Trention AB (TRENT)

Trention AB is a Sweden-based company that invests in and provides credit to companies. Within credit operations, Trention AB offers various types of financing solutions. In the investment business, the Company invests directly in both listed and unlisted, primarily Swedish small and medium enterprises. Trention AB is listed in Sweden (NASDAQ Stockholm) under the ticker TRENT.

Below I present my key arguments for why each margin of safety criteria is considered to be fulfilled. At the end of the write-up, I also include some “other factors and characteristics” that I consider to be of importance for the idea.

Margin of safety

1) Selling below liquidation value?

  • TRENT is currently trading at a price-to-net-current-asset multiple of 0,71x.
    • Market capitalization = 182M SEK
    • NCAV = 255M SEK
      • The company’s current assets consist mostly of short-term loans and cash.
  • Not included in the NCAV amount stated above is TRENT’s 26,4% ownership in the Swedish publicly-traded company Saxlund Group. At the current share price of Saxlund that position has a market value of 10M SEK. Although this position is stated as a non-current asset, one might argue that it can be considered to be more of a “readily ascertainable asset” nature.

2) Proven business model?

3) Sound financial position?

  • TRENT currently carries 20M SEK of debt on the books. That is a small and financially sound amount considering TRENT’s debt-to-equity ratio of 0,1x.
  • TRENT has a Z-score of 7. That’s well above the cut-off for the indication that financial troubles could lie ahead (i.e. risk of bankruptcy).
  • From an income statement perspective, TRENT has shown that the amount of debt they carry is not an issue (i.e. they have had no problem covering their interest payments).

4) Responsible management?

Other factors and characteristics

  • TRENT is an illiquid, nano-cap market capitalization company (182M SEK = $19M).
  • P/E = 11x.
  • Dividend yield = 3%.
  • TRENT is not only trading at a 52-week low but at an all-time low.
  • TRENT has accumulated 370M SEK of net operating loss carryforwards.

Disclosure: The author is long Trention AB (STO:TRENT)