and profit between the private and public (transport) segments. If one wants to analyse the balance sheet as well as the cash flow statement, manual work needs to be done.

So let’s get started…

Profit

As a starting point, the following chart provides an overview of the profit of the three for-profit segments.

The Gornergrat railway, and to a smaller extent the Investments and other services segment, significantly increased their earnings in the past decade. With the exception of Covid and the decrease in tourism and closure of leisure activities all segments are continously profitable.

Liabilities

At year end 2024, the BVZ Holding Group had around 382.4 million CHF of interest-bearing liabilities.

This high amount of debt might disencourage looking at the company. But as Dave Waters from Alluvial Capial points out, the majority of this debt is guaranted by the swiss government and thus has low interest cost.

Placing the accounts of BVZ and MGV side by side, it becomes clear that the fast majority of debt (roughly 90%) is held by MGV to finance its rolling stock. Exluding MGV means excluding this huge pile of debt. As the only two companies I am aware of, BVZ and MGV break down the liabilities to each individual loan in their reporting.

The following chart gives an overview of all loans and whether they are owed by MGV or BVZ.

The majority of loans are used to finance the rolling stock (trains called Orion in the case of MGV). The majority of liabilities owed by the for-profit segments of BVZ are for the rolling stock of Gornergrat railway called Polaris. BVZ jointly built a residential building in Andermatt for which it also took up a small loan.

Adding the short term liabilities of BVZ of around 7.5 Mio. CHF, the total amount of debt owed by the private part of BVZ amounts to around 48.5 Mio. CHF at the end of 2024. This number is substantially lower than one would imagine by only looking at the consolidated accounts.

Cash

The asset side of the consolidated balance sheet states that the BVZ group has bank deposits of around 74 Mio. CHF. But how much of this cash belongs to MGV and how much to the for-profit part of the company?

The table shows the cash balances of BVZ group, MGV and the difference between the two. Note that I also deduct the cash balance of MGM of around 0.2 Mio. CHF each year (not shown in the table) to just depict the cash balance of the for-profit part of BVZ.

So the for-profit part of BVZ has around 55 Mio. CHF of cash on hand.

Yet, the cash balance of BVZ Holding AG itself only amounts to 1.1 Mio. CHF at the end of 2024. This means that more than 50 Mio. CHF sits at one of the two fully consolidated companies, BVZ Asset Management AG or Gornergrat Bahn AG.

These funds might have been planed to be used on the construction of appartments on top of Zermatt train station, which was recently rejected by the local population. Thus some of the funds might not be needed as planed. Gornergrat Bahn AG only purchased new rolling stock in 2022 which is why I doubt major investments are needed in this segment in the years to come.

This exercise shows that BVZ has around a quarter of its market capitalisation in cash, roughly equal to the amount of debt. The increase in the recent years shows that its business segments are strongly cash generative. While the Gornergrat railway took up some debt in the previous years, it has been used to finance its long-term investment into new rolling stock.

Dividends

As its name implies, BVZ is merely a holding company. Thus, its ability to pay dividends to shareholders relies on itself receiving dividends from its subsidiaries. The statuory accounts show that BVZ’s only source of revenue are these dividends. The company has no employees and only tiny costs reducing the received dividends.

So from which companies did BVZ receive payments in the past?

For me the main takeaway of this table is that Gornergrat Bahn AG has not paid out any of its profit since 2020, despite cumulative earnings of 37 Mio. CHF.

You might ask: Why did MGV pay dividends in 2025 when it is subsidised by the state? This is because the Glacier Express, which is a subsidiary of MGV, is not subsidised by the state and hence allowed to run a profit. Glacier Express paid out a dividend of its profits to MGV which the company subsequently paid out to its shareholders, mainly BVZ Holding AG.

One caveat of both for-profit operating segments, real estate and Gornergrat, is that they are very capital intensive. Thus, depreciations and, at least for the mountain railway, continous investments are necessary for upkeep.

Thus, the next step is to approximately calculate the cash flow of the for-profit segments of BVZ.

Cashflow

For this exercise, I deduct the numbers from the cashflow statement of MGV from the one of the overall BVZ group. While this approach might not be perfect, it might yet give an approximate insight in the cash generation of the for-profit segments of BVZ.

The following chart depicts the operating cashflow of the overall BVZ group and the share of MGV.

Around half of the operating cashflow of the overall BVZ group is generated by MGV, the non-profit segment.

How do the other parts of the cash flow statement look after deducting the part generated by MGV? This can be seen in the following chart.

The strong negative investing cashflow in 2022 is due to the previously mentioned renewal of the rolling stock for the Gornergrat railway. The financing cashflow in 2024 includes the yearly dividend of around 3.6 Mio. CHF as well as the partial repayment of a mortage loan.

Overall, the for-profit segment of BVZ on average have generated an annual free cash flow of around 20 Mio. CHF (as the dividend is included in the financing cashflow) in the last three years.

Gornergrat

One chart at the begining of this post showed that Gornergrat Bahn AG was aible to strongly improve its profits since 2014. I asked myself whether this was possible due to higher number of passengers or because of increases in ticket prices.

A comparison across time provides a good opportunity as the product of the railway, providing a ride to the mountain top for its passengers, does not change over time. There are no, or only very minor, impacts of new technologies or other factors.

Gornergrat railway has roughly doubled its ticket prices for the main season since 2005, despite cpi only growing 10%. In my point of view this shows the strong moat such a mountain railway has. If one comes to Zermatt (for many tourits from faraway places likely only once in a lifetime) you want the best view on the Matterhorn and will likely take the required train ride independent of the price. Nevertheless, I must say that 132 CHF for a return ride Zermatt-Gornergrat is a steep price tag, despite the overall high price level of Switzerland.

Risks

One obvious risk is the dependency on tourism. Depending on the amount of tourists visiting Switzerland, specifically Zermatt, the results of BVZ might vary strongly. The company states in its reports that about half of the visitors of Gornergrat are swiss residents, which dampens the reliance on foreign visitors. On the other hand, I suspect foreign visitors to be the much more lucrative customers.

Another risk is the strong entanglement with the Zermatt establishment. As I already mentioned in my article about the shareholder structure of BVZ, I think that the entrenched families of Zermatt are among the shareholders. As they are often active in the tourism business themselves, i.e. through running hotels or restaurants, their interest might differ from other shareholders. This might lead to BVZ investing in activities strengthening the standing of Zermatt as a tourist destination (from which the families benefit without spending anything), which might provide to good of a return on capital.

A strong advocate of this connection between local families and BVZ is the former hotel operator Jürg Biner, who wrote several blog articles about his assessment of the situation: https://richtighandeln.blogspot.com/2018/01/an-daniel-laubers-ehrentisch-seiner.html https://richtighandeln.blogspot.com/2018/01/daniel-laubers-kunststucke-erster-gute.html

Finally, the public transportation segment might nevertheless impact the overall performance of the company. It makes up most of the asset of BVZ Holding group and the management must divide its attention between the public transport operation and the three for-profit segments.s

Summary

To sum up, by focusing on the for-profit segments of BVZ you get:

• A small amount of swiss real estate worth 120 Mio. CHF generating around 1.6 Mio. CHF of profit per year
• An irreplacable mountain railway generating around 15 Mio. CHF of profit per year
• 50 Mio. CHF of cash roughly equaling the debt the for-profit segments have taken on
• Minority investments in Zermatt Bergbahnen, the last parking opportunity before (the car-free) Zermatt and the Glacier Express

I doubt that this combination will generate tech-like returns but am quite certain that the company will be able to generate satisfactory earnings in the coming years and that the stock will accordingly trade higher. The Gornergrat railway is one if not the major tourist attraction of Zermatt and has been so for the last hundred years. In my view this is unlikely to change anytime soon.