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The future looks bright for Nordax

Carnegie Småbolagsfond fell by 1.3% in November, a weak month for Nasdaq Stockholm. The Small Cap Index dipped 2.1% and the OMX Stockholm PI fell 3.5%.

Dometic, one of the larger holdings, rose by 10% in November. Dometic is acquiring American Seastar Solutions, a boating equipment supplier. The impact on sales and financial performance is significant; despite the 10% uptick, the stock is valued lower than it was pre-deal. The valuation is low and we still see potential for profit improvements.

Up by 10%, Catena Media was the standout in November. The stock has performed well since the IPO, but the price trend this autumn left something to be desired, mainly due to a sell-off by the largest shareholder and a sudden switch of CEO.  This caused some anxiety ahead of the Q3 report. The worry turned out to be needless and sales and profits were both strong. A share price that has receded from historical peaks, strong quarterly results and acquisitions add up to an attractive valuation based on next year’s results.

The drama in Nordax is ongoing and Nordic Capital upped its stake in the company in November and now controls more than 20% of equity. Nordic Capital has not historically held interests in listed companies and we believe a bid for the entire company is likely. We have owned the stock since the IPO and believe Nordax is a very well-managed company with bright prospects. We do not think Nordax has received the valuation it deserves thus far. In our view, it is overcapitalised and an extraordinary dividend might benefit the valuation. The stock rose by 7% in November.

The fund’s underperformer in November was roofing manufacturer Nordic Waterproofing, down by 16%. The quarterly report fell short of expectations but did not trigger any major forecast adjustments. Thus, valuation of the share has slipped considerably. As we see it, although the Swedish housing market is facing challenges, the fact remains that Nordic Waterproofing has little exposure in Sweden and significant exposure in the rest of the Nordics, where trends are strong in Denmark and Finland for commercial building and the renovation market. In addition, Nordax has a strong balance sheet and low valuation.

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Carnegie Småbolagsfond invests in smaller value companies on the Stockholm Stock Exchange. Such small caps have historically had stronger share price growth than larger companies, partly because they have more opportunities...

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