CapMan update - Upgrade to BUY

CapMan reported better than expected Q1 results. Q1 EBIT was clearly above our estimates driven by investment returns. We have raised our 2021 EBIT estimate to EUR 46.8m (prev. 38.2m). Improvement is being seen across the board but 2021 earnings look to be driven less by recurring profits and more by investment returns and carry. We raise our TP to EUR 3.1 (2.7) and upgrade to BUY (HOLD).

Estimates beat on profitability figures
CapMan posted better than expected Q1 results. Revenue was slightly below expectations at EUR 11.3m (EUR 12.5m/11.9m Evli/cons.) but the EBIT of EUR 10.1m clearly beat expectations (EUR 7.8m/7.6m Evli/cons.). The EBIT beat was driven by higher that expected fair value changes (EUR 8.2m/3.5m Act./Evli) while the Management Company business EBIT was lower than expected (EUR2.5m/3.9m Act./Evli). Capital under management stood at EUR 3.9bn, up 20% y/y. The Buyout XI fund held a final close at EUR 190m, with a new Real Estate product of for CapMan significant size in the pipeline.

Expect clear earnings improvement in 2021
CapMan’s development continues to look bright after the challenges faced in the previous year. In terms of absolute profits, the Investment business has in the near past been the clear driver, but good progress can be seen more or less across the board. The performance of the own funds has during the start of the year surpassed the collective return target. We have raised our 2021 operating profit estimate to EUR 46.8m (prev. 38.2m), noting that some two-thirds consists of the more unpredictable investment returns and carried interest.

BUY (HOLD) with a target price of EUR 3.1 (2.7)
Following adjustments to our estimates we raise our target price to EUR 3.1. Compared with the Finnish peers the 2021e P/E is certainly not challenging, but on our estimates a high share of the profit is from more uncertain sources and thus remain somewhat on the cautious side.

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