Valmet Corporation – Out of the woods

I’ve been looking at the company for a while now and today I initiated a position in an industrial I argue has a conservative pricing.

Summary: I find the current share price to be too conservative for this quality company and expect that the return in the coming year will come from multiples expansion (from PE 16.6 to 18), dividend of 3.5% (EUR 0.75 / 21 EUR per share) and future earnings growth (5 year historic earnings growth of CAGR 33%).

About the company: Valmet Oyj is a Finnish company with an industrial history over 200 years. As a standalone listed company, the history stretches only back to 2013, when it was spun off from Metso Corporation. Valmet is the leading global developer and supplier of technologies, automation and services for the pulp, paper and energy industries.

Business overview:

The company has four segments:

  • Services
  • Automation
  • Pulp and Energy
  • Paper
Valmet segment overview

At Valmet, Services and Automation are considered to be “stable” businesses, as they represent rather stable and slightly growing markets that are driven by the size of the installed base and mill operating rates. Currently, the increasing consumption of board, tissue and pulp in particular, as well as demand for bioenergy, are boosting production growth, which is creating new demand for Valmet’s services and automation (source: Valmet Investor Relations)

Pulp and Energy and Paper business, such as board, paper and tissue machines, pulp mills, and biomass power boilers are referred to as “capital” businesses. They are driven by new investments in machinery and mills, which makes these businesses more cyclical and volatile compared to the more stable services and automation businesses (source: Valmet Investor Relations)

Market leader in the growing market of converting renewables

Pulp & Paper industry: Paper and packaging experiencing several “megatrends”, which are important demand drivers for new packaging and consumer board products.

  • Urbanisation,
  • Digitalisation (headwind for traditional paper and print industry)
  • A rapidly growing global middle class,
  • Eco awareness
  • Population growth
  • Booming e-commerce


The current dividend yield is ~3.0 % and has increased since the IPO in 2013. The current payout ratio is 50.2% and the ratio has declined since the IPO, which is a result of increased earnings and growth. Net debt / EBITDA is 0,69 and the net debt is 7.7 % ( Net debt shows how much net interest-bearing liabilities in the company in relation to total assets ). The dividend safety is satisfactory, and I expect an increase for 2019 to EUR 0.75 per share (increase of 15%).

Valmet dividend history and payout ratio


The stock is currently trading at P/E 16.6 (P/E 2020E is 13.7 Source: Bloomberg consensus) which is fairly conservative for this company on a historical basis and compared to peers (e.g. ABB, Honeywell and other industrials). I expect a return on my investment of ~45 % and a share price of EUR 30. This is based on the current conservative pricing, which gives room for multiples expansion (based on historic multiples and peers), combined with expected earnings growth and a dividend yield of 3%.

Investment Checklist:

Valmet scores 86 points in my investment checklist, which is above my treshold of 80 points.

Investment Checklist Valmet


  • Lower pulp prices may reduce the willingness to invest in Valmet’s products
  • Weaker economic outlook in the overall economy
  • Climate change may cause increased damage to the forest from the bark beetle in Central Europe.
  • Project-specific risk (project cost estimation, scheduling, quality and performance)

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Dividend Income Update – December 2019

The final dividend in 2019 has been recorded and it is time to review the lean, mean, dividend machine for the year. December was the month this year with the lowest dividend received, and I only received the monthly dividend from Transalta Renewables. I did not receive a dividend in December last year, hence 2019 is the first year with dividends every single month.

Dividends received per year

Quick facts about my dividend machine:

  • Average dividend per month: 1.733 NOK
  • Dividend received per day: 57 NOK
  • Current dividend yield: 3.3%
  • Current yield on cost: 3.8 %
  • Dividend increase compared to last year: 89%
  • Total dividend paid in 2019: 20.794 NOK
  • Received dividend from 26 companies in 2019 compared to 12 companies in 2018.
  • Expected organic dividend growth in 2020 is 7.9 %
  • Estimated dividend received in 2020: 28.262 NOK (based on status quo)
  • Withheld tax on dividends in 2019: 1.626 NOK

In December I’ve bought shares in:

  • Biotage AB – increased position to full size
  • Visa Inc – future dividend aristocrat?
  • Bakkafrost – participated in subsequent offering

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Visa Inc. – Future Dividend Aristocrat?

Not overlooked, nor undervalued. This is not a case for value investors, but a perfect match for dividend growth investors. I purchased my first shares in the company on 2 December 2019 for USD 184.15 per share.

About the company:

Visa, Inc. is a global payments technology company working to enable consumers, businesses, banks and governments to use digital currency. Visa operates in a four party model, which includes card issuing financial institutions, acquirers and merchants. We are not a bank and do not issue cards, extend credit or set rates and fees for account holders on Visa products (Source: Visa Inc. 10-K filing 2018).

Visa has a current market cap of USD 394 billion and is traded on NYSE. In the latest quarter released on 24 October 2019 the growth in underlying business drivers remained strong, primarly driven by growth in payment volumes and processed transactions. The company’s growth prospects are good in the coming years and the expected growth in EPS per share in 2020 is in the mid-teens.

Source: Visa Inc company presentation 24 October 2019


The company benefits from the ongoing shift away from cash payments and over to digital payments. Digital payments continue to grow as a percentage of all payments world-wide and Visa is one of the key beneficiaries. Societies become more and more cashless and with an increasing standard of living the growth in years to come will be substantial.

Hard to use cash when shopping online
Shift from cash to digital payments is ongoing


Visa has increased its dividend since the IPO in 2008 making it a Dividend Contender. The current dividend yield is 0.65%, but the latest dividend hike was 20 % and it is expected that the dividend will increase by double digits in the coming years. Current pay-out ratio of ~20 % and strong growth in earnings per share will eventually materialise in future dividend hikes.

Source: The Motley Fool


Both Visa and its closest peer, Mastercard Inc, has experienced a strong share price performance the past five years, with Mastercard leading the way. Because of the strong share price performance, the company trades at a premium relative to its historical multiples. During the past decade, the highest EV / EBITDA of Visa was 27, the lowest was 8.8 and the median was 17.1. The current EV / EBITDA is around 26. I believe the valuation is justified due to the strong track-record of the company

Comparing Visa and Mastercard share price performace
Both Visa Inc and Mastercard Inc has solid share price performance the past five years


  • When profitability is high in a industry with few competitors it attracts unwanted attention from others who want a piece of the action. New competition will press volume and margins down until the superprofit is gone. Cryptocurrencies and e.g. ApplePay has entered the market and tries to shift volumes from traditional payment methods to the digital sphere. This shift will in the years to come be faster and the continuous evolution of new technologies and business models may pose a risk to the company.
  • Regulatory risk: Regulatory risk is the first risk factor presented by the company in their annual report and the increased focus on compliance, anti-money laundering and regulation may pose a threat to the company. Lack of competition in the industry (i.e. duopoly with MasterCard) may pose a risk to the company due to increased oversight and regulation of the global payments industry.

Disclaimer: I am long Visa Inc

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Dividend Income Update – November 2019

November has been a cold and rainy month and the dividends has poured into my account. This month has only been surpassed by April and May, which in the Nordic countries are the main period for capital distribution from listed companies, and I’ve recorded in total 2.397NOK from seven companies. Last year I received dividends in November from three companies, and again this is a sign that the lean, mean, dividend machine is on track.

I received the monthly dividend from TransAlta Renewables, quarterly dividend from AbbVie, AkerBP, Mowi, Ocean Yield and Equinor as well as the semi-annual dividend from Investor AB.

Current dividend yield for my portfolio is 3.3 % compared to 3.7% last month and the downward yield trend in my portfolio is starting to be more apparent. The reason why the yield is curving downwards is because share prices of my holdings has been positive, but I’ve also sold my shares in Hemfosa due to a takeover bid on the company and Ocean Yield with a very high dividend yield. These are now cash positions and I’m contemplating how to reinvest the funds going forward. I’ve also purchased shares in Biotage AB with a low yield, but a high expected dividend growth the coming years.

Above you can find what I expect to receive in dividends in 2020. I’ve estimated that my dividends will increase to ~27.600 NOK, which is an increase of 37% compared to my expected dividend for 2019. This increase is due to dividend growth from my companies, but mostly due to purchase of new companies.

In November I’ve bought shares in:

  • Biotage AB
  • Lerøy Seafood – ~ discount to peers
  • Sparebanken Vest – a no-brainer investment with low P/B, high ROE, 5% bonus shares the next two years

The offloaded positions this month is:

  • Nekkar ASA – sold at 3.19 NOK per share due to a more attractive investment option
  • Hemfosa – due to takeover bid
  • Ocean Yield

Every month I will post an update on my monthly dividends. Here you can find last the update for September.

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Kitron ASA – strong revenue growth and improving margins

Established in Arendal in 1962, Kitron has a long track record within the manufacturing of high-complexity, high-reliability electronic products. It is expanding its global presence with manufacturing facilities in Norway, Sweden, Lithuania, Germany, Poland, China and the U.S. Its customers outsource manufacturing of electronic circuit boards and related services to improve flexibility, cost efficiency, accuracy and innovation. The company has a reputable customer base, including companies like Kongsberg Gruppen, Northrop Grumman, Saab, Volvo, Lockheed Martin, ABB.

Segment overview

The company operates within five different segments; Defence/aerospace, Energy/telecoms, Industry, Medical devices and Offshore/marine. Below is an overview of split in revenues per segment.

Source: Company presentation Q3


The company’s dividend history is not too long, but they have paid a consecutive dividend the past five years and has a high dividend growth rate (extraordinary dividend of 0.2 NOK paid out in 2018 based on 2017 financials). Kitron’s dividend policy is to pay out an annual dividend of at least 50 % of the company’s consolidated net profit before non-recurring items. The EPS as per 30 September 2019 is 0.55 NOK and it is estimated that the full-year EPS will be around 0.8 NOK.

Today the current yield is around 4.3% (share price 9.38 NOK), but I expect that the dividend for the fiscal year 2019 to be 0.50 NOK; implying a forward yield of 5.3%. The payout ratio is approximately 55%, which I believe is OK for this type of company.


Growth and EBIT-margin

On the latest Capital Markets Day (CMD) the company launched a revenue target for 2025 of NOK 5 billion and EBIT margin of 7%, with potential M&A adding upside. This implies an EBIT’25e of NOK 350m, representing a solid CAGR’19-25e of 10% (Source: Kitron CMD and Pareto Equity Research).

Source: Kitron CMD
Source: Kitron CMD


The stock price for Kitron ASA has since a low of 1.51 NOK per share increased to today’s price of 9.38 NOK per share. This increase is well justified due to the strong revenue growth and improving EBIT-margin, and there isupside potential if the company’s targets are reached. These are the key drivers for value creation for shareholders and one should expect accretive acquisitions going forward based upon the communication to the market by the management on the Capital Market Day.

Comparing EV/EBIT to its closest Nordic Competitors; NOTE AB and Scanfil Oyj, it is trading at a premium. EV/EBIT for Note is 11.6, while Scanfil trades at 10.3.


Disclaimer: I hold a position in Kitron ASA.

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Sparebank Vest – Selldown of Equity Capital Certificates

Sparebanken Vest is a Norwegian Savings Bank located on the west coast of Norway and is the third largest savings bank in Norway. It operates as an independent financial services group (not part of the Sparebank 1 – alliance) and it has a market cap of approximately NOK 6.4 billion and a strong focus on digital transformation.

Sparebanken Vest announced its intention to convert about NOK 2.4 billion of the primary capital to ECCs (equity capital certificates) that will be transferred to a newly established foundation. The offering to private investors included 10% bonus certificates (5% the first year and additional 5% the second year), which in my view made this offering a no-brainer to participate in. The only downturn was that the offering was oversubscribed and participants did not receive full-subscription.

Source: Managment presentation

The savings bank has the most desirable “Price to Book vs Return on Equity”-combination and I believe the management decision to focus on introducing customer dividends, improving liquidity in the trading of the ECCs and to continue their digital transformation from a boring savings bank to a digital financial services provider will cause a multiple expansion and hence increase the market cap. The low P/B compared to peers are unjustified and the gap will most likely narrow over time.

Source: Pareto Equity Research

Expected returns:

Expected total returns from holding the ECCs will consist of:

  • Earnings growth
  • Dividends (current yield of 5%)
  • Multiple expansion (higher PB)
  • Bonus ECCs of 10% for participants in the offering (over 2 years).


  • Increased capital regulation
  • Regional risk, e.g. focused on the west coast of Norway

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Hemfosa – takeover bid

Updated 21 November 2019:

Sold my shares at 117.4 SEK on the 21 November 2019. The price of SBB AB B-shares was trading at 23.5 SEK, implying a discount of ~6.5 % if I held my shares until the offer had gone through (beginning of January 2020). Even though a bid for one of my companies is welcome in the short-run I believe shareholders of Hemfosa would have been better of as a standalone company.

Why did I choose to sell now?

I have no interest in becoming a shareholder in SBB since I don’t know mcuh about the company, its management or its properties

There is a risk that the deal will not go through (risk inherent in takeovers)

SBB AB is currently trading at a premium of 80% compared to its NAV, while Hemfosa is trading at a premium of 40%

One year ago I purchased my first shares in Hemfosa Fastigheter following the spinoff of Nyfosa. Spinoff-situations are usually a great way for investors to achieve superior returns, and this was one of the reasons why I invested in the company in the first place (read more about spinoff situations here). Since then the shares has returned great value to its shareholders, and with the recent takeover announcement by SBB I have a total return on my holdings of ~100%.

On Friday 15 November Samhällsbyggnadsbolaget i Norden AB (Ticker: SBB) made a public offer on Hemfosa Fastigheter, with a mix between shares in SBB and a cash offer. Hence, the correct price for HEMF will now be a function of SBB’s share price going forward.

Pre-bid, the shares in Hemfosa traded around 102 SEK, and SBB traded around 24 SEK. The bid presented therefore a premium of approximately 22% and priced Hemfosa at 126 SEK. Following the announcement, shares in SBB dropped 8% and therefore lowering the value of the takeover bid (this is normal when a company announces its intent to acquire another company).

Source: Google Finance

The offer

SBB offers each shareholder in Hemfosa the following consideration alternatives. Offer for Hemfosa common shares (the “Common Base Case Consideration”)

  • In respect of 55 percent of the number of Hemfosa common shares tendered by such shareholder: 5.5 SBB Class B common shares per Hemfosa common share, and
  • in respect of the remaining 45 percent of the number of Hemfosa common shares tendered by such shareholder: SEK 120.00 in cash per Hemfosa common share.

The acceptance period will commence on 19 November and end on 20 December. The deal will most likely go through as the board of directors recommend the offer and large shareholders has indicated that they will accept the offer.

What is the correct price of Hemfosa’s shares today?

As mentioned above, the share price going forward will be a function of the share price in SBB. Therefore, the final premium might be higher or lower than the premium at announcement. Shareholders in Hemfosa should therefore closely monitor the share price in SBB. As per close on Friday 16 November the calculation is therefore as follows:

Author’s own calculations

Based on closing prices on Friday the shares in Hemfosa is trading at a discount of ~3.5%

Under the «Mix & Match Facility» presented, the shareholders can choose between a pure cash offer, shares in SBB or to accept a partial cash offer and shares in SBB. The result of this depends on the choices made by other Hemfosa shareholders, as there are limitations set by SBB. If you choose to wait, the announcement will be made on or around 20 December.

If you have less than 50 shares you will receive an all-cash-offer at closing of acquisition.

Should you sell your shares in Hemfosa in the market or accept the offer from SBB?

It depends.

It depends on:

  • whether you are interested in becoming a shareholder in SBB
  • how many shares in Hemfosa you own
  • choices made by other investors under the “Mix & Match Facility”
  • share price development of Hemfosa and SBB in the coming days / weeks.
  • the probability of the deal going through

Should you buy shares in Hemfosa to collect the current discount?

This is called “Risk-Merger Arbitrage”, and it is not recommended for private investors to try to exploit anomalies or mispricing in securities. There are several risk factors you have to consider:

  • The probability of the deal going through
  • Time value of money (time until the deal is completed)
  • Declining share price in SBB (usually a risk-merger arbitrage also includes a short position in the acquiring company).

Disclaimer: I own stocks in Hemfosa Fastigheter.

20 Nordic companies which will benefit from 7 Megatrends

It goes without saying that the world tomorrow will not be the same as the world yesterday. Changes happen constantly, and the changes may be of a temporary character, but others are so powerful that they will result in changes for the society on a fundamental level.

I have written a short article describing 7 Megatrends and presents 20 Nordic companies which will benefit from these seven megatrends.

Enter your email on my subscription list and receive a free copy of the PDF (link enclosed in welcome message). I will not bombard you with emails but send you regular updates once a month with past write-ups, dividend income updates and other articles on my blog.

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Top 5 Nordic ESG-companies

Investors has in the recent years become more aware of the companies they invest in and “green” companies has received a premium valuation. This premium valuation may be justified, but it can also be a sign of a overvaluated area to invest in. Either way, the increased focus has caused the cost of capital of these companies to go down, investors to receive a high return on their investments and the market expects these companies to contribute to the UN Sustainable Development Goals in year to come.

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. In this post you’ll be introduced to 5 Top Nordic ESG-companies that will benefit from the increased focus from investors on climate change, pollution and plastic in the sea.

The 5 Top Nordic ESG-companies in this article adresses various goals. Below you can find the goals that these five companies are most focused on:

  • Goal 7: Affordable and Clean Energy
  • Goal 12: Responsible Consumption and Production
  • Goal 13: Climate Action
  • Goal 14: Life Below Water

#1 Tomra Systems

Tomra was founded in 1972 on an innovation for return of emty beverage containers, and has since then grown into a global company with market-leading positions in their two segments; Sorting Solutions and Collection Solutions. One of the biggest environmental challenges today is plastic in the ocean, and continuing on today’s path will cause the ocean to contain more plastic than fish by 2050. Herein lies the great business potential for Tomra Systems as more focus will be on collecting waste, recycle it and create a circular economy (moving away from the linear economy).

Tomra Investor Presentation


P/EP/BNet debt / EBITDA EV / EBITDA Dividend yieldPayout ratioROE
45 7 2.0 27 1.05%* 50 %*15.3%

The current valuation of the company is the only drawback as it is trading at a P/E of 45 and a EV / EBITDA of 27. Tomra has increased their dividends since 2007 and has paid a consistent dividend since 1993.

Source. * adjusted for extraordinary dividend in 2018

#2 Beijer Ref

Beijer Ref is one of the largest refrigeration wholesalers in the world and has also operations in air conditioning and heat pumps.

Within the EU, a new F-gas regulation was published in April 2014 which increases the demand for the phasing out of HFC(3) refrigerants with a high greenhouse impact. The F-gas regulation also regulates the authority for intervening in the refrigerant cycle in order to avoid leakage, all in order to reduce the discharges. The new F-gas regulation will also regulate the imported volume of refrigerants into the EU with a falling import volume until 2030. This is to give owners of installations time to adapt their selection of refrigerant (source: Beijer Ref).

This EU-regulation will keep demand for Beijer Ref’s products high in the coming decade since few retailers has replaced their old refrigerators. Furthermore, the heat pump segment is also experiencing high growth since warmer summers drives demand for heat pumps (can also be used for cooling).


P/EP/B Net debt / EBITDA EV / EBITDA Dividend yieldPayout ratioROE
40.4 7.9 2.2 24.2 1.1% 45.2%19.7%

The company has paid a dividend since its spinoff from Beijer Electronics in 2010 and paid out an extraordinary dividend based on the 2018 financials.

#3 Eolus Vind

Eolus Vind is Sweden’s first commercial wind power developer. Since inception in 1990, the company has become a leading Nordic wind power developer and has installed and delivered more than 540 wind turbines. The core business is to construct wind power facilities in favorable wind locations and transfer them to customers. The company operates in the Nordics, Baltics and the US and the company is listed on Nasdaq Stockholm Small Cap.

Demand for electricity and wind power is expected to increase over the next decades at a 7 % CAGR. The shift to renewable energy will require investments in wind power parks, as there is little room for more hydro power and solar power is less competitive in the Nordic region due to the climate


P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
20.2 3.0 (6.5) 15.1 1.4%28.1%14.9%

The company has paid out a steady dividend in the past decade, and paid out an extra ordinary dividend in 2014. The company announced that it will pay out a dividend of 1.5 SEK on the basis of 2018-2019 financials, even though the market expected it to distribute an additional lumpsum due to its net cash position.

#4 Scatec Solar

Scatec Solar develops, builds, owns and operates solar power plants across emerging markets. Technical improvements has changed the solar power industry, and it is expected that the industry will be even more competitive compared to fossil fuels and coal in the coming decade.

Scatec Solar’s business setup is positioned to provide electricity to energy-demanding regions, where the number of sunhours is an obvious comparative advantage. The solar industry in general is subject to governmental incentive programs in order to facilitate increased capacity and energy production from this source. Typically, Feed-in-Tariff (FiT) schemes are used to improve the economics for a renewable energy provider. The company signs Power Purchase Agreements (PPAs) typically on a 20-25 year basis which gives great visibility in the company’s earnings and cash flows.

Scatec Solar has an aggressive target of 4.5GW of installed capacity by the end of 2021, and as of end of Q3 the installed capacity is approximately 1.2GW. This means that in order for the company to defend its current valuation it must deliver on its project backlog. The company announced a new segment, Release, which is a small-scale redeployable solar power generator. The ambition is to grow the new segment by 300 – 500 MW per year from 2022 and onwards.


P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
NA 3.8 (1.9) 7.9 0.9%NA 0.51%


As more projects are finalised the earnings and cash flows will increase substantially in years to come. Based on the dividends distributed so far it is expected that the dividend growth will be attractive for dividend growth investors in the coming years.

#5 Nederman Holding

Nederman, The Clean Air Company, is one of the world’s leading experts in creating solutions for handling and recycling of production waste streams. Their products and solutions for eco-efficient manufacturing contribute to improved production economics, safer work places and reduced environmental impact.

Goal No 12 “Sustainable consumption and production” is about promoting resource and energy efficiency, sustainable infrastructure, and providing access to basic services, green and decent jobs and a better quality of life for all. One of the targets for this goal is to substantially reduce waste generation through prevention, reduction, recycling and reuse by 2030.

According to the Health Effects Institute (HEI) in the US, 95 percent of the world’s population is exposed every day to poor quality air and the solutions to current problems of air pollution largely can be found in industry. Solutions provided by Nederman is filtering, cleaning and recycling of air to make industrial environments more efficient, safe and sustainable.


P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
16.93.1 2.010.7 2% 33.2%18.2%

Disclaimer: I hold various positions in Tomra, Beijer Ref, Eolus Vind, Scatec Solar and may, in the future, initiate a position in the Nederman Holding.

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Dividend Income Update – October 2019

It’s time to sum up this month’s dividends, even though October is not over yet. I will not receive any more dividends this month and for October I recorded 791 NOK. This is down from last year, but last year I only received dividends from ABG Sundal Collier (which I offloaded during the year). This year I received dividends from three companies, which may be an indication that my portfolio is more diversified compared to last year.

I received the monthly dividend from TransAlta Renewables, quarterly dividend from Hemfosa and semi-annual dividends from Beijer Ref. If we include the witholding tax subtracted from the dividends my dividends this month is actually 902 NOK.

Current dividend yield for my portfolio is 3.7 % compared to 4.1%. The reason why my yield is lower since last month is because I’ve purchased some shares in Nekkar , with no dividend payouts, because I sold some shares in Eolus and because the yield in Tomra and NIBE is lower than my previous dividend yield. The dividend yield is also lower because the share price of my holdings has increased.

If you want to know why I decided to purchase shares in Nekkar you should read my write – up here: Nekkar – time to unveild value.

Above you can find what I expect to receive in dividends in 2020. I’ve estimated that my dividends will increase to ~27.000 NOK, which is an increase of 40%. This increase is due to dividend growth from my companies, but mostly due to purchase of new companies. In October I’ve bought shares in:

Every month I will post an update on my monthly dividends. Here you can find last the update for September.

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