On Saturday 25th of February, it was D-day again for investors in Flanders. VFB organized his congress in the Kinepolis in Antwerp. More than 1000 investors attended this conference. The conference was focused on Technology and Innovation.

Here is the program of the companies presenting their company strategy and results. Programma Happening

Additionally there was a program of workshops. Happening Workshops

So with this full agenda in my hand, I had four objectives and main reasons for visiting this event.

1. Attend company presentations (and workshops if possible)
2. Do some market research and talk to this Flemish investor. Who is he or she? Why does he attend this happening? And what do the students think? I had prepared a list of 6 simple questions to get a good idea of the investor attending this event
3. Visit the different booths of the companies, software vendors, banks, magazines, …but with a focus on Belgian Dividend Paying companies.
4. Find out about new books, information where we can learn from…

Find below our report of the day and What did we learn?

Welcome words by Sven Sterckx, chairman of VFB 

The chairman of the VFB, Sven starts the conference with explaining the fact that investors’ portfolios have shifted over the years from 60% cash and bonds to 20% stocks. This is a positive signal. The day program of the congress is focused on companies working with Technology and Innovation. He quotes Freeman Dyson who said :“Technology is a gift of God. After the gift of life it is perhaps the greatest of God’s gifts.”

Technology is a driver of economic growth. Sven believes we are in a new technology revolution where digitalization will replace human tasks. One example is the Robo-advisor where the financial sector will make use of. Demographically the population will shrink so technology will be needed to drive economic growth. That’s what the program of the conference is all about. What companies work with technology and what are their growth plans to make an investment of your money worth it?

1. Company Presentations

Bekaert – Baron Bert De Graeve

Bekaert is a company that exists 137 years and is a global company focused on technology. An industrial company for years in the Euronext Brussels – BEL20 with a turnover of 3,7 billion revenue. One out of three tyres has been enforced by Bekaert. Bekaert won the price for innovation for their wire used within concrete enforcements. Many products that innovate within different industries…

Bekaert is a simple company (steel wire) with a lot of products in different industries. Some wires are ultrathin. Automobile industry is a key market for Bekaert representing 43% of their revenue. 23% of the revenue is in the construction business. Other industries are utilities, agriculture, machines construction and basic materials. Bekaert is geographically represented in all parts of the globe with a continuous growth in different continents. 50% of automobile business is done in EMEA and North America. In APAC the automotive business is even bigger. India has even a bigger growth potential. The factory is in Indonesia. Europe and China are most profitable regions. It is vital to be close to the customer in order to realize growth.

Technology is defined by “Understanding customers”. The goal is for the heart and the mind. Technological leadership is defined by innovation. You can’t survive without innovation. Adapting more quickly is required in order to maintain leadership. Cost containment and savings is key and the Chinese competitors have taught Bekaert to be cost efficient. Chinese employees want to win and China is the incubator today to kick off such programs.

Where are we from a financial perspective? Operational EBIT of 8% is our current result but the goal is 10%. This is a big objective but achievable. During 2 years we had a difficult time due to Chinese competition. The goal is to increase profitability and divest losing investments. 2017 will not be a growth year because we acquired another company Bridon that is active in specific industries. Together we can be more profitable but we need to integrate this company first. The end goal is 10% which should be achievable and good for investors.

Shareholders value is important for Bekaert. What is important here? By acquisition of Pirelli and Bridon, we can improve growth potential and profitability with bigger margins. 50 million is also achieved by cost savings. This is achieved by working more efficiently using better processes using technology.

Innovation is important key driver for growth. The acquisition of Pirelli was an example. Nobody was able to do this… Now Bekaert is also fighting copy cats in China. Now the company has more legal power with more than 1500 patents.

An team of 550 engineers drives technology in the different factories around the globe. This is represented in BMS Program.

Product innovation is demonstrated by an example in tyres for cars and trucks. Another example is Fortifix for road construction.

Innovation is a way of working. It’s the way you deal with employees, customers and suppliers to guarantee a sustainable innovative product. Employee safety is a KEY PROGRAM called BE CARE.

Investing in Bekaert is being part of a great company with growth potential. We want to be a global technology leader going forward by creating value. The end objective is 10% EBIT margin. There’s great corporate governance and transparency as Bekaert is listed on the stock market. There’s a good dividend which the company wants to sustain going forward…

 Our own opinion and remarks

This was a great company presentation showing the strategic thinking Of Bekaert. The company has growth plans and forecasts a clear profitability EBITDA target . A value investor who loves quality investments certainly should consider investing in Bekaert. The share price is now consolidating between 45 and 47. There’s a dividend payout of 1,1 Euro gross per share that will be paid in May. 

 

Technology, Innovation & Investing by Marc Lambotte – CEO Agoria

What is technology? Marc starts with the story of the Austin Martin, the car of his father and how this car was technology advanced. Younger people are no longer interested in car technology. What do you know about technology? Do you know the phenomenon Smomby – Smart phone Zombie…

Do you know that today robots can also function working with employees? Trucks driving without driver and linked with first truck – platooning. Schools with technology (ipad teaching) and without exist…

4,3 billion is the number of email boxes within the world and it is increasing. Email = yellow postcard going forward. Whatsapp and other apps will be the medium. But the name of the app doesn’t matter anymore. Technology won’t be important going forward….as you don’t care which manufacturer is taking care of it.  Younger people are no longer interested about technology as such but only in technology with a GOAL that is “Improving quality of life”.

What does this mean for Belgian companies? Do you want to invest in companies that have a competitive edge and leadership? Do you want to lead or follow as a company?

Example : Raytheon was an example of the microwave inventor. The followers won the battle.  Diamond Multimedia was inventor of MP3 player…now Apple, … See here the end result.

What did the winners see? The winners look at the market from a helicopter view. The followers were like medicine researchers focused on detail. Do you need to invest in companies in Belgium?

The market share of Belgian technology has declined since 2002 and is now stable. This is now changing and there’s little growth today. Investments in technology is increasing again with 9%. New jobs is a focus of especially the Belgian government. Now we are back in an upward trend. Agoria has the same key objective: create jobs. The goal is to create 10.000 jobs by 2020.

But there is one big problem. The jobs available on the market cannot be filled with the Belgian working population available. There are too many people not working and the jobs can still not be filled. There’s an unbalance. The tax pressure is not sustainable as well. The company taxes are too high and take more than 50% of the companies added value. In Belgium taxes on capital and work are already extremely high compared to Europe average. See graph with Belgian taxes compared to EU average. (blue = Belgium – green = Europe). Left chart is taxes on working, right bar chart is taxes on capital.

But…nevertheless…. There are many beautiful perils in Belgium. Belgian technology! Company examples are IBA, AMOS, Unifly (traffic control management systems). And there’s huge potential as many students now finish their universities study. Marc shows the video of Belgian students team with ambition working on a solar powered car for the Abu Dhabi Solar Challenge in Australia.

You can also support Ambition by buying a flag and post a picture with the tag#AgoriAmbition. Your task is take a picture with Agoria flag. There are prices you can win.

Marc concludes that there is hope for Belgium. We have to be more like the Dutch people. When you realize 90% of the project, what does a Belgian do? He will be silent and quiet about the 10%. The Dutch will invite the press and communicate the world that they achieved the 90%. We have to embrace the ambition. Ambition is a dream with a V8 engine.

The choice is YOURS. Invest your money in the Belgian perils despite the difficult circumstances where taxes are high and jobs can not be filled.

Our own opinion and remarks

This was a good presentation of what technology is all about. Agoria’s mission is to support companies and help them to create jobs. But two important factors are critical to achieve this:

1. Lower company taxes
2. Better education in schools and universities aligned with the technology applied in the companies

Without great education in technology, jobs can not be filled and growth can not be achieved. It is a war for talent today. Let’s hope that the market share of Belgian technology keeps growing. Everyone will have to do an effort to achieve this…Belgian government, employer organizations, our young generation X & Y…everyone! 

Read also our past blogpost Watch Out – Who’s stealing our money? where I talk more about taxes. It is sad that the lower company taxes are still not approved because CD&V is blocking this. In the meantime we are missing out on Foreign Direct Investment because which foreign company would like to invest in such a tax climate…? 

MELEXIS by CEO Françoise Chombar

Technology will advance faster to improve people’s life. World trends will influence Melexis’ future.

1. Trend Electric Vehicles: legislation, cleaner air and reduction of oil dependency are driving this trend
2. Trend Self driving cars: New systems will come in cars with a focus on safety avoiding casualties. This is long term trend with environmental & societal benefits that will become reality.
3. Trend Robotics: robots and human is perfect marriage. They are complimentary. Industrial automation and collaborative robots will contribute a better life and work environment.
4. Trend Big data: Sensors will generate big data streams. Chips will plugged in different devices to enable smart cities which allow you quickly to find a parking spot for example.

Our markets

Automotive market is a core market. Other market is semiconductor. Biggest market is Europe. China will pass US market in a fast pace by the year 2020. In Asia volume of car sales is increasing rapidly. In Europe it is a replacement market. But the environment climate in China is an issue.

Melexis growth was 9% overall. In China it was 17%. Melexis grows in some regions quicker than the market. Innovation is mainly driven by Europe. This is Melexis playground.

The vision of Melexis is to provide good engineering that enables the best future with products that are

1. Sustainable
   1. Chips for applications in automotive, robotics, household devices,….
2. Smart Safe
   1. Only supplier with this system. Time of flight system in BMW7 available only. This is to measure body position of the driver in the car or surveillance systems. This is a specific niche where Melexis has competitive advantage.
3. Stylish
   1. Mobile living room and interior design will become more important in the future. Led lights with chips of Melexis can change the color and create a special atmosphere. It makes the car a warm environment.

Chips are also used in house applications such as a washer machine or robots. Melexis is a small company but a leader in some niche markets. See here the market position of Melexis market position in the market.

Focus is on organic growth. There has an steady growth with increasing profitability. Operating margin is around 25%. R&D is a big focus for Melexis going forward.

Questions by analist Guy Sips:

Who are your competitors?

This depends on the products and the market. Magnetic sensors: infinion. Alegro, Micronast acquired now by TDK. Texas instruments, ST Micro are others.

How did the Ford Dieselgate impact you?

It did influence positively. You just have to use Melexis technology without using software.

Impact of China going forward?

China legislation and growth has been a big driver. Today 18% in greater China. In future we will see an increase going forward. Will it be exponential? Probably not. Automotive sector is a strategic market for the China government. This means a lot of money is invested in this market

Fabless production going forward?

Melexis has always been fabless. Focus is on the good design combined with the best technology, this allows to make better products.

Merger & Acquisitions – Is there interest for Melexis?

Our engineers have plenty of ideas. Focus is on organic growth with a focus on innovation. This will remain the future strategy. If the number of suppliers are reduced, this is beneficial for the customers. They have lesser choice. The customers don’t like this trend as they have less choice. For Melexis this is positive as the market position of Melexis improves as a result.

Our own opinion and remarks

This was a good presentation of what Melexis does and in which markets the company sells the products. The growth strategy is clearly focused on organic growth. The share price today is today around 82 Euro. Quite high price and valuation according to our opinion. The dividend has been paid out this week.

Investing in Benelux technology stocks by Stefaan Genoe – Degroof – Petercam

Stefaan starts with his reluctance to provide financial tips to family and friends as they tend to pick the worst performer. He agreed to do this list today because the public here at the VFB congress does his homework.

Today technology shares are part of everyone’s portfolio. An example is Warren Buffet who recently purchased Apple. Important elements for evaluating technology companies is pricing power, cash flow generation, market position, brand and good management.

In the Benelux, we have several names. See following slide with several companies.

What should you do? In which company do you want to invest money?

Diversify, but not too much. Invest in good shares only. An investor should not diversify too much and invest in quality stocks. 10 -15 shares is a nice portfolio. One stock can raise 100%. An example is ASML

Technology companies are growth companies. Growth is a kind of safety for your portfolio. See the quote of Peter Lynch.

“Buying the losers and selling the winners is about as sensible as pulling out the flowers and watering the weeds”

Growth is not the only element. Elements such as ROCE, P/B and dividend return are not relevant for technology shares. Discounted cash flow, P/E ratio and EV/EBIT is relevant. EV/EBIT takes into account the debt ratio and capital employed.

Stefaan explains the value of the company versus the growth ratio. Profit growth of European companies has been flat. The value of certain companies is expensive at this moment. You have to evaluate whether the price is expensive or cheap. Stefaan uses another quote of Peter Lynch

An Investor decides on his own journey and needs to be disciplined. Invest in companies that have great ideas.

Here come the five names of Stefaan.

1. ASMI : market leader in ALD. Smaller chips will generate larger demand for ALD machines.
2. Barco : New management. New dynamic. New products and services Nexxis & Clickshare. EBITDA today is 5,4% and can move to 10-12% going forward. High growth in China and India is expected.
3. Bekaert: EBIT target of 10%. New CEO who looks with a new focus at the company. Simplification is now the key focus. 10-15% EBITDA should be possible as longterm target. Bridon Ropes weights on the profitability. When oil sector picks up, Bridon can be a contributor. FCF yield is today 7,8%. There is a nice cash flow stream
4. Umicore: Leadership in an exploding battery market. Coming years ROCE will increase
5. Econocom: nice growth in the past. Unique IT business model. Integration services, distribution, and leasing are the three pilers of their businessmodel. Now there’s a trend to more outsourcing of IT and this will be beneficial for Econocom. Organic growth of 5% is expected. And they also focus on acquisitions with higher margin and growth

 

Our own opinion and remarks

It is no surprise that some company names of today’s conference are on the list of Stefaan. Bekaert and Barco are qualitative companies. Barco was alerted as BUY signal in Transstock on 18 July 2016. Investors who invested then have seen a nice ride upwards. Another BUY moment was the break out of the 75 Euro level. 

Umicore and Econocom are two surprising names for me. Although I don’t doubt the value of their company strategy and results, the share price of both companies is going down. Umicore is in a down trend channel and Econocom growth potential still needs to be confirmed going forward. For a LONG BUY and HOLD investment, I won’t put my money in those two names. I have no opinion about ASMI. The stock price had already a nice ride up. How much juice does it still have?

This expresses my own personal opinion and can not be regarded as financial advice. Read our disclaimer.

 2. Our Market Research

Our second objective was to talk with other investors that were attending the VFB Conference. Who is this Flemish investor? What is his investment profile? Why is he or she coming to this conference?

I listed 6 questions:

• What is the main reason for coming to the VFB Conference?
• In what do you invest? Stocks, Funds, ETF’s & Trackers, Options,…
• How would you describe your investment strategy? Buy and Hold for longterm, Short-term investment for quick profit gains, Dividend investor,..
• Which sources of information do you consult on regular basis?
• Which broker do you use?
• Do you use any other addiitonal software to evaluate stocks, fundamental or technical analysis,….?

We spoke with around 30 people (students, investors from different ages, male and female). We did meet couples, brother and sister, a mother and her son, …all investors who want to make their money grow. With the students I also asked what were their dreams?

Here are the results. I will split the results of the students versus the investors.

Question 1

The investors are mainly coming to the VFB conference to attend the company presentations and to evaluate whether they want to invest their money in the growth strategy of a Belgian company. The reason nr 1 that was the dominant answer was attending the company presentations. Some investors are also interested in visiting the booths. Talking to other investors and sharing ideas is the least of the Flemish investor’s concern.

The students come to the VFB Conference as it is part of their school assignment. They are studying Finance and Insurances. They learn about investing in companies at school. They need to write a report of their visit.

Question 2 & 3

The investors attending the conference mainly invest in company shares with a first focus on Belgian companies. Stay close to home is the driver here. Secondly European shares. Third investors still own funds. The majority of the investors are entrepreneurs and people who are on pension. They see the need to make their money grow. When I asked “how they would describe themselves as an investor”, the majority of investors (95%) said they were a BUY and HOLD investor for the longterm gains and value. I only did meet two people (brother and sister) who were familiar with the dividend investing strategy. They were doing private banking as well. Interesting…I did meet only one ACTIVE trader who invested for the short term with turbos.

The students are currently investing with a portfolio of 500k in a school simulation. They invest in shares, funds, ETF’s and trackers. For their own portfolio they would invest also as a BUY and HOLd investor for the long term. There were only 2 or 3 young people who wanted to focus on quick growth of their capital. They described their teacher as a “more active” trader :-))

Question 4

The investors use De TIJD as the main source of company information and financial news. Second answer was De Belegger or Mister Market. Fourth answer Trends magazine for more indepth information. The students also use DE TIJD as key resource but answerred more online resources. Here is the list of the main answers.

• www.bloomberg.com
• www.trivano.com
• www.chartmill.com
• www.beursduivel.be
• www.analist.be
• …

Question 5

On the question which broker the Flemish investor uses, we got a diversified answer. The dominant answer was Binck bank. Other answers were Keytrade, my own bank, Private banking, Degiro, Leleux. Amongst the 16 students that we interviewed, we only did find 2 that had started their investment portfolio with Binck.

Question 6

The majority of investors does not use any additional software. A few investors use Excelco (as part of the VFB subscription), Transstock or VectorVest. Students are not familiar with this software.

Our conclusion

The majority of the investors attending the VFB conference has (some) grey hairs and does his homework whether he wants to invest money in Belgian companies. This is part of his conservative BUY and HOLD strategy buying (Belgian) stocks on the LONG side and for the long term. The VFB conference is perfect venue for this type of Flemish investor who wants to hear and learn from CEO’s about the company strategy and growth potential. This explains why the booths were mostly empty during the company presentations. 

The students dream to work as a bank advisor. Some millenials want to work in the real estate sector. We hope they succeed in their dreams and wish them all the best in the future.

3. Our visit to the booths

3.1 Real Estate Bevaks

Several real estate companies active in different sectors were also present at the VFB Happening. We spoke to some companies such as QRF, Aedifica and Home Invest Belgium to name a few of them. QRF pays a stable 5% gross dividend. Aedifica will pay a 3,35% gross dividend, Home Invest will pay a 4,5% gross dividend. We spoke to the CEO Sophie Lambrighs of Home Invest.

CEO Sophie Lambrighs:

“The future dividend is coming from rent and added value creation.(sales of old buildings) Due to the growth of the aging population, there is still potential for growth. 60% of the business is done in Brussels where qualitative apartments are still needed and where  40% of the people are renting.  The publication of the yearly results will be done next Friday 31st March”

If you want an overview of Belgian real estate, you can find it on the public site of analyst Gert De Mesure. 

3.2 Other booths

There were also companies such as Deceuninck, Greenyard foods, and others who were present to become more known amongst the general public. We visited also the booths of the online brokers such as Binck, Leleux and Keytrade.

Did you know that you can consult the Binck ETF screener FOR FREE on this link…https://www.binck.be/klanten/trackers-filter

Why pay for an ETF screener, right ?

Last but not least, you could find software vendors such as Transstock, VectorVest and online software such as Analist Pro.

3.3 Books

The VFB conference is always interesting to discover new books. During one of the VFB events, we purchased the book “Beleggen voor (je) kinderen” written by Wilfried Voorspoels. You can read our book review on the following link.

We acquired also the book “Waarde(n)vol” of Ben Granje and Robert van Beek. This is an edited Dutch translation of the book Loaded from Phd Sarah Newcomb. We will post a book review in coming month. For more info about the book, go to http://www.robertvanbeek.eu/loaded-waardenvol/

4. Final Conclusion

The VFB Happening is a must for Belgian investors who want to learn about Belgian companies working hard and competing in a global economy. The world is flat today (for those who don’t realize it) and growing a company requires capital. Investors who do their homework for investing their money, have the opportunity to learn about those companies, talk to the CEO’s, learn about the products and understand the story behind the growth strategy. Investing is a journey and the investor decides when he gets on the boat and when he gets off. 

What and who did we miss ?

• Where were other online brokers such as Bolero, Lynx, Degiro or others? I did miss them with demo’s of their platform and workshops on how to invest
• Where was the media? Last year VRT made a report for “Het Journaal”. This year there was NO media coverage, neither from VTM nor VRT. This is a sad conclusion and only means there is a big disconnect between the media and the investors world. Investing in the stock market is seen by journalists as risky business. People have been made afraid of the stock market especially after the speculation tax debacle. I personally would reverse the question to those journalists and ask what has been their education on risk management? Investing in the stock market has risk but you need to manage risk the same way as you drive a car. You need a disciplined and methodical approach to the stock market. The fact that the media did not cover this event, means they do not understand the importance of this event for Belgian investors, the Belgian companies and the Belgian economy in general. Put money at work means also investing in the Belgian economy…. 

I personally always learn new key insights at this VFB event. We have great companies in Belgium working hard in a global economy. We should be more proud like the Dutch (=words of Marc Lambotte) and I agree with him. 

I will be back next year ! Thanks for reading until the end! Don’t hesitate to leave a comment if you did like this blog post. Don’t hesitate to send me an email if anything doesn’t work. THANKS !!

5. Presentations of the day

Marc Lambotte, ceo Agoria 

Bekaert, Baron Bert De Graeve, Voorzitter

Barco, Jan De Witte, ceo

Agfa-Gevaert, Christian Reinaudo, ceo

Solvay, Roger Kearns

Keyware Technologies, Alain Hubert, cfo

Gimv, Koen Dejonckheere, ceo

EVS, Muriel De Lathouwer, ceo

Quest for Growth, Yves Vaneerdewegh

Telenet, Birgit Conix, cfo

Global Graphics, Gary Fry, ceo

Melexis, Françoise Chombar, ceo

Biocartis, Hilde Windels, ceo ad interim

Stefaan Genoe, Degroof Petercam

Workshops: Binck – VectorVest Europe – Pareto – MeDirect Bank – Keytrade Bank