Thank you @Sauli_Vilen for the extensive report. Broadly high-quality work! A few scattered observations:
- Overall, investors should have a highly interesting equation on their hands: the company’s downside risks are quite limited, while there are a whole host of upside drivers. The progress of the latter even within a 12-month window, and the strategy and rhythm are now well-aligned. I actually share much of the same core view, but I am more cautious regarding the timeline.
- One reason for this is Fintoil’s ramp-up: shifting the product mix toward higher profitability and scaling up volumes sufficiently may take a longer time to achieve the targeted EBITDA margin of over 20%. Biochemical plants and that market are not easy.
- On the other hand, one counterargument found in the report could be the recent boost given to SolarWind operations: in the wake of the Fortum-Google deal and the datacenter boom, even abandoned offshore wind plans are being resurrected, not to mention other Taaleri-style renewable energy projects. If ever, SolarWind IV now has the optionality (though not a guarantee) to turn into a proper success story. Will Taaleri succeed here?
- The twists and turns of Taaleri’s opportunistic and once-again altered strategy can be rapid, such as the sudden expansion plans into private credit (PC) and university spin-offs (VC). However, cleaning up its own underperforming, loss-making operations tends to be more sluggish. The report rightly highlights real estate and its fragile state. The report correctly questions these private equity funds’ fundraising capabilities, and they now have a point to prove. The VC market is holding up a bit better, but turning an early seed-stage university business idea into a scalable, successful venture easily takes 5–15 years. How does this align with Taaleri’s return on equity targets?
- Group-level corporate overhead costs are rather plump compared to Taaleri’s current scale. There are almost CapMan-like features… Provided that Taaleri succeeds in its turnaround, keeping corporate overhead tight must be kept under close scrutiny, specifically from a shareholder perspective. Productive employment is fine, but artificial group structures that reduce shareholder distributions are not. The Turku Toriparkki shares suggested by @Juurikki alone won’t suffice as profit distributions for the people
- Personally, I would not advocate for the “dismantling of the group structure” suggested in the report at this stage merely to reduce the share price discount. In practice, Garantia acts as a guarantor for the rest of Taaleri’s more elusive operations; carving it out would likely cause the valuation of the remaining Taaleri to crash. The net result of a spin-off would thus be a wash (±0)? On the other hand, if the rest of Taaleri starts gaining real traction alongside Garantia down the road, listing the insurance business as an independent company would make sense in that scenario.
- The report rightly questions why share buybacks are not being conducted despite the deep valuation discount. This is compounded by the fact that only a couple of people in Taaleri’s management structure hold any meaningful stake in the company’s shares. This inevitably raises doubts: does the executive suite lack confidence in T’s future? The Chairman of the Board—where strategic decisions on these matters are made—is reportedly nearing retirement age, so perhaps change is on the way then? Employee satisfaction is declining.
- In the report, likely for lack of better alternatives, Sweden’s Solid Försäkring was dug up as a peer for Garantia. Since it doesn’t quite operate on the same turf, should we look further afield and make comparisons to the likes of the US’s Enact Holdings and Australia’s Helia Group?
- Return on equity of over 15% for Taaleri during this strategy period? That would be quite a hefty achievement; my bet is that it won’t be reached until toward the turn of the decade, assuming many of the pieces click into place.
- The sum-of-the-parts calculated in the report close to €12? Quite likely. In my own back-of-the-envelope calculations—assuming Garantia maintains its strong run & SolarWind IV succeeds & Fintoil hits its stride, etc.—we even reached the neighborhood of €15 in the coming years. In any case, the undervaluation is substantial, and it makes one wonder how this is possible. Especially when the overall picture includes an entity like Garantia, which operates in a domestic competitive haven and serves as a falling knife arrestor for the shareholder?