Taaleri as an investment

Stocks
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Sale has made a new company report after Q3. :slight_smile:

We reiterate our target price of 8.5 euros for Taaleri and our ‘add’ recommendation. Despite the strong result, the Q3 report was largely in line with our operational expectations, and forecast changes have remained limited. The stock is cheap by all measures, but short-term share price drivers are scarce. The key short-term driver is the movements in the company’s balance sheet, and we remain cautiously awaiting increased activity in this area.

Quoted from the report:

In our opinion, the visibility regarding the use of the balance sheet has slightly improved, as the company clearly wants to put its balance sheet to work. Regarding investment activities, we are still awaiting concrete signs of how the company will utilize its capital. The realization of the Canadian biochar project is quite probable in our view, and Taaleri will likely make a significant investment in it. Furthermore, we do not rule out the possibility that the company might increase its ownership in Fintoil in connection with its divestment/refinancing. As we noted on the previous page, the company’s balance sheet firepower will significantly increase over the next 24 months as substantial capital is released. The reinvestment of this capital will be a completely central value driver for the stock. Naturally, successful divestments of old targets also increase investor confidence in the company’s investment activities.

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1497

Good morning everyone! The numbers have been crunched and the report written again. Indeed, the result was good, but adjusted for one-off revenues, it was well in line with expectations. :chart_increasing:

The most important single observation from the earnings info and report is that the company’s so-called ‘sense of timing’ regarding strategy implementation has improved. Especially concerning the balance sheet’s investment activities, the company now has a completely different approach than, say, 12 months ago, and I consider it very likely that many movements will occur on the balance sheet within the next 24 months. On the sales side, the company is divesting from all three of its major investments (Texas, Toriparkki, and Fintoil) and old wind funds (large performance fees recorded upfront) in this window. When this is combined with good results, a strong balance sheet, and a conservative dividend payout, the company, according to my calculations, has over 100 MEUR in investment capacity :money_bag:. The famous million-dollar question is, where will this capital be invested and how successfully? This sum corresponds to about half of the company’s market value, and this is naturally a key driver for the share price. In the interview (Taaleri Q3'25: Vahva raportti - Inderes), I asked Ilkka about this investment focus, and he divided it into two: 1) bio-investments (e.g., the Canadian biochar project) and 2) more traditional PE investments (helping family companies grow to the next level, etc.). Point 2 is very competitive, and it raises the question of what Taaleri’s competitive advantage and ability to find good companies are compared to private equity investors :thinking: My own guess is that the Canadian biochar project will move forward, and Taaleri will make a significant investment from its own balance sheet. Additionally, I consider it very possible that Taaleri will actually increase its ownership in connection with Fintoil’s refinancing. My understanding is that in connection with the refinancing, the current fund-based ownership structure would also be dismantled, and an industrial owner would then be needed to replace it. If both of these materialize, a fair slice of that balance sheet firepower will already be channeled into these. Well, time will tell, but I certainly have the feeling that sleeves have been rolled up and more will start happening in the company than before.

Then, about valuation. Yesterday, I again spent a long time pondering the valuation, and there’s no getting around the fact that Taaleri is one of the cheapest stocks on the exchange. Whether you look at the sum-of-the-parts (a big discount to a conservative estimate), balance sheet-based valuation (P/B 1x), earnings-based valuation, or peer valuation, it’s cheap.

So, what causes this discount? In my opinion, a key reason is related to investments made from the balance sheet. Investors clearly have concerns about the successful use of capital. Additionally, I believe there is also a kind of ‘tournament fatigue’ visible here. Taaleri did not really make any major moves regarding its balance sheet in its previous strategy period, and now investors understandably want concrete evidence. Furthermore, I think it is quite justified to price Taaleri at a discount to the sum-of-the-parts (a so-called investment company discount or conglomerate discount) due to its undeniably rather complex structure. I would also gladly hear arguments from you as to why you wouldn’t buy Taaleri, which is competing for the title of the cheapest company on the Helsinki stock exchange? :thinking:

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It’s clear: 1. shareholder value appreciation is unacceptably weak, 2. the ownership list does not support increased confidence - there are no large/small institutions/family offices etc. increasing their holdings - on the contrary, there is selling and exiting, 3. it is generally known that shareholders are dissatisfied with the total return and there is a perception that if the price were only higher and liquidity allowed, there would be willingness to sell off the shares, 4. there are also many failures in fund products, leading to disappointed customers: e.g., Africa funds cannot be closed even overtime, the circular economy fund stumbled, etc., 5. customer communication/reporting through Aktia has been dismal, 6. the company’s strategy is still elusive and erratic; even the CEO himself has to put effort into articulating it. There are many of these, but yeah​:weary_face: - there has been and still is, e.g., a :gem_stone:specialist​:gem_stone: in wind energy.

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1499

I follow Inderes’ model portfolio in my investments :grinning_face:

(In reality, Taaleri is now one of the largest holdings in the portfolio.

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To the question of why I don’t buy cheap Taaleri, I have previously answered as follows:

I have added a little Taaleri, but the reason why not more is because, for me, it’s due to the fact that

  • Taaleri is a historical underperformer in recurring revenues, and although non-recurring revenues have been moderately good, I would have more faith in the company if revenues were more focused on recurring ones.

  • the desired value realization previously occurred through hefty dividends, but now that the focus is more on investments made from the balance sheet than on distributing dividends to owners, this is starting to resemble more of a SPAC: we invest your money in something really profitable, we just don’t know what yet. It might be bioindustry or it might not. Yes, the company has a good track record in opportunistic investments, but it only takes one slightly worse investment – and I suppose there has been some turnover in the team, and historical successes are no guarantee of future ones.

  • why should I trust a company whose strategy and focus seem to be constantly in flux – strange back-and-forth maneuvering, e.g., with real estate investments and bioindustry. As @Ghostrider noted, the company’s core competencies are Energy and Garantia – to an outsider, this seems obvious, but within the firm, there seem to be too many other aspirations.

I would have no problem buying the company cheaply and waiting for the value to rise only sometime in the distant future, if I had faith that the company’s management knows what it’s doing. Now I only have partial faith in that.

Now a pretty good interim report came out, but those arguments haven’t changed. Rather, on the contrary, the information about investing in more traditional private equity, regarding which you yourself wondered what Taaleri’s competitive advantage is, makes one again question whether the firm has a clear focus in its operations.

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That sounds like investor uncertainty. So, the perfect time to invest in affordable Taaleri? :slight_smile:

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1502

The fact is that the market expects Taaleri to destroy value in the future with its current P/B 1x valuation. If Taaleri’s cost of equity in the market were, say, 10%, then the market expects the balance sheet to yield less than this. Even Garantia’s result alone is ~7% return for the group’s current balance sheet. Since the rest of the group (POR+group) will be clearly in the black in the coming years, it practically means that the market expects investment activities to be very heavily value-destroying from now until eternity. Historically, the company’s return on equity has been a staggering 24%/year, but in the future, the market believes it will be closer to 2.4% than 24%. Nor does the market believe any sensible structural arrangements (e.g., sale of Energy) can occur. The sentiment around Taaleri is very bleak when looking purely at the share price. :cloud_with_rain:

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@Sauli_Vilen What do you think would be a fair valuation for Taaleri, if we look at the historically realized ROE level of about 24%? Would it be somewhere between 2.5-3 with the current track record? It seems nowadays that investors want immediate stock price appreciation and don’t have the patience to wait for the price to correct to a reasonable level. In Taaleri’s case, even with the naked eye, one can see that the stock is quite undervalued. As Buffett also says, when there’s a buying opportunity, you don’t need to fine-tune the last decimal of a DCF to make the stock look cheap.

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With a gloomy sentiment, shares have been offloaded for a long time, at ever-lower prices, as one after another gives up, finding much better opportunities. Money tends to move, and that’s a good thing. And because no “big bang” (jytky) in the form of M&A or similar significant cooperation arrangements have occurred, nor has any willingness for such been communicated in the strategy, the previous expectation of value destruction simply continues. Perhaps someone will then pick it up really cheaply when the management/major owners also retire?

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Well, if the company could sustainably generate that 24% return on equity and some of this money were continuously invested productively, then your suggested 2.5-3.0x P/B would be easily justifiable. Of course, it’s good to remember that Taaleri’s own target is “only” +15%, and Garantia structurally weighs down the entire group’s return on capital significantly. But indeed, if that 15% were a sustainable level and the market believed this, then it should probably be priced at 1.5-2x P/B. I do emphasize the lack of continuity here. When investments are opportunistic from here and there, it’s difficult for investors to trust that they will succeed in the future as well. In the report, I phrased it like this:

To put it bluntly, buying Garantia or Finsilva at a discount does not indicate the company’s ability to find real technological breakthroughs in industrial-scale bioindustry.

@Prototyping, you describe that tournament fatigue very well, and in my opinion, Taaleri doesn’t deserve much higher multiples based on its performance and passivity in recent years. However, I will correct that no value has been destroyed here, as the return on equity has been ~12%/year for the last 3 years. Not dazzling, but still above the cost of equity.

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The theoretical “correct” P/B level can be calculated as P/B = ROE/(r-g), where r is the required rate of return on equity and g is the earnings growth rate, which can also be derived by multiplying the portion of earnings retained by the company by the return on equity. If r were the 10% mentioned by Sauli, then that formula would break down with a 24% ROE and, for example, a 50% payout ratio, because the required rate of return would become negative :smiley:

EDIT: If zero growth is assumed, i.e., everything would be paid out to owners, then P/B = 24% / 10% = 2.4x, or with the financial targets’ 15% ROE, 1.5x. Of course, in both cases, the assumption here is that ROE will remain at that level forever, which cannot be considered certain, especially not the 24% ROE.

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I’m not buying because a few months ago I bought my own position “full”. Although I wouldn’t have nightmares if Taaleri was “overweight” in my portfolio.

The valuation level itself would currently be at a very comfortable buying level for me (cf. e.g. the USA, where I currently can’t seem to find anything to buy at suitable multiples).

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1508

A fund managed by Taaleri Real Estate, Taaleri Land Fund Ky, has sold a land complex located in Vattuniemi, Lauttasaari, to Bonava Suomi Oy and Suomen Asunnot ja Tontit I Ky. The purchase price was 6.5 million euros.

The sale supports the fund’s plan to divest from properties in a controlled manner and create value for investors. The land plot now sold is exceptional for the fund, as it is an entire buildable plot in an excellent location. The fund acquired the plot in 2016. Since then, the area has developed significantly, and the value of the property has risen from its original acquisition price.

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DNB-Carnegie recently started following Taaleri :newspaper: The initiation of coverage report was quite high-quality, and I recommend checking it out for anyone interested in Taaleri. For me, the report didn’t offer any major new insights, and the view is very similar to ours.

Carnegie also, not surprisingly, bases its valuation on a sum-of-the-parts analysis, and its estimates are very close to our views or Nordea’s. The table below summarizes the sum-of-the-parts for all three of us:

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The values for Garantia and Energy are very similar across all of us. For other capital funds, Carnegie has taken the same bearish stance as Nordea and assigns them a negative value. As I said here earlier, even though the outlook for that segment isn’t great, I find it hard to see its value being negative :thinking: This is, however, a rounding difference in the overall picture. In terms of group expenses, we are significantly above the others. In my opinion, it is fundamentally wrong to value group expenses with a smaller multiple than the group in general (this is a common error in SOTP models). This somehow expects that at some point, group expenses would drop out, which is not realistic. Another difference is that both N & C apparently use the operating profit of the “Other” segment, while we use expenses. The segment occasionally records various revenues (e.g., from Taaleri Kapitaali investment bank), and these, of course, reduce losses. In our opinion, the continuation of these revenues indefinitely is not a realistic expectation, and we have wanted to be cautious here. There is no right or wrong way here; it’s about different views. Nordea and Carnegie both use a 15 MEUR adjustment, which I expect to be tax liabilities (ours are shown in investments). There is also a clear difference in the investment portfolio, as we include upfront booked performance fees here, whereas I don’t find these from Nordea or Carnegie (it’s possible they are hidden somewhere :face_with_peeking_eye:).

But, all in all, even though there are some differences in the calculations, they all arrive at a very identical end result. The fair value is about 10e/share, and the majority of this value comes from Garantia. :abacus:

Carnegie’s report: DNB Carnegie Access: Taaleri: Initiating coverage: A specialist in finding profitable niches - Inderes

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Even though it’s foolish to look for a reason for every stock movement, Taaleri’s move today is quite significant in size, and at least with my skills, I couldn’t find any news..

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Is someone just increasing their position, or what’s going on?

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That news is this Kauppalehti’s advent calendar window: NĂ€istĂ€ osakkeista löytyy laatua tarjoushaukalle – Listalla Helsingin pörssin edulliset laatuyhtiöt | Kauppalehti

Listed as the cheapest quality company

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Funny coincidence that this article landed right here.
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Eden Asunnot invests in a residential property to be built in Niittykumpu, Espoo.

Eden Asunnot will build a residential apartment building, which will feature 48 high-quality rental apartments. The property will be built next to the peaceful TontunmÀki area, which is dominated by detached houses. The area is located close to services and has good public transport connections. Niitty shopping center and Niittykumpu metro station are approximately 600 meters away.

Apartment sizes vary from studios to four-room family apartments. Most apartments have either a glazed balcony or a private terrace. The apartments also feature apartment-specific cooling, which enhances living comfort. The building’s sauna is located on the first floor, and there is also a terrace connected to the sauna.

It

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Garantia Expands into International Credit Risk Insurance Business

Garantia has launched its international credit risk insurance business by offering credit risk insurance in the Nordic countries. The company completed its first credit risk insurance project outside Finland in autumn 2025, marking an important milestone in Garantia’s growth strategy.

Credit risk insurance protects the financier from losses caused by the borrower’s insolvency. With the insurance, financiers can manage the credit risks of their loan portfolios, and its use increases financiers’ lending capacity. Credit risk insurance is particularly utilized in corporate loans and structured finance as an alternative to financing syndication or other risk transfer arrangements.

Garantia’s goal is to expand its operations into new markets and develop its product portfolio to meet the needs of international clients. The company sees potential especially in the Nordic countries, where financial markets are seeking new solutions for risk management and efficient capital utilization.

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Here are Sale’s comments as Garantia goes global :smiling_face_with_sunglasses:

Garantia, a guarantee insurance company owned by Taaleri, announced on Wednesday that it had completed its first credit risk insurance project outside Finland in the autumn. At the same time, the company officially expands its guarantee offering to the Nordic countries. Previously, Garantia has only operated in Finland.

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