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Geneva asset manager reveals overlooked peripheral plays

Geneva asset manager reveals overlooked peripheral plays

The best opportunities in European equities lie in peripheral countries, Geneva asset manager Quaero Capital has found, releasing a rundown of companies to watch in the space.

In fact, Greece has been the best performing market in Europe in the first half of the year, rising 28%, the Geneva boutique’s European smaller companies team reported.

With tourist season ahead, a strong holding in the European Smaller Companies fund has been consumer goods firm Sarantis, which has multiplied by 10 since Quaero first invested in January 2012.

Another strong contributor to the fund is Mytilineos, which is up 34% since the beginning of the year, as the company has bought out minority shareholders to form a larger entity.

‘We expect a new strategic plan, which will include the intention to pay dividends, to be announced, alongside a new name for the company, which is still trading at a valuation barely above accounting book value and on a single-digit P/E ratio,’ the group said in a statement.

Stars of the Iberian Peninsula

The Geneva group’s investment in the Iberian Peninsula has grown, now representing a 17% weighting in the value-driven European Smaller Companies strategy, evenly spread between Portugal and Spain.

A productive holding in the region has been swimming pool equipment maker Fluidra, which rose 29% in Q2 after reporting organic growth of 13%. The company is owned by four local families and the share continues to be under-held by the local investment community, Quaero said.

‘We expect the company to go on to generate results for the 2017 that will be ahead of their estimates for 2018.

‘It may also become an attractive target for a large US player. We usually perceive family ownership as a barrier for takeover, but when a bid is eventually accepted by the family, the premiums tend to be substantially higher.’

Portuguese holding company Sonae Capital has generated a return of 19% over the quarter and distributed a bumper dividend equating to a yield of 11%.

As it continues to reduce debt levels by selling assets, the firm is looking to become the private equity firm of the Azevedo family’s Sonae.

‘We believe the value of the company’s assets are continuing to rise as the property recovery which started in Lisbon and the Algarve is starting to move north to Porto where the company is more firmly based. With this more positive backdrop, it is surprising that the share is still trading at such a large discount to the value of its net assets.’  




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