Whitestone Group 100% Acquisition of TKM Industries

Whitestone Group announced that it has, via its subsidiary ‘Treestone', acquired 100% of TKM Industries, a company specialising in metal machining located in Wandre (Liège, Belgium). The acquisition was carried out in partnership with ‘Wallonie Entreprendre', which will own 10% of the acquisition vehicle (Ecotys) and contributed part of the acquisition leverage. Through a capital increase, Whitestone increased its stake in Treestone from 50% to 71%. The larger stake in Treestone will also increase Whitestone's stake in Atima and ISO Tech to 66% and 71% respectively. Nearly 90% of the €42.0m raised during FY24 has been invested with back-to-back investments in Tillman Laboratories, Lambda-X, Telemis, Sibelco, GFI (stake increase) and TKM Industries. We welcome the news and see it as an indication of management's ambition to further grow the group's portfolio. We reiterate our BUY rating and €14.2 TP.
Investment Case: Whitestone is a long-term and active investor with a bias towards investing in small and medium sized businesses across select European countries – by doing so, we think that Whitestone has created a niche in the market. The investment in GFI should provide a hedge against unexpected/significant volatility in public markets while investments in fast growing SMEs will provide much needed growth and may result in exits that lead to outsized capital gains. Whitestone's portfolio offers 2 layers of diversification as the portfolio is invested across 4 countries (BE, FR, LU, and CH) and 3 thematic platforms. While current market capitalisation is in the €50.0m to €100.0m range, potential capital raises in the future followed by expansion/rotation of the portfolio will create long-term shareholder value. Currently, ~90% of Whitestone's portfolio is comprised of companies with positive FCF and this % is expected to increase with multiple companies expected to break-even in the next couple of years. We believe that a combination of these factors will help Whitestone achieve consistent NAV increases.