Jensen-Group (ISIN BE0003858751) - Hidden European Champion at a “Dirt Cheap” price

Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!!!

As mentioned in the Performance review, I had already build up a new position in late 2024 in a new stock. This time I will try something new: I will only post a few sections of the write-up and only those who send me an email will receive the full version (for free of course).. The reason for this is that I am really interested how many of the readers are actally reading the full document. The bonus song of course is included in this post at the end.

0. Investment meme

For some strange reason, I felt the urge to start the pitch with this rather “German humor” meme:

1. Elevator pitch:

Jensen-Group, a company originally from Denmark, now listed in Belgium, is a 420 mn EUR market cap “hidden champion” that is the world market leader in “Heavy laundry” equipment and automation. The company is run in third generation by the Jensen family which still controls 40% of the shares.

The company manufactures and sells globally and is riding some structural tailwinds, most notable energy/resource efficiency and automation.

After a Covid driven slump in sales, 2023 revenues and earnings have surpassed pre-Covid levels by a significant amount and 2024 looks like another double digit growth year (sales +10%, EBIT +20% 9M 2024).

The company now achieves solid double digit EBIT margins (11,4% EBIT margin YTD) and a ROCE >20%. Although the stock price is close to ATH (and the stock is up +30% over 1 year), the valuation is very low with a P/E of around 10x for 2024 (and almost no debt).

Although there is no “hard” catalyst, I do think that the stock is a potentially very attractive investment at current price levels for the patient business focused investor.

2. Introduction:

I had put Jensen Group on my watch list during my “all Belgian Shares” series in April and now its time to really follow on. This is what I had written back then:

3. The company

3.1. History

Jensen was founded in 1937 in Denmark and is currently led by Jesper Munch Jensen in third generation. The company has a very nice history page. In a nutshell, the company actually started as a dairy repair shop but then moved into laundry technology and through acquisitions and own developments became a leading supplier of large scale laundry solutions.

3.2. KPI overview

3.3. What Problem does Jensen Group solve ?

Jensen is a machinery manufacturing company that offers solutions for “heavy duty” wet-laundry applications. On their website they give a good overview of their application areas:

So Hotels, Hospitals. Cruise Ships are all heavy users of “heavy duty laundry”. Despite the quality of the laundry process itself, staff shortage seems to be a big issue in the laundry industry as well.

One needs to sort the dirty laundry, handle it and in the end dry and fold it and not mix laundry pieces across batches. In the past, to my understanding, there was a high level of manual work involved which seems to become more and more difficult to fill.

What Jensen Group offers are more or less fully automated solutions for most of the heavy duty laundry process that can run 24/7 with a very reduced requirement of manual labour.

In case you want to learn more, Jensen has a lot of nice Youtube videos showing different products and laundry factories. I find these Videos quite relaxing after a hard day ;-)

In comparison to most competitors, Jensen can build a large “laundry factory” completely and anywhere in the world due to their global presence.

6. Valuation / Expected return

In the first 9 months of 2024, Jensen reported quite impressive numbers:

EBIT margins have further increased from 10% in 2023 to 11,5%.

Unfortunately, they do not break out organic growth (Maxi Press is included in this)but still this looks impressive. Especially the significant order intake seems to indicate that further growth might be on the horizon.

Historically, Jensen has grown EPS by 11% over 20 years. In the last 5 years, including the Covid period, growth accelerated to ~15% p.a.

Sales growth has been significantly lower and looks like this (until 2023)

This gap is explained through a significant increase in profitability especially at the bottom line from 0,6% in 2003 to 7,8% in 2023.

So the challenge here is clearly to come up with a realistic growth rate for Jenesen going forward. It is also clear that the last 2 or 3 years are not representative with respect to top line growth.

On the other hand, as mentioned before, there are some strong fundamental tailwinds for Jensen. In addition, there is also a good chance to sell higher value components (Robotics, Software) and increasing the share of Services is a clear strategy, supported by the purchase of Maxi Press.

Personally, I think an organic EPS growth rate in a range of 5-10% is not totally unrealistic for the next 2-5 years.

One interesting aspect with regard to short term growth is also the fact, that the big industry fair TEXCare, which usually takes place very 4 years happened in November 2024. Interestingly, the TEXCare 2020 did not happen due to Covid so this was the first big fair after 8 years. I read several comments that the industry was VERY happy with orders at teh fare. I am really looking forward what Jensen will say when they report 2024 number s in early March.

It needs to be seen how Cash conversion looks in a more “normal” year like 2024. if we assume a 80% conversion, then based on ~50 mn EBIT for 2024, FCF would be~ 40 mn EUR and(including Maxipress purchase price) somewhere between 7-9% current FCF/EV yield.

That in turn would result in a return expectation in a range of 12-19% p.a. plus any additional return from a multiple expansion.

As Jensen pays out only a relative small portion of that cash in Dividends plus some share buy backs, the big question of course is how they will allocate cash going forward. In my opinion, they have allocated capital very well in the past and I see no reason why this should change anytime soon.

There are also not a lot of comparable companies that I can think of, certainly not directly. From my current universe, I would think Krones and 2G Energy might be the closest ones that I can think of. Both sell globally, assemble relativ complex machines and do not sell to automobile manufacturers.

Here is a small comp sheet:

We can see that Krones, the larger German manufacturer of bottling machines is similarly valued, 2G much higher. Krones as such is also an interesting company that I want to look deeper, same as 2G. However, in 2G’s case, a lot of growth seems to be priced in.

10. Conclusion & Summary:

As mentioned in the beginning, it took some time before my enthusiasm grew for the company. I had looked at the company already a few times until I got really interested. However, the more I researched and read about them, the better I liked the company and the business.

At the bottom line, one gets a decently managed company that has decent growth and margins at a very decent valuation. If they manage to continue to grow, not only EPS could grow but at some point in time, here is also a good chance to get a (significantly) higher valuation multiple.

In any case, I started a 4% position at around 42 EUR per share already in December 2024.

As there is no hard catalyst, the next relevant date will be beginning of March when Jensen then reports 2024 numbers. it will be especially interesting to see if orders have significantly increased after the TEXCare fair in November. If business further accelerates, I might increase the position to a full position.

Annex: Bonus Song: “Dirty Deeds” from ACDC: