The other half of this entity is indeed Kesälahden Maansiirto, a renowned earthmoving company in North Karelia, strongly personified by the entrepreneurial spirit of brothers Veikko and Pekka (deceased) Karjalainen. As I understand it, the company in its old form was a very sought-after partner for infrastructure construction. At a quick glance, Intera has grown the entity quite a bit. Perhaps this piece of my home province is already a sufficient reason to investigate further and possibly subscribe to shares.
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When scarcity is shared, it easily leads to scarce liquidity.
This was my reason for criticizing the small allocation. It seems interesting, and I believe that the infrastructure sector has counter-cyclicality, which further increases my interest in this IPO.
So, presumably, investors who set aside a portion of their salary will again receive those couple of dozen shares with an already significant investment.
It’s starting to make me wonder if one ever wants to sell what they’ve received, the fees will eat up a significant portion of the invested capital. Buying after the IPO is a different matter, but the initial trend seems to be showing that as well.
Of course, with the information provided, there would be interest in more, but we play with what we’re given.
Kreate now has its own company page: Kreate Group - osake - Inderes
Kreate’s webcast will also be live on InderesTV, so you can get to know the company as part of the roadshow 
Tutustu Kreateen webinaarissa 8.2.2021 klo 18.30 - Inderes
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Kreate appears to have opened a website related to its listing, which contains all kinds of material related to the offering.
It’s surprising that when the company lists, they don’t bother to put together the 2020 figures, but instead make comparisons of 1-9/2020 vs 1-9/2019. Many much larger and more complex companies have already completed their year-end packages long ago, even without a special situation like a listing.
From the listing prospectus, page 92, future outlook: revenue is estimated to decrease somewhat, profitability “normal” despite increased competition
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Has a lower limit for the number of significant shares been published for this yet?
1-9/2020 partial outlook, 2020 EBITA 10-10.5 MEUR (Revenue 235 MEUR, EBITA% 4.4%)
2019 EBITA was 11.7 MEUR (Revenue 221 MEUR, EBITA% 5.3%)
Is this why last year’s figures are preferably only compared for 3 quarters?
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I myself work as an official in a civil engineering company in the Helsinki metropolitan area. I worked at Kreate in 2015-2016. The company and especially the current infrastructure market are somewhat familiar to me, so I can comment on the current situation in the field.
Currently, especially in the Helsinki metropolitan area, and the situation is probably similar elsewhere in the country, the market situation is challenging. Corona has taken money from municipalities, and in the Helsinki metropolitan area, cities have put projects on hold. I cannot say more specifically about state contracts, but I would guess that they are also operating on a tight budget. Competition for contracts is now really tough, there are a lot of bidders, and prices have been driven down really tight. So, as was stated on the company’s website, this year’s turnover for Kreate will certainly also decrease. Kreate is such a big player that success in traditional and smaller-scale street and municipal contracts will continue to be difficult for them. There is now so much oversupply in the market, and even smaller excavation companies are offering those small contracts, which affects contract prices. The situation is exactly the same for example with GRK Infra, which is one of Kreate’s toughest competitors.
The situation is a bit better in terms of technical expertise and demanding contracts. For example, the state is currently investing somewhat in rail projects, so Kreate’s rail sector operations will be important now and in the near future, as competition in the “traditional” street and road sector is so tough. Kreate also has its own foundation engineering unit that contracts for building foundations, civil engineering, ground reinforcement works, etc. Corona has probably also had a big impact on residential and commercial building construction, so the foundation engineering unit probably also has less work in the near future.
I cannot comment on the company’s financial figures, but I can say that the company is a good and desired workplace. They do successful contracts, but I also know that right now they have contracts underway in the Uusimaa region that have been calculated very tightly. Competition is tough.
Still, my feeling is that once corona is overcome and life returns to normal, there will be work. Infrastructure always needs to be built and repaired. Finland’s infrastructure repair debt is growing. It is difficult to estimate how long-lasting effects corona will have on the market; this and perhaps next year, we will still operate on a smaller flame. But now that projects are being held back and the repair and construction debt is growing, at some point the market will open up and then there will be work available and prices will certainly be a bit better.
An interesting case and I would certainly be interested in getting involved.
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I don’t know if I’m stating the obvious, but in the construction industry, the infrastructure sector is considerably more stable than residential and commercial construction, due to the relatively consistent order backlog from the public sector. For this reason, the earnings development in these infrastructure companies can be expected to be steady and predictable, although it does require winning contracts and successful execution. So, while Lehto, YIT, and Consti somewhat follow economic cycles, Kreate should be able to generate profits even during a downturn.
The anchor investors also caught my attention, as Harjavalta Oy owns a majority stake in Rakennusliike Lapti (revenue approximately €300 million), a company that builds residential and commercial properties, and its CEO is Timo Pekkarinen, who is the owner of Tirinom.
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Pekkarinen is the founder of Lapti. Suomen Hoivatilat was a spin-off from Lapti. My understanding is that Harjavalta bought Lapti, and Pekkarinen became Harjavalta’s CEO. Lapti is perceived as having construction fully under control in all aspects. My personal feeling is that one can confidently invest with Pekkarinen.
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Harjavalta and Tirinom will own about 26% after the share issue.
I bet that Intera will continue to hold the most voting power (currently owns 50.7% of the shares). Of course, Pekkarinen will certainly be able to influence things with the votes of Harjavalta and Tirinom, if he wants to.
How can I participate in Kreate’s offering? Sorry for the dumb question.
Nordnet has at least some kind of corporate events page, where currently open offerings are displayed.
Jees, I need to check if it’s possible through Mandatum, or if I have to participate through Nordnet.
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Karon’s thoughts:
It would be interesting to know if Kreate is interested in expanding, for example, to Sweden, where there are significantly more infrastructure projects. I have done a few jobs for Kreate myself, but I haven’t really been in contact with them, but it is considerably more defensive than ordinary building construction.
Many larger projects are nevertheless underway and will probably materialize in Q2’21 → It’s another matter who wins them.
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From Karo’s story:
“If and when the additional share option related to the sale is exercised, Intera’s ownership will decrease to 1.1 million shares, or 12.5 percent of Kreate’s shares. Harjavalta will then have 15.5 percent and Tirinom 10.5 percent of the share capital.”
I didn’t consider that additional share option. This is how Pekkarinen might indeed end up “in charge”.
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Kreate just announced the full 2020 figures on the webcast. Had those been announced anywhere before?
If not, I’ll have to dig them out of the recording.
Edit:
Kreate 2020 preliminary figures:
EBITA 10.5
Revenue 235
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I marked a big slice relative to my own portfolio. The presentation and stable result were convincing, even though the 2021 outlook is a bit sluggish.