Hopefully, @Timo_Huhtamaki, you don’t mind if I start a thread for the company based on your excellent buy/sell thread post? I also took a light initial position, and it would be interesting to follow this in the long run.
Could @Yu_Gong1 set up the company pages?
A year-old introductory video from BHG’s Investor Day
Looks like an interesting company, although the increase in the number of shares is not pleasing. No share buyback program seems likely in the coming years…
Sorry for the delay @Huhtis. It was a busy IPO day 
Here’s the company page and releases will start appearing on the service now BHG Group - osake - Inderes
I also started following this one after @Timo_Huhtamaki’s earlier buy announcement. Depressed cases like these with a justified upside always interest me. The 12-month share price curve has indeed been almost linearly declining, and I can’t quite explain to myself why it wouldn’t continue downwards at the same rate in the coming weeks…? I suppose it’s cheap if the sentiment ever turns, but somehow I don’t dare buy yet - I guess there must be some kind of floor in the market value somewhere, perhaps at the level of cash reserves..? 
There’s a lot of market headwind right now. I still believe that for a long-term investor, there’s a really juicy opportunity here. A few things that come to mind, somewhat poorly structured:
The e-commerce market is extremely interesting when you delve into the dynamics of e-commerce in different categories. E-commerce is too often discussed as a single online blob, assuming they behave the same way in the market, and listed e-commerce companies, among others, all drop simultaneously on the stock exchange when some player lowers forecasts. This was concretely seen when fashion e-commerce company Boozt lowered its outlook last week, causing both BHG and CDON to drop at the same time, even though their product categories are completely different. There are really big differences between product categories in e-commerce, for example, when looking at marketing costs or return rates (e.g., in fashion, marketing costs, return rates, and the proportion of products sold at a discount are all high compared to other consumer goods e-commerce categories). So, the category mix is very important when comparing these as investments. Some product categories are also very local businesses, surprisingly, for example, the furniture market and partly home decor, where local category management and a local supply chain are key. In many home appliances, installation services and their functionality are definitely a competitive advantage. Also, the average order value (AOV), which for BHG is approximately just under 300 euros and for Boozt, for example, around 90 euros, affects operational profitability. One could talk at length about the different categories of e-commerce and their dynamics, but the point is to look deep into the product category mix and the supply chain, not just the demand drivers and the e-commerce company’s ability to sell products. The spontaneous brand awareness of an e-commerce company also has a big impact, bringing organic visibility; similarly, the breadth and quality of built customer bases, as regulation related to customer registers is constantly tightening.
When we look at the near-term outlook, for BHG, the comparison period (spring 2021) was very good, which means that relative growth will certainly be low, and the market might be alarmed by that when the Q2 report comes out. This spring has also been cool, which will surely be reflected in the sales of very profitable outdoor furniture during Q2, and last year people also bought a lot of them, which means a 1-2 year purchase hangover. The DIY boom was also at its peak during the corona pandemic, so many have already bought hardware store products a year ago, filling their cabinets. Similarly, discretionary spending is under pressure, and fewer home sales are apparently taking place, which is reflected in the sales of Netrauta and Taloon.com-type e-commerce stores. So, there is headwind, and that certainly explains a lot why the stock price is at such a low level.
But then, if you think about when a long-term investor should pick such companies for their portfolio, I personally think that now is a better time than, for example, at the peak of e-commerce demand boosted by the corona pandemic. In the Nordic region, the total market for BHG’s product categories is about 30 billion euros, and online penetration is still low (about 10-13%) in both main segments. Digitalization is unlikely to stop, and the clear competitive advantages of e-commerce companies will not disappear, even with headwinds. These products will continue to be sold in the future, and the industry is also very fragmented in Europe, and BHG (largely thanks to anchor owner EQT) is in a clear position as a market consolidator. Someone previously referred to the increase in the number of shares; the background to this is that acquisitions have been partly financed with own shares, i.e., a targeted issue has been made to the seller, which I consider a good thing for the success of integration = a common interest in creating shareholder value.
It’s also worth looking at what kind of players have been acquired into BHG’s portfolio. There are truly category-leading e-commerce companies, such as NordicNest, which sells Scandinavian design to 70 countries. These acquisitions in Finland have also been high quality, including Netrauta. Expansion into Germany also began last year with the acquisition of AH-Trading. So, there is indeed value within, and synergies for many of last year’s closed acquisitions are still being built, and integration is partly ongoing. In my experience, the benefits of these industry integrations are fully realized only within 1-3 years, once systems have been merged (and duplicate costs eliminated), product management harmonized, accounting and part of administration centralized, supplier synergies analyzed, and cross-selling initiated, etc.
As valuations have fallen, I’ve personally speculated that, in addition to European expansion, a larger consolidation move in the Nordics could also be possible. The image below is from an investor event where BHG presented the acquisition of AH-Trading, and towards the end of the presentation, there was this telling visualization of BHG’s growth directions, with the title “everything for the home.” They haven’t communicated this before, and it seems clear that BHG will not remain in its two current main segments but will expand into new verticals. E-commerce valuations have now fallen significantly, which can be a big opportunity and bring a nice overnight surprise in the form of a corporate arrangement. In the Nordics, CDON or Boozt are listed options, and there is also one larger listed player here in Finland with over 500 million euros in revenue The Hobbyhall e-commerce store would also fit very well, as they operate in exactly the same product categories, so there would be synergistic acquisitions in the market. Investment company Ferd AS, by the way, is the 3rd largest owner in BHG (6%) and the second largest in Boozt (12.5%)… EQT, as BHG’s main owner, has certainly conducted a thorough due diligence of the market and its consolidation potential, so I am quite sure that there are several recipes in the cookbook for successful value creation.
But we will follow with interest !
Salkunrakentaja’s article from April of the current year, which discusses online stores and mentions BHG Group. Below is an excerpt from the article, focusing on the company’s portion and the concluding paragraph.
"BHG Group is familiar to Finnish DIY enthusiasts, for example, through its online stores Netrauta.fi and Taloon.com, but its portfolio includes dozens of other online stores from all Nordic countries. BHG’s sales grew by 13 percent in 2021 compared to the strong first year of the pandemic. Including acquisitions, sales grew by over 40 percent. BHG Group is valued at an EV/S ratio of 1.1 and its market value is 3.4 times its gross profit.
Stock Picker’s Opportunity
The valuations of online retailers have normalized. For long-term investors, this could offer a good buying opportunity. E-commerce continues its structural growth, and online stores have the tools to succeed. However, the near-term development involves many threats.
It is important for investors to assess the position of e-commerce amidst the pressure from brick-and-mortar stores and manufacturers. How well do traditional players transition online, and how strong a grip do brands have on consumers? Are e-commerce products discretionary consumption or essential goods?
Even though stock prices have halved in many places, it does not mean that e-commerce stocks are cheap by traditional valuation metrics. Online stores use a large portion of their business cash flow for expenses and growth, and only a few make substantial profits. Many, however, are growing significantly faster than brick-and-mortar stores and are valued more favorably than their brick-and-mortar counterparts. Investors must assess what is the path for e-commerce to profitable business.
High inflation may reduce consumers’ willingness to buy. Home decor might be among the first items to cut back on, but pet treats will continue to be bought. Although we learned during the pandemic to acquire clothes online, there is an experiential element to shopping. We will visit shopping malls again. Brick-and-mortar did not die during the pandemic."
The target price comes down with the share price decrease. (June 13)
I haven’t followed the expectations, but the growth and profitability figures don’t seem to be moving in the right direction based on this information alone.
BHG Group AB (publ) - Interim report: 1 January-30 June 2022
Profitability despite challenging environment
– Long-term investments in the technology and customer platform continue – in order to take advantage of unchanged, long-term growth trends – while focus on profitability is prioritisedHIGHLIGHTS
1 April-30 June
· Net sales increased 10.1% to SEK 3,908.5 million (3,550.6). Organic growth was -8.1% and pro-forma organic growth was -7.4%
· Gross profit increased 3.4% to SEK 975.6 million (943.2), with a gross margin of 25.0% (26.6)
· Adjusted EBIT amounted to SEK 162.2 million (278.0), corresponding to an adjusted EBIT margin of 4.2% (7.8)
· Cash flow from operating activities amounted to SEK -161.8 million (336.1)
· Earnings per share amounted to SEK 1.44 (1.63) before dilution and SEK 1.43 (1.62) after dilution1 January-30 June
· Net sales increased 14.7% to SEK 7,019.1 million (6,118.4). Organic growth was -4.5% and pro-forma organic growth was -3.0%
· Gross profit increased 10.7% to SEK 1,817.3 million (1,641.0), with a gross margin of 25.9% (26.8)
· Adjusted EBIT amounted to SEK 296.4 million (461.8), corresponding to an adjusted EBIT margin of 4.2% (7.5)
· Cash flow from operating activities amounted to SEK -40.1 million (455.6)
· Earnings per share amounted to SEK 2.34 (2.61) before dilution and SEK 2.33 (2.58) after dilutionKey events during and after the period
· BHG Group AB received SEK 1,000 million via a directed issue of 16,393,443 shares on 4 May. The issue was oversubscribed, and a large number of Swedish and international institutional investors as well as certain shareholders participated in the issue. The aim of the issue was to increase BHG’s financial preparedness for future growth initiatives, primarily organically and through acquisitions, as well as to maintain financial flexibility.
"The e-trader BHG Group reports an adjusted operating profit of SEK 162 million for the second quarter of 2022. Analysts had expected an average of SEK 138 million, according to Infront.
The adjusted operating margin was 4.2 percent, compared to the expected 3.8 percent.
Operating profit was SEK 123 million. Here, 113 million was expected.
Net sales amounted to SEK 3,909 million, compared with the expected SEK 3,594 million. Organic growth amounted to -8.1 percent."
Quoted from Avanza. The target prices are at a completely different level than the current share price, and yet the forecasts were exceeded. That’s a very positive thing, though.
@Avocado posted a question on the TA Q&A forum, which led me to find this thread. I didn’t know anything about the company, but I’ve used Netrauta a couple of times. Based on those experiences, the customer experience was not at all convincing.
Regarding deliveries and order quantities, I was left with a rather confusing impression. Delivery schedules were not met in either case, and there were clear deficiencies in their communication. Customer service seemed to be located in Estonia, and their ability to act as an intermediary operator was poor. Similarly, for one of the deliveries, the ordered quantity of goods changed during transport, meaning the warehouse didn’t have the amount that was ordered at the time of purchase.
These could always be just bad luck on a large scale, but I don’t even want to think about how returning wood panels would have worked if there had been many “waste pieces” in the delivery batch. The more one deals with building materials, I, at least, will in the future go to a brick-and-mortar store to examine the quality of the goods and choose the desired bundles of boards from the warehouse, for example.
The success of this type of online store depends a lot on how the order-delivery chain actually works and how cost-effective the online store operator manages to make it. What kind of experiences do others have?
I became an owner today, having gotten the idea from Avocado’s messages. I don’t know about Netrauta, but I bought some items for my home from Nordic Nest on a trial basis a while back, and both the online store and the products were good. I haven’t contacted customer service, but unfortunately, these are often outsourced and thus operate somewhat haphazardly. However, I recently returned as a customer and bought branded dishes for the kitchen for almost a thousand euros (they are still on their way). Thanks to Avocado, I noticed that this online store belongs to the group, and I’ve also used Kodin1. Generally, if I’ve approved a service, the product/service has been good, as I am a relatively demanding person.
Edit: It’s worth mentioning that when I was choosing between stores back then, I also considered, for example, Stockmann, whose online store I ultimately found to be inferior (it was cumbersome to browse products when one image filled half the screen). Nordic Nest’s selection also appealed to me more at the time, and now I didn’t even consider other options.
By the way, I had problems with product returns and complaints (furniture) with Kodin1. We went to the store to look at the purchases and ordered based on that. One of these furniture pieces did not meet our quality criteria. First, a new one was sent, and the returned one was packed/picked up with a different delivery. Even after the exchange, the situation did not change, so we had to accept the proposed discount, which was reimbursed normally. But in this case, customer service was really poor. I don’t know if they have some kind of centralized customer service. They don’t know the products and therefore can’t really listen to the customer.
That doesn’t sound good. If it were a soda factory or some other trivial business, it wouldn’t matter. But since it’s a growing e-commerce consolidator, it’s concerning. The message says that the CEO’s skills have run out. This could also be interpreted as having failed at something, and now there’s a skeleton in the closet that will come out in a few weeks.
Undeniably, Schatz’s departure also came as a surprise to me. However, my concern is mitigated by the fact that BHG is organized into two P&L units, each with highly experienced leaders: Mikael Hagman for the DIY segment, who is the founder and long-time CEO of Vitvaruexperten and a former board member of Verkkokauppa.com, and Christian Eriksson for the Home Furnishing segment, who has been with the company since 2014 and previously held leadership positions at e-commerce company CDON.com, among others. So, from a competence perspective, I don’t see a significant risk, as the critical complementary acquisitions for growth and the related evaluation and integration efforts will likely be done in one of these segments.
I see a major M&A opportunity in this e-commerce valuation crash. BHG has hinted at the possibility of expanding beyond its current main verticals, so I don’t consider a larger move to form a third pillar impossible. There are numerous unlisted and listed opportunities for this in the Nordics and Germany. The CEO’s departure might also be a move to prepare for such a change. And in the current segments, it’s worth remembering that online penetration in BHG’s product categories will grow in the long term, and BHG remains a high-caliber platform and a clear consolidator in this market, where e-commerce has advantages due to locality, especially in the supply chain. EQT, as the main owner, is certainly actively exploring and promoting these opportunities.
Friday and half of Monday were spent pondering the CEO’s departure. Then, the sell side started to get crowded. Sometimes it happens that information comes out, a day or two passes, and only then does the stock price react.
Speculation: Could it be that many were puzzled after the CEO’s departure (myself included)? Then some big Swedish investor, let’s say named Palle Svensson, started calling his friends to see if there was any reason why the CEO left. Price action would suggest that what Palle found out was not good news. It strongly feels like someone knows something that others don’t.
My shares hit the stop-loss today. Reason: CEO’s departure + breaking of a technical support level that had held for 2 months.
I have to reply to myself now and virtually pat myself on the back… I haven’t followed the company in a while, but now in the “bought and sold” thread, someone mentioned buying BHG at 19 SEK, I mean, what? Is it already that low? I’ll have to check what the amount of cash reserves was, maybe the bottom really is there… 
I’m also wondering about this development. Is bankruptcy being priced in here?
TW reports the following rearview mirror figures:
P/E 5
P/S 0.19 (no typo here!)
P/B 0.4
EV/EBITDA 6 (well, this isn’t outrageously cheap anymore; Harvia, for example, has 7)
Looking at those numbers makes me want to go all-in. But when I look at the blood-red knife of the share price curve, it’s probably better to wait a bit longer.
I was wondering the same thing, is bankruptcy coming? At the very least, the market expects people to completely stop buying durable goods, with all money going to daily necessities and expenses, so furniture and other items won’t be bought (at all?).
The stock price is unbelievably low. And then, considering that BHG, operating with an online business model, does not have the inflationary burdens of competing physical hardware and home product stores, and consumer spending will likely shift to more affordable product segments anyway. I wouldn’t rule out the scenario that the main owner, EQT, might take this off the market with a premium. BHG should also be considered as a sum of its parts, as it is a bunch of significant online stores, and it’s hard to imagine this company going bankrupt in any scenario.
