Author Topic: SCHO.CPH - Schouw & Co. A/S  (Read 18441 times)

John Hjorth

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SCHO.CPH - Schouw & Co. A/S
« on: December 08, 2016, 05:06:09 PM »
This a former languishing paper and cardboard factory, that through this century has morphed into an industrial conclomerate - so far, a very successful one, [speaking very short!]

You might ask: "A Danish stock? - and "under the radar?"" and I don't know what.

Link for non-Scandinavian investors: here.

Link for Scandinavian investors: here.

Please take a look - if you are interested - at the latest aquisition done by the company, based on 2016Q3 reporting, on the website, compared to the attached.

I have spend quite some time studying this thing. Please feel free to ask questions in this topic.
« Last Edit: December 14, 2016, 09:40:56 PM by Parsad »
”In the race of excellence … there is no finish line.”
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rb

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Re: Schouw & Co [SCHO.CPH]
« Reply #1 on: December 08, 2016, 05:21:13 PM »
Interesting. Do you know why they had that stock price collapse in 2008?

Alex.N.B

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Re: Schouw & Co [SCHO.CPH]
« Reply #2 on: December 08, 2016, 05:55:38 PM »
any thoughts on valuation?

John Hjorth

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #3 on: December 08, 2016, 07:16:50 PM »
Interesting. Do you know why they had that stock price collapse in 2008?

The company betted hard - very hard - on getting one of the predecessors of Vestas Wind Systems A/S [VWS.CPH] [NEG Micon] to get it out of its daire straits, and was paid for that - dearly.
« Last Edit: December 09, 2016, 06:29:21 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
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John Hjorth

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #4 on: December 08, 2016, 07:49:45 PM »
any thoughts on valuation?

Alex,

Point taken - somehow. You can make your calculations. Most likely, You will be surprised what will be hapening going forwards. So will I. As I have already been.

Edit:

Trying here to give a more constructive answer to Alex.

I think a valuation method could be sum of the parts for the subsidiaries plus net assets ex shares in subsidiaries for the holding company, deducted an estimated net present value of costs at the holding company level.

The subsidiary BioMar is a major part of this conglomerate, and I have tried to find the major competitors and see if they were listed to get some kind of perception of the value of BioMar. Unfortunately I haven't been able to idetify them. [As I understand things, BioMar is the worlds third largest producer of fish food.]

The company is right now sitting on a cash pile in the area of DKK 1.5 B after the sale of the shares in Kramp. What really matters here also is what the company will do with that cash. My guess is that it will be big - really big - perhaps in the range of DKK 2 - 3 B and involving leverage in the aquisition. Something that is Danish, and right now privately held. [Perhaps a big chunk or the whole of a small well run Danish regional bank? - I really don't know - The company has done crazy stuff before.]

The CEO Jens Bjerg Sørensen has proved him self to be a skilled operator and capital allocator under his 15 year long tenure, and his runway will likely be 10 years more before his retirement, unless something bad happens along the way.

The "problem" [sort of a good one, if a problem even can be a good one] is also with regard to valuation: How do you calculate a value of a strong cash flow combined with proven capital allocation skills for the management.

Seems to be like doing a sort of sum of the parts valuation on BRK in 1980 or the like without adding some component related to the value of the BRK cash flow combined with the capital allocation skills of Mr. Buffett and Mr. Munger.
« Last Edit: December 09, 2016, 06:32:13 AM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

DooDiligence

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #5 on: December 11, 2016, 12:04:55 AM »
Mr. Sorensen mentioned an interest in opening a GPV facility in Mexico to gain access to US markets.

Given the Donalds hostile posture do you think they'll hold off on Mexico or will it not make a difference?

I noticed that Fibretex added a US based biz by acquiring Non Woven Solutions a few years ago.

What kind of investments has Incuba made & are they active managers?

Wikipedia lists the three major manufacturers of fish feeds for aquaculture as Biomar, EWOS (owned by Cargill) and Skretting (Skretting claims to be the largest producer.)

http://mobile.feednavigator.com/Manufacturers/Biomar-Skretting-and-Cargill-look-to-ways-to-push-novel-oils-into-the-salmon-feed-supply-chain

This seems a very interesting conglomerate to be trading at barely over book (very little intangibles & lots of depreciation of PPE - is there additional hidden value?)

Why did they sell Kramp?

I'll keep reading...
« Last Edit: December 11, 2016, 08:53:14 AM by DooDiligence »
abc 2.6 | abev 1.6 | aapl 0.9 | bbh 3.3 | brk.b 10.0 | chtr 4.2 | cvs 5.7 | dva 5.5 | dis 4.1 | ew 2.1 | gpc 2.8 | mo 6.1 | nvo 5.1 | sftby 2.3 | vde 4.2

(%'s held @ cost, PV allos are slightly 2 significantly higher. includes a slowly dwindling cash pile.)

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John Hjorth

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #6 on: December 11, 2016, 04:26:26 PM »
Thank you very much for the help with the BioMar competitors here, DooDiligence. I need to do some more work to understand this industry, that BioMar is in, and perhaps later post some more about it here.

Kramp:

Company annoucement about the sale of the Kramp shares of September 9 2016. Schouw want - and requires - control, which the company could not get here. So the company walked away with the money leaving the company to the investment partner, to now go somewhere else to invest the proceeds.

Incuba:

Incuba is held by Schouw through an intermediate holding company called Incuba Invest A/S.

The shareholders of Incuba Invest A/S are:

Schouw - 49.02%
Aarhus University Research Foundation - 32.21% Link.
NRGi a.m.b.a. - 18.77% [It's a Danish Power Utility - principally oprating in the middle and Nordthern part of Jutland].

The shareholders of Incuba A/S are:

Incuba Invest A/S - 45%
Aarhus University Research Foundation - 55%

From the Incuba AS report, p.6, translated to English:

"INCUBA's purpose is to establish and operate firmbased science that supports especially smaller business innovation and growth. Science parks are operated at 3 locations, each with its own professional fulcrum: IT Katrinebjerg, health Skejby and cleantech at Navitas"

So basically Incuba is mainly a real estate company, providing housing to a range of small melting pots.

I have family in Aarhus. I think I will take look at the buildings etc. next time I visit my elder brother and his family.

The 2015 financials for Incuba Invest A/S and Incuba A/S are attached [unfortunately only available in Danish].
« Last Edit: December 11, 2016, 04:55:03 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

DooDiligence

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #7 on: December 11, 2016, 11:19:28 PM »
Good Morning John (I hope you & your wife are enjoying a beautiful orange Danish day today!)

The list of Incuba companies / industries is very wide & includes some well known multi nationals like Furuno, Honeywell, Amerisource Bergen World Courier, Wise Consulting.

I started Googling each & quickly got overwhelmed but noticed a large percentage with English language sites which seems to show global ambitions for many of the businesses / tenants at Incuba.

This seems like a great knowledge hub & I'd be curious about the atmosphere (co-mingling opportunities between businesses through shared facilities...)

Are some of these companies like Robotic Ultrasound actually manufacturing here?

Are there facilities for the bio techs to do hard science?

For my own selfish reasons, I notice that Novo Nordisk is conspicuously absent?!?

It seems like this facility may not actually be a huge driver of revenues for the company now but I'll bet the activities going on there have & will lead to opportunities for the company & the nation.

Is it normal for a company like Schouw to be trading marginally above book or am I reading the numbers wrong?

Fair warning; Aarhus sounds like a wonderful place to visit!
« Last Edit: December 11, 2016, 11:24:00 PM by DooDiligence »
abc 2.6 | abev 1.6 | aapl 0.9 | bbh 3.3 | brk.b 10.0 | chtr 4.2 | cvs 5.7 | dva 5.5 | dis 4.1 | ew 2.1 | gpc 2.8 | mo 6.1 | nvo 5.1 | sftby 2.3 | vde 4.2

(%'s held @ cost, PV allos are slightly 2 significantly higher. includes a slowly dwindling cash pile.)

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DooDiligence

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #8 on: December 12, 2016, 12:59:04 AM »
Oops; I started Googling before reading their Nov 2016 report which is answering a lot of my questions...

Management seems extremely candid.
« Last Edit: December 12, 2016, 01:06:11 AM by DooDiligence »
abc 2.6 | abev 1.6 | aapl 0.9 | bbh 3.3 | brk.b 10.0 | chtr 4.2 | cvs 5.7 | dva 5.5 | dis 4.1 | ew 2.1 | gpc 2.8 | mo 6.1 | nvo 5.1 | sftby 2.3 | vde 4.2

(%'s held @ cost, PV allos are slightly 2 significantly higher. includes a slowly dwindling cash pile.)

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John Hjorth

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Re: Schouw & Co. A/S [SCHO.CPH]
« Reply #9 on: December 12, 2016, 02:59:46 PM »
DooDiligence,

Thanks, bad weather today - also in the morning - I would say: as almost always on this time of the year here.

Yes, with regard to the three locations owned and run by Incuba A/S, I imagine it's like three beehives, filled with incredible smart, busy and diligent people working around the clock for their own dream to come true. [Which also make me think they [the beehives] must be gold plated or something like that, with a book value of ~DKK 900 M!] Most likely not production facilities, but rather offices and labs. [When the startups either fails by running out out cash and lack of access to further funding, or they enter to the startup of the production phase, they move out by closing shop, or move somewhere else to start production for real.

A more or less constant in- and outflux of tennants in the buildings over time - A real nightmare to manage, by the way!

There is a good write-up about Incuba in the 2001 financials [it's still with access on the website]. At the foundation of Incuba Schouw held 40%, and company called Dansk Kapitalanlæg A/S also held 40%.

Dansk Kapitalanlæg A/S was a fairly large venture capital and private equity company, owned by major Danish banks and insurance companies. At some time that company was set in run-off mode, and is now liquidated not so long ago. The CEO of that company was the Schouw board member Niels Kristian Agner. He also joined the Schouw board in  1988. So the shift in strategy for Schouw at that time to the conglomerate setup and the Incuba investment I do consider far from coincidental.

The University Foundation is an enormous sucker with an enormous book equity, due to it's ownership of Cheminova during many years and the dividends from Cheminova, followed by the sale of Cheminova to FMC Corporation in 2014 for DKK 8.5 B, and appearently the Foundation wanted to do more and more of this Incuba stuff, so things ended up as is now, with Schouw holding only a minor stake in the beehives and Dansk Kapitalanlæg A/S out.

So, what this is for Schouw now is actually an investment pipeline where actually the Foundation has the most capital commited to keeping it running- for Schouw to pick up investments in startups with good prospects.

A few years back I was with the Lady of the House at a Sushi restaurant in London. It was a quite special restaurant. No tables in the middle of the room - lots of free space there - for a reason: Along the walls was a small conveyer system running eternally in a circle - out through the kicthen, so one just picked some food on a small dish at your own choice while it  passed you, without even beeing served by anyone - only staff in kitchen to make the food and one person taking care of your payment.

The original Incuba A/S is now Incuba Invest A/S, and the beehives are now put in the associate Incuba A/S. Schouw makes there picks among the startups in Incuba Invest A/S, where it doesen't have to share profits with the Foundation at the same rate, because the Foundation has a lot capital committed directly in Incuba A/S.

So Jens Bjerg Sørensen is not sitting waiting for the phone to call, like Mr. Buffet. In stead, he is calling a staff member at Incuba A/S: "Any new tennants that I have not heard about?" [Perhaps quarterly or semi-anually]. If any, he jumps in his car when he has the time for it, all three bee hives are within 15 minutes driving distance from Schouw HQ, to go on a visit of courtesy - and certainly also curiousity, presenting him self as a small co-owner of the actual bee hive in mention, and the chat starts : "Please tell me a bit about what you're doing?", and he listens, and after the chat ends, it's one of two alternatives:

a. Thank you for the talk - it sounds very interesting! - Good luck with it! - Nice meeting you - goodbye.
b. Thank you for the talk - it sounds very interesting! - Good luck with it! - Here is my business card, please give me a call, if you need more capital, and we can discuss. - Nice meeting you - goodbye.

Incuba Invest divests shares in Scandinavian Micro Biodevices [August 11, 2016] [at a gain of DKK 60 M]

I consider this a tiny and brilliant nebengeschäft aside all the long term conglomerate investment stuff involving the big bucks.
« Last Edit: December 12, 2016, 03:26:25 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai