Bigger stakes in Nordic Entertainment Group and Peab
The Stockholm exchange rose 5.5 percent in May. The small cap index rose 8.9 percent. Carnegie Småbolagsfond rose 6.2 percent.
We have increased our holding in Nordic Entertainment Group. May was an eventful month for the company. The Bundesliga restarted, resulting in record viewer numbers on Nent’s channels, and the Premier League announced plans to restart on June 17. Nent therefore announced that it will reintroduce normal pricing on July 1. This is clearly good news. The company also announced that it will launch in the Baltics in 2021 and will be present in 15-20 countries within five years, which is certainly exciting. It also announced that the launch in Iceland has been very successful. It is important to be cautious about long-term growth targets as a lot can happen in five years, but we have a great deal of respect for Nent’s management, led by CEO Anders Jensen. So far, it has delivered on everything it envisioned and more.
And after Telia’s purchase of TV4 there is always a likelihood of another behemoth feeling a need to do the same and buy Nent. The influx of subscribers to Viaplay has been fantastic during the pandemic, and even though some may choose to leave once the world returns to normal, many will probably stay. The valuation of Nent does not reflect its structural growth opportunities and seems more coloured by the old-fashioned linear television business. We regard this as an opportunity. The share rose 22 percent in May.
We have increased our holding in Peab. For several years, the company has impressed with stability and profitability that have outperformed its sector colleagues. We do not see any significant negative effect from the coronavirus, and the company is well equipped with a large order book and a strong balance sheet. Housing construction is being adversely affected in the short term, but this is largely offset by both commercial construction and civil engineering. We have the distribution of the real estate company ahead of us as a potentially positive factor. The share has performed negatively this year and the valuation looks attractive.
We have taken in Electrolux as a new holding. The fund usually invests in substantially smaller companies than this, but after weak share price performance and the spin-off of Electrolux Professional, the formal requirements for being classified as a small cap are now met. We see the current situation with low commodity prices, an awakening world economy and a low valuation as favourable and have therefore, somewhat opportunistically, invested in the company. Electrolux needs no detailed introduction. It is something of a Swedish crown jewel and can be seen as extremely well-managed, albeit in a tough industry. We are hearing information that everything from hardware stores to lawnmower manufacturers are busy, and perhaps some of this could spill over to Electrolux. Either way, the valuation looks attractive in a reasonably normalised market.