Hexatronic receives huge order in UK

Hexatronic’ site in Hudiksvall

As Hexatronic released their year-end report on Friday the announced a huge agreement in UK worth around 500 MSEK. Compared to 2018, this agreement equals around 30% of the total revenues. The sheer size of the order will make its imprint on the reports the coming years. During 2018, Hexatronic have had problems on the Swedish market. Due to legal problems and a long winter in the beginning of the year, building fibre networks have slowed down. This combined with the high number of acquisitions during 2017 and 2018 have reduced revenues generated in Sweden from 60 % to 35 % of the total revenues. The dependency on the one marked is significantly reduced, somewhat reducing the overall risk in the Hexatronic share.

Acquisition-driven growth

In 2018 Hexatronic’ revenues grew 23 %. In the same period the organic growth has been -6 % because of the weak Swedish market. During the past years, Hexatronic have acquired companies in key markets, the US, the UK and the German market. All three are large markets and have low penetration of fibre network. In 2018 Hexatronic acquired German Opternus (revenues 15 MEUR), British Professional Quality Management Services (revenues 4.2 MGBP) and finalised the Acquisition of US Blue Diamond Industries (revenues 29 MUSD) announced in late 2017. The weak Swedish market have put pressure on the margins on Hexatronic. The EBITDA in 2018 was 8.7 % (11.6 % in 2017). It is below the 10%-target, Hexatronic has set up for themselves.

The UK order

The order is the second order from CityFibre. In August, Hexatronic announced a 70 MSEK order in the UK market and the same customer, now named, made a follow-up on Friday worth 500 MSEK CityFibre announced last year a plan for building fibre networks across the UK. They plan to invest 2.5 billon GBP to connect 5 million homes. The current order covers the first million homes. When CityFibre choses Hexatronic for the first two steps, it indicates that Hexatronic is in a very strong position to win significant orders for the remaining 4 million homes in the next 6 year up to 2025.

The share in 2018 and 2019

The difficult Swedish market has set the tone for the Hexatronic share during 2018. To some extent, this is unjust. Despite a growth in revenues of 23%, significant orders, and the number of acquisitions the share took a beating during 2018 and fell 40 % from 78 SEK in January to 46.7 SEK just before New Year. In 2019, the share have recovered some and closed after the announcement of the order at 57.5 SEK.

Personally I expect the year-end report and the large order will set a new direction for the share in 2019. Q4 gave indications that organic growth again will add to acquisition driven growth, the Swedish market seem back on track, and we will soon see the effect of the resent acquisitions especially in the US. Only cloud on the sky is a patent infringement case in the UK where Emtelle has made an lawsuit. the past few years Emtelle have lost similar cases in Sweden and New Zealand.

Shares in 2018


Well, Trump and Brexit hit the share market hard in December. Probably it affected every corner of the global share markets. Even the Swedish were I invested my money. Looking back on 2018 a few shares performed very well – and too many performed awful. In 2018, I even experienced the first bankruptcy, as CybAero had to close and the shares lost their value. The 2018 newcomer is PolarCool, a spin-off from BrainCool, who had its debut on Spotlight market at the end of November.

2018 share pride development. (* New in November, ** Bankrupt in June)

Losers in 2018

In general the broad Stockholm index (OMXSPI) lost 7.7 % during 2018. The average loss in my portfolio was 10.4 %. Again this year (as in 2017), my portfolio performed worse than the index.

The main culprit is of course CybAero with a loss of 100 % as the share lost its value after the bankruptcy in June.

A1M Pharma also lost a significant part of its value during the year. To make things worse, A1M announced yet another preferential rights issue shortly before Christmas. During autumn, there came a new CEO and new chairperson of the board. NASDAQ has furthermore placed the share on the observation list. Since the IPO, there have been an issue each year – 2015, 2016, 2017, 2018, and now 2019 – weighting the share down heavily. The share lost 90 % of its value in 2018.

In terms of investor value, PolarCool did not bring much to the portfolio. On its first day the share lost approximately 50 % of the issue price of 2 SEK. This continued through December and with a closing price of 0.56 SEK on Friday, the share is down 72 %. I hope the company will be more successful in 2019 as the product can limit the damages caused by concussions in sports.

Waystream performed almost as bad. Down 69 % during the year due to low sales. The reaction during the year was harsh, and to some extent, unjust. The present market cap is 21.1 MSEK – compared to a turnover from January to September of 57.3 MSEK. Higher sales will probably lift the share significantly. Of course, I hope it will happen soon.

Winners then

Dignitana is up 79 % during 2018 despite an issue in December. If we go back two years, the price was 19.30 SEK so there still is some steps ahead before we reach the former levels. Probably Dignitana will start to generate cash in 2019.

Heliospectra is up 60 % almost recovering for the loss in 2017. During the year, the share had two peaks. One in January where it shortly went above 10 SEK and one in July where it peaked at 9.74 SEK. Lack of announced orders caused it to fall back, I think. Personally, I am a bit worried about the lack of announced orders in November and December. Right now orders seem too few.

Fortnox went up 55 % in 2018. This follows the 45 % rise in 2017. Of the shares in the portfolio, Fortnox is the most stable growing share. On several occasions during the second half of 2018, the share even has been above 80 SEK, with a top at 84.50 SEK in late august. I tend to think that a price SEK 80+ is fine, but the P/E at that share price is too high. I am sure we will see these SEK 80+ levels again during 2019 as Fortnox both extends the number of costumers and their individual spending. In Q3, the turnover growth was 38 % with an operating margin of 34 %.

It is difficult to make predictions – especially about the future

There are a number of companies where a crucial element in 2019 will be the growth in sales. In mature companies this along with the ability to earn profits are of course the main driver for the share price.

For many of the companies in my portfolio selling products and earning profits are the next step. Some still do not have products to sell. Cantargia and A1M Pharma are the best examples with years ahead before their products will reach consumers.

A number of companies have some sales, but they are still struggling to reach breakeven. This goes for AroCell, BrainCool, Dignitana, Heliospectra, Nexam Chemical, Recyctec, Phase Holographic, and PolarCool. Of these, I think Nexam, Dignitana and perhaps Recyctec are the most likely candidates to reach a positive cash flow and perhaps even breakeven in 2019.

Waystream balances on breakeven and if they manages to return to positive cash flow and earn profits, I guess we will see the share go up again.

Fortnox and Hexatronic both earn profits and grow. Their share prices have developed quote opposite, though. Where Fortnox have grown organically, Hexatronic have grown through acquisitions during 2018. I expect both companies to grow significantly during 2019. I hope that Hexatronic will resume its organic growth along the acquisition-based growth.

Then there is Trump and Brexit. Both injects uncertainty into the market – which always will make shares fall. A hard Brexit will directly affect a number of companies in my portfolio. Hexatronic have identified UK as a priority market and a number of BrainCools studies have been conducted in the UK. Nexam have production facilities in Scotland. With a weaker UK economy, they will have trouble on the UK market, and trouble moving products from UK to the rest of Europe. In truth this might be more important than individual company specific drivers.

Check out my growth share portfolio, the share price trigger list or my EGS (Evaluation of Growth Shares) Model.

Rally in BrainCool


During 2018, there has been a steady news stream from BrainCool. Despite this, the share price have gone down for the better part of the year moving from 8.77 SEK in the first week of January to the low point at 4.9 SEK in July. Since then it has recovered and during August and September held ground between 6 and 7 SEK. Then suddenly on October 1th, a rally started and in three days, it jumped no less than 79 %, from 7.0 SEK to 12.4 SEK. Continue reading

Fortnox report

Fortnox a silent winner


My best-performing share the past two years are by far Fortnox. At the same time, the Fortnox share does not attract much attention in forums and elsewhere investors discuss their investments. Probably because the news flow is low. There is a report, then three months later another. During these three months, the only thing that had happened is that Fortnox earns more money, acquire more customers and have a better marginal. That is why I think of Fortnox as a silent winner. Continue reading

Portfolio H1-18

Portfolio performance first half of 2018


First half of 2018 have been exiting. During the first six months one share have more than doubled and one almost – and in the other end of the lane, one went bankrupt. It is the first time I experience a company going bankrupt as investor. I was not exactly surprised, as trading has been on halt for many months. Nevertheless, it is sad.

Above is the portfolio development during H1. As OMX SPI shows the Swedish index was almost flat (+0.9 %) during the period. Compared the portfolio on average went up 4.4 %. Continue reading

Dignitana share price

From large to small – the role of Dignitana in my portfolio


Dignitana was for a time the largest position in my portfolio. It is not anymore, despite the fact that I hold approximately the same number of shares as before. The share price at all-time low and the company is struggling to achieve the necessary turnover to be profitable. In this post, I sum up the development that Dignitana has been through the past three-four years to give an idea of where to go from here. Continue reading

Hard and unjust punishment of Nexam after Q1 report


The Q1 report from Nexam came on Wednesday. This is the first report for a full quarter after the acquisition of Plasticolor. Of course, this makes comparison difficult. Nevertheless, I cannot find reason in the report for a 9.4 % fall. The market reaction seems both hard and unjust. Continue reading


Strong quarter for Hexatronic despite hard winter


The Q1 report from Hexatronic came out Friday last week. Traditionally Q1 is the weakest quarter. Furthermore, Easter was in Q1, which affects revenues negatively. And it has been a harsh winter. Nevertheless, Hexatronic came out with a 16 % growth and higher profits compared to Q1-17. I added a few more shares after the report. Continue reading