Disclaimer: This isn’t funding recommendation. PLEASE DO YOUR OWN RESEARCH !!!!!
As talked about within the Efficiency overview, I had already construct up a brand new place in late 2024 in a brand new inventory. This time I’ll attempt one thing new: I’ll solely publish just a few sections of the write-up and solely those that ship me an e-mail will obtain the complete model (without spending a dime in fact).. The rationale for that is that I’m actually how lots of the readers are actally studying the complete doc. The bonus tune in fact is included on this publish on the finish.
0. Funding meme
For some unusual motive, I felt the urge to start out the pitch with this relatively “German humor” meme:
- Elevator pitch:
Jensen-Group, an organization initially from Denmark, now listed in Belgium, is a 420 mn EUR market cap “hidden champion” that’s the world market chief in “Heavy laundry” gear and automation. The corporate is run in third technology by the Jensen household which nonetheless controls 40% of the shares.
The corporate manufactures and sells globally and is driving some structural tailwinds, most notable vitality/useful resource effectivity and automation.
After a Covid pushed hunch in gross sales, 2023 revenues and earnings have surpassed pre-Covid ranges by a big quantity and 2024 appears to be like like one other double digit progress yr (gross sales +10%, EBIT +20% 9M 2024).
The corporate now achieves strong double digit EBIT margins (11,4% EBIT margin YTD) and a ROCE >20%. Though the inventory worth is near ATH (and the inventory is up +30% over 1 yr), the valuation could be very low with a P/E of round 10x for 2024 (and nearly no debt).
Though there isn’t any “laborious” catalyst, I do assume that the inventory is a probably very engaging funding at present worth ranges for the affected person enterprise centered investor.
- Introduction:
I had put Jensen Group on my watch checklist throughout my “all Belgian Shares” sequence in April and now its time to essentially comply with on. That is what I had written again then:
- The corporate
3.1. Historical past
Jensen was based in 1937 in Denmark and is presently led by Jesper Munch Jensen in third technology. The corporate has a really good historical past page. In a nutshell, the corporate really began as a dairy restore store however then moved into laundry know-how and thru acquisitions and personal developments turned a number one provider of enormous scale laundry options.
3.2. KPI overview
3.3. What Drawback does Jensen Group resolve ?
Jensen is a equipment manufacturing firm that provides options for “heavy responsibility” wet-laundry purposes. On their web site they offer a very good overview of their software areas:
So Inns, Hospitals. Cruise Ships are all heavy customers of “heavy responsibility laundry”. Regardless of the standard of the laundry course of itself, workers scarcity appears to be a giant challenge within the laundry trade as nicely.
One must type the soiled laundry, deal with it and in the long run dry and fold it and never combine laundry items throughout batches. Previously, to my understanding, there was a excessive stage of guide work concerned which appears to develop into an increasing number of tough to fill.
What Jensen Group gives are roughly totally automated options for many of the heavy responsibility laundry course of that may run 24/7 with a really decreased requirement of guide labour.
In case you wish to be taught extra, Jensen has plenty of good Youtube movies displaying completely different merchandise and laundry factories. I discover these Movies fairly stress-free after a tough day 😉
Compared to most opponents, Jensen can construct a big “laundry manufacturing facility” utterly and wherever on this planet resulting from their international presence.
6. Valuation / Anticipated return
Within the first 9 months of 2024, Jensen reported fairly spectacular numbers:
EBIT margins have additional elevated from 10% in 2023 to 11,5%.
Sadly, they don’t get away natural progress (Maxi Press is included on this)however nonetheless this appears to be like spectacular. Particularly the numerous order consumption appears to point that additional progress may be on the horizon.
Traditionally, Jensen has grown EPS by 11% over 20 years. Within the final 5 years, together with the Covid interval, progress accelerated to ~15% p.a.
Gross sales progress has been considerably decrease and appears like this (till 2023)
This hole is defined via a big enhance in profitability particularly on the backside line from 0,6% in 2003 to 7,8% in 2023.
So the problem right here is clearly to give you a practical progress price for Jenesen going ahead. Additionally it is clear that the final 2 or 3 years will not be consultant with respect to prime line progress.
Alternatively, as talked about earlier than, there are some robust basic tailwinds for Jensen. As well as, there’s additionally a very good likelihood to promote greater worth elements (Robotics, Software program) and growing the share of Companies is a transparent technique, supported by the acquisition of Maxi Press.
Personally, I believe an natural EPS progress price in a variety of 5-10% shouldn’t be completely unrealistic for the subsequent 2-5 years.
One attention-grabbing side with regard to quick time period progress can also be the actual fact, that the massive trade truthful TEXCare, which normally takes place very 4 years occurred in November 2024. Apparently, the TEXCare 2020 didn’t occur resulting from Covid so this was the primary large truthful after 8 years. I learn a number of feedback that the trade was VERY proud of orders at teh fare. I’m actually wanting ahead what Jensen will say once they report 2024 quantity s in early March.
It must be seen how Money conversion appears to be like in a extra “regular” yr like 2024. if we assume a 80% conversion, then based mostly on ~50 mn EBIT for 2024, FCF can be~ 40 mn EUR and(together with Maxipress buy worth) someplace between 7-9% present FCF/EV yield.
That in flip would end in a return expectation in a variety of 12-19% p.a. plus any extra return from a a number of enlargement.
As Jensen pays out solely a relative small portion of that money in Dividends plus some share purchase backs, the massive query in fact is how they’ll allocate money going ahead. In my view, they’ve allotted capital very nicely prior to now and I see no motive why this could change anytime quickly.
There are additionally not plenty of comparable corporations that I can consider, definitely circuitously. From my present universe, I’d assume Krones and 2G Power may be the closest ones that I can consider. Each promote globally, assemble relativ complicated machines and don’t promote to car producers.
Here’s a small comp sheet:
We are able to see that Krones, the bigger German producer of bottling machines is equally valued, 2G a lot greater. Krones as such can also be an attention-grabbing firm that I wish to look deeper, identical as 2G. Nevertheless, in 2G’s case, plenty of progress appears to be priced in.
10. Conclusion & Abstract:
As talked about at first, it took a while earlier than my enthusiasm grew for the corporate. I had appeared on the firm already just a few occasions till I bought actually . Nevertheless, the extra I researched and examine them, the higher I favored the corporate and the enterprise.
On the backside line, one will get a decently managed firm that has first rate progress and margins at a really first rate valuation. In the event that they handle to proceed to develop, not solely EPS might develop however sooner or later in time, right here can also be a very good likelihood to get a (considerably) greater valuation a number of.
In any case, I began a 4% place at round 42 EUR per share already in December 2024.
As there isn’t any laborious catalyst, the subsequent related date might be starting of March when Jensen then reviews 2024 numbers. it will likely be particularly attention-grabbing to see if orders have considerably elevated after the TEXCare truthful in November. If enterprise additional accelerates, I’d enhance the place to a full place.
Annex: Bonus Music: “Soiled Deeds” from ACDC:
https://www.youtube.com/watch?v=whQQpwwvSh4