Tokmanni - Expecting growth in revenue, earnings and dividend

Store network approaching 200 stores with acquisitions

Tokmanni acquired 4 stores in Northern Finland in December with combined revenue of some EUR 9m in 2017. The stores were transferred to Tokmanni at the beginning of 2019. These together with the earlier Ale-Makasiini acquisition (9 stores, revenue EUR 20m in 2017) put Tokmanni's store count at 190 vs. the target of about 200 stores. At the targeted opening pace of ~5 stores per year, Tokmanni is set to reach its 200 store target in the next couple of years. Growth beyond this was not addressed at the CMD in December, but plans are likely to receive increased attention going forward.

Expecting continued LFL growth and stable GM in Q4

Tokmanni’s LFL growth has surprised positively in Q1-Q3 (+6%), considering the company has had zero or slightly negative LFL growth in recent years. Solid LFL growth has been supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning. Revenue guidance was raised to reflect good LFL performance with Q3 earnings. We expect LFL growth to continue at solid 4% level in Q4, but for 2019E we maintain a more conservative 1% LFL growth assumption. We foresee the gross margin at 34.8% in Q4, which is in line with the average level of Q4s in 2015-2017.

Expecting growth in revenue, earnings and dividend

We expect Q4 revenue of EUR 267m (7.5% growth y/y, of which LFL 4.0%) and adj. EBITDA of EUR 31.0m (EUR 28.6m y/y). We expect a dividend of EUR 0.45, which corresponds to ~70% EPS payout and yields 5.6%. Our rating and target price (“Buy”, TP EUR 9) remain intact ahead of Q4 earnings.