value and opportunity

As indicated in the last post of the “All Swiss Stocks series”, the next country I have targeted is Denmark. As always, I will look at the stocks in a random order. According to the Nasdaq OmX Nordic website, Denmark currently has 183 listed companies, spread over 2 segments, Nasdaq Copenhagen and the Nasdaq First North Growth Segment.

One decent feature of the Nasdaq OMX Nordic website is that they have very good summaries for each company (in cooperation with Morning Star) which makes this way of research quite efficient.

In addition, I have subscribed to TIKR.com which makes it easier to look at historic financials.

In this first installment, 2 out of 10 candidates are going onto the preliminary watch list. As always, comments are highly welcome !!!

1. Tryg A/S

Tryg is a 14.4 bn EUR market cap insurance company active mostly in Denmark, Sweden and Norway and is one of the largest Non-life insurance companies in the Nordics.

The first thing to notice according to the Stock exchange data sheet (good service),  is a 3,5 and 10 year avg ROE above 20% and a rather expensive valuation at currently 31x P/E and 2,2 times book value which for an insurance company is very expensive. However with a combined ratio )M 2021 at around 83% Tryg is super profitable and pays out most of its profit as dividends.

The share price has been done well long term, although more recently it has been going mostly sideways:

Tryg looks like a very high quality insurance business, however compared to my largest holding Admiral which I consider equal in terms of quality, it is significantly more expensive, therefore I “pass”.

2. Digizuite A/S

Digizuite is a 28 mn EUR small cap “digital asset management SaaS” company. Digizuite IPOed in May 2021 at 9 DKK per share and after some ups and downs is now trading below the IPO price at around 7 DKK:

The do have a detailed investment case on their web site. At first sight, the stock looks OK for a SaaS business, valued at around 8xARR (annualized recurring revenue). However looking at growth rates (~30% p.a.) and EBITDA margins (-60%) shows that they don’t seem to have balanced expenses and growth. The “rule of forty” would say that (Growth rate+EBITDA margin) should be greater 40% which in this case is even negative. “Pass”.

3. Orphazyme A/S

Orphazyme is a “late-stage biopharmaceutical company harnessing the amplification of Heat Shock Proteins. It is engaged in the development and commercialization of novel therapeutics for the treatment of neurodegenerative rare diseases.”

It has a market cap 61 mn EUR has no revenue but plenty of losses. The chart doesn’t look promising either:

Clearly not my area of competence, “pass”.

4. NNIT A/S

NNIT is a 283 mn EUR market cap IT consulting company that interestingly seems not be able to profit form the recent push into digitalization. Sales have been stagnating since 2016 and profits have been on a steady decline, resulting in a loss in 2021 and an increasing debt load.

The chart reflects this:

To be honest, if an IT consultancy could not grow during the last few years, they have to have some structural issues. A quick look into their annual report shows, that especially their sizeable business with public entities seems to struggle.  As I am not a turn-around specialist, I’ll “pass” here as well.

5. GreenMobility A/S

GreenMobility is a 57 mn EUR market cap company that offers EV car sharing in Denmark, Belgium and Finland and recently also in Sweden and Germany. The business is loss making and in Q3 2021, the company raised new money. At least growth has accelerated again.

The stock price has been remarkable stable, considering that a lot of Green stocks got hammered over the past few months:

This is a stock I would actually want to “watch” to see how this develops.

6. Demant A/S

Demant is a 8,5 bn EU market cap company specializing in in hearing aids. Hearing aids is clearly a long term growing business with high gross margins. With the exception of 2020, the company has been growing at around 8-10% per year. According to TIKR, the company reduced share count by -20% over the past 10 years.

ROEs have been around 25%, EBIT margins on average in the high Teens with the exception of 2020.

Based on expected 2021 results, the shares look fairly valued, with a 28x P/E and 22x EV/EBIT. However this is after a significant draw down form its recent peak:

Compared to the larger Swiss competitor Sonova, Demant looks a little bit better. Overall, I do not think that based on the current valuation Demant is a buy, but I would nevertheless put them on “watch” in case the stock becomes cheaper.

7. BioPorto A/S

BioPorto is a 85 mn EUR market cap Diagnostics/Biotech company that according to the stock chart had “another day  int the sun in 2021”:´after moving sideways for 20 years plus:

The company does have some revenue but burns a lot of money very year. Nothing to see here, “Pass”.

8. FirstFarms A/S

FirstFarms is a 72 mn EUR market cap company that seems to run agricultural businesses or farms in Eastern Europe. The stock has been doing somehow Ok over the past 10 years:

The company looks profitable at first sight but it seems that the profits actually come from selling land and reinvesting at a higher price. The stock trades above book value and the company employs significant debt. “Pass”.

9. Brain+ A/S

Brain+ is a “digital Therapeutics” company with a tiny market cap of 6 mn EUR. The company IPOed in October 2021 and claims to detect Alzheimer most likely through an app. The stock looks very much like early stage VC risk and don’t seem to have any revenues. “Pass”.

10. German High Street Properties A/S

A Danish company that brands itself as German but with a Danish only investor website and Danish only Management . With 57 mn EUR market cap, it is a small fish. As I don’t like Real Estate companies anyway, I’ll “pass” without digging deeper.