Of all the companies on the Brussels Stock Exchange, Picanol has created the most fundamental value over the past ten years. The maker of looms dethrones the chipmaker Melexis, learns a study from Value Square.
As the name suggests, the asset manager Value Square is a value investor par excellence. To look for the value champions, the Ghent House has been calculating for 14 years in a row which Belgian listed companies created the most fundamental value. For this purpose, Value Square does not look at the share price, but at the evolution of the book value - i.e. equity - added to the net dividends paid. In the long term, share prices must follow the evolution of the underlying fundamental value. That's what super investor Warren Buffett posits', says Patrick Millecam, Value Square's main strategist. That appears to be true in our study. Over the past ten years, the 89 companies we analyzed achieved an average fundamental value increase of 5.47 percent. The Belgian All Share Index did slightly better with a return of 7.17 percent. The same trend also applies to our top ten: a value increase of 18.33 percent on average, compared to a stock market climb of 16.86 percent'. Still, there are exceptions to the rule. Two companies in the top 20 of largest value creation, EVS and Orange Belgium, even saw their share prices fall. EVS paid out generous dividends, but for Orange Belgium, either the current share price is too low or it was too high ten years ago. Who is in the top three?
The loom maker Picanol owes his gold medal and his efficiency of 40 percent per year largely to the start 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. As a result, the price of Picanol, which was making losses at the time, was extremely low. Due to the weak balance sheet and the crisis, Picanol had to lay off one-fifth of its staff and required a capital increase. The current strong man, Luc Tack, came up with fresh money and subscribed for 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 big 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 chemicals group's voting rights.
The chipmaker for the automotive sector ranked first three years in a row, but has to settle for silver because of a lean 2019, in which the net profit halved. Last year, geopolitical tensions led to a 5 percent drop in global car sales. Melexis is still growing a lot faster than the market. Each car has an average of 11 Melexis chips. The group aims for 20 chips within a few years.
The developer and lessor of logistics parks VGP is taking to the podium for the first time with a value creation of 18.9 percent per year. The share price follows that course almost perfectly. VGP is known for its high-quality services. As soon as the tenants move into the buildings, VGP also offers them management services. Through this interaction, VGP can make future and existing parks even better,' explains Millecam. VGP also created three successful joint ventures with the insurer Allianz, freeing up capital to further expand the pipeline. In the long term, VGP will benefit from the booming e-commerce, which will keep logistics buildings in demand.
Value Square also makes an annual comparison with Warren Buffett's Berkshire Hathaway holding company. Although Berkshire could not keep up with the pace of the S&P500 index in recent years, it was able to increase its fundamental value by 295 percent in a decade. That's equivalent to an annual return of 14.74 percent. Only the best six Belgians can outperform Buffett and its partner Charlie Munger.
Tekst: Serge Mampaey
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