* Sentiment on trading discount not yet bringing opportunities — Industrial
holding companies as potential investments boil down to three key elements:
performance of the underlying investments, dividend policy and the trading discount
to net assets. This last point is the most volatile, driven by the degree to which
underlying investment portfolios can be replicated and market sentiment. We
expand our coverage universe with the addition of Industrivarden and aim to identify
opportunities to play this under-explored space.
* Initiate coverage on Industrivarden with Sell — We initiate on Sweden-based
industrial holding company Industrivarden AB with a Sell rating and a price target of
SEK 155 per share. Based on a forecast 2015E dividend of SEK 6.75 per share and
a widening of its trading discount towards a long-term sector average of 20%
(currently 7%), we expect a 12-month total return of -6%.
* Remain Neutral on GBL — GBL is showing some positive signs that its strategy to
rebalance its portfolio is starting to come through. This could start to drive, finally, a
narrowing of its stubbornly-stable trading discount, but we feel it is still a bit too early
to build this into our valuation. We await its capital markets day on 24 September as
a possible catalyst, but retain our Neutral rating at this time.
* Remain Neutral on Investor — Investor has traded broadly flat since we reduced
its rating to Neutral in April and we maintain this Neutral view at current levels. We
assume that its trading discount will remain at a sector average 20% over the
coming 12 months, but referenced against our adjusted NAV estimate, which
includes ‘hidden value’ in its Molnlycke holding.