Raute - Moving on after challenging years
Raute adds EUR 18m to its equity base
Raute proceeds with its capital raising plans as expected. The EUR 18m sum includes a perpetual junior loan of EUR 4m which Raute can repay after 3 years. The holders also have a conversion right, at a strike of EUR 13.50 per share, which extends to 4 years. The loan initially carries a coupon of some 11% over the first 3 years, after which the spread jumps by 500bps. Raute recently completed a directed issue of EUR 6.4m, while the EUR 7.5m rights issue further lifts share count by 20%. We calculate the value of a right at EUR 0.575 per share.
Three large orders drive results next year
Raute has recently secured EUR 125m in orders attributable to three large projects. Deliveries begin next year, and we estimate close to two-thirds of the value to be attributable to FY ’24. The EUR 45m French greenfield LVL order went to Europe, as expected, but the destination was a lot more in the west than we expected and hence Raute should still have more long-term large order potential in countries such as Finland, Poland and the Baltics. We leave our FY ’23 estimates unchanged, but now estimate next year’s growth rate at 25%. The Q1 report highlighted smaller order demand as a point of softness, and its potential extension casts some uncertainty around the pace of improvement, but next year is bound to see significant growth in any case. Recent years’ challenges ate into the balance sheet, but now improving top line and profitability as well as the capital raise have given Raute the strength to work on long-term strategic plans, including some potential M&A which would be most likely to add capabilities for the Analyzers segment.
Ex-rights a minus, the large French LVL order a plus
Raute is valued at 6x EV/EBIT on our FY ’24 estimates, which we don’t view too challenging as our EUR 8.5m EBIT estimate remains far short of long-term potential. The ex-rights date detracts from the share price, however Raute has also signed the French order since our latest update (although it was referred to earlier its confirmation details still delivered a positive surprise). We retain our EUR 12.0 TP and BUY rating.