Portfolio update #4: Sell SAF Tehnika, Silvano Fashion Group…

Rapid sell off SAF Tehnika on news

SAF Tehnika published their H1 FY result on the evening of February 7th. That evening I had time to quickly update my database and see what’s up with trailing numbers. So just a quick glance at SAF Tehnika 2017-2018 FY 6 months report:

Revenues for Q2 down -13.1% compared to Q2 of 2016-2017 FY.

Net loss amounted to -258k € with decreased EBITDA of over 3 times in Q2.

And just like that a gem in Baltic market became (at last price of H1 6.45 €):

• EV/EBITDA of 10.9;
• P/tBV of 1.9;
• and P/E of 18.3.

Previous trailing ratios can be found here.

Market reaction the next morning was adequate. I placed my ask that evening with a discount of -6%, but that was not sufficient and I had to exit at 6€ a share. I took a minimal profit of +2% including the received dividends from my recent additions and a sound +125% profit from 2016 acquisitions.

My suspicion was correct, and now SAF Tehnika trades at around 5.3€ a share.

SAF1R future

I do like this company. Clean balance sheet. High payout of dividends. Transparency.

Will definitely keep an eye on upcoming quarters. Management tends to point their business model, which is project type. It’s hard to even out quarters, and if Q2 was bad, maybe bunch of projects going to appear in Q3/Q4 which would make FY look reasonable. Will see how that goes.

Selling Silvano Fashion Group

I first bought SFG1T in 2015.06 at 1.41€ during the great turmoil with Russia invading Ukraine. Silvano has exposure to Russian ruble as well as tight trade relations to CIS region. Second purchase was just before publication the terrible financial report at 2.97€. Positions on the graph:

Including dividends early portion generated +146%, while a purchase 9 months back generated +6.9% profit or CAGR of +40.2% and +9.8% correspondingly.

SFG1T surprised market with gross 0.3 €/share dividends paid on last days of January 2018. I exited few days after ex-div date, taking dividends. Basic idea is to clear up portfolio a little bit. We are approaching the end of party in one way or the other. Better stay on the safe side. What I did not think through was upcoming general meeting, which will probably distribute more dividends. I suspect gross 0.1-0.15€ distribution per share. Will see. Share now trades at 2.77€.

Adding more INVL Baltic Real Estate

We have a flair of increasing inflationary pressure in Eurozone. Especially the Baltics. Commercial real estate contracts usually index their rental income with inflation, so in that way investing in real estate REIT is hedging against inflation.

Another thing is increased dividends. Together with Baltic Horizon Fund (REIT) portfolio exposure to commercial real estate now is about 30%.

Adding Grigeo and purchase of East West Agro

At 1,42 I added more GRG1L to portfolio. Prior to purchase news came out on termination of agreement between Grigeo and Homanit Holding GmbH to purchase the sale of 100% of the shares of UAB Grigeo Baltwood. I expected this deal to improve Grigeo’s balance sheet and on one hand it was a negative announcement. However unaudited 2017 FY result was really really good. Quick peak:

Trailing EV/EBITDA decreased to 5.5 levels. Which is really good for this transparent company. For a long time GRG1L had negative free cash flow (FCF) due to endless investments. 2017 FY marked 17% FCF/Market Cap ratio. Which is promising on the dividend side. Debt burden also decreased and debt to equity ratio now stands at round 1.

Purchase of East West Agro (EWA1L)

Just a quick commentary. I think market beat down the price too much. I entered at 21.6. Q3 result wasn’t appealing, but I have reason to believe 2017 result will be far more satisfactory.

 

 

Current portfolio composition

As of 2018.03.17 with Friday’s prices my Baltic market portfolio structure looks like this: