This is another somewhat special situation, so I thought I’d briefly explain the current pricing dynamics of EAB’s stock. The exchange ratio for the share arrangement is locked such that one EAB share yields 0.172725 new Evli shares. Conversely, this means that to get one Evli share, an investor must buy 5.79 EAB shares. Decimals in the number of shares are not a problem here, as an investor can buy a minimum of 100 shares, or alternatively, according to the terms of the arrangement, partial shares are adjusted with cash consideration. Thus, the acquisition price for one Evli share at the current EAB share price would be 5.79 * 3.05 = 17.66 euros. In this example, the investor receives additional dividends totaling 0.99 euros and cash consideration of 1.26 euros for the acquired EAB shares, both of which “finance” the purchase and thus lower the acquisition price. This leads to the 15.4 euro price for an Evli share through EAB.
The additional dividends and cash consideration are not dependent on EAB’s share price development, but the aforementioned acquisition price for Evli’s shares (17.66 euros) fluctuates with EAB’s share price; the lower the share price, the cheaper the investor gets Evli ownership through EAB’s shares. However, this calculation does not take into account Evli’s market price, so theoretically, it is possible that at some point, Evli could be bought directly from the stock exchange for less. Although the current discount in pricing favors EAB, the situation would be different if, for example, EAB’s share price remained stagnant and Evli’s share price fell below 15.4 euros. In such a case, the investor should naturally buy Evli shares directly. It is advisable to be careful in trading if one intends to utilize changes in Evli’s and EAB’s share prices in the coming months.
Elite Alfred Berg’s third real estate development fund acquired 8 investment properties from the Finnish Seafarers’ Pension Fund for 21 million euros.
The acquired office and commercial properties are located in Malmi, Itäkeskus and Herttoniemi in Helsinki, as well as in the center of Järvenpää and Kuninkaalassa in Vantaa. The total area of the properties is 11,800 square meters.
EAB Value Added Fund III Ky invests in properties offering rental cash flow and significant development potential in the largest Finnish cities. Value creation is based on changes in property use, leasing, improving the rentability of properties, and expansions.
Including debt capital, the fund’s investment capacity is a maximum of 200 million euros. The funds are intended to be invested during an investment period that extends to the beginning of 2023.
Had some coffee and a chocolate muffin to celebrate this.
EAB Group Plc (EAB, the Company) provides a preliminary announcement on its net profit for both January–June and the full year 2022. The profit percentage for January–June 2022 is expected to be significantly positive due to the positive development of business operations. The profit percentage for the entire 2022 financial year is also anticipated to be significantly positive (previously clearly positive), provided that market conditions do not materially worsen during the remainder of the year.
Elite Alfred Berg’s real estate development fund, Elite Finland Value Added Fund II Ky, is selling a portfolio of 17 grocery retail properties for approximately 50 million euros to the Special Investment Fund LähiTapiola Sijoituskiinteistöt.
Elite Alfred Berg’s real estate fund, Elite Alfred Berg Logistics Properties Special Investment Fund, purchased Cramo’s (Cramo) Northern Finland logistics center in Oulu for 4.5 million euros. The property is the fund’s first investment target.
Last week’s developments:
After several weeks of declines, stock market performance in the markets we follow mostly turned positive last week. The largest euro-denominated increase was experienced in the United States market (+5.7%), but Europe (+2.5%), Japan (+0.8%), and other parts of Asia (+0.7%) also saw positive weekly returns. In emerging markets, prices remained at the previous week’s level, while in Finland, the weekly return was -1.4%. This is largely explained by the fact that the Finnish stock exchange was closed on Friday, when prices were clearly on the rise elsewhere in Europe. Thus, global equities (MSCI World AC) rose by just under four percent in euro terms (+3.98%).
I also apologize for the lack of a pre-comment; we accidentally had the wrong earnings info date marked in our calendar and only realized it last night with Kasper The pre-comment was done, but there was no point in publishing it yesterday. The first pre-comment I forgot during my Inderes career
But in truth, this report no longer matters to EAB shareholders. You will now own ~10% of Evli, and EAB’s share price development is entirely dependent on Evli. Here is our latest report explaining that logic in more detail: Alennushinnalla Evlin kyytiin - Inderes
Elite Alfred Berg’s real estate development fund EAB Value Added Fund III Ky has, with an agreement signed on June 28, 2022, committed to purchasing two commercial properties under construction from the Sikla group. The properties in question are a building intended for car sales and repairs in Oulu and a car repair shop property in Jyväskylä. The seller in the transaction is Siklatilat Oy, part of the Sikla group. The total value of the transaction, excluding taxes, is over 15 million euros.
The properties will transfer to the fund’s ownership upon their completion. The completion of the properties is scheduled for spring 2023.
Now that EAB is delisting, I thought I’d do a small self-assessment of our (mainly my) monitoring success. The best way to evaluate this is probably through our recommendation history. EAB’s monitoring indeed started in late 2017. At that time, I wasn’t the analyst, but Juha was, as my capacity was full then. The monitoring transferred to me in late 2018, and later Matias and Kasper have also been involved.
Looking at the recommendation history, being negative from 2018 to the COVID-19 crisis was absolutely the right call. The company’s performance was weak, and there was a genuine risk of capital adequacy during COVID-19.
We made a clear mistake during the COVID-19 summer of 2020. The stock had already been beaten down significantly due to market fears and capital adequacy concerns. The strong market recovery, combined with the company’s restructuring during COVID-19, led to a rapid recovery in earnings, and because the valuation was so low, the risk/reward ratio was definitely in place. Of course, there were significantly more attractive targets available in the sector at the same time, but that’s a poor justification for our own mistake, as we don’t have relative recommendations.
The stock price quickly recovered to around the 3 euro level, which is a pretty good estimate of the company’s fair value. After that, the negative recommendation has again been correct. Of course, the merger with Evli was done on very favorable terms for EAB, which gave the share price another small jump, but I don’t consider this a very big mistake from a return-risk perspective.
Otherwise, I feel that I succeeded quite well in monitoring. My forecasts were mostly relatively close to correct, and the biggest change came mainly from the market. My view on the company’s fair value was also in the right ballpark most of the time. In addition, I felt I had a good grasp of the company’s role in the consolidation, even though the final dance partner came as a surprise.
“We are discontinuing our coverage of EAB shares because the company merged with Evli and thus ceased to be a separate listed company. From now on, investors can follow the company’s story as part of Evli, which we cover. EAB’s current shareholders will own approximately 9% of Evli after the arrangement.”
The merger has already been discussed in this extensive Evli report…
The pre-comment was done, but there was no point in publishing it yesterday. The first pre-comment I forgot during my Inderes career 
