Low P/E and BETA, high dividend and ROE.
These are the 2018 figures provided by Inderes.
What could go wrong?
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Hi!
I don’t think anything else can go “wrong” other than Grano’s operations not being sufficiently streamlined. Or that the efforts in digitalization don’t bear fruit. Panostaja’s position looks very good right now. Grano has its operating margin in order.
Carrot is a plus, Oscar’s growth, KL-Varaosat (KL-Spare Parts) is growing, Megaklinikka (Megaclinic) is turning a profit with efficiency improvements, Selog is moderate.
CoreHw is a question mark. Will it turn significantly profitable now or not? Bigger deals are coming, but will they happen now or only in the next quarter due to the turn of the year?
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So, what are your views on the company now? The stock price has fallen quite a bit and is starting to look attractive.
Grano has achieved quite good EBITDA, but depreciation is rather high. Will the efficiency measures start to yield results soon?
Other interesting drivers of profit are KL-varaosat (KL-Spare Parts), which I still believe will improve, as the brands they represent are well-known, and their investment in e-commerce, etc., is starting to pay off.
I believe Carotte has clearly improved, and it should, as it’s still a landlord’s market and I don’t think the need will decrease in the coming years.
Oscar Software will achieve good results and grow rapidly. I predict this will be Panostaja’s next cash cow.
Core-Hw is a complete wildcard. I have high hopes for it, but waiting is difficult. It would be a true jackpot if they get their own product out soon and it’s something that actually sells.
I don’t see much potential in the other companies operating under Grano. Megaklinikka, Selog, Heatmasters, and Helakeskus are companies that need to be divested to acquire companies with better potential.
What are other esteemed forum members pondering?
Q4 will end soon for this company.
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How do you assess Panostaja’s development in the 2019 financial year? Last year was good mainly due to the successful KotiSun exit. However, the portfolio contains many companies that have not made a profit for years, and whose valuation is, in my opinion, a big question mark. Among the new entrants, Oscar is probably interesting. I wouldn’t place too much expectation on companies like Caruna (Carotin), as they do generate large revenue figures, but profitability (risks) are high due to small margins.
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I agree about Carot, but Panostaja’s goal is to grow it to a 100M revenue class. In Finland, temporary work is still used relatively little compared to other Nordic countries/Europe.
Even though margins are around 5%, I believe this company can be sold to larger players with a good margin. It’s unlikely to stay in Panostaja’s portfolio “for long”. Here’s an example of what Barona paid for Op-team. Who knows what Carot’s price tag would be with 100M revenue and 5M net income.
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Has the latest recommendation taken into account that Grano’s net debt has fallen to just under 51 million and Panostaja’s ownership is 54.8%? With just these figures, I get a higher value for Grano. The debt is rapidly decreasing, which increases the value of Panostaja’s Grano investment. Last year alone, the debt was reduced by over 8M.
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It took several years for Takoma to turn around, and several friends tried to do it. With Grano, history seems to be repeating itself; for one reason or another, the management can’t turn the ship around. Based on its early stages, Carrot doesn’t seem like a good investment. These two companies represent the largest parts of Panostaja’s revenue.
Then there are a few ancient small businesses (Heatmasters, Helakeskus, Hygga, and Tilatukku) in the portfolio, which should be realized immediately to stop taking up management’s time.
Core and Oscar seem like good targets, and the potential is significant over a 5-year horizon. However, Panostaja’s future cannot solely rely on these two.
After cleaning up Takoma, I thought the path to success was open, but one disappointment after another keeps coming. I feel like selling everything and forgetting its existence, but the weekly drop in the share price makes me consider making additional investments. You can invest in bad companies if the price is right. The company now has cash, and if they don’t waste it on completely foolish investments, dividends are guaranteed in the future.
This IFRS 16 impact on companies’ debt levels is interesting, by the way. It certainly made historical comparisons more difficult.
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Reasons for joy and celebration, as well as preparation and strengthening operational capabilities
It has been a busy autumn for Panostaja’s investment targets!
Hygga celebrated its 10th anniversary in October, during which the company has grown to become Finland’s largest private dental clinic. Growth is set to continue significantly with new openings.
Grano has had to strengthen its operating conditions this autumn with reorganizations. However, a strong wave of new creation has also been present. The company has now launched a coronavirus-killing protective tape on the market.
Gugguu has experienced an energetic autumn. The company’s online store is strengthening its position in Europe, while its visibility on social media is growing. Influencer marketing is one of Gugguu’s strengths.
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I’ll put my initial reaction to the result here in the form of a tweet:
https://twitter.com/Juha_Kinnunen/status/1337316666565332993
I need to try to be active here in the future so we can get a discussion going about Panostaja.
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Grano is starting to get into shape. If the revenue would still recover, it would start to show on the bottom line. Operating margin already rose to 22%.. Grano’s debt is also decreasing rapidly now → increasing value.
Hygga will now have a good opportunity to grow in the coming years.. Purchased services multiply revenue, and by managing things well, they will gain valuable publicity and certainly permanent/new customers. In addition, satisfied customers also recommend the service to others.
CoreHW is in an interesting phase with its own product. If it breaks through, the sky is the limit. The core business is also profitable. A growing company with quarterly fluctuations, however.
Corona has somewhat disrupted Grano’s and CoreHW’s business.
Oscar makes consistently solid revenue and hopefully growth will continue to accelerate.
Helat/Heatmasters is a bulk business and costs must be kept in check and debts small.
A strong cash position should be put to work and generate profit for us shareholders. One would think there are acquisition targets to be found.
One should not only look at the numbers, as for example the growth of CoreHW, Oscar, and Hygga consumes capital but will pay off later.
I expect a lot from Grano in the future once the last efficiency improvements are completed.
Carrot has been a real disappointment. No words even for how poorly that has been managed.
Tommila has made the right moves as CEO in a short time.
I eagerly await the next year. I would also gladly hear others’ thoughts on the current portfolio companies.
A few brand new product videos of the CoreHw demo kit. Looks promising, if they manage to invest in marketing.
Gugguu was a good move by the management. Forum members with families might already be familiar with the products, which are somewhat higher-end children’s clothes.
What makes Gugguu interesting is that the small company has generated a lot of positive buzz on online forums among parents; it’s currently “THE” brand. Even used Gugguu clothes sell for almost new prices. So, I’m keenly watching this. With branding, they need to remember to maintain that image and not jump on the bandwagon with cheap Chinese producers. Expanding the online store to, for example, Britain would be desirable, as there would be a market for quality children’s clothes there. The alternatives here are various levels of supermarket stuff, GAP, or very expensive creations from Maison or other specialty brands that target the top percentile of society. Polarn O. Pyret has already made it here, though there seem to be only a few brick-and-mortar stores.
Regarding Oscar, I’d say that the change in working practices caused by the coronavirus should benefit Oscar, and I’m following the situation with enthusiasm.
I personally don’t like Carrot’s staffing business model – the company is literally only as good as its employees. The danger here is that good employees will be noticed and won’t stay on Carrot’s books for long, leaving behind those who are perhaps not as effective.
I see a good future for Hygga – the large age cohorts are now mostly retired. Now would be the time, and most also have the means, to take care of their health. There have also been some mergers in the industry – is Hygga a potential target? Perhaps, but I would rather see Hygga grow its operations and internationalize.
Panostaja is, in my opinion, available at a really low valuation right now. At Grano, a turnaround has been prepared with efficiency improvements, and the potential will be an operating profit of 8-10 million this fiscal year. Q2 and Q4 could have an operating profit of 3-3.5 million, and Q1 and Q3 1-1.5 million.
There would have already been good results without these write-downs. Oscar and coreHw are growth companies, so only investments in growth are expected from them. The same applies to Hygga. But these are future profit generators, either after growth investments or when sold.
When the other companies make a ±0 result, there will already be plenty to distribute below the line.
I have strong confidence that Grano’s efficiency improvements will now start to yield results. At the latest, Q2 will bring a surprise. Now you can still get this at a very affordable price compared to its potential.
A new comprehensive report on Panostaja published today:
Comprehensive reports are open to everyone, so go and check it out!
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If sales can be significantly increased after a couple of years of decline, those figures are quite realistic. However, it’s worth noting that according to the company, the Q4’20 profitability level was not realistic going forward - costs had been cut so much that they were not at a sustainable level. Profitability improvement through growth would then be more sustainable.
Additionally, it’s important to note that Grano has a large minority ownership of almost 45%. Looking at Grano’s operating profit can therefore be misleading - Panostaja consolidates 100% of Grano’s operating profit, but if and when Grano generates profit, a significant portion will go to others than Panostaja’s owners due to the minority interests. Before that, a share has also gone to creditors, even though interest rates are currently low. These often go unnoticed, which is why I repeat - no offense intended.
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Is the debt reduction reflected in valuations, or are the valuation multiples just being adjusted accordingly? Doesn’t Grano’s debt reduce quickly?
From approximately 76 million to about 60 million in a year.
Of course, sales have taken a hit due to the corona pandemic, but if they start to rise or recover, the operating margin remains good, debt decreases rapidly, and operating profit improves, then I see your valuation as quite low. Debt reduction must be reflected in the valuation if other variables remain the same. With that debt repayment rate, Grano will be net debt-free in 4-5 years.
Even if it’s an investment company, the best value added would be to keep Grano until it’s debt-free and carefully prepare the turnaround. With your current valuation, Panostaja’s share would be worth 60.72M if Grano were debt-free.
That alone makes 1.15€ per share. The dumbest solution would be to hastily sell it off at a discount to some larger player.
And your valuation, in my opinion, is quite “conservative” overall.
There’s probably no reason for Panostaja to be anything but moderate. By various calculations, the company’s value has probably been too low for the past 10 years. However, the profit has not increased at all and the track record is weak. There is more evidence of owner value destruction than of its growth.
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It depends on your perspective. The report also included total returns. Kotisun was a very profitable acquisition overall… but there are some misses too. Time will tell if it’s worthwhile to stay invested. The valuation is cheap, at least. Half of the stock’s value is cash. Wasn’t it calculated in that report that the average annual return over the last 15 years was 5.5%… probably most of it distributed as dividends/capital returns.
For example, growth companies can’t even be valued by just looking at the bottom line; you have to look at whether the operations are genuinely growing and remaining profitable… of course, if you invest and the number of employees grows, so do the costs. For example, Corehw and Oscar are growth companies that cannot be valued by observing what remains below the line for the investor versus what is distributable. Potential returns from these come when the companies are sold, as is typical for investment company operations. That’s when you should monitor how the growth story progresses…
In my opinion, CoreHw is at the most interesting stage with its product launch, and Oscar with its SaaS-ERP operations. Hygga is also at an interesting stage with its licensing operations, the Aster project, and its role as a purchased service provider. Hygga’s revenue will grow a lot, but it’s another matter how much operating profit will be generated… one would think that if fixed costs are somewhat similar (facilities, equipment), operations would become more efficient, but that remains to be seen. However, at least in the summer, a fairly large team was sought for developing the licensing business, so Hygga is also investing in growth in this area.
The year started nicely. A small dividend and divestment. I wonder if it’s time to buy?
Today’s Q1 result certainly didn’t cause any cheers.
Hygga’s growth and the good order backlogs of Oscar and CoreHW are the only positive things. Even in these, there are some things that add a bit of darkness to the silver lining: Hygga is still operating at a loss, Oscar did not grow compared to Q1 a year ago, and CoreHW’s Q was not good either.
We need to get rid of Carrot and cut our losses, and we shouldn’t venture into that industry again.
The biggest sorrow, of course, is Granon’s return to losses, as the industry is not exactly a hot trend, and consistent results should be achievable even in difficult times.
The sale of Helakeskus will happen in Q2. Heatmasters has been in the long-term portfolio, and no growth is visible; we could divest from this as well, but something new should be found to replace it.
I have managed to stay in the ride, and through dividends over the years, we are still in the black, but now it would be time to create the next success story.
My own faith has been in Oscar Software, which has been building SaaS functionalities and would be a valuable addition to the portfolio if successful.
CoreHW also has some potential, and Hygga could gain market share if dental services are outsourced outside of Helsinki as well.
At the moment, I probably wouldn’t invest my own money in this until Oscar turns itself onto a growth path or a good new acquisition emerges.
Let the old shares, however, remain in the portfolio, and let’s see if the team can turn the tide.
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