WISA’s Capital Markets Day was held and the stock market listing is imminent - a few random observations:
- Investment story: Plywood market grows by a few % per year, balance sheet and debt level in good shape, dividend 50% of earnings, set financial targets can be reached without major investments meaning there is earnings leverage when times improve, dazzlingly high customer retention, earning capacity year after year despite market fluctuations, management seemed competent during the Capital Markets Day, aims to increase the share of premium plywood products.
- Weaknesses: Despite EU tariff support, the threat from China, CEO and CFO do not seem to have UPM stock ownership (commitment?), premium plywood’s share of sales only a quarter, moats are not quite as high as the company implies.
- Special notes: Wisa’s spin-off was reportedly a shock to the personnel. It still didn’t really become clear why Wisa is being spun off: it looks like it stems more from UPM’s streamlining than Wisa’s needs.
- Valuation: Of course, no prediction of the stock’s future market price was given at the Capital Markets Day, but my own back-of-the-envelope calculations would point to just under a euro.
- Special situation: UPM’s major owners might trigger a large wave of selling of Wisa’s stock in November, and at what price would it be a bargain? Would it be worth starting to scoop up shares around 70-80 cents?
- Overall assessment: Wisa looks set to become a traditional Grahamian value stock, whose return to the owner relies on the dividend and steady development of the company. No rocketing growth is coming, but in the potential special situation in November, one might get portfolio filler at a bargain. Sell, reduce, hold, add, or buy? I will hold the shares automatically coming as a continuation of UPM shares and, especially if the special situation materializes, I will add.