Aspo - Some more results to be accrued

Aspo’s Q2 group-level EBIT was known before the report. We make minor upward revisions to our estimates, and we see Aspo on a firm track towards full profitability potential.

H1’21 results display a solid foundation to build on

Aspo’s Q2 revenue grew 24% y/y to EUR 142.9m vs the EUR 133.6m/134.5m Evli/cons. estimates. ESL’s top line was up 40% y/y; the EUR 5.4m EBIT was a bit above our estimate as utilization and rates continued to improve throughout the fleet. That said, there should be more potential as efficiency obstacles like port congestion, varying loading demand, virus measures and high dockings limited Q2 profitability. We expect ESL’s EBIT to decline by EUR 0.9m q/q in Q3 as dockings will be roughly double of those seen in Q2. We believe ESL’s EBIT has now reached a firm foundation since cargo volumes were still not abnormally high (some 8% lower than in Q2’19 but up 19% y/y). Meanwhile the Baltic Dry Index has reached multi-year highs and we believe the Supramax vessels’ freight rates are now stabilizing. Telko’s revenue topped our estimate and the 7.7% EBIT margin also marked another record. Strategy work at Leipurin continues but Q2 figures remained soft compared to our estimates. We understand admin costs were a bit elevated e.g. due to the CEO recruitment; Aspo’s long-time CEO Mr Aki Ojanen is retiring and the successor, Mr Rolf Jansson, will begin his work next week.

The EUR 30-36m EBIT guidance moderates H2’21 estimates

We wouldn’t be very surprised to see Aspo top the current EBIT guidance range set for this year. There’s still some uncertainty regarding Q4 results, but we believe ESL’s contribution will then help Aspo reach another record quarterly EBIT. We make minor revisions to our estimates; we remain at the upper end of the FY ‘21 range while we now estimate FY ’22 EBIT at EUR 39.7m (prev. EUR 38.9m). Telko may find it hard to achieve further margin gains (in our view some softness is to be expected), but growth could help sustain high absolute profitability going forward.

Progression and cash flow generation back up valuation

Aspo is valued around 8x EV/EBITDA and 14x EV/EBIT on our FY ’21 estimates. We don’t view these levels challenging considering the profitability potential that is not yet quite fully realized. Our TP is now EUR 12.5 (11.5); we retain our BUY rating.

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