Enersense - Growth strategy proceeds

Enersense completed its directed share issue and thus raised some EUR 16m in gross proceeds. The company is looking into some growth initiatives that would deploy the capital. These could involve organic growth prospects but in our opinion M&A is also high on the agenda. We have made small adjustments to our estimates. Our TP is now EUR 13 (11) and we retain our BUY rating.

Current markets offer both organic and M&A potential

Enersense already had a healthy balance sheet with a positive net cash position and there wasn’t any acute pressing need to raise additional cash. The company had some EUR 23m in cash at the end of Q1. This suggests there will now be close to EUR 40m in available funds plus possible additional debt facilities. In our opinion such an amount could enable Enersense to acquire targets with around EUR 100m in revenue, considering the relatively low EV/S multiples seen across the relevant sectors. At this point it remains unclear which segment Enersense might be looking to bolster. In our view Enersense has wide M&A opportunities in both Finland and abroad. The Finnish Power market is currently driven by e.g. wind power investments, while 5G will remain a major driver for Connectivity for years to come. Enersense is already a big Finnish player in these two related construction and maintenance markets, and there remain some smaller service suppliers the company might be contemplating to acquire. The Finnish smart industry market, by contrast, represents a much wider opportunity set, not to mention the potential overseas scope.

Long-term financial target amounts to EUR 30m in EBITDA

We make small adjustments to our estimates following the transaction. We understand Empower synergies continue to materialize well and we see the company is on track to reach annual EUR 20m run-rate EBITDA in the near-term, while the long-term target implies EUR 30m.

Valuation remains undemanding relative to potential

Enersense still trades at modest multiples, and the ca. 6x EV/EBITDA and 11x EV/EBIT on our estimates for next year represent meaningful discounts compared to peers. Our new TP is EUR 13 (11) and we retain our BUY rating.

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