24 APR, 2023
By Francisco Rodríguez d’Achille and Iván Díez, Partners and Directors of LONVIA Capital
Despite the difficult start to 2023, with the collapse of Silicon Valley Bank in the US shaking the foundations of the banking system and reaching as far as Europe, where it hit Credit Suisse, there are still significant investment opportunities. Abstracting from external factors and focusing on the long term, Small&Mid caps are once again positioning themselves as an interesting asset class, highlighting Europe’s global leadership role in some specific market niches.
Firstly, we could highlight the medical technology segment. Historically the best contributor to performance each year, it has experienced a more mitigated performance since the beginning of 2023. After peaking in 2021, driven by exceptional growth rates and very low-interest rates, the latter experienced a strong compression of multiples last year resulting in a normalization of valuations until the third quarter.
On the other hand, although there are doubts about the level of funding for research and development of advanced therapies, companies seem quite comfortable with the continuation of the underlying dynamics in biotech and advanced therapies, with demand for equipment expected to remain strong, albeit at more normalized levels, after the exceptional years of 2020 and 2021. Sartorius Stedim customers, for example, have announced that they expect their orders to increase by 5-20% in 2023.
In the corporate software segment, we highlight Fortnox’s continued good releases and performance, with sales up 34% in Q4 2022 and a record EBIT margin of 41%. Atoss software also makes progress following the release of annual results again above target and significantly increases its mid-term targets for 2023-2025. In industrial software, Nemetschek and Mensch & Maschine show good guidance after solid results. The latter company reached the upper limit of its full-year forecast and its revenues increased by 27% to EUR 92 million.
In the field of industrial automation, HMS Networks, a key player in Industry 4.0, is again on track as the company posted very good results in the fourth quarter with sales up +34% benefiting from the ongoing standardization of supply chains. Also noteworthy was the strong performance of Interroll, which recorded a strong increase in its margin.
In semiconductors, the short, medium, and long-term fundamental outlook remains favorable for companies in this segment. Besi, Comet, and Asmi would be the companies we would like to highlight with the best performances also at the beginning of 2023.
Undoubtedly, the past year 2022 (following the trend during this first quarter of 2023) has opened a window of opportunity, in terms of quality and valuations, in these companies called “the European champions of tomorrow”, which continue to consolidate in their respective high-growth niches, positioning themselves as true global leaders with great geographic diversification of their revenues.