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Aspo - CMD notes

Aspo held its CMD, where the key message was that focus is more towards add-on M&A as opposed to exits (except for the sale of Kauko and Leipurin’s Vulganus machines).

EBIT margin target raised to 8% from the previous 6%

Aspo’s EBIT has gained a lot in the past year. Telko already had a strong ‘20, while the recovery has come through in ESL’s figures this year. The revised ESL and Telko EBIT targets, both up by 200bps to 14% and 8% respectively, are thus not very surprising. Aspo introduced a 5-10% p.a. growth target, and we view this the major update because it signals a commitment to hold and grow Telko. We make upward estimate revisions to reflect the targets. ESL reached a 15% EBIT in Q3, and while demand remains strong, we believe the next quarters will see some softening since AtoB@C time charter costs are growing. ESL’s performance is otherwise solid (e.g. contracts are better optimized from a logistics POV), and it has retained an advisor to source investors for a portion of the hybrid vessel capex. Leipurin retains its 5% EBIT target. There’s still way to go until the target is reached, but Leipurin has a profit boost initiative (e.g. category management) while the Food Industry is a good growth driver.

Aspo remains very committed to Telko and exit is unlikely

Aspo’s new 5-10% growth target reflects especially Telko add-on M&A potential. There’s no major change in the sense that Eastern performance is to rely on organic growth, but it seems Telko is now ready for somewhat larger deals should a fitting target come up for sale. Telko’s own profitability is already running so high that not every acquisition will provide an immediate boost to EBIT margin. The geographic scope has also been expanded a bit westward beyond the Nordics and Baltics. Aspo remains committed to the current three segments within logistics (ESL) and trade (Telko & Leipurin), however a new stand-alone subsidiary with an EV of some EUR 20-50m is also likely (B2C targets are not off the table). Aspo’s focus is still to hold and grow its segments without any definite exit plans/schedules.

Earnings growth outlook is attractive

We now expect FY ’22 EBIT margin at 7.0%, or EUR 42.4m (prev. EUR 40.9m). This represents an EV/EBIT of only about 11x, and there’s still further earnings potential in the following years. We retain our EUR 14 TP. Our rating is now BUY (HOLD).

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