Aspo - Developing mostly as expected
ESL’s Q2 earnings were softer than we estimated, while its H2 outlook also appears slightly more cautious now, yet Telko showed continued positive profitability development after integrating last year’s string of acquisitions.
Telko performed well, ESL still soft relative to estimates
Aspo’s EUR 9.2m Q2 comparable EBITA was soft relative to the EUR 10.2m/10.0m Evli/cons. estimates as ESL’s earnings fell short of our estimate by some EUR 1m while Telko and Leipurin performed somewhat better. Higher dockings and low forest industry demand, as well as continued weak spot market, were ESL profitability headwinds. Industrial demand uncertainty has remained high so far this year, which is a challenge especially for ESL, but in our view Telko and Leipurin have performed at least as well as management might have expected. Yet even Telko could benefit from a more stable operating environment as its volumes didn’t grow on an organic basis, although margins continued to develop favorably.
Telko can grow more organically and through M&A
In our view the wide guidance range left for H2’25 (implying comparable EBITA in the range of EUR 17-27m) reflects the still mostly soft dry-bulk cargo market, as there’s a chance Q4 could see significant improvement while Q3 remains quite muted. We believe Aspo may also prefer to leave some buffer in case Telko closes additional acquisitions soon, which could then burden EBITA in the form of M&A costs. We view the sale price of Leipurin as quite fair; the 15x FY’24 EBIT multiple is in line with peers’, although the company has seen impressive earnings growth so far this year. The value of Leipurin was however small relative to ESL and Telko, and now Aspo can better focus on developing the latter through M&A. We thus believe new Telko deals will be seen next year at the latest.
Guidance range low-end assumes flat ESL H2 EBITA y/y
We expect relatively stable, albeit slightly further improving, performance from Telko and Leipurin in H2 while ESL should see at least some more earnings recovery towards the end of the year. We estimate the low-end of the guidance range assumes basically flat performance for ESL’s H2 y/y, which seems a conservative assumption given how soft the comparison figures already are. We estimate FY’25 comparable EBITA at the EUR 40m midpoint, on which basis Aspo is valued about 12x EV/EBIT. Our new TP is EUR 6.4 (6.3) as we retain BUY rating.