Monthly Report March 2025

Performance

Adrigo Small & Midcap L/S Class A and Class C declined by 7.73% in March after fees. The Carnegie Small Cap Return Index Nordic fell by 6.3% over the month, while STIBOR 1M returned 0.19%.

Among the fund’s larger holdings, Getinge (medical technology) and Balder (real estate) made solid contributions. Among the fund’s smaller and mid-sized positions, we noted strong performance from Maven Wireless (technology) and Paxman (medical technology). The fund’s short positions, as a group, had a positive impact on returns. Two holdings accounted for approximately 50% of the fund’s decline during the month.

Since inception, Adrigo Small & Midcap L/S Class A has returned 65.8% after fees. Over the same period, the benchmark interest rate STIBOR 1M has returned 7.9%, while the Carnegie Small Cap Return Index Nordic has returned 91.3%. The fund’s average annual return since inception is 7.1%.

Market Overview

Global equity markets showed some weakness in March. The EURO STOXX 50 declined by 3.8%, while the MSCI World index fell by 5.0%. In the US, the S&P 500 dropped 5.6%, and the Nasdaq recorded a sharper decline of 8.1%. Among emerging markets, the MSCI China index stood out with a gain of 2.0%. Performance within the Nordic region was mixed. The Danish market was the clear laggard, falling 16.9%, significantly impacted by continued share price weakness in Novo Nordisk. The Swedish market (OMX Stockholm Benchmark) declined by 8.1%, while Finland saw a more moderate drop of 2.2%. Norway was the best-performing market in the region, up 1.8%.

Companies and Performance Highlights

We invested in Paxman in December 2024. The company is a global leader in scalp cooling – a technology that helps prevent hair loss during chemotherapy. In March, a takeover offer was announced for its competitor, Dignitana. The offer, which consists entirely of newly issued Paxman shares, was recommended by Dignitana’s board. We believe there is a strong likelihood that the deal will go through. If successful, Paxman will become the clear dominant player in the field.

Paxman has delivered rising profits, solid cash flow, and held a net cash position at year-end. From 2017 to 2024, its annual sales growth averaged 35%, significantly outpacing Dignitana’s 22% per year. Profitability also differs markedly: in 2024, Paxman reported an operating margin of 13%, while Dignitana recorded a loss. There are obvious cost synergies from the merger, and we believe there are also substantial synergies to be realised on the commercial side.
The scalp cooling market, which currently has a penetration rate of just 2.5%, is still in its early stages. Until now, Paxman and Dignitana have essentially formed a duopoly – one that now looks set to become more of a monopoly. The coming year will be particularly significant, as changes are being introduced to the US reimbursement system for scalp cooling. From 1 January, new CTP codes will be implemented, making reimbursement for treatment much more straightforward. We expect market penetration to increase significantly as a result.
In the days following the acquisition announcement, Paxman launched a new share issue, raising over SEK 123 million (roughly 10% of its market cap). French institutional investor Eiffel Investment Group subscribed to half of the issue. The growing international institutional interest in Paxman is clearly a positive sign.

In early April, Online Brands completed another acquisition – Reforma – which generates revenues of around SEK 30 million. Founded in 2011, Reforma sells furniture and home décor, primarily in the Swedish market. This strengthens Online Brands’ position in the online home décor segment. Its largest and most profitable company, Trendcarpet, currently sells rugs in 16 European countries, and there is strong potential for marketing synergies between the businesses.

Online Brands currently has a market cap of just over SEK 300 million – a conservative valuation, in our view, given its pro forma revenue for 2024 is SEK 431 million, with an adjusted EBITDA of SEK 36.1 million. Last year ended on a strong note, with organic sales up 24.3% and an EBITDA margin of 12.8%. While still relatively small, the company is a fast-growing, acquisitive and profitable e-commerce firm – yet it remains under the radar for many investors. Insiders have increased their holdings over the past six months and now control nearly 70% of the company. This is of course a positive signal, though a larger free float would be beneficial for the share's valuation.

Periods of market turbulence often create attractive investment opportunities. For example, we consider the recent declines in both SKF and Balder to be excessive. SKF is naturally cyclical and potentially exposed to tariff-related risks, but we foresee a significant revaluation over the next 6–18 months, as the company is set to be divided up. We expect the market to place a substantially higher valuation on the industrial segment than is currently reflected in the share price. In the case of Balder, we are seeing clear signs of a streamlined structure, which should support a re-rating.

Finally, we would like to thank our co-investors, as always, for your trust. We are acutely aware of the fund’s weak performance in the second half of 2024, but we also have strong conviction in our current portfolio. Please don’t hesitate to get in touch with any questions or comments.