What does the crowd think about Cargotec?
Do you believe in MacGregor’s recovery or the breakthrough of port automation?
Analyytikon lempipoiminnat konepajoista - Inderes Eki gave good comments on the current situation in today’s morning show.
Wärtsilä and Cargotec company evening.
Cargotec is always a good choice for a long-term portfolio until retirement age. A digitalization pioneer in its industry.
The long silence on the port automation front has provided fertile ground for skepticism to grow, but today’s announcement instills confidence that this area will also gain momentum.
Has anyone got it in their sights, and at what price level? The software side’s potential is very interesting.
Random Walker discussed the matter in his blog on 18.6.19:
‘’ Let’s look at Cargotec’s long-term value creation potential in services and software business from a slightly different perspective. The actual software business has brought less than 5 percent of Cargotec’s total revenue in recent years. Assume that Cargotec is able to achieve a dominant position in its industry ecosystem and, for example, one fifth of the company’s revenue comes from the software business (with a SaaS model). Traditional engineering workshops are typically priced at an EV/S ratio of about one, but SaaS companies’ EV/S ratio has been an average of about 6 in the 2010s. If one fifth of Cargotec’s revenue were based on the SaaS business, the company would be priced at an EV/S ratio of 2 (80% x 1 + 20% x 6). For example, with a revenue of 4 billion euros (corresponding to analyst forecasts extending a few years ahead), Cargotec’s enterprise value (EV) would be 8 billion euros. If Cargotec’s indebtedness remains unchanged and about one billion euros of interest-bearing net debt (Q1/2019) is deducted from the enterprise value, the equity value would be about 7 billion euros, or about 110 euros per share. ‘’
Hi, allow me to make a few comments. Valuing Cargotec’s software business on a SaaS basis is in itself well-founded, as the core of Cargotec’s software business, Navis, prices its TOS (Terminal Operating System) according to customer usage, container volumes, etc. XVELA (a collaboration and communication tool for shipping companies and terminals), the other key part of the software offering, is also SaaS-based. So far, so good. The problem with applying this pricing to Cargotec on a sum-of-the-parts basis, however, is the lack of recent growth. Cargotec’s software revenue in Q2’19 (rolling 12 months) was 165 MEUR, exactly the same as two years earlier. The market has been disrupted by the global consolidation of shipping companies into three alliances (2M, Ocean Alliance, The Alliance) and the resulting slowdown in decision-making related to all kinds of investments. However, the recent clear rise in freight rates may encourage progress. Another problem has been that terminal operators have proceeded with their software updates with a small-steps policy, i.e., only one part of a certain terminal at a time. In short: it will take some time until a fifth of Cargotec’s revenue comes from software. In addition, sum-of-the-parts calculations tend to result in significantly more attractive valuation levels than the stock markets are willing to accept. Thanks anyway for raising the issue, let’s stay vigilant on this topic in the future! Regards, Erkki Vesola
Cargotec Q3’19
Cargotec’s Q3 order intake decreased by 7% year-on-year to EUR 858 million, while the consensus expectation was EUR 904 million (-2% year-on-year). Kalmar performed the worst, with orders falling by 19% year-on-year. The group’s sales grew by 12%, but fell slightly short of the consensus (+14%). Profitability, on the other hand, was at a good level (adjusted EBIT margin 7.6%), in line with consensus. Kalmar (11.3%) was the most positive surprise in terms of margins, while Hiab’s profitability clearly decreased from Q2 to 11.1%. The group’s gross margin continued to decline (Q3’19: 23.3% vs. Q3’18 24.5%), but this has been successfully compensated by strict control of fixed costs. Marketing, administrative and general expenses as a percentage of sales were 17.5%, compared to 19.1% a year ago.
Cargotec, as expected, reiterated its 2019 guidance for comparable operating profit to improve from EUR 242.1 million in 2018. The guidance will be achieved, as comparable operating profit after Q3’19 is 10% higher than the corresponding figure last year.
What are the thoughts on Cargotec for the current year and the coming years? I need to free up some cash in my portfolio and I’m wondering if this is the one. It’s been a steady performer, mostly thinking about whether to offload Talenom or this one.
This potential sale of the software side at Cargotec is interesting:
https://www.inderes.fi/fi/tiedotteet/cargotec-arvioi-navis-liiketoiminnan-strategisia-vaihtoehtoja
The result and guidance themselves seemed okay.
Erkki turned positive on Cargo:
The stock (one-off items cleaned, hehe) doesn’t look bad.
But if one were to consider this as a long-term hold in a portfolio for several years, the slowdown of its main driver, global trade growth, is undoubtedly concerning:
Globalization, measured by the value of trade, for example, has been in decline for over 10 years. This is, of course, partly reflected in Cargotec’s stock price, which has been stagnant for 15 years. In the short term, cyclicals can bounce significantly as the economic outlook brightens, but is there potential here for a very long-term hold?
According to Järvinen, the funds have been moved abroad to more than one country. The police have also sought to trace assets transferred abroad and possibly hidden.
Järvinen does not comment directly on whether the funds have been successfully traced.
We have taken such precautionary measures as obtaining a security seizure and seeking court decisions from the district court, which the enforcement authorities have then implemented in Finland. In addition, together with the prosecutor, we have carried out mutual legal assistance procedures abroad and, among other things, such a request for freezing procedure.
Some of the embezzled money may be recovered, but it’s hard to go digging for it abroad.
Good QA blog on the effects of the virus on Cargotec: https://www.inderes.fi/fi/yhtiojulkaisu/kysymyksia-ja-vastauksia-koronaviruksesta
This is indeed excellent service from Cargotec; their investor communications are on par with Sampo’s. It even creates a backlash against companies that don’t engage in this kind of communication. Is the company management arrogant if they don’t put their IR team to work!? Unfortunately, the situation for many Finnish listed companies seems to be that they haven’t hired dedicated IR personnel, and the CEO handles it alongside their other duties. There are good examples of this on this forum, such as Nixu and Herantis Pharma. My apologies if I forgot someone.
I stumbled upon this in the morning.
Was Eki there? Did this event spark any new thoughts about Cargotec’s direction?
I bought Cargotec shares from an offering in 2005 at around 25€/share, which I hastily sold for around 39€ shortly after buying. Cargotec’s business has developed quite poorly in 15 years, as the price is now around 28€. In my opinion, the company has suffered from weak management in an industry where margins are simply too small. Costs cannot or are not known how to be adjusted to the prevailing competitive situation, and history tells us that pricing power is not exactly great either.
Summa summarum: no place in my portfolio anymore
Can Inderes ask how Cargotec is proceeding with the dividend? As I understand it, the dividend detaches today, and by buying tomorrow, one is no longer entitled to it. The annual general meeting has not approved the dividend proposal. Will the dividend be paid? Apparently not? Has the dividend detached tomorrow, but will not be paid?
Cargotec’s share has not detached! (CORRECTION: The dividend has not detached 
) The Annual General Meeting decides on dividend distribution. Since the AGM has been canceled, there is no decision on dividend payment either. The dividend will only detach when the AGM convenes to decide on it at some point. Currently, only the board’s proposal is in effect. The new AGM invitation will then include a new record date and payment date.
It also seems to me that Cargotec’s share is still firmly on the Helsinki stock exchange and has not detached from there, despite the stock market turmoil. 
From the notice of the Annual General Meeting: "The Board of Directors proposes that a dividend of EUR 1.19 per A-series share and EUR 1.20 per outstanding B-series share be paid. The dividend will be paid in two installments, in March and October 2020.
The first installment of EUR 0.60 per A-series share and EUR 0.60 per outstanding B-series share will be paid to shareholders who are registered in the company’s shareholder register on the dividend record date of March 19, 2020."
I interpret it to mean that if you sell today, you lose the right to the dividend. And conversely, if you buy, you get the dividend. There is just no certainty about the amount and payment date. But how is that payment proposal overturned? I would say it’s quite difficult, with Vehviläinen in quarantine.
There is no need to revoke the payment proposal. It was a proposal from the board to the Annual General Meeting (AGM). When the new AGM invitation is issued, it will contain a new proposal for the dates, or perhaps the dividend will be reduced, or not paid at all, or the board will be authorized to decide on it separately later (up to a certain amount). In other words, shareholders with decision-making power at the AGM will decide when and how the dividend is distributed. Currently, no such decision has been made.
It seems like the QT rally enthusiasm has spread to this one too, as the Q1 release is only in the afternoon and it’s already +3% 
I set the stop-loss at 16.10 just in case I get completely screwed.
