Aapeli has prepared a new company report on Glaston.
Orders received from Glaston’s Q4 figures turned out to be disappointing, while operational figures were well in line with our expectations. The guidance for the current year, indicating stable development, was in line with our expectations and suggests that the subdued market situation will continue. However, reflecting the order flow and the subdued market outlook, we made negative revisions to our forecasts for the coming years. Nevertheless, we still see the stock’s risk-adjusted return expectation as attractive due to its moderate valuation and high dividend yield.
Quoted from the report:
Related to the subdued market situation and the uncertainty of a market turnaround, we also lowered our growth expectations for the coming years, which was reflected accordingly in the income statement lines. However, we expect the company to be able to increase its margins in the coming years through ongoing efficiency and cost-saving programs.
I applied for a job as a “purchasing manager at a Pirkanmaa-based conglomerate”. It was Tamglass Engineering Oy, now GLASTON. They were eliminating the purchasing manager position! In the early 90s, Finland experienced its worst recession since World War II.
Here are Aapeli’s concise comments on the change of CEO.
Glaston announced on Monday that the company’s CEO Toni Laaksonen has resigned to move to another company. More detailed information on the transition period will be announced later. The company’s Board of Directors has immediately initiated a search process for a new CEO.
Toni Laaksonen had merits because he was selected as CEO for GLASTON through a long process! Success as CEO is not reviewed over a six-month period. The Board and ultimately the main owners have chosen the product development direction, which has led to failure in product development projects. See comments under the pseudonym LASIHELMi.
Here are Aapeli’s preliminary comments as Glaston releases its results tomorrow, i.e., Tuesday.
We expect the company’s operational development to have slightly lagged behind the comparison period, also in line with the order book at the start of the year. Instead, we expect order intake to have grown from a sluggish comparison period, but only moderately, reflecting the market situation. We therefore expect the market situation to have remained sluggish and the company, reflecting this, to reiterate its guidance for the current year. Our focus in the report, in addition to the figures, will especially be on more detailed market comments and the potential impacts of tightened trade policy on the company.
And here are the same guy’s comments on the just “published” Q1 results.
Glaston published its Q1 report this morning. The operational figures were slightly below our expectations in absolute terms, while orders received were well in line with our forecast. On the other hand, the reiterated guidance for the current year and the continuation of a sluggish market situation met our expectations.
Aapeli interviewed Glaston’s CEO Toni Laaksonen right after Q1.
Topics:
00:11 Q1 summary
01:35 Impact of trade war on architectural markets
02:44 Customer decision-making uncertainty
03:43 Aftermarket activity in the services sector
04:43 Direct impacts of tariffs
05:49 Glaston’s competitors
06:52 Challenges in the MDS segment
07:56 MDS order book and margin structure
09:45 Work done for profitability
11:00 Costs and impacts related to arrangements
11:53 Product launches and reception
In addition to the interview, a fresh company report penned by Aapeli is available here.
Glaston’s Q1 figures slightly missed our operational expectations, but orders received were well in line with our forecasts. In connection with the report, the company reiterated its guidance and its expectation of a continued subdued market situation. In our view, however, the increase in geopolitical tensions further raises the risk of weakening demand. Reflecting this, we lowered our expectations for the company’s order flow development, which was moderately reflected in this year’s forecasts and more clearly in those for the coming years. Despite the lowered forecasts, we believe the stock’s valuation is quite depressed, and without major market disruptions or operational setbacks, the stock’s justified downside is quite limited. This, combined with our forecasted high dividend yield, brings patience to await an improvement in market conditions. Thus, we reiterate our ‘Add’ recommendation for the stock, but lower our target price to 1.5 euros (previously 1.7 €) in line with the forecast changes.
Quoted from the report:
Financial position still strong
Glaston’s operating cash flow (incl. lease liability payments) decreased to -0.9 MEUR in Q1 (Q1’24: -7.5 MEUR), reflecting the change in working capital (-2.7 MEUR vs. Q1’24: -11.5 MEUR). Correspondingly, due to low investments, free cash flow was negative at -1.6 MEUR (Q1’24: -8.2 MEUR).
At the end of Q1, the company had interest-bearing net debt of 21.8 MEUR, and the ratio of net debt to adjusted EBITDA was at a good level, approximately 1.1x. Correspondingly, on the balance sheet side, the key figures were also at a comfortable level (equity ratio 44%, net gearing 33%). Thus, the financial position also enables the company to distribute generous profits.
Glaston Corporation’s Board of Directors has today appointed Miika Äppelqvist as the company’s new President and CEO, effective June 1, 2025.
Miika Äppelqvist started his career at Glaston in 2013 and has been a member of the company’s Executive Management Team since 2020. He was born in 1981 and holds a Master of Science degree in Industrial Engineering and Management. Miika Äppelqvist has had a significant career at Glaston, and he will transition to President and CEO from his current position as Chief Solutions & Operations Officer. His previous roles include SVP Architecture and SVP Glaston Heat Treatment Technologies.
I was looking at the cheapest stocks on the Helsinki Stock Exchange with earnings forecasts, and Glaston caught my eye. Glaston is indeed an interesting company when looking at its earnings development and share price over the past few years. Earnings have grown quite nicely, but at the same time, the share price is languishing. A real junk stock at the moment in the context of the Helsinki Stock Exchange. With Aapeli’s 2025 forecasts, the P/E ratio is 8.1x and EV/EBIT is 6.1x.
Glaston is a somewhat less familiar company to me, so does anyone on the forum have any insight into why the valuation has remained so low?
My only view is that Glaston is very indebted, so if you understand these numbers (and I don’t), could you investigate that indebtedness and give your view on the amount of debt (Google Finance shows ~120M in debt). The dividend has still been growing in recent years, and I don’t understand how this equation works?
Edit: It’s also worth noting that there have been several major sellers for this [stock]… last year OP FIN Small Cap sold its entire holding (>5M shares), and Sinituote picked them up quite well, and this year Sohlbergin säätiö has dumped over a million shares, so this is one reason why the share price is crawling.
It seems that the nominally high indebtedness is due to the company’s working capital items, such as trade payables, which are interest-free debts to suppliers. Interest-bearing net debt, for example to banks (Interest-bearing debts - cash and cash equivalents), appears to be less. (Image from the company’s annual report)
At the end of Q1, the company’s interest-bearing net debt was EUR 21.8 million, and the ratio of net debt to adjusted EBITDA was approximately 1.1x. Among other key figures, the equity ratio was 44% and the net gearing ratio was 33%. So, it seems like a strong company in terms of its balance sheet, and Aapeli also predicts similar dividends in the future.
Ownership is concentrated and so-called free float shares are scarce. This also affects the valuation.
The previously mentioned lack of trust or belief also affects it.
Challenging value chain position. Glaston is a supplier to stronger players and a price taker. There is little pricing power, and competition is tough.
I could still tolerate that and could add to the cheap stock, but I don’t want more geopolitical risk.
Other Western companies would want to move production to the West, or at least India, Vietnam, etc. Glaston is constantly moving its factory to China.
I understand the logic of the decision, but I don’t want more risks from China and geopolitics.
