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CapMan - Earnings improvement story still strong

CapMan’s Q2 results were better than expected on bottom-line figures. AUM growth is seen to pick up with the establishment of the NRE III (target EUR 500m) and Growth II funds (target EUR 85m). We have revised our 2020 EBIT estimate to EUR 9.4m (prev. 1.2m), with the solid 2021 earnings prospects intact.

EBIT beat from higher investment returns
CapMan’s delivered an upbeat Q2 earnings report. Q2 EBIT of EUR 4.1m beat our expectations (Evli EUR 2.6m) following a clear recovery in investment returns. Revenue amounted to EUR 8.7m, short of our expectations (Evli EUR 10.4m) due to continued weaker Services business sales and somewhat soft management fees given no new fund closings. AUM (EUR 3.2bn) continued to stall at near previous quarter levels. AUM is seen to grow during H2 following the establishment of the NRE III and Growth II funds, which combined could bring in near EUR 600m in equity commitments. Investor demand for the new funds has according to CapMan been strong.

Solid 2021 earnings prospects despite weak 2020
We continue to expect 2020 to be somewhat of a gap-year due to the weak start but have raised our EBIT estimate to EUR 9.4m (prev. EUR 1.2m) mainly due to higher expectations for investment returns. We expect a clear increase in fee-based profitability in 2021 due to an increase in management fees from fundraising during H2/20. Investment returns are also set to pick up clearly after the challenging 2020. CapMan will re-organize its Service business (no changes to CaPS) and Scala’s private placement business will be discontinued, but the earnings impact is not seen to be notable. All in all, we see a clear improvement in 2021 and expect an EBIT of EUR 33.7m.

BUY with a target price of EUR 2.20 (1.95)
The Q2 report in our view served to prove that CapMan remains on a healthy track despite the elevated uncertainty of Q1 and with the solid earnings outlook 2021E P/E of ~11x is not particularly challenging. We retain our BUY-rating with a TP of EUR 2.20 (1.95).

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