Aspo - ESL and Telko can improve more
Aspo’s Q3 results were in the end neutral; both ESL and Telko can improve more next year, when they are also to be split.
The Q3 report was largely neutral relative to estimates
Aspo’s EUR 9.6m comparable EBITA was close to estimates as ESL’s earnings stayed soft, due to weak forest industry demand, while Telko did a bit better than expected. Telko’s sales margin improved further, even when there was a volume-driven top line headwind, thanks to a higher share of specialty products. The Q3 earnings report was thus quite neutral relative to estimates; Aspo leaves its FY’25 guidance intact for now, meaning there’s a wide comparable EBITA range for Q4’25, which we believe is mostly due to ESL as its earnings are only now bottoming out. In our view ESL’s Q4’25 EBITA could remain rather flat in a low scenario, while it should already gain some in the base case.
Together ESL and Telko do roughly EUR 40m of EBITA
Aspo speeds up its plans to separate ESL and Telko into separate entities; the transaction is expected to occur by the end of next year. Telko can improve closer to its long-term 8% EBITA target, which looks relevant again now that the Q3 margin was already almost 7%. Further upside potential exists as not yet all of Telko performs that well, completed and future M&A deliver additional synergies and product mix can be improved more organically as well as inorganically. Telko will likely close add-on deals over the coming quarters and continue to improve margins even if the uncertainty around industrial demand limits volumes for now. We estimate Telko to do more than EUR 18m of EBITA this year, which could gain by another EUR 2m next year (on an organic basis). We expect ESL FY’25 EBITA at around EUR 20m; the long-term potential with the current fleet (not including the upcoming green Handy vessels) should be some EUR 30m, and we expect FY’26 to get halfway there at around EUR 25m.
Valuation not high, but ESL’s earnings gains pace is uncertain
The valuation of ESL can represent certain challenges as the performance of new vessels isn’t yet fully visible in the numbers given the soft market, while Telko remains small compared to peers but has shown solid improvement recently. Aspo is valued 12.5x EV/EBIT on our FY’25 estimates, which should be roughly an adequate multiple for both ESL and Telko on their next year earnings. We find Aspo SOTP value is ca. EUR 7 per share; our new TP is EUR 7.1 (7.0), and our rating is now ACCUMULATE (BUY).