TECH
🤔 Technion, a Swedish serial acquirer focused on industrial and niche companies, is under scrutiny for failing to meet its promised 20% return on investment target, currently achieving only 6% over the last five years.
📉 Legacy businesses linked to real estate are performing poorly, negatively impacting organic growth and operating margins, raising concerns about the overall strategy execution.
🔄 High CFO turnover and reliance on future performance improvements create uncertainty, placing the stock in a ‘standby’ mode despite recent increased acquisition activity in the UK.
@adriarivero:
“Technion is a position I’ve held for quite some time. For those unfamiliar, it’s basically a Swedish serial acquirer. A serial acquirer is a company that grows by making acquisitions. It grows organically through its existing businesses and inorganically by buying other companies and integrating them. The key is acquiring quality companies with competitive advantages and good organic growth, and doing so at attractive prices. Technion focuses on industrial and niche companies, primarily in Sweden and Nordic countries, and now increasingly in the UK, which seems reasonable given the cheap opportunities there due to capital outflows and economic/political issues. However, I’ve become increasingly disappointed. They promised returns based on paying five times earnings (a P/E of 5), implying a 20% return on investment, which is great. But they aren’t delivering, and that worries me. The position is on standby. Legacy companies bought before 2007-2008, focused on cyclical real estate, are struggling and represent a high percentage of sales. This led to poor recent results, negative organic growth, and double-digit drops in operating margins. High CFO turnover (up to four recently) is another yellow, maybe red, flag. You have to trust the management team. Chris Meyer is on the board, which is good, but not everything. Johan Stelin, the CEO, I like less now. Daniel, involved in acquisitions and improving legacy assets, is a key reason I’m still invested; his book on mental models impressed me. They are trying to buy better businesses now. The actual ROIC over 5 years is 6%, far from the promise. If numbers don’t improve, I’d seriously consider selling. Positively, acquisition pace has increased recently (Feb-Apr), mostly in UK/Sweden, potentially adding 15% to sales this year. The question is: are they buying well, or overpaying to mask legacy issues? We’ll see in the next results.”
Watch the exact part of the video where @adriarivero talks about Technion AB here:
Watch the video on YouTube
Read more articles analyzing Technion AB (TECH) at the following link. TECH stock.
