Aspo - Many avenues for long-term growth

Aspo’s Q1 results came in quite close to estimates. ESL’s outlook for the year has softened a bit more than we previously estimated, but new vessel investments should take the carrier to a whole new level in the coming years.

Overall Q1 results didn’t show any particular large surprises

Q1 revenue from cont. operations grew 10% y/y to EUR 142m, driven by the Kobia acquisition and Telko’s 7% growth excl. Russia and Belarus. The EUR 148m top line, incl. non-cont. operations, was soft vs the EUR 160m/152m Evli/cons. estimates. ESL’s EBIT declined to EUR 6.0m, missing our EUR 8.5m estimate, due to lower volumes. Meanwhile Telko’s EUR 2.7m EBIT was clearly above our EUR 1.9m estimate; EUR 10m annual EBIT shouldn’t be too hard to achieve as recent M&A is yet to reach full earnings accretion. Leipurin bottom line developed well, as expected, and the overall EUR 8.5m EBIT came in relatively close to the EUR 9.7m/8.8m Evli/cons. estimates. Our updated EBIT estimate for the year stands at EUR 39.7m (prev. EUR 42.4m).

FY ’23 somewhat softer for ESL, but the fleet will grow

The Kobia deal is delivering according to plan and Telko’s EBIT is stabilizing around a 5% margin after the Russian exit, while M&A should continue to contribute. ESL sees lower volumes this year, yet pricing holds up. We thus expect EBIT to hold around EUR 40m, in the short and medium term, for the current operations. Large industrial investments around the Baltic Rim will expand ESL’s market in the future. ESL seems well-placed to capitalize on a big cargo increase, and we believe its plans will involve several new Handysize vessels. ESL will soon begin to receive its own (and pooled) Coaster hybrid vessels, but the EUR 150m investment is likely to be topped by the long-term opportunity. The move will require measures such as divesting the Supramaxes, new external minority equity and vessel pooling.

10x EV/EBIT isn’t high as all three are to grow long-term

ESL’s fleet is to grow by a significant amount over the long-term and the new assets will further solidify its position. The moves add to ESL’s value attributable to current shareholders, but the magnitude of the positive is hard to gauge due to the open size of the investment and financing required. Meanwhile Aspo is valued 10x EV/EBIT on our FY ’23 estimates, a level we don’t view too challenging. We retain our EUR 9.5 TP and BUY rating.

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