Picanol dethrones Melexis as Brussels value champion

Of all the companies on the Brussels Stock Exchange, Picanol created the most fundamental value over the past decade. The maker of looms dethrones chipmaker Melexis, a study by Value Square learns.

As its name suggests, asset manager Value Square is a value investor par excellence. To find the value champions, the Ghent-based company has been calculating for the past 14 years in a row which Belgian listed companies have created the most fundamental value. Value Square does not look at the share price, but at the evolution of the book value - i.e. the equity - plus the net dividends paid out.

'In the long run, stock prices should follow the evolution of the underlying fundamental value. That's what super investor Warren Buffett posits,' says Patrick Millecam, Value Square's chief strategist. 'That turns out to be true in our study. Over the past decade, the 89 companies we analyzed realized an average fundamental value increase of 5.47 percent. The Belgian All Share Index did even slightly better with a return of 7.17 percent. The same trend holds true for our top ten as well: an average increase in value of 18.33 percent, versus a stock market climb of 16.86 percent.'
Still, there are exceptions to the rule. Two companies in the top 20 for greatest value creation, EVS and Orange Belgium, actually saw their share prices fall. EVS paid generous dividends, but for Orange Belgium, either the current share price is too low, or the share price was too high 10 years ago.

Who is in the top three?

1. Picanol

Loom maker Picanol owes its gold medal and 40 percent annual return largely to its start-up date. '2008 and 2009 were one of the most difficult years in history for the textile industry, and perhaps even more so for loom manufacturers,' says Millecam. Consequently, the share price of the then loss-making Picanol was extremely low. 'The weak balance sheet and the crisis forced Picanol to lay off a fifth of its staff and forced a capital increase.'

The current strongman, Luc Tack, came up with fresh money and subscribed to new shares at barely 1.27 euros. That's 43 times less than today. Thanks to Tack, Picanol became a success story. The cash flows became so large that he invested them in Tessenderlo, where, like Picanol, he cut costs, focused on the most promising activities and fine-tuned the production apparatus. Picanol now controls 62 percent of the chemical group's voting rights.

2. Melexis

The automotive chipmaker prided itself on first place for three consecutive years, but must settle for silver due to a lean 2019, in which net profit halved. Last year, global auto sales dropped 5 percent due to geopolitical tensions. Melexis is still growing a lot faster than the market, though. Each car has an average of 11 Melexis chips. The group is aiming for 20 within a few years.

3. VGP

Logistics park developer and lessor VGP is advancing to a podium spot for the first time with 18.9 percent annual value creation. The stock price is following that trajectory almost perfectly. 'VGP is known for its quality service. Once the tenants move into the buildings, VGP also offers them management services. That interaction allows VGP to make future and existing parks even better,' Millecam explained. 'VGP also created three successful joint ventures with insurer Allianz, freeing up capital to further expand the pipeline. In the long term, VGP benefits from booming e-commerce, which keeps logistics buildings in demand.'

Value Square also makes comparisons each year to Warren Buffett's holding company Berkshire Hathaway. Although Berkshire could not keep pace with the S&P500 index in recent years, it was able to increase its fundamental value by 295 percent in a decade. That equates to a return of 14.74 percent per year. Only the top six Belgians can outpace Buffett and his associate Charlie Munger.

Disclaimer

• Source: The Time
• URL: https://www.tijd.be/markten-live/nieuws/aandelen-brussel/picanol-onttroont-melexis-als-brusselse-waardekampioen/10232957
• Author: Serge Mampaey