Picanol dethrones Melexis as Brussels value champion

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 chipmaker Melexis, according to a study by Value Square.

As the name suggests, asset manager Value Square is a value investor par excellence. To find the value champions, the Ghent house has been calculating for 14 years in a row which Belgian listed companies created the most fundamental value. To do this, Value Square does not look at the stock price, but at the evolution of book value - i.e. equity - added to the net dividends paid.

“In the long term, stock prices should follow the evolution of the underlying fundamental value. That's what superinvestor Warren Buffett posits,” said Patrick Millecam, Value Square's chief strategist. “That appears to be true in our study. Over the past ten years, the 89 companies we analyzed achieved an average fundamental increase in value of 5.47%. The Belgian All Share Index did even better with a return of 7.17 percent. The same trend also applies to our top ten: an average increase in value of 18.33 percent, compared to a stock market climb of 16.86 percent. '
However, there are exceptions to the rule. Two companies in the top 20 of greatest value creation, EVS and Orange Belgium, even saw their prices fall. EVS paid generous dividends, but for Orange Belgium, either the current price is too low or the price was too high ten years ago.

Who is in the top three?

1. Picanol

The loom-maker Picanol owes its gold medal and its 40 percent annual yield largely to the start date. “2008 and 2009 were one of the hardest years in history for the textile industry, and perhaps even more so for loom manufacturers,” says Millecam. The price of the then loss-making Picanol was therefore extremely low. “Due to the weak balance sheet and the crisis, Picanol had to lay off a fifth of its staff and a capital increase was necessary.”

The current strong man, Luc Tack, came up with fresh money and subscribed for new shares at just 1.27 euros. That is 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 equipment. Picanol now controls 62 percent of the chemical group's voting rights.

2. Melexis

The automotive chipmaker ranked first three years in a row, but has to settle for silver due to a lean 2019, in which net profit halved. Last year, global car sales fell 5 percent due to geopolitical tensions. However, Melexis is still growing much faster than the market. Each car has an average of 11 Melexis chips. The group is targeting 20 copies within a few years.

3. VGP

The developer and lessor of logistics parks VGP is advancing to a podium finish for the first time with a value creation of 18.9 percent per year. The stock price follows that course almost perfectly. “VGP is known for its 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 insurer Allianz, freeing up capital to further expand the pipeline. In the long term, VGP will benefit from booming e-commerce, so that logistics buildings remain in demand. '

Every year, Value Square also compares with Warren Buffett's Berkshire Hathaway holding company. Although Berkshire has been unable to 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. This corresponds to a return of 14.74 percent per year. Only the top six Belgians can beat Buffett and his partner Charlie Munger.

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