Tired germans and eager directors

Just over half of our portfolio companies reported during the month, with predominantly good results. At the fund's inception in July, we were forced to buy just before the interim reports, with the short-term reporting risk that entails. Now, instead, we are acting based on actual outcomes and have significantly higher visibility as we compare the companies' operational development against our intrinsic values.

Germans walking around in worn-out trousers

RevolutionRace accounted for one of the few reporting disappointments during the month. The company's largest market, Germany, weighed on growth, while neighbouring markets such as Switzerland and Austria showed good strength. Klarna's latest report confirms the same picture of a subdued German consumer, suggesting that the slump is macro-related rather than a problem with the offering – which largely consists of hiking trousers.
 
On the positive side, the acquisition of ICIW will add approximately 15% growth to operating profit going forward. And despite everything, the company increased its earnings per share during the quarter, and even more so for the full year, which concluded with the report. The valuation of EV/EBIT 13 on rolling figures is low based on the company's strong history, and we believe the company continues to trade at a clear margin of safety against our intrinsic value. CEO Paul Fischbein also seems to be anticipating better times, as he significantly increased his holdings after the negative report reaction.

The inside team strengthens after half-time

CEO Johan Larsson, CEO of the construction company NYAB, was much more satisfied with the figures. The company is bidding on projects within electrification and construction, among others. If the agreement is secured, the company, with the primary support of subcontractors, will carry out the project. The business model, which is less capital-intensive than a traditional construction company, allows for greater flexibility and potentially stronger cash flow dynamics. On the other hand, the company is dependent on subcontractors and the delivery risk that could entail. The company grew by just under 20 percent while operating profit increased by 45 percent during the quarter. However, in this industry, the second half of the year is when results and cash flows are largest, and Larsson describes the beginning of the year with the following quote:

"It's just like a football match. We go into half-time with a good result, but it's in the second half that it's decided whether you win the match or not."

Whether the company can defend or extend its lead remains to be seen. What speaks for a good continuation is that both CEO Johan Larsson and board members have continuously increased their holdings during August. Some of the purchases have occurred as recently as a few days ago. The valuation provides some support with a trailing P/E of 17 and EV/EBIT of 13 times, although the second half needs to be reasonably strong for the margin of safety we see to remain intact.

Not a coffee stain to be ashamed of

During the month, we have made several changes. Those with potentially the greatest impact are that we have divested shares in Bure Equity and Bahnhof and, on the reporting day, welcomed Coffee Stain to the portfolio after a weak, initial reaction to a very strong and undervalued cash flow.

We have also increased our position in Cheffelo. After the operational recovery from the setback in 2022, the stock has performed strongly, but is still valued at a cautious EV/EBIT 12 on trailing figures. While there is still over six months until the next dividend season, at today's share price, the company's history indicates that most of the free cash flow will be distributed – which corresponds to a dividend yield of just over 8 percent.

No holding is sacred

We enter the autumn with a well-diversified portfolio consisting of quality companies bought with a margin of safety. Each holding is uncompromisingly evaluated against our intrinsic value, and we do not hesitate to reallocate capital when the risk/reward ratio changes.

You can find Amos Value's largest holdings in August here