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Verkkokauppa.com - Critical Q4 ahead

05.02.2020 - 8.40 | Preview

Talenom - Sights remain set on growth

04.02.2020 - 09.00 | Company update

Talenom’s Q4 results fell below our expectations, with EBIT at EUR 1.5m (Evli 2.6m), driven by higher than anticipated D&A and the impact of the introduction of the Incomes Register. The impact of growth investments on profitability in 2020 appears somewhat larger than previously anticipated and we have lowered our 2020-2021E EBIT estimates by ~10%. We raise our TP to EUR 41 (37.5) but downgrade to HOLD.

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EBIT in Q4 clearly below expectations

Talenom’s Q4 results were below our expectations. Revenue grew 19.8% to EUR 14.9m (Evli 15.1m), while EBIT amounted to EUR 1.5m (Evli 2.6m). Compared with our estimates the difference was largely due to higher than anticipated D&A and introduction of the Incomes Register. D&A expenses increased as depreciation of the latest implementations of the bookkeeping line began in Q4. One-off items were limited although year-end reviews to our understanding also affected the elevated expenses.

Growth investments pressuring margin improvements

Talenom’s expects relative growth in net sales and relative profitability in 2020 to be in line with 2019. We see that margin improvement potential remains possible in 2020 through enhanced operational efficiency in acquired businesses and from the bookkeeping line improvements. More importantly, Talenom is in our view seeking to maintain momentum on growth and targeting geographical expansion and growth in smaller customer segments domestically as well as growth pick-up in Sweden. Talenom also emphasized focus on customer retention and satisfaction. With growth investments expected to increase we now only expect a 0.4pp EBIT-margin improvement and sales growth of 18.9% in 2020.

HOLD (BUY) with a target price of EUR 41 (37.5)

Talenom is in our view continuing on a healthy long-term track. We have lowered our 2020-2021E EBIT estimates by around 10%. With the outlook still remaining solid we raise our target price to EUR 41 (37.5), valuing Talenom at 30x 2020E P/E. With the share price having picked up we downgrade to HOLD (BUY).

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Marimekko - Upswing expected to continue in Q4

04.02.2020 - 08.55 | Preview

Marimekko reports its Q4’19 result on 13th of Feb. We expect Q4 sales of EUR 34.6m (16.5% y/y) and adj. EBIT of EUR 2.9m. We have kept our estimates largely intact and expect ’19 dividend of EUR 1.14 per share. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of Q4.

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Christmas sales expected to boost revenue growth

Marimekko’s upswing has continued in ’19 driven by positive sales development in Finland and increased licensing income from APAC region, resulting in two guidance upgrades in July and October. We expect Q4’19E sales to grow by 16.5% y/y (EUR 34.6m), driven by Christmas sales and representing some 28% of total year-end sales while we expect adj. EBIT to nearly double from Q4’18 to EUR 2.9m (Q4’18: 1.6m) due to improved gross profit and lower relative share of fixed costs. We expect good sales performance to continue in Finland (+15% y/y) but also APAC region (+27% y/y).

A sequel of the UNIQLO collaboration

Marimekko gave its first positive profit warning for ‘19E ahead of Q2 due to increased licensing income from APAC region. Licensing income of EUR 1.2m was booked in Q3 and shortly after the result it was revealed that the collaboration was with UNIQLO, a Japanese global apparel retailer, with who Marimekko partnered also in 2018. The new fall/winter collection was launched in late November ‘19 in all UNIQLO markets except in Japan. We thus see more far reaching positive impacts resulting from the partnership as the collaboration rises Marimekko’s brand recognition globally.

“HOLD” with TP of EUR 39.0 intact

Based on the second guidance upgrade given in October, sales are expected to increase from ‘18 while comparable operating profit is expected be higher than in ’18, amounting approx. EUR 17m. We have made only small adjustments to our estimates and expect 2019E sales of EUR 125.3m (+12% y/y) while our adj. EBIT expectation is in line with the guided EUR 17m (FY18: 12.2m). We expect Marimekko to propose a dividend of EUR 1.14m per share in ‘19. In ‘20E, we expect ~8% sales growth and further EBIT improvement (~21% y/y), driven by positive gross margin development. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of Q4.

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Talenom - Miss on EBIT

03.02.2020 - 13.50 | Earnings Flash

Talenom’s Q4 results were below our expectations due to a miss on profitability. Net sales amounted to EUR 14.9m (Evli/cons. EUR 15.1m) while the operating profit amounted to EUR 1.5m (Evli/cons. EUR 2.6/2.4m). Talenom reiterated its guidance for 2020, expecting relative growth and relative profitability to be in line with 2019. Talenom proposes a dividend of EUR 0.75 (Evli/cons. 0.74/0.71).

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  • Talenom’s net sales in Q4 amounted to EUR 14.9m (EUR 12.4m in Q4/18), in line with our and consensus estimates (Evli/cons. EUR 15.1m). Revenue growth in Q4 was 19.8% y/y.
  • Introduction of the Incomes Register had a negative impact of EUR 0.33m on net sales and operating profit in Q4/19.
  • The operating profit in Q4 was EUR 1.5m (EUR 1.5m in Q4/18), below our and consensus estimates (Evli/cons. EUR 2.6/2.4m), at a margin of 9.8%. The operating profit miss was mainly due to higher than estimated depreciation and amortization.
  • Guidance reiterated: the relative growth in net sales and relative profitability in 2020 expected to be in line with 2019.
  • Net investments during in 2019 EUR 15.4m compared with 9.5m in 2018.
  • Talenom proposes a dividend of EUR 0.75 per share (Evli/cons. 0.74/0.71).

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Tokmanni - Increasing target price ahead of Q4

31.01.2020 - 09.00 | Preview

Tokmanni reports its Q4 earnings on next week’s Friday, 7th of February. We expect Q4 revenue to grow by 7.2% to EUR 288m and EBIT of EUR 32.7m. We keep our rating “BUY” with updated TP of EUR 16 (13.5) ahead of Q4.

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New store openings to support sales

Q4 is normally the strongest quarter in terms of both revenue and profit for Tokmanni. According to PTY, revenue of department stores & hypermarkets grew by some 6% in Oct-Nov but declined by 1.5% in December. Decline in sales was exceptionally high in clothing (-11.6%) but also in home & leisure (-4.8%), partly due to mild winter. We expect Tokmanni’s Q4’19E revenue to grow by 7.2% to EUR 288m (Q4’18 268m) driven by new store openings and increased customer flows. Two new stores were opened during Q4 with combined selling space of ~4500m2. We expect Q4’19E adj. EBIT of EUR 32.7m (Q4’18: 25.6m) resulting in EBIT margin of 11.4%.

Expecting further profitability improvements in 2020E

So far Tokmanni’s ‘19 has been strong. In Jan-Sept’19 LFL sales grew +4.9% and at the same time gross profit developed favorably as gross margin was 34.1% vs. 33.7% in Jan-Sept’18. The actions taken to improve profitability seem to work although we hope to get more color on the progress made in improving the efficiency of Tokmanni’s supply chain as the success of this is one of the key drivers for further profitability improvement. In 2020E, we expect EBIT margin to increase to 8.2%, stemming mainly from gross margin improvement and 4.4% y/y revenue growth (EUR 989m) driven by store network expansion. The company’s long-term target is to reach adj. EBIT margin of ~9%.

“BUY” with TP of EUR 16 (13.5)

We have kept our estimates intact ahead of Q4 and expect FY19E revenue of EUR 947m (FY18: 870m) and adj. EBIT of EUR 71m (FY18: 52m). We expect Tokmanni to propose a dividend of EUR 0.62 per share in ’19 (cons. EUR 0.60). We keep our rating “BUY” with updated TP of EUR 16 (13.5) due to the ~20-30% increase in Nordic non-grocery peer multiples. On our estimates, with the new target price of EUR 16, Tokmanni trades at ’20E-21E EV/EBIT multiple of 16.1x and 14.6x which still translates into ~7-10% discount compared to its international peers.

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CapMan - Robust fundraising pipeline

31.01.2020 - 08.45 | Company update

CapMan posted strong Q4 results and the operating profit adjusted for the EUR 4.2m goodwill amortization related to CapMan’s operations in Russia improved clearly to EUR 7.7m, aided by significant carried interest. On-going fundraising projects, with the NRE III and NC III funds as new projects, provide major AUM growth potential. The Q4 report overall provided clear support for continued solid earnings growth in coming years. We raise our target price to EUR 2.5 (2.1) ex-div and retain our HOLD-rating.

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Carried interest boosted Q4 profitability

CapMan’s Q4 results beat expectations. Revenue grew to EUR 16.6m, aided by EUR 5.4m carried interest mainly from the Hotels fund. The operating profit amounted to EUR 3.4m but was affected by a non-cash amortization of goodwill relating to CapMan’s business in Russia and the adj. operating profit was at EUR 7.7m. A clear positive sign was the growth in management fees during Q4, up to EUR 7.3m. CapMan proposed a dividend of EUR 0.13 per share.

Major AUM growth potential in coming years

CapMan has begun the fundraising for the NRE III and NC III funds, which should add new AUM north of EUR 500m upon close. Together with other on-going fundraising projects we see major AUM growth potential in the coming years. We have post Q4 raised our estimates, with our 2020-2021E adj. operating profit estimates up some 20%. We expect a 140% increase in the Management Company business adj. operating profit (excl. carry) in 2020 driven by fee growth and limited cost increases.

HOLD with an ex-div TP of EUR 2.5 (2.1)

CapMan’s share price has seen larger increases and on peer multiples the expected major profitability improvement in 2020 appears to have been largely accounted for. On our revised estimates we raise our target price to EUR 2.5 (2.1) ex-div and retain our HOLD-rating.

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Suominen - Volumes haven’t stabilized yet

30.01.2020 - 09.20 | Company update

Suominen’s Q4 results fell short of our expectations as volume pressure continued. We have cut our estimates, our updated TP is EUR 2.25 (2.50), rating still HOLD.

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Suominen’s EUR 94.5m Q4 revenue missed our estimate

Suominen’s Q4 revenue declined by 14% y/y and 12% short of our EUR 107.1m estimate. The decline was attributable to volume losses but also to lower prices (due to lower raw materials prices). Volumes were lost in the Americas, with revenue down by 6% to EUR 62m, but the drop was sharp in Europe as Q4 sales slid by 26% y/y to EUR 32m. Suominen’s customer base is concentrated as the ten largest accounts make 65% of sales. Suominen lost volumes last year as the nonwovens price hikes became effective. Suominen says certain customer accounts might still be negatively affected. Suominen reported an 8.3% gross margin in Q4, in line with our estimates. The gross profit was thus EUR 7.8m while we expected EUR 9.0m. SGA, R&D and other items were as expected, and therefore the EUR 1.1m gap in EBIT relative to our estimate (EUR 1.4m vs EUR 2.5m) was due to the low sales figure and resulting weak absolute gross profit.

Short-term growth uncertain, but EBIT should still improve

Although the Q4 sales shortfall was a disappointment relative to our expectations, the softness didn’t fundamentally alter our view towards Suominen’s wider picture as a high level of uncertainty continues to fog the outlook. Suominen doesn’t guide sales outlook for FY ’20 but expects EBIT to further improve from the FY ’19 EUR 8.1m figure. We have cut our estimates for this year. We previously estimated Suominen to achieve 5% top line growth in ’20. We now expect 3% growth. Our expectation for FY ’20 EBIT is now EUR 12.0m (previously EUR 16.1m). Nonwovens demand is expected to grow at a CAGR of more than 4% in the markets where Suominen is present. Suominen targets to grow in excess of this rate in the long-term, however the oversupply problem seems to persist at least in the short-term.

Long-term targets are hard to price in given uncertainty

In our view Suominen’s valuation is neutral considering profitability has just bottomed out. However, it’s hard to say when profitability reaches adequate levels; we retain our cautious stance. Our TP is now EUR 2.25 (2.50), rating HOLD.

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CapMan - Carry offset by goodwill amortization

30.01.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q4 amounted to EUR 16.6m, above our estimates and above consensus estimates (EUR 12.5m/11.4m Evli/cons.) following clearly higher carried interest. EBIT amounted to EUR 3.4m, below our and consensus estimates (EUR 4.7m/5.0m Evli/cons.). Adj. EBIT was EUR 7.7m. CapMan proposes a dividend of EUR 0.13 per share (EUR 0.13/0.13 Evli/Cons.).

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  • Revenue in Q4 was EUR 16.6m (EUR 8.9m in Q4/18), above our estimates and consensus estimates (EUR 12.5m/11.4m Evli/Cons.). CapMan recorded EUR 5.4m in carried interest, (Evli EUR 2.0m).
  • Operating profit in Q4 amounted to EUR 3.4m (EUR -2.9m in Q4/18), below our estimates and consensus estimates (EUR 4.7m/5.0m Evli/cons.). The operating profit includes a EUR 4.2m goodwill amortization relating to CapMan’s business in Russia and the adjusted operating profit amounted to EUR 7.7m
  • EPS in Q4 amounted to EUR 0.02 (EUR -0.02 in Q4/18), in line with our and consensus estimates (EUR 0.02/0.03 Evli/cons.).
  • Management Company business: Revenue in Q4 was EUR 13.0m vs. EUR 8.7m Evli. Operating profit in Q4 amounted to EUR 2.4m vs. EUR 2.9m Evli. Adj. operating profit was EUR 6.6m
  • Investment business: Operating profit in Q4 amounted to EUR 2.1m vs. EUR 1.6m Evli.
  • Services business: Revenue in Q4 was EUR 3.2m vs. EUR 3.4m Evli. Operating profit in Q4 amounted to EUR 0.9m vs. EUR 1.2m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.13 per share (EUR 0.13/0.13 Evli/Cons.).
  • Capital under management by the end of Q4 was EUR 3.2bn (Q4/18: EUR 3.0bn).

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Suominen - Miss due to low sales

29.01.2020 - 12.40 | Earnings Flash

Suominen’s top line missed our estimate as Q4 sales declined by 14% y/y due to lower volumes as well as prices. Suominen expects operating profit to improve this year compared to FY ’19 (EUR 8.1m).

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  • Q4 revenue amounted to EUR 94.5m, compared to our EUR 107.1m estimate. The miss was due to higher-than-expected volume losses. Declining raw materials prices also had a negative effect.
  • Gross profit was EUR 7.8m vs our EUR 9.0m expectation. The resulting 8.3% gross margin was close to our 8.4% estimate.
  • Q4 EBIT was recorded at EUR 1.4m, whereas we expected EUR 2.5m. SG&A and R&D were basically as expected, so the earnings miss was attributable to low gross profit, which was due to weak top line.
  • The BoD’s dividend proposal for FY ’19 is EUR 0.05 per share; our expectation was EUR 0.04 per share.
  • Suominen guides FY ’20 EBIT will improve compared to ’19 (EUR 8.1m). Suominen will no longer provide sales guidance on annual level, which in our view is understandable given the recent struggles with volumes. Suominen targets long-term sales growth above that of the relevant market.

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Finnair - Strong Q4 traffic supports revenue growth

29.01.2020 - 09.20 | Preview

Finnair will report its Q4 result on next week’s Friday, 7th of February. The company’s Q4’19 traffic was in line with our expectations thus we have made only minor adjustments to our estimates. We expect Q4 revenue of EUR 740m and EBIT of EUR 8.2m. We keep our rating “HOLD” with TP of EUR 6.5 ahead of Q4.

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Good Q4 traffic data

Finnair’s traffic met the expectations in Q4. Capacity (ASK) grew by 10.6% vs. our 9.4% expectation, while sold capacity (RPK) grew as much as 13.6% vs. our 9.4% expectation. Thus, passenger load factor (PLF) increased by 2.1 percentage points to 79.0% in Q4. PLFs grew in all the market areas but especially in Europe (+3.4pp) and in Finland (+3.4pp). Total passenger number rose by 11 % y/y. Cargo development continued soft as the global uncertainty in world trade continued to press the global air freight market, especially in Asia. We expect Q4 revenue of EUR 740m (Q4’18: 684m) and EBIT of EUR 8.2m (Q4’18: 26.5m).

Slight increase in jet fuel prices

Jet fuel prices slightly increased towards the end of the year. The average price in USD moved up by 1% and in EUR by 2% on a q/q basis compared to Q3’19. Yet the average price in Q4’19 was still -7% lower y/y in USD and -4% lower in EUR.

Coronavirus hampers share price

Finnair’s share price has slumped after the fears around Coronavirus rose. In order to control the situation, China has restricted traveling and day-to-day business in some areas, which affects Finnair’s operations in Asia. The impacts for Finnair’s financial outlook are still unknown thus we have not made changes to our estimates. We expect to get more color on this with the Q4 result.

“HOLD” with TP of EUR 6.5 intact

We have kept our estimates largely intact ahead of Q4 result. For FY19E we expect revenue of EUR 3077m (FY18: EUR 2850m) and adj. EBIT of 140m (FY18: EUR 218m), resulting in EBIT margin of 4.6% which is at the lower end of the guided adj. EBIT margin level of 4.5-6.0%. We expect Finnair to propose a dividend of EUR 0.11 per share for ’19. We keep our rating “HOLD” with TP of EUR 6.5 intact ahead of Q4.

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Consti - Downgrade to HOLD

29.01.2020 - 08.45 | Preview

Consti will report Q4 earnings on February 7th. We expect to see the favourable profitability development trend from Q3 to continue but for revenue to decline from the strong comparison period. Apart from margin development, the order intake will be of key interest following order backlog declines during 2019. Following a near 50% share price increase since our previous update we downgrade to HOLD (BUY) with a target price of EUR 7.0 (5.8).

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Expect continued positive profitability development trend

Consti’s Q3 saw profitability improve substantially, following a lengthy period of weaker profitability, affected in particular by a few large renovation projects. With some older projects still having an impact on Q3, we expect profitability to improve q/q and estimate a EUR 3.0m operating profit in Q4. We expect revenue to decline some 16% from the strong comparison period following the completion of some larger renovation projects and estimate a revenue of EUR 80.9m.

Profitability to improve in 2020, sales growth unlikely

Consti has in recent years typically given a rather vague guidance and not guided revenue development and we expect a likely guidance to reflect a higher operating profit in 2020 compared to 2019. Based on the weak H1/19 we expect a clear improvement in profitability in 2020 and the operating profit margin to improve from 1.5% in 2019E to 3.3% in 2020E. The sales growth outlook for 2020 remains unfavourable based on the order backlog development. We currently estimate only a minor decline of 1.7% in awaiting details on Q4 order intake.

HOLD (BUY) with a target price of EUR 7.0 (5.8)

Consti’s share price has increased near 50% since our previous update. We are prepared to accept part of the increase following concurrent smaller peer multiple increases and although valuation compared to peers remains attractive, with the still limited proof of sustainable profitability improvement and the on-going St. George arbitration proceedings we downgrade to HOLD (BUY) with a target price of EUR 7.0 (5.8).

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CapMan - Expecting a good finish to the year

27.01.2020 - 09.15 | Preview

CapMan will report Q4 results on January 30th. We expect the operating profit to remain on par with the quarterly average earnings during 2019 and expect and operating profit of EUR 4.7m. CapMan should record higher carried interest (Evli est. EUR 2.0m) in Q4, aided by the Hotels I fund, while we expect higher personnel costs and lower investment returns to offset the positive impact. Our DPS estimate is at EUR 0.13 (2018: EUR 0.12). We retain our HOLD-rating and TP of EUR 2.1 intact ahead of the results.

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Q4 operating profit estimate at EUR 4.7m

We expect Q4 revenue of EUR 12.5m (Q4/18: 8.9m) and an operating profit of EUR 4.7m (Q4/18: -2.9m). Pre-Q4 we have made downward adjustments to our estimates mainly due to increases in personnel expenses relating to expected bonuses and minor downward adjustments to revenue estimates. We have also lowered our investment return estimates based on the news flow on exits during Q4. We expect carried interest to increase clearly q/q (Evli est. EUR 2.0m) due to continuation of the Hotels fund and thereto related realization of carried interest.

Expect continued solid earnings growth in 2020

Our estimates imply a y/y improvement of 73% in operating profit during 2019. CapMan has not given any guidance for 2020 but expects significant growth in capital under management and we expect continued solid growth in operating profit of around 40% in 2020 driven by earnings growth across the board. The continuation of the Hotels I fund during Q4 will have a clear positive impact on both management fees and operating profit following an expected limited impact on costs.

HOLD with a target price of EUR 2.1

We expect CapMan to propose a dividend of EUR 0.13 per share, translating into a dividend yield of 5.6% on previous closing price. We keep our HOLD-rating and target price of EUR 2.1 intact ahead of the Q4 results.

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Suominen - Improvement gradient still uncertain

24.01.2020 - 09.25 | Preview

Suominen reports Q4 results on Wed, Jan 29. Our estimates stand unchanged. We expect positive FY ’20 guidance given ’19 figures represent a rather soft comparison base. Our TP is now EUR 2.50 (2.25), rating remains HOLD.

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Expect a stable Q4 result compared to preceding quarters

We note nonwovens demand unchanged since Q3, and thus leave our estimates intact. We estimate Q4 revenue at EUR 107m i.e. down by few percent y/y due to volume losses. All the nonwovens’ raw materials prices basically flatlined during Q4 and so we expect gross margin stable at 8.4%. We also expect other costs to have remained in control and thus see EBIT at EUR 2.5m (EUR -0.4m a year ago). We see stabilizing prices and volumes helping Suominen to continued improvement with FY ‘20e EBIT at EUR 16.1m (compared to ‘19e EUR 9.2m).

FY ’20 guidance should be positive for both sales and EBIT

Although Suominen’s FY ’19 figures will likely translate to an EBIT twice that of ’18, the company’s profitability is still far off from satisfactory. We thus expect continued meaningful profitability improvement this year. Suominen recently published its new strategy and financial targets for 2020-25. The targets were moderated; Suominen now aims for sales growth above that of the relevant market. As Suominen’s markets grow ca. 3% p.a. we would expect this to imply a CAGR of some 3-5%. In order to reach the targeted above 12% EBITDA margin (which would imply an EBIT margin close to 8%) by ‘25, Suominen not only needs to achieve improved operational efficiency but also robust sales growth. We look forward to Suominen commenting on the outlook for the two currently reported geographies, Europe and Americas, as well as any color on the possible Asia expansion (about which the company has talked over the years). We would also like to hear about turning customer relationships stickier since the nonwovens markets are still well-supplied.

We update our TP but remain HOLD due to uncertainty

Our updated TP is EUR 2.50 (2.25) as peer multiples have gained in recent months. Our rating is still HOLD. Valuation starts to look attractive longer term (‘21e EV/EBITDA ~4.5x and EV/EBIT 10x) yet in our view there’s too much uncertainty. We expect Suominen to declare EUR 0.04 dividend per share for ’19.

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Vaisala - Upgrades outlook on continued good momentum

12.12.2019 - 08.08 | Company update

Vaisala upgraded yesterday its 2019 outlook. The upgrade did not come as a surprise as momentum in both business units have continued strong and as such our estimates were already taking this into account. We’ve made small upward adjustments to our estimates. We maintain our HOLD recommendation with new TP of 29.5 (prev. 24.5).

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Continued good momentum in both business areas

Vaisala cited that strong demand in both business areas has continued. In Q3 Vaisala’s orders received YTD was up +34% yoy with bulk of growth being organic, supported by acquired businesses. Strikes in November and December have been a significant risk to production and logistics, but Vaisala has been able to maintain its good delivery capacity also during Q4. The continued strong demand has had a positive impact on gross margin and project margins have also remained at a good level. However, there are still uncertainties related to the rest of the year, like the ongoing strikes in France, and estimating the impact of these is challenging.

Outlook upgrade not a surprise, estimates slightly upwards

Vaisala now estimates 2019 net sales of 395-405 MEUR and EBIT to be in the range of 36-42 MEUR. Previous outlook was net sales of 380-400 MEUR with EBIT of 25-35 MEUR including 10-12 MEUR acquisition related amortization and one-off expenses. As our 2019E estimates for net sales of 398 MEUR were in the upper range of the previous guidance and our EBIT estimate of 36.4 MEUR was slightly above previous guidance, the outlook upgrade did not come as a surprise. We have slightly adjusted our 2019 and onwards estimates upwards reflecting the continued good momentum. As noted previously, with acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable and road to >12% margins progressing well. The driver for profitability improvement is larger volumes and continued good growth in industrial business. We estimate IM share of Vaisala’s EBIT in ’20-21E to grow to 66% (vs. 56-57% in ’17-’18), driving Vaisala’s ~10-12% EBIT growth and EBIT margins of 10.5-11% (12-13% adj. for IAC).

Valuation is stretched, but justified

Vaisala’s share har rallied +105% YTD, being now at an all-time high. On our raised estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 23x and 21.6x for ‘19E and ‘20E, a 30-38% premium to our peer group median despite exhibiting lower profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the current stable outlook for W&E, strong ESG profile and growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 29.5 euros (prev. 24.5) and maintain our HOLD recommendation.

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Aspo - CMD notes; targets softened

27.11.2019 - 09.15 | Company update

Aspo updated its long-term targets in connection with the CMD yesterday. There were no actual downgrades to longterm EBIT margin targets, however Aspo abandoned the target ranges’ upper limits for both ESL and Telko, in addition to pushing the margin target dates further forward into the future for all segments. Our updated TP is EUR 8.25 (8.75), while our rating remains HOLD.

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ESL’s 12% EBIT margin target left intact, but pushed back

ESL now aims for EUR 200m revenue and 12% EBIT margin in ‘23. The previous target was EUR 200m revenue and 12-15% margin in ‘20. A target softening wasn’t a big surprise considering the recent cargo weakness, largely attributable to the Nordic steel industry, although in our view the ‘23 target date should leave ESL with potential for a positive surprise assuming the market challenges are not seriously prolonged. No big news regarding the fleet’s current situation were floated. ESL said it is assessing new fleet investments i.e. growth prospects beyond ‘23. These would be in the form of environmentally friendly coasters (consistent with the acquisition of AtoB@C). Such an evaluation reflects ESL’s positive outlook on biofuels volumes. ESL also told it is considering different types of ownership and financing alternatives for the potential new smaller vessels. However, no major investments are likely soon.

Telko and Leipurin margin target dates pushed back

While Telko’s volumes have developed well (+10% this year), the focus will be on improving profitability in the coming years, i.e. the story wasn’t changed. Telko’s profitability in e.g. Ukraine hasn’t been developing as hoped. Aspo also said Kauko’s annual revenue will decline to EUR 10m effective Jan 1. Telko now targets 6% EBIT margin with EUR 300m revenue (excl. Kauko) in ‘23 (previously EUR 300-350m revenue and 6-7% margin in ‘20). Leipurin still targets EUR 140m revenue and 5% EBIT margin, however the date was pushed back by a year to ‘23.

Full potential will not materialize for a while

We have updated our estimates following the new targets. We revise our estimates down especially beyond ‘20, but also see next year EBIT some EUR 2.4m lower than previously. Our new TP is EUR 8.25 (8.75). Our rating remains HOLD.

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Exel Composites - Turnaround progressing well

22.11.2019 - 09.20 | Company update

Exel Composites updated its guidance for FY ‘19. The update wasn’t big news as progress has been good this year. We make small revisions to our profitability estimates, and our new TP is EUR 6.00 (5.50), rating now HOLD (BUY).

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EBIT has improved considerably this year

Exel Composites updated its FY ’19 guidance. The company had previously guided improving revenue and adjusted EBIT compared to previous year. The updated outlook guides increase in revenue (as before) and significant increase in adjusted EBIT. The positive guidance update didn’t come as a major surprise as Exel had already accumulated EUR 5.9m in adjusted EBIT during the first nine months of the year, compared to the EUR 5.0m for FY ’18. Exel says there have been no material changes to order activity since the release of Q3 figures. We thus continue to expect further extension to the recent segmental performance trends. We see Construction & Infrastructure growing at a 10% annual rate, whereas we expect more muted 3-5% CAGR development for Industrial Applications and Other Applications.

Good volumes and cost savings program have helped EBIT

We see no reason to make changes to our top line estimates, i.e. we still estimate Exel’s revenue to grow at a 7% annual rate during the next few years. Exel expects to fully realize the annual savings target of EUR 3m during 2020. Although visibility is limited, we make small upward revisions to our profitability estimates. We now expect EUR 2.3m in Q4 EBIT (previously EUR 2.1m). For FY ’20 we now estimate the figure at EUR 9.2m (previously EUR 8.6m). In other words, we see Exel achieving operating margins at above 8% going forward. Such a level still falls short of the company’s long-term target (Exel targets long-term adjusted operating margin at above 10%).

Long-term upside remains due to operating leverage

In our view more positive development can be expected; higher revenues will further lift operating margin. There’s still long-term upside potential in Exel, however we see certain caution is in order due to limited visibility. We regard EV/EBITDA and EV/EBIT multiples of some 7-8x and 11-12x for this year and next as reasonable (roughly 30% below peer medians). We update our TP to EUR 6.00 (5.50); our new rating is therefore HOLD (BUY).

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Aspo - Market softness to cut results short

21.11.2019 - 09.15 | Company update

Aspo abandoned its former guidance for the rest of this year as ESL’s cargo volumes will be soft due to low steel industry demand. Telko’s profitability development will remain muted especially in the Western markets. We cut our estimates, our TP is now EUR 8.75 (9.25), rating HOLD.

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In our view ESL’s long-term case remains intact

As was known previously, SSAB will temporarily shut one of its two furnaces in Raahe. The seizure is expected to last some 4-6 weeks, and the furnace should be firing up again early next year. ESL had of course made allowances in its budgeting for such an event, nevertheless the shipments materialized lower than expected. We note the Baltic Dry Index has declined steeply during the last couple of months, however ESL says its Supramaxes haven’t been materially affected so far. As the new LNG-powered vessels and AtoB@C are now performing according to expectations, it follows that the lowered near-term outlook is entirely due to low steel industry shipping volumes. With regards to Telko, Aspo says the Eastern market is developing basically as before, however the Western market has proved more challenging than expected.

We cut our Q4 estimates, see higher uncertainty for Telko

We trim our Q4 estimates. We previously expected ESL to achieve EUR 5.5m in Q4 EBIT; our new estimate stands at EUR 4.3m. Our previous Q4 EBIT estimate for Telko was EUR 2.7m, and the reduced expectation amounts to EUR 2.3m. We leave our estimates for Leipurin intact. This means we estimate Aspo to post EUR 6.4m Q4 EBIT, which can be compared to the EUR 6.7m figure recorded in the previous quarter, and the adjusted EBIT of EUR 7.4m in Q4’18. We thus see Aspo reaching EUR 22.1m in FY ’19 EBIT (EUR 20.6m in ’18, or EUR 25.4m when adjusted for the Kauko write-off). Aspo now guides FY ’19 EBIT to be higher than in ’18. Aspo previously expected the figure to be in the EUR 24- 30m range. We also cut our next year estimates for Telko.

Improvement steepness is uncertain due to macro softness

Our updated TP is EUR 8.75 (9.25), rating remaining HOLD. In our view both ESL and Telko continue to hold significant improvement potential, however caution is in order considering the softness of certain key Aspo markets.

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Cibus Nordic - Yield not yet entirely digested

18.11.2019 - 09.20 | Company update

Cibus’ portfolio performed as expected in Q3 as the EUR 12.5m net rental income figure was in line with our estimate. Admin and financial expenses were elevated due to administrative transition as well as IFRS 16 adjustments and other financial costs. We make minor changes to our estimates, retain our SEK 135 TP and HOLD rating.

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Admin and financial expenses were temporarily elevated

Cibus’ portfolio developed without surprises during Q3 as the properties generated EUR 13.2m in rental income (vs our EUR 13.3m estimate). Property expenses also were largely as expected, and thus net rental income amounted to EUR 12.5m (we expected EUR 12.4m). Cibus is currently in the process of developing its organization and so transitions administration as well as asset management back to itself. This meant central administration as well as financial costs were temporarily elevated during the quarter, with admin expenses amounting to EUR 1.2m (compared to the normal EUR 0.9-1.0m level), and thus operating income stood at EUR 11.3m (vs our EUR 11.5m estimate). Cibus also made IFRS 16 related adjustments to its reporting, and now records site leasehold fees among its financial expenses, the effect being roughly EUR 0.15m per quarter. Net financial expenses totaled EUR 4.0m in Q3, and Cibus sees the level at around EUR 3.4m going forward.

Q3 was quiet in terms of portfolio development

There were no changes to Cibus’ portfolio during the quarter as the company still holds 139 Finnish properties valued at EUR 862m. Net debt LTV ratio and occupancy rate were basically unchanged at their respective 59% and 95% levels. Average lease-length remains at 5.0 years. Likewise, annual net rental income capacity continues to stand at EUR 49.9m, implying EUR 46.2m operating income potential. Cibus says it expects to list on the Nasdaq Stockholm Main List by Q3’20. Cibus continues to actively monitor the Nordic property market beyond Finland.

Cibus’ portfolio still offers a 100bps yield pick-up

We leave our operative estimates largely intact following the report. We retain our TP of SEK 135 per share, rating HOLD. Cibus’ portfolio net yield, at 5.1%, remains almost 100bps above that of a typical listed Nordic Real Estate portfolio.

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Cibus Nordic - Operating profit as expected

15.11.2019 - 10.20 | Earnings Flash

Cibus posted Q3 results largely in line with expectations. Operating income (rental income less property and central administration expenses), at EUR 11.3m, was close to our EUR 11.5m estimate. Larger than expected financial expense items meant profit from property management was a little soft as Cibus is developing its own organization.

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  • Q3 rental income amounted to EUR 13.2m vs our EUR 13.3m estimate.
  • Net rental income stood at EUR 12.5m, compared to our EUR 12.4m expectation.
  • Operating income was recorded at EUR 11.3m while we expected EUR 11.5m.
  • Net operating income (profit from property management) was EUR 7.3m, falling short of our EUR 8.5m projection due to higher than expected financial expense items. Cibus is in the process of transitioning administration as well as asset management back to the company from third-parties.
  • Annual net rental income capacity stands at EUR 49.9m (unchanged).
  • The property portfolio is valued at EUR 862m, which translates to an EPRA NAV of EUR 11.4 (previously EUR 11.3) per share.
  • Net debt LTV ratio was 58.9% (previously 59.0%) at the end of Q3.
  • Occupancy rate stood at 94.5% (94.3% in Q2’19).

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SSH - Issues profit warning

14.11.2019 - 08.15 | Company update

SSH lowered on Tuesday its revenue estimate for 2019. The lowered outlook did not come as a surprise as the bar was set really high for Q4. We’ve cut our sales and EBIT estimates for 2019 and coming years. Despite the estimates cut, the big picture remains unchanged in our view, with the underlying question in the investment case still being growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On the back of lowered estimates, our new target price is 1.0 euros (prev. 1.10), our recommendation remains SELL.

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Lowering revenue estimate for 2019

SSH now estimates that its revenue from the software business (software fees, professional services, and recurring revenue) will decrease somewhat compared to 2018 level, which was 15.6 MEUR (excluding patent income). The previous guidance was for above 10% revenue growth. Reasons behind the lowered revenue outlook are lower professional services revenue than expected, negative FX impact from weakening euro, and postponement of significant NQX sales due to lengthy procurement processes.

Estimates cut, NQX showing signs of traction

Due to the profit warning we have cut our 2019E net sales estimates from 17.1 MEUR to 15.0 MEUR, and 2019E EBIT from 0.9 MEUR to -0.9 MEUR. Consequently, our net sales estimates for 2020-21E are also cut ~8%, while our EBIT estimates are cut even further. The lowered net sales estimates have a clear negative effect on our profitability estimates, thus postponing profit turnaround into the future. On the positive, the firewall product NQX is showing promising traction, with SSH citing that “significant sales” were now postponed to 2020. Our read is that significant would mean deals in the seven-figure range. In Q3, SSH received a request for information (RFI) by the Finnish Defence Forces Logistics Command regarding NQX.

Target price 1.0 euros, recommendation unchanged

On our renewed 2019-20E estimates, SSH is trading at EV/Sales multiples of 3.0x and 2.5x, which is clearly below the sector as noted before. Despite the estimates cut, the big picture remains unchanged in our view, with the underlying question in the investment case still regarding growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On the back of lowered estimates, our new target price is 1.0 euros (prev. 1.10), our recommendation remains SELL. Our target price implies an EV/Sales multiple of 2.2x on our ‘20E estimate, slightly below Nordic software peers, which we see as warranted given weaker metrics and the uncertainty to our estimates.

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Finnair - CMD notes

13.11.2019 - 09.45 | Company update

Finnair held its CMD yesterday where the company presented its road map for sustainable and profitable growth after a phase of accelerated growth. The company aims to grow in line with market growth, focusing on improving its market position in Asia. The company provided a mix of efficiency improvement actions in order to improve profitability. We don’t expect any short-term impacts hence we retain our rating “HOLD” with TP of EUR 6.5.

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Focusing on Asian mega cities

Finnair continues to focus on improving its market position in Asia. The company’s geographical position provides Finnair a competitive advantage of transfer traffic between Europe and Asia. Transfer traffic between the two continents is essential as transfer traffic represents 62% of Finnair’s flown ticket revenue of which transfer traffic from Asia represents 73%. The company will concentrate on Asian mega cities which are providing higher yields. Japan and China are the two main markets but Finnair increases its presence also in other Asian countries, South Korea being an example as the company opens a new route to Busan in March 2020. The market growth is estimated to be some 4% between Europe and Asia. The company aims to be a modern premium airline and has renewed its website and mobile app to better serve its customers globally. The company is also renewing its ticket types and will offer a new option, premium economy class alongside with the normal economy and premium classes.

Heavy investments on fleet renewal

During the past few years, Finnair has focused on accelerated growth. The company has increased its capacity in 2015-2019 by 14 new A350 aircrafts and five more has been ordered (for 2020-2022). During the strategy period, the company aims to increase its wide-body fleet from 22 to ~30 and the total fleet from 83 to ~100. The company has estimated that the fleet investments during 2020-2025 will be some EUR 3.5b-4.0b (including the five new A350s) depending on the final fleet renewal plan. According to the company, one-third of the investments will be invested into growth and the remaining two-thirds into fleet renewal/replacement. The company aims to increase the share of its owned aircrafts. The investments will predominantly be funded by the company’s cashflow.

Updated financial targets for 2020-2025

Finnair updated its financial targets for 2020-2025 as the company is moving towards a new phase where the company seeks sustainable and profitable growth. The company’s opex (ex fuel) has increased by 6.1% (CAGR) since 2014, which exceeds the revenue growth of 5.5% (CAGR). Based on the strategy update, the company aims to moderate its growth and expects it to be in line with the market growth. Finnair guides ASK growth (CAGR) of 3-5% which is in line with our expectations (3-4% in 20E-21E). The company’s new target is to reach comparable EBIT margin of over 7.5% (prev. over 6%) over the cycle (at constant fuel and currency), after a 12-18 month build-up period. Profitability improvement will be driven by operational efficiency. Key drivers for lower unit costs are fuel efficiency, digitalization and automatization as well as improved on-time performance. Finnair targets to improve its OTP rate to 85% (2018: 78%). Also, fleet renewal should boost efficiency and updated ticket types to support margins. We see Finnair’s profitability target achievable, although we don’t expect any short-term impacts as the improvement of OTP is gradual and implementation of new processes takes time. Finnair also updated its ROCE target and expects ROCE of over 10% (prev. over 7%) over the cycle (at constant fuel and currency), after a 12-18 month build-up period. The company will provide more information of its sustainability targets in Q1’20.

HOLD with TP of EUR 6.5

We have made small adjustment mainly to our 21E estimates after the CMD. We expect revenue to grow 3-4% in 20E-21E while we expect comparable EBIT margin of 5.2% and 6.6%. The updated strategy does not impact our short-term estimates but we see the new targets to create positive outlook for Finnair’s earnings development in the future. We keep our rating “HOLD” with TP of EUR 6.5.

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Endomines - Upgrade to HOLD

08.11.2019 - 09.15 | Company update

Endomines’ Q3 results were clearly below our estimates, as no concentrate from Friday was sold during the quarter. Mining operations have progressed well but issues with the commissioning of the mill delayed concentrate production. Full forecasted production rates at Friday are expected by the end of the year. We adjust our TP to SEK 4.7 (4.8) and upgrade to HOLD (SELL) following share price declines.

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Estimates miss from mill commissioning delays

Endomines Q3 results fell clearly below our estimates, as no gold concentrate from the Friday-mine was yet sold, whereas we had expected minor sales. The gold concentrate production was affected by issues with commissioning the mill at Friday, which delayed previous plans of commencing production during Q3. Revenue amounted to SEK 1.6m (Evli 10.9m) and EBIT to SEK -16.4m (Evli -7.2m). Revenue was generated from gold recovered from the clean-up at Pampalo. Production at the Friday-mine has progressed well and a significant ore stockpile has been built up and Endomines expects to be reaching full forecasted production rates by the end of the year.

Bumps on the road in the near-term not unlikely

We have slightly revised our 2019 estimates downwards following the delay in concentrate production. The issues relating to the commissioning of the mill continue to pose risks for concentrate production in Q4. The impact of any further delays are however essentially not of any major importance and would only shift cashflows to a slightly later stage and the improved financial situation from the completed rights issue allows for some headwind.

HOLD (SELL) with a TP or SEK 4.7 (4.8)

Our view on Endomines post-Q3 in general remains intact. Our SOTP (Gold spot price) implies a value of SEK 5.4 per share but with the production uncertainty still present we continue to justify a discount and check our target price to SEK 4.7 (4.8) per share following SOTP adjustments. Due to a near 10% share price decline since our previous update we upgrade our rating to HOLD (SELL).

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Endomines - No gold concentrate production in Q3

07.11.2019 - 09.50 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q3, as the commissioning of the mill was delayed. Mining operations have progressed well, and an ore stockpile has been built up. Due to the lack of gold concentrate sale from Friday, Endomines’ Q3 figures were clearly below our estimates.

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  • Endomines did not sell any gold concentrate from Friday in Q3, while gold recovered from the clean-up at Pampalo generated some revenue. Mining has progressed well at Friday and a significant ore stockpile at the mine and the mill sites has been produced.
  • Revenue* amounted to SEK 1.6m, with our estimates at SEK 10.9m. We had expected minor gold concentrate sales from Friday, while Q3 revenue consisted solely of sale of clean-up gold from the Pampalo mill.
  • EBITDA* in Q3 was at SEK -13.2m, below our estimate of SEK -3.2m given the limited gold concentrate sales. (*Not reported, derived from H1 and Q1-Q3 figures)
  • In the third quarter Endomines was able to commence the ramp-up of the Friday mining and milling operations and the work is now fully ongoing. Issues relating to the commissioning of the mill delayed the start of gold concentrate production. Successful commissioning of the mill is expected to take place during Q4.
  • Endomines did not give an updated production guidance for 2019. The ramp-up of the Friday mine is on-going and an updated guidance will be given once completed the mill is successfully commissioned and ramp-up completed

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Marimekko - Strong outlook ahead

07.11.2019 - 09.35 | Company update

Marimekko delivered good Q3 result, as expected. We saw some concrete actions to reach a wider target audience as the company launched its first streetwear collection KIOSKI. We have slightly increased our estimates for 19E-21E. We keep our rating “HOLD” with TP of EUR 39 (30).

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Q3 earnings supported by increased sales both in Finland and international

Marimekko’s Q3 result was strong, as expected. Revenue grew by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/consensus. Sales is Finland grew by 14% while international sales increased by 17%. Marimekko’s sales grew in all the market areas, growth being particularly good in Finland and APAC region. In Finland, growth was driven by retail sales (16% y/y). In APAC region, retail sales increased by 14% and wholesale sales by 9%. Also, increased licensing income boosted sales in APAC. Comparable operating profit was slightly higher than consensus estimates but in line with our estimate at EUR 7.8m resulting in EBIT margin of 22.7% (vs. EUR 7.8m/7.6m Evli/consensus). Earnings development was boosted by the good growth in net sales but at the same time profitability was impacted by increased fixed costs which were partly due to the share-based incentive scheme for management.

Successful launches appeal to a wider target audience

In Jan-Sept, Marimekko’s sales development has been good especially in Finland (9% y/y) and APAC region (14% y/y), which are the two main markets for the company but also in EMEA (25% y/y). Marimekko’s brand continues strong in Finland and the company has been able to reach new customer groups while keeping the existing customers, resulting higher sales. Marimekko’s first (unisex) streetwear collection KIOSKI, which was launched in Q3 is an example of the actions the company has taken in order to appeal to a wider audience. The launch of the collection was successful and we see the collection to appeal well to a younger customer base in particular. In addition to Marimekko KIOSKI, the new leather bag line supports the company’s strategy as bags and accessories (share of net sales ~26%) provide a convenient way to introduce the brand to new customers. In Q3, Marimekko’s prints were also part of an anniversary collection by Target, bringing a lot of visibility in the US. During Jan-Sept, most of the company’s net sales were generated in Finland (54%) while 21% of net sales came from APAC region. Finland and APAC both represent ~37% of brand sales.

Growth strategy to support outlook for 19E-21E

We expect 19E revenue to grow by 10% y/y in Finland and 14% y/y internationally. In our assumptions, Finland represents ~55% of the total revenue in 19E-20E. We expect retail and wholesale sales to develop favorably in the future resulting from increasing global brand awareness and wider customer base. Increasing retail sales should also support gross margin improvement. We have slightly adjusted our 20E-21E outlook by increasing our revenue expectation by some 1% while increasing our 20E-21E EBIT expectation by 0.5% and 5.7%. We foresee revenue growth of ~8% in 20E-21E. Marimekko’s target is to achieve operating profit margin of 15% which we see achievable given the growth outlook. We also expect increasing e-commerce to support growth.

“HOLD” with TP of EUR 39 (30)

We expect Marimekko’s 2019E sales to grow by 12% and to total EUR 125.3m. We have increased our EBIT expectation to EUR 17.0m (prev. EUR 16.8m), resulting in EBIT margin of 13.6% (2018: 10.9%). We see that Marimekko is able to achieve and maintain higher margins than the premium goods peer group, which justifies higher multiples similar to our luxury goods peer group median. On our estimates, Marimekko trades at 19E-20E EV/EBIT multiple of 18.8x and 15.4x which translates into 14-18% discount compared to the luxury goods peer group median. Our target price translates into EV/EBIT multiple of 19.6x and 16.0x on our 19E-20E estimates, which still are below the EV/EBIT multiples of Marimekko’s luxury goods peer group. We keep our rating “HOLD” with TP of EUR 39 (prev. EUR 30).

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Pihlajalinna - Becomes part of the consolidation

06.11.2019 - 09.40 | Company update

Pihlajalinna’s Q3 revenue was in line with expectations but profitability was better than expected. Mehiläinen made a cash tender offer of all the shares of Pihlajalinna with the offer price of EUR 16 per share. We see the offer likely to be approved by the shareholders. With the TP of EUR 16 (12) our rating is now “HOLD”.

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Efficiency improvements already shown in Q3

Pihlajalinna delivered good Q3 result. Revenue grew by 5.5% (of which 3.7% organic growth) and was in line with estimates at EUR 122.7m (EUR 123.0m/121.5m Evli/consensus). The company’s adj. EBITDA beat expectations and was at EUR 17.4m (21.9% y/y) vs. our EUR 15.7m. Profitability improved mainly as a result of the efficiency improvement program but was also supported by increased revenue growth.

Mehiläinen plans to acquire Pihlajalinna

Mehiläinen has made a cash tender offer of all the shares of Pihlajalinna with the offer price of EUR 16 per share which values Pihlajalinna’s total equity at EUR ~362m. The offer price translates into a premium of ~46% compared to Monday’s closing price of EUR 10.96. The tender offer is unanimously recommended by the non-conflicted members of the board of directors of Pihlajalinna. We see the offer likely to be approved by the shareholders as the largest shareholders have already accepted the offer (~63% of shares). The combined revenue would represent some 23% of the total private social and healthcare market and in certain sectors the market shares might become too large, harming the competition. At the same time Terveystalo’s acquisition of Attendo’s Finnish branch in 2018 supports the approval. The offer is subject to the approval of the Finnish Competition and Consumer Authority (FCCA).

“HOLD” with TP of EUR 16.0 (12.0)

After the good Q3 result, we have fine-tuned our 19E-21E estimates. We expect 2019E sales to grow by 6.3% to EUR 518.5m and adj. EBIT of EUR 23.0 resulting in adj. EBIT margin of 4.4% (2018: 3.0%) The offer price of EUR 16.0 translates into EV/EBITDA multiple of 9.6x and 7.7x on our 19E-20E estimates which is 5-10% discount compared to the peer group. We have increased our TP to match the offer price of EUR 16.0 (prev. EUR 12.0) and our rating is now “HOLD”.

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Marimekko - Q3 result in line with expectations

06.11.2019 - 09.10 | Earnings Flash

Marimekko’s Q3 net sales increased by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/cons. Adj. EBIT was EUR 7.8m vs. EUR 7.8m/7.6m Evli/cons. Sales grew in all the market areas which boosted earnings development. Marimekko reiterated its guidance for 2019E.

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  • Finland: revenue was EUR 19.7m vs. EUR 19.6m Evli view. Revenue increased by 14%. Retail sales increased by 16%. Wholesale sales increased by 9%.
  • International: revenue was EUR 14.8m vs. EUR 15.1m Evli view. Revenue increased by 17%. Retail sales increased by 15% and wholesale sales increased by 4%.
  • Net sales growth was generated primarily by Finnish retail and wholesale sales as well as licensing income and wholesale sales in the APAC region.
  • Q3 adj. EBIT was EUR 7.8m (22.7% margin) vs. EUR 7.8m/7.6m (22.5%/22.5% margin) Evli/cons. Profitability was boosted by sales growth but at the same time higher fixed costs impacted negatively on profitability.
  • Q3 EPS was EUR 0.79 vs. EUR 0.77/0.73 Evli/cons.
  • Guidance for 2019: net sales in 2019E are forecasted to be higher than in the previous year and comparable operating profit is expected to be higher than in the previous year, amounting to approximately EUR 17m.

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Pihlajalinna - Tender offer from Mehiläinen

05.11.2019 - 09.00 | Earnings Flash

Mehiläinen and Pihlajalinna have on 5th of November 2019 entered into a combination agreement pursuant to which Mehiläinen will make a voluntary recommended public cash tender offer for all issued and outstanding shares in Pihlajalinna. The offer price is EUR 16.00 in cash for each issued and outstanding share in Pihlajalinna, valuing the company’s total equity at EUR ~362m. The offer price represents a premium of ~46%. The non-conflicted members of the board of directors of Pihlajalinna have unanimously decided to recommend that the shareholders of Pihlajalinna accept the tender offer.

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  • Q3 revenue was EUR 122.7m vs. EUR 123.0m/121.5m Evli/consensus estimates. Revenue grew by 5.5% y/y. Organic growth was 3.7% y/y.
  • Q3 adj. EBITDA was EUR 17.4m (14.2% margin) vs. EUR 15.7m/11.4m Evli/cons estimates. Adj. EBITDA increased by 21.9% y/y.
  • Q3 adj. EBIT was EUR 9.3m (7.5% margin) vs. EUR 6.8m/3.8m Evli/cons estimates. Profitability improved due to the efficiency improvement program which was launched in June but was also supported by revenue growth.
  • Outlook for 2019E remains unchanged: Pihlajalinna’s consolidated revenue is expected to increase from 2018. Adj. EBIT is expected to improve clearly compared to 2018.

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Next Games - Awaiting a launch of BRN

04.11.2019 - 09.15 | Company update

Next Games Q3 results were below our estimates, with revenue of EUR 7.8 (Evli 8.7m) and EBIT at EUR -2.1m (Evli -1.6m). The number of active users in live games continued to decline but monetization figures remained on good levels and Next Games remained on target monthly fixed cost levels. The targeted growth in 2019 is looking more at risk with little news on the BRN launch. We retain our HOLD-rating with a target price of EUR 0.9 (1.0).

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Decline in active users impacted revenue and profitability

Next Games Q3 results fell short of our expectations. Revenue amounted to EUR 7.8m (Evli 8.7m). Revenue was affected by a continuing declining trend of the number of active users in both NML and Our World, although monetization figures continued to be on a good level. EBIT was as a result of the lower than estimated revenue below our estimates, at EUR -2.1m (Evli -1.6m). Next Games remained on target monthly fixed cost levels in Q3.

2019 growth target at risk

Next Games seeks moderate revenue growth during 2019 compared to 2018 assuming NML and Our World maintain current levels and the plan of launching one game per year remains on schedule. We now estimate a 2.6% revenue growth in 2019. We assume slight overall improvement in revenue of live games in Q4, supported by the post-Q3 NML update and the start of TWD season 10. We continue to assume the launch of Blade Runner Nexus late 2019, although with the already prolonged soft launch period and little update on the game’s situation in Q3, the risk of a delay in launch to 2020 remains high. Comments on Our World do not suggest any notable upscaling in 2019.

HOLD with a target price of EUR 0.9 (1.0)

We have made slight revisions to our estimates post-Q3 and have lowered our 2019-2020 EBIT-margin estimates by some 3-4pp respectively following lowered gross bookings estimates. We adjust our TP to EUR 0.9 (1.0) and retain our HOLD-rating.

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Etteplan - Continued good performance

04.11.2019 - 07.45 | Company update

Etteplan’s Q3 results were better than expected, with both revenue and EBIT beating our estimates. EBIT was aided by net one-offs of EUR 0.8m, at EUR 5.7m (Evli 4.9m). Revenue growth was 17.0%, with a respectable 5.1% organic growth given continued market uncertainty. The comments on market outlook saw some continued signs of slow-downs, without any major changes. We retain our HOLD-rating with a target price of EUR 9.6.

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Exceptional Q3 profitability boosted by one-offs

Etteplan’s Q3 results were better than we had expected. Revenue amounted to EUR 61.5m (Evli 59.1m), with the difference mainly due to higher sales in Engineering solutions. Growth was driven by acquisitions made during Q2-Q3/19, with revenue growth at 17.0% y/y, of which 5.1% organic growth. EBIT was above our expectations at EUR 5.7m (Evli 4.9m) due to non-recurring items of EUR 0.8m, including a EUR 1.1m impact from a revaluation of the earn-out in the Eatech acquisition. Challenges in Germany also continued to have an effect on profitability.

No major changes in market outlook

The market outlook continued to reflect the more challenging environment posed by uncertainty in the global economy. Comments on demand outlook point towards some slow-down and the situation in China continued to be challenging, with a decline in hours sold y/y. However, no signs of any larger deterioration in the overall demand situation was observable and according to Etteplan remained generally at a good level.

HOLD with a target price of EUR 9.6

Our top-line estimates remain largely unchanged post Q3. We have made some adjustments to our coming year estimates due to a readjustment of amortization of acquisition fair value adjustments, with our 2020-2021 EBIT estimates down by some 5%. With only minor estimates revisions and the continued uncertainty in demand outlook, we retain our HOLD-rating with a target price of EUR 9.6.

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SRV - Persisting challenges

01.11.2019 - 08.45 | Company update

SRV’s Q3 results were below our expectations, as while revenue beat our estimates slightly (Act./Evli 227.1m/222.1m), EBIT was below our estimates at EUR -6.3m (Evli -2.5m). Profitability was impacted by impairments relating to investments in Russia and weaker margins in the Construction segment, driven by two larger projects. SRV announced the initiation of a recovery programme, with the short-term goal of ensuring positive cash flow and operating profit in 2020.

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Results below expectations

SRV’s Q3 results were weaker than expected. Revenue was slightly above our estimates, at EUR 227.1m (Evli EUR 222.1m), while EBIT was below our estimates at EUR -6.3m (Evli -2.5m). EBIT was weaker partly due to impairments relating to investments in Russia, which we had forecast to Q4/19, but the weaker margins also hit EBIT of the Construction segment harder than we had estimated and was EUR -3.4m (Evli -0.5m). Positive operational news in the quarter were quite frankly limited, but the announced recovery programme and comments from recently joined CEO Saku Sipola point towards stronger determination in improving cash flows and the balance sheet.

Initiated a recovery programme

SRV announced the launch of a recovery programme, with the short-term goal of ensuring its operative operating profit and cash flow for 2020 are positive and returning its operative operating profit for 2021 to the level of 2017 (EUR 27.1m). We interpret the information given as a continued subpar performance in 2020 and take a more conservative stance on earnings improvement, lowering our 2020 EBIT estimate to EUR 12.6m (prev. EUR 28.2m). The slowing down of the construction sector and the more non-recurring nature of a larger part of the problems in 2019 in our view, however, still continue to speak for clear profitability improvements.

HOLD with a target price of EUR 1.30

Following revisions to our estimates we lower our target price to EUR 1.3 (1.4), retaining our HOLD-rating.

Open report

Next Games - Results below expectations

01.11.2019 - 08.20 | Earnings Flash

Next Games's net sales in Q3 amounted to EUR 7.8m, below our estimates and in line with consensus (EUR 8.7m/8.1m Evli/cons.). EBIT amounted to EUR -2.1m, below our and consensus estimates (EUR -1.6m/-1.1m Evli/cons.).

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  • Net sales in Q3 were EUR 7.8m (EUR 13.4m in Q3/18), below our estimates and in line with consensus estimates (EUR 8.7m/8.1m Evli/Cons.). Growth in Q3 amounted to -41.8 % y/y. Compared to our estimates, revenue was lower than expected as the number of active users in NML and Our World declined compared to Q2, while we had expected flattish development. ARPDAU figures were quite in line with our estimates for both games.
  • Operating profit in Q3 amounted to EUR -2.1m (EUR -10.3m in Q3/18), below our and consensus estimates (EUR -1.6m/-1.1m Evli/cons.), at a margin of -27.1 %. The company’s cost base remained at target levels but the lower revenue compared to our estimates affected profitability.
  • Adj. EBIT amounted to EUR -1.2m (Q3/18: -9.2m), below our estimate of EUR -0.5m.
  • TWD: NML - DAU 163k (Q3/18: 275k), MAU 479k (Q3/18: 800k), ARPDAU EUR 0.21 (Q3/18: 0.24).
  • TWD: OW - DAU 127k (Q3/18: 386k), MAU 529k (Q3/18: 2.1mk), ARPDAU EUR 0.36 (Q3/18: 0.23).
  • The funds received from the rights offering were received post-Q3 and at the 22.10 the company had a cash balance of EUR 10.3m.

Open report

CapMan - Solid performance across the board

01.11.2019 - 07.50 | Company update

CapMan posted solid Q3 results, largely in line with our estimates, with Q3 revenue amounting to EUR 9.7m (Evli 9.9m) and EBIT of EUR 5.5m (Evli 5.3m). CapMan is showing good development across all business segments and in the light of a good fundraising outlook we have slightly raised our AUM estimates and for 2020-2021 and made corresponding changes to the Management company business EBIT. Following adjustments to expenses of Other operations our Group estimates are largely intact. We retain our HOLD-rating with a TP of EUR 2.1 (1.95)

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Solid results, carry contribution minor

CapMan continued to post solid results, on Group level largely in line with our estimates. Q3 revenue amounted to EUR 9.7m (Evli 9.9m) and EBIT of EUR 5.5m (Evli 5.3m). AUM development compared to Q2 was flattish given no new fund closings but up 21% y/y. The Mezzanine V -fund entered carry but with a limited impact and total carry was at Q2 levels of EUR 0.7m. The Investment business contributed to a larger part of EBIT, aided by Buyouts exit from Kämp Collection Hotels. Q3 in general in our view showed little signs of weakness.

Positive fundraising outlook

CapMan is currently raising capital more or less across the board and management sees significant growth in AUM during 2020. Investment returns so far during 2019 surpassed the lower end of the 10-15% target return and all three service businesses are reportedly performing well, with 1-9/2019 Services business growth of over 90%. We have slightly increased our views on 2020-2021 AUM development and as a result raised our Management company EBIT estimates by some 12%. Following an offsetting impact of revised Other operations expense estimates our Group estimates remain largely unchanged.

HOLD with a target price of EUR 2.1 (1.95)

On Group level our coming year estimates remain largely unchanged. With the outlook for the core business looking yet more favourable we adjust our target price to EUR 2.1 (1.95) and retain our hold rating.

Open report

Etteplan - Good Q3 figures

31.10.2019 - 13.40 | Earnings Flash

Etteplan's net sales in Q3 amounted to EUR 61.5m, slightly above our estimates and in line with consensus (EUR 59.1m/60.4m Evli/cons.). EBIT amounted to EUR 5.7m, above our and consensus estimates (EUR 4.9m/4.9m Evli/cons.), in line with our and consensus estimates after excluding EUR 0.8m one-offs.

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  • Net sales in Q3 were EUR 61.5m (EUR 52.6m in Q3/18), slightly above our estimates and in line with consensus estimates (EUR 59.1m/60.4m Evli/Cons.). Growth in Q3 amounted to 17.0 % y/y, of which 5.1 % organic growth.
  • EBIT in Q3 amounted to EUR 5.7m (EUR 4.4m in Q3/18), above our estimates and consensus estimates (EUR 4.9m/4.9m Evli/cons.), at a margin of 9.3 %. EBITA amounted to EUR 6.6m (Evli EUR 5.5m), at a margin of 10.7%. Q3 EBIT/EBITA was improved by one-off items of EUR 0.8m related to a revaluation of the earn-out in the Eatech acquisitions.
  • EPS in Q3 amounted to EUR 0.19 (EUR 0.13 in Q3/18), above our estimates and consensus estimates (EUR 0.15/0.15 Evli/cons.).
  • Engineering Solutions: Net sales in Q3 were EUR 35.3m vs. EUR 31.9m Evli. EBITA in Q3 amounted to EUR 3.4m vs. EUR 3.0m Evli.
  • Software and Embedded Solutions: Net sales in Q3 were EUR 15.4m vs. EUR 15.8m Evli. EBITA in Q3 amounted to EUR 1.6m vs. EUR 1.6m Evli.
  • Technical Documentation Solutions: Net sales in Q3 were EUR 10.7m vs. EUR 11.5m Evli. EBITA in Q3 amounted to EUR 0.8m vs. EUR 1.0m Evli.
  • The MSI-% of sales improved above 60% for the first time.

Open report

Tokmanni - Upgraded to “BUY”

31.10.2019 - 09.25 | Company update

Tokmanni’s Q3 sales were in line with our expectation and the company was able to deliver strong earnings. The outlook for future earnings development looks positive. We have increased our estimates for 20E-21E. We upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

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Solid Q3 performance

Tokmanni’s upswing continued in Q3 as the company beat the already high Q3 expectations. Sales grew by 9.9% (of which LFL growth of 4.9% vs. our 3.0%) to EUR 231.5m vs. EUR 231.3/228.4m Evli/consensus. Sales were supported by increased number of customer visits and higher average purchases but also by tax refunds. Tokmanni’s adj. gross profit was EUR 82.0m (35.4%) vs. EUR 82.1m (35.5%) our view. Gross margin improvement was driven by the structure of sales, private labels and increased direct import. Improved profit margin and lower relative share of costs reflected to the company’s operating result as Tokmanni’s adj. EBIT increased to EUR 21.9m vs. EUR 19.4m/18.7m Evli/consensus.

Positive earnings outlook – estimates upgraded

Tokmanni updated its 2019E outlook for revenue and expects strong revenue growth for 2019 based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in LFL revenue (prev. Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue.). The company reiterated its guidance for profitability and expects comparable EBIT margin to improve from the previous year. We expect 2019E revenue to grow by 8.8% to EUR 947m and EBIT to improve to EUR 71m (prev. estimate of EUR 68m) resulting in EBIT margin of 7.5% (2018: 6.0%). In our view, Tokmanni has succeeded in appealing more customers by wide selection of products and low prices and the actions taken towards improved profitability are working, creating positive outlook for the earnings development also in the future. The company’s long-term comparable EBIT margin target is about 9% which we believe to be achievable. We have increased our 2020E-2021E revenue expectation by 0.5%-1% and adj. EBIT expectation by 3-4%. We expect 2020E-2021E LFL growth of 1.5% and EBIT margins of 8.2% and 8.6 %.

Seasonally strong final quarter ahead

Tokmanni will open two new stores during Q4’19 in Vääksy and Virrat, which will increase the store network to 191 stores (Tokmanni targets to increase its store network to above 200 stores). The new store openings as well as Christmas sales should support the sales growth in the last quarter of the year, which is normally the strongest quarter of the year for Tokmanni. The company indicated that many of the “easy” ways of improving profitability have already been used but the company continues to take actions towards improved operational efficiency for example by continuing profitability improvements of its supply chain. Margin expansion is also supported by increasing the share of direct import and private labels (the current private label’s share of sales is 31.8%).

Upgraded to “BUY” with TP of EUR 13.5 (10.2)

Tokmanni’s EBIT margin levels in 19E-20E are at the same level with the company’s international discount peers. We see that Tokmanni is able to achieve and maintain higher margins than the Nordic peers, which justifies higher multiples similar to our international discount peer group median. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 15.0x and 13.1x which translates into 16-25% discount compared to the international discount peers and to ~10% premium compared to the Nordic peers. Our target price translates into EV/EBIT of 16.4x and 14.3x on our 19E and 20E estimates, which still are below the EV/EBIT multiples of Tokmanni’s international discount peers. The company also offers attractive dividend yield (~6%) in 19E-20E. Based on our estimates increase, we upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

Open report

Exel Composites - More uplift to be expected

31.10.2019 - 09.10 | Company update

Exel Composites posted Q3 results basically in line with our estimates. Wind energy continued to support volumes. Exel left FY ’19 guidance unchanged, expecting revenue and adjusted operating profit to increase. We update our TP to EUR 5.5 (5.0) as we see further improvement in the cards. Our rating is still BUY.

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No major surprises in terms of segmental performance

Exel Composites posted EUR 23.6m in Q3 revenue, a figure slightly below our EUR 24.7m estimate. Industrial Applications, a segment which includes telecommunications customers, continued soft as revenue declined by 10% y/y. We expected flat development. Other Applications reported EUR 4.8m Q3 revenue, a decent improvement y/y but not quite meeting our EUR 5.0m estimate. Construction & Infrastructure, driven by wind energy, improved by 11% y/y to EUR 10.9m and thus was basically in line with our expectations. The adjusted operating profit of EUR 1.7m was also in line with our expectations. Overall, the Q3 report didn’t provide major surprises as key customer industries such as wind energy continued to support volumes.

We make relatively minor estimate changes

We make only minor updates to our revenue and profitability estimates. We have revised our Q4 revenue estimate slightly upwards due to the strong 10% increase in order intake. We continue to expect Exel to manage around 7.5% adjusted operating margins going forward. Exel says it expects to fully reach the targeted EUR 3m in annual cost savings in 2020.

We see further upside in the light of recent performance

We continue to expect Exel to post positive volume and profitability development going forward. Although we do not make major changes to our estimates, in the light of recent good performance we argue slightly higher valuation multiples are warranted. Our updated TP is EUR 5.5 (5.0), which would imply roughly 8x EV/EBITDA and 12x EV/EBIT (adj.) on our ‘19e estimates. On our ‘20e estimates the multiples would amount to some 6x EV/EBITDA and 10x EV/EBIT. Such valuation is still significantly below peer group median. Our rating remains BUY.

Open report

CapMan - In line with expectations

31.10.2019 - 09.00 | Earnings Flash

CapMan's net sales in Q3 amounted to EUR 9.7m, in line with our estimates and slightly below consensus (EUR 9.9m/10.1m Evli/cons.). EBIT amounted to EUR 5.5m, slightly above our estimates and in line with consensus (EUR 5.3m/5.6m Evli/cons.).

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  • Revenue in Q3 was EUR 9.7m (EUR 7.2m in Q3/18), in line with our estimates and slightly below consensus estimates (EUR 9.9m/10.1m Evli/Cons.). Growth in Q3 amounted to 34.7 % y/y.
  • Operating profit in Q3 amounted to EUR 5.5m (EUR 4.8m in Q3/18), slightly above our estimates and in line with consensus estimates (EUR 5.3m/5.6m Evli/cons.), at a margin of 56.7 %.
  • EPS in Q3 amounted to EUR 0.03 (EUR 0.03 in Q3/18), in line with our estimates and consensus estimates (EUR 0.03/0.03 Evli/cons.).
  • Management Company business: Revenue in Q3 was EUR 7.0m vs. EUR 6.9m Evli. Operating profit in Q3 amounted to EUR 1.9m vs. EUR 2.0m Evli.
  • Investment business: Revenue in Q3 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q3 amounted to EUR 3.2m vs. EUR 2.4m Evli.
  • Services business: Revenue in Q3 was EUR 2.7m vs. EUR 3.0m Evli. Operating profit in Q3 amounted to EUR 1.6m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q3 was EUR 3.2bn (Q3/18: EUR 2.7bn). Real estate funds: EUR 1.9bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.1bn.
  • The CapMan Mezzanine V fund under our CapMan’s Credit strategy started realizing carry in September.

Open report

Raute - Market uncertainty continues

31.10.2019 - 09.00 | Company update

Raute’s Q3 missed our estimates, but overall a weak Q3 was as expected due to low order book. Raute sees Q4 a lot stronger, yet when it comes to the wider picture the report didn’t offer us a reason to change our cautious view. We thus reiterate our EUR 25 TP and HOLD rating.

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Elevated market risks continue to weigh on order intake

Raute’s Q3 revenue decreased by 30% y/y to EUR 33.7m, and hence EBIT declined to EUR 1.7m from EUR 5.5m. Raute posted Q3 services revenue at EUR 17m, a figure in line with our estimate and an increase of 20% y/y. Raute says certain customers have seen deteriorating prices due to the recent boom in plywood and LVL mill investments and subsequent high capacity utilization rates. Raute sees the market currently polarized in the sense that a good level of demand remains for both large as well as small orders (in addition to services and spare parts demand), whereas activity for mid-sized orders such as mill modernizations is weak. The modernization softness was reflected in the very low EUR 8m (EUR 15m) Q3 services order intake. Elevated uncertainty continues to postpone major investment decisions.

Raute is in a good shape to weather further softening

We don’t make major updates to our estimates following the report. We note Raute expects Q4 to be strongest quarter of ’19 in terms of EBIT, which we now expect at EUR 3.0m. In our view Raute is well-positioned for a cooling market environment due to its strong balance sheet and leading product offering. Next year will be greatly helped by the recently disclosed EUR 58m Russian project delivery. On the other hand, excluding the Segezha order the current EUR 109m order backlog implies only some EUR 50m in orders, a rather soft level. In other words, even if the big order alleviates concerns regarding next year, we want to see pick-up in orders before turning our view more positive.

We see valuation as neutral due to uncertainties

We view Raute’s valuation, at ca. 7x EV/EBITDA and 9x EV/EBIT for ‘19e, as neutral. Valuation on ‘20e multiples could quickly turn attractive should orders pick-up, however visibility on next year’s figures remains limited despite the good groundwork laid by the record order. We reiterate our EUR 25 TP and HOLD rating.

Open report

SRV - Earnings weaker than expected

31.10.2019 - 08.45 | Earnings Flash

SRV's net sales in Q3 amounted to EUR 227.1m, in slightly above our and consensus estimates (EUR 222.1m/222.0m Evli/cons.). EBIT amounted to EUR -6.3m, below our and consensus estimates (EUR -2.5m/-2.9m Evli/cons.). SRV announced the initiation of a recovery programme.

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  • Revenue in Q3 was EUR 227.1m (EUR 208.7m in Q3/18), slightly above our estimates and consensus estimates (EUR 222.1m/222.0m Evli/Cons.). Growth in Q3 amounted to 8.8 % y/y.
  • Operating profit in Q3 amounted to EUR -6.3m (EUR -5.7m in Q3/18), below our estimates and consensus estimates (EUR -2.5m/-2.9m Evli/cons.), at a margin of -2.8 %. The operative operating profit amounted to EUR -7.0m, below our estimates (Evli -2.5m).
  • EPS in Q3 amounted to EUR -0.22 (EUR -0.15 in Q3/18), below our estimates and consensus estimates (EUR -0.13/-0.13 Evli/cons.).
  • The order backlog in Q3 was EUR 1,592.6m (EUR 1,661.5m in Q3/18), down by -4.1 %.
  • Construction: Revenue in Q3 was EUR 226.0m vs. EUR 220.9m Evli. Operating profit in Q3 amounted to EUR -3.4m vs. EUR -0.5m Evli.
  • Investments: Revenue in Q3 was EUR 1.4m vs. EUR 1.2m Evli. Operating profit in Q3 amounted to EUR -3.1m vs. EUR -1.5m Evli.
  • SRV further announced the initiation a recovery programme, with the short-term goal of ensuring its operative operating profit and cash flow for 2020 are positive and returning its operative operating profit for 2021 to the level of 2017.

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Raute - No changes to an uncertain market

30.10.2019 - 10.35 | Earnings Flash

Raute’s Q3 EBIT, at EUR 1.7m, fell short of our EUR 2.5m estimate due to delayed new order development. Raute continues to comment the market situation in a cautious manner.

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  • Raute’s Q3 revenue stood at EUR 33.7m vs our EUR 35.0m estimate. Services revenue was in line with our estimate while project deliveries fell a little short of our expectation.
  • Q3 EBIT was EUR 1.7m whereas we expected EUR 2.5m.
  • Order intake amounted to EUR 73m in Q3 vs EUR 42m a year ago. The figure was greatly helped by the EUR 58m record order the company had disclosed previously.
  • Order book stood at EUR 109m at the end of Q3 vs EUR 121m a year ago.
  • Raute continues to comment the market environment in a cautious manner, citing prolonged negotiations and decision making. Services and spare parts demand remains stable, indicating good mill capacity utilization rates.
  • Raute reiterates existing guidance, expecting both revenue and operating profit to decline compared to previous year.

Open report

Exel Composites - Proceeding according to plan

30.10.2019 - 10.00 | Earnings Flash

Exel Composites reported Q3 figures very much in line with our estimates. Revenue didn’t quite meet our estimate for the quarter, however operating margin came in a bit above our estimate.

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  • Q3 revenue was EUR 23.6m vs our EUR 24.7m estimate. Wind energy continued to support growth in the Construction & Infrastructure segment.
  • Exel Composites posted EUR 1.7m in Q3 EBIT i.e. in line with our expectation.
  • Operating margin, at 7.0%, was slightly above our 6.8% estimate.
  • Exel says Q3 order intake remained on a good level and grew 9.7% y/y.
  • The company says the cost savings program is proceeding according to plan, and the targeted EUR 3m in annual savings will be fully reached in 2020.
  • Exel reiterates FY ’19 outlook, expecting revenue and adjusted operating profit to increase compared to previous year.

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Aspo - Q4 needs to be strong

30.10.2019 - 09.45 | Company update

Aspo’s EUR 6.7m Q3 EBIT fell short of our EUR 7.6m estimate, yet we see the key segments making progress despite the prolonged series of disappointing earnings. Macro weakness hit both ESL and Telko in Q3; we see the segments positioned to improve despite macro headwinds. Our TP is now EUR 9.25 (9.50); we rate Aspo HOLD (BUY).

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ESL’s cargo volumes disappointed projections

ESL Shipping’s Q3 EBIT of EUR 4.4m is a step forward on the path towards a materially elevated earnings level. However, we expected the dry bulk carrier to achieve a EUR 5.3m EBIT for the quarter and as such view the result disappointing. ESL shipped 4.2 million tonnes of dry cargo in Q3, which according to our view fell almost 10% short of expected levels. The company comments the volume miss was especially due to low Nordic steel industry shipments, although softness was seen also in other cargo categories such as forest products. Besides the weak Q3 cargo development, the report had a silver lining as Aspo says the LNG-powered vessels and AtoB@C are performing strong.

Chemicals prices remained soft, pressuring Telko earnings

Telko’s underlying Q3 volumes grew by 8% y/y, yet revenue decreased by 4% as plastics and chemicals prices extended their slide. The cited 16% y/y and 3% q/q chemicals price decreases meant Telko’s EUR 74.7m in Q3 revenue and EUR 2.4m EBIT fell short of our respective EUR 81.5m and EUR 2.7m estimates. This led to EBIT margin decreasing by more than 100bps y/y. However, such a comparison is not very meaningful due to the big drop in prices, and we note the 3.2% Q3 EBIT margin a clear improvement relative to Q2 as prices have continued soft. We view the figure as evidence that Telko is making progress in improving working capital management.

Aspo’s key segments were affected by macro weakness

We leave our Q4 estimates for ESL intact despite the earnings miss as we see certain positive comments (such as good demand for loading operations) balancing the negatives regarding transportation volume softness. We expect ESL to achieve EUR 5.5m in Q4 EBIT, thus bringing FY ’19 EBIT to EUR 15.7m. We update our estimates for Telko to reflect the latest market developments. We now expect Telko to achieve EUR 2.7m in Q4 EBIT (we previously expected EUR 3.0m) and thus see the chemical distributor’s FY ’19 EBIT at EUR 9.8m. We note the uncertainty is elevated concerning Telko’s profitability going forward. On the positive side, we see the company making progress with its efficiency improvement program, and thus in an improved position to post better results should markets stabilize. On the other hand, the market and price outlook stays clouded for now. Leipurin’s machinery business continued to strain profitability, and Aspo sees the business line will post an annual loss. A change in schedule for a significant Russian machinery delivery leads us to cut our Q4 EBIT estimate for Leipurin to EUR 1.0m from the previous EUR 1.3m. On the positive side, Aspo’s group administration costs only amounted EUR 0.9m (has been previously hovering around EUR 1.3m).

We update our TP, rating now HOLD (BUY)

We update our estimates, and now expect Aspo to record EUR 24.0m in FY ’19 EBIT. We expect ESL to further improve going forward and see Telko improving materially should markets and plastics and chemicals prices stabilize. Aspo left its FY ’19 guidance intact, indicating accelerating performance for Q4 and a minimum of EUR 8.3m in EBIT. Our new TP is EUR 9.25 (9.50), rating now HOLD (BUY).

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Pihlajalinna - Towards profitability improvement

30.10.2019 - 09.20 | Preview

Pihlajalinna will report its Q3 earnings on next week’s Tuesday, 5th of November. Our interest is on how the execution of the efficiency improvement program is going and what are the impacts for Q3. We have increased our revenue and earnings estimates by 1-2%, resulting from the cooperation agreement with Pohjola Insurance. We keep our rating “BUY” with TP of EUR 12 ahead of Q3.

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Changes in service network

Pihlajalinna has faced efficiency problems especially with the new clinics which has impacted negatively on the company’s profitability. In order to improve profitability, the company launched an efficiency improvement program in H1 that aims to achieve annual cost savings of EUR 17m. The planned cost savings are expected to be realized during 2020. As a result of the efficiency improvement program the company informed that it will merge units but closures of some of the loss-making clinics are also possible. We have already seen some actions taken during Q3 as the company has announced changes (mergers and unit closures) to its service network at least in Eastern and Southwest Finland.

Cooperation agreement with Pohjola Insurance

Pihlajalinna and Pohjola Insurance signed a cooperation agreement in early September which is a continuation to the successful pilot project that took place during the summer. The company estimates that the turnover from the contract could be some EUR 5-10m per annum, which means 1-2% increase in revenue. As a result of the agreement we have increased our revenue and earnings estimates by 1-2% for 2020E-2021E.

We retain “BUY” with TP of EUR 12

We expect Q3’19E revenue to grow by 5.8% to EUR 123m (cons. of EUR 122m) driven by new clinics and fitness centers. We expect adj. EBIT of EUR 6.8m (cons. of EUR 5.4m) resulting in EBIT margin of 5.6%. We expect profitability to improve from last year as some of the costs savings are expected to be shown already in Q3’19. We keep our rating “BUY” with TP of EUR 12.

Open report

Solteq - Minor bumps, narrative unchanged

30.10.2019 - 09.00 | Company update

Solteq’s Q3 results fell short of our expectations due to the postponement of certain customer projects. Net sales were EUR 13.0m (Evli 13.5m) and EBIT EUR 0.3m (Evli 0.7m), with Q3 providing no other surprises. Solteq announced plans to implement a new structure during 2020, with two business segments, and their long-term financial targets. We retain our HOLD-rating with a TP of EUR 1.50.

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Estimates miss from project postponements

Solteq’s Q3 results fell short of our as well as company expectations. Revenue in Q3 grew 1.2% to EUR 13.0m (Evli 13.5m) and EBIT amounted to EUR 0.3m (Evli 0.7m). The third quarter was impacted by the postponement of certain customer projects to the fourth quarter, with the value of a single postponed order at more than EUR 0.3m. Aside from the impact of the postponed projects the Q3 results provided no surprises. Solteq noted a continued positive development of its order backlog.

Plans to change segment structure during 2020

Solteq announced intentions to change its segment structure during 2020 into two business segments: Solteq Software and Solteq Digital. Solteq Software will focus on the company’s own products and Solteq Digital on IT expert services. The long-term financial targets for Software/Digital are: minimum average annual revenue growth 20%/5% and minimum EBIT-margin 25%/8%. For some perspective, this could imply Group EBIT-margins well over 10% by 2022.

HOLD with a target price of EUR 1.50

We have lowered our 2019 net sales and EBIT estimates to EUR 58.3m (prev. 58.9m) and EUR 3.9m (prev. 4.4m), with only minor adjustments to our coming year estimates. Solteq as an investment case relies on the transition towards own software and related services and some positive signs were seen from order inflow during Q3, although not large enough to warrant changes to our views. With our estimates largely intact we retain our HOLD-rating and target price of EUR 1.50.

Open report

Tokmanni - Strong performance continues

30.10.2019 - 09.00 | Earnings Flash

Tokmanni’s Q3 revenue increased by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus. LFL growth continues to be above our estimates at 4.9% vs. 3.0% our expectation. Tokmanni’s adj. EBIT was EUR 21.9m vs. EUR 19.4m/18.7m Evli/cons. Gross margin was 35.4% vs. 35.5%/34.4% Evli/cons. Tokmanni updated its 2019E outlook.

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  • Q3 revenue grew by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus.
  • Q3 adj. gross profit was EUR 82.0m (35.4% margin) vs. EUR 82.1.m (35.5 %) Evli expectation.
  • Q3 adj. EBITDA was EUR 37.2m vs EUR 34.4m/33.9m Evli/consensus
  • Q3 adj. EBIT was EUR 21.9m (9.5% margin) vs. EUR 19.4m (8.4%) our expectation and EUR 18.7m (8.2%) consensus.
  • Q3 eps was EUR 0.27 vs EUR 0.23/0.22 Evli/consensus
  • Revenue was driven by increased customer numbers and customers’ average purchases but also due to tax refunds
  • Updated 2019E outlook: Tokmanni expects strong revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Innofactor - Return to slight sales growth

30.10.2019 - 08.15 | Company update

Innofactor’s Q3 saw a return to net sales growth and better than expected profitability. The continued solid order backlog development remains a clearly supportive factor. With order backlog conversion visibility being challenging due to longer duration of signed contracts, we continue to expect only minor growth in the near-term, however noting the advantages of the added sales stability. We retain our BUY-rating with a TP of EUR 0.85 (0.80).

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Profitability above estimates, solid order backlog growth

Innofactor’s Q3 results were better than our expectations. Net sales were in line with our estimates at EUR 14.0m (Evli 14.1m), showing slight growth of 1.4%, for the first time since Q3/2017. EBITDA and EBIT beat our estimates at EUR 1.5m (Evli 0.7m) and EUR 0.3m (-0.2m) respectively. Q3 EBIT was slightly burdened by depreciation adjustments attributable to the period 1-9/2019. Profitability improved compared with the previous year due to the measures taken to improve profitability at the end of 2018 and the sales per employee improved 12% from the previous year. The order backlog further grew by 107% y/y to EUR 53.2m.

Continuing to show signs of improvement

Innofactor’s Q3 results in our view continued to show signs of good progress and also saw the recurring components of the net sales mix increase to just slightly over 50%. Interpreting the speed of translation of the order backlog to sales remains challenging due to the increased share of long-term projects, which on the other hand provides added stability in net sales going forward. We have made minor revisions to our estimates post-Q3, expecting revenue growth of 3% during 2020-2021. Our 2020-2021 EBITDA estimates are up by around 5%, expecting profitability to continue to improve.

BUY with a target price of EUR 0.85 (0.80)

Having made minor upwards revisions to our estimates we adjust our target price to EUR 0.85 (EUR 0.80). On our estimates valuation on purchase price excluded basis still remains fairly attractive and we retain our BUY-rating.

Open report

Aspo - ESL’s EBIT not there yet

29.10.2019 - 10.45 | Earnings Flash

Aspo’s Q3 EBIT, at EUR 6.7m, missed our EUR 7.6m estimate by 12% (the consensus was EUR 7.8m). ESL improved, but still didn’t quite reach the level of EBIT we were expecting. Nevertheless, Aspo retains its FY ’19 guidance, implying steepening improvement for Q4.

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  • Aspo booked Q3 revenue at EUR 148.0m, whereas we expected EUR 155.3m.
  • EBIT was EUR 6.7m vs our EUR 7.6m estimate.
  • ESL Shipping recorded EUR 43.4m in Q3 revenue vs our EUR 43.3m expectation. The dry bulk carrier posted EUR 4.4m in Q3 EBIT, compared to our EUR 5.3m estimate. Aspo says cargo volumes didn’t reach the previously estimated levels and this was especially due to steel industry shipments.
  • Telko’s Q3 revenue was EUR 74.7m compared to our EUR 81.5m estimate. The chemical distributor achieved EUR 2.4m in Q3 EBIT, while we expected EUR 2.7m. The resulting 3.2% operating margin was therefore in line with our 3.3% estimate.
  • Leipurin’s Q3 revenue stood at EUR 29.9m vs our EUR 30.5m estimate. Leipurin’s Q3 EBIT amounted to EUR 0.8m vs our EUR 0.9m expectation. The 2.7% operating margin was slightly below our 3.0% expectation.
  • Aspo retains its FY ‘19 operating profit guidance, according to which the company sees EUR 24-30m in EBIT. As Aspo booked EUR 15.7m in EBIT for the first nine months of ’19, the implication is a minimum of EUR 8.3m EBIT for Q4. In our view such a level should still be achievable, although might be a close call.

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Innofactor - Profitability beats expectations

29.10.2019 - 09.15 | Earnings Flash

Innofactor’s Q3 results were better than we had expected. The net sales in Q3 amounted to EUR 14.0m (Evli EUR 14.1m), while EBITDA amounted to EUR 1.5m (Evli EUR 0.7m). Innofactor reiterated its 2019 guidance, with net sales expected to increase from 2018 and EBITDA to be in between EUR 4.0-6.0m.

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  • Net sales in Q3 were EUR 14.0m (EUR 13.8m in Q3/18), in line with our estimates (Evli EUR 14.1m). Net sales in Q3 grew 1.4 % y/y. Sales per employee has improved by 12.0% since the previous year.
  • Operating profit in Q3 amounted to EUR 0.3m (EUR -1.2m in Q3/18), above our estimates (Evli EUR -0.2m), at a margin of 1.8 %. Profitability has been supported by the measures taken during the end of 2018 to improve profitability.
  • EBITDA in Q3 was EUR 1.5m (EUR -0.5m in Q3/18), above our estimates (Evli EUR 0.7m), at an EBITDA-margin of 11.0 %.
  • Order backlog at EUR 53.2m, up 107% y/y, aided by several significant orders signed.
  • Guidance reiterated: Innofactor’s net sales in 2019 is estimated to increase from 2018 and EBITDA is estimated to grow up to EUR 4.0–6.0 million

Open report

Solteq - EBIT miss from project postponements

29.10.2019 - 08.15 | Earnings Flash

Solteq's Q3 results were slightly below our estimates. Net sales in Q3 amounted to EUR 13.0m (Evli EUR 13.5m), while EBIT amounted to EUR 0.3m (Evli EUR 0.7m). The operating profit was affected by the postponement of certain customer projects. Solteq reiterated its guidance, expecting the operating profit to grow clearly compared to the financial year 2018.

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  • Net sales in Q3 were EUR 13.0m (EUR 12.8m in Q3/18), slightly below our estimates (Evli EUR 13.5m). Growth in Q3 amounted to 1.2 % y/y. The revenue of overseas subsidiaries increased considerably.
  • Operating profit and adjusted operating profit in Q3 amounted to EUR 0.3m (EUR 0.5m in Q3/18), below our estimates (Evli EUR 0.7m), at a margin of 2.2 %. The operating profit was below company expectations due to the postponement of certain customer projects to the fourth quarter.
  • Product development investments during Q3/19 amounted to EUR 0.9m (1-9/2019: EUR 3.0m), co’s FY2019 estimate EUR 3.7m.
  • The group’s order intake continued to develop positively during Q3/19 and improved considerably compared to Q3/18.
  • Guidance reiterated: Solteq's operating profit is expected to grow clearly compared to the financial year 2018
  • Solteq further announced a change in reporting structure and will during 2020 implement and structure with two segments: Solteq Software and Solteq Digital. The average annual sales growth targets for the segments are 20% and 5% respectively and EBIT-margin targets 25% and 8% respectively.

Open report

Verkkokauppa.com - High importance of sales mix

28.10.2019 - 09.35 | Company update

Verkkokauppa.com was able to make a turnaround in profitability in Q3 but at the same time sales growth decreased. Profitability improvement was mainly due to sales mix and better terms with suppliers. The management had a good control over the business in Q3. We keep our rating “HOLD” with TP or EUR 3.3.

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Profitability improvement driven by sales mix

In Q3, Verkkokauppa.com focused more on profitability and achieved EBIT of EUR 4.3m vs. EUR 3.7m/3.0m Evli/cons. EBIT margin increased to 3.6% vs. 2.9%/2.4% Evli/cons driven by higher gross margin (15.7% vs. 14.7% our expectation). Gross margin improvement was mainly due sales mix (smaller product categories with higher gross margins) and better terms and conditions from suppliers. The company’s sales in Q3 were below expectations and the growth (3%) was only slightly above the market growth of 2.5% (GfK), reflecting the tight and price driven competition in consumer electronics. The company was also able to keep good control over the costs (~8% y/y) in Q3.

Support from other product categories

Verkkokauppa.com has sought growth over profitability and as the company has aggressively competed in a highly competitive consumer electronics market, the company’s earnings development has been weak. In Q3, the company shifted more focus towards other categories with higher margins. We see this as a positive change as the aggressive competition in consumer electronics market is expected to remain tight, and the growth might become too expensive. After Q3, the pressure on EBIT has eased, although Q4 is critical for the business as Black Friday and Christmas are important sales drivers for the company.

“HOLD” with TP EUR 3.3

Verkkokauppa.com updated its outlook for FY19 and expects sales of EUR 500-525m and EBIT of EUR 11-15m (prev. sales of EUR 500-550m and EBIT of EUR 11-17m). We expect 19E sales of EUR 513m and EBIT of EUR 12.8m. As we expect the aggressive competition to continue we have decreased our 20E-21E sales expectation by 3-5%. On our estimates Verkkokauppa.com trades at 19E-20E EV/EBIT multiple of 9.0x and 7.8 which translates into ~80% discount compared to the peer group. We keep our rating “HOLD” with TP of EUR 3.3.

Open report

Consti - Upgrade to BUY

28.10.2019 - 09.30 | Company update

Consti posted good Q3 results, showing clearly positive profitability figures again after four consecutive weak quarters. Although some open risks still exist in older projects, the stricter bidding procedures, the new organizational structure and lack of new significant negative impact projects supports continued healthy profitability. Going forward the order backlog development will be of larger interest and the Q3 development has prompted us to expect sales declines in 2020.

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Clear profitability improvement

Consti’s Q3 saw profitability returning back on a healthier track, with EBIT of EUR 2.1m (Evli 2.2m). The improvement in profitability (Q3/18: -1.4m) was due to a clearly smaller impact of old projects in the discontinued housing repair unit, which however still did have an impact. Net sales growth was better than we have expected, growing 3.7% y/y to EUR 81.8m (Evli 79.5m). The order backlog development remained rather weak, amounting to EUR 206.8m in Q3, down -23.6% y/y. The decline has been affected by stricter bidding procedures, but also to some degree by a tie-up of resources in larger projects.

Order backlog development speaks for 2020 sales decline

We have lowered our net sales estimates post-Q3, now expecting a sales decline in 2020 of ~5%. Our current estimate appears rather generous given the order backlog development. More clarity will be given by order intake during Q4/19-Q1/20, the quarters in which intake has typically been strongest. In our view the freeing up of resources, improved profitability and the progression of the organizational structure development speak for the potential for improving order intake. Our bottom-line estimates remain largely intact.

BUY (HOLD) with a TP of EUR 5.8 (5.4)

The signs of profitability improvement alleviate some of the uncertainty pressure, although risks still remain. Nonetheless, valuation still appears attractive and we raise our target price to EUR 5.8 (5.4) and upgrade to BUY (HOLD).

Open report

Scanfil - We see extended solid performance

28.10.2019 - 09.20 | Company update

Scanfil’s 7.9% EBIT margin topped our estimate, and while the result was partly due to a favorable product mix, we now see the company in shape to post 7% EBIT margins on a regular basis. Our new TP is EUR 5.00 (4.75), rating BUY.

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HASEC contributed, yet organic growth was also decent

Scanfil’s sales have developed in a stable fashion during the last few years. The Communication segment was the only one of the five where revenue declined y/y. The segment supplies telecommunications companies with products such as base stations, is arguably the most cyclical and challenging of Scanfil segments, and with LTM revenue of EUR 86m the smallest. Nevertheless, even Communication sales have been improving since Q2. Consumer Applications and Energy & Automation grew slightly, and Medtec improved by 14% relative to the soft comparison period. Most noteworthy was the Industrial segment, which contributed ca. 80% of the revenue increase, and as such the most significant segment generates almost a third of Scanfil revenue. Although HASEC added revenue meaningfully, more than half of the Industrial segment’s growth was organic.

We see Scanfil able to routinely post 7% EBIT margins

Scanfil says the integration of HASEC is proceeding according to plan. Revenues attributable to HASEC will be mostly reported under the Industrial and Medtec segments. Scanfil says the strong 7.9% operating margin was partly due to favorable product mix, and so we wouldn’t extrapolate this profitability level too far. However, Scanfil posted an above 7% operating margin also in Q2 with what the company says was a normal product mix. It’s early to assess prospects for next year, but in the light of such performance Scanfil’s 7% operating margin target for ’20 might start to look a tad conservative.

We raise our TP due to continued good performance

We’ve made upward revisions to our EBIT estimates, now expecting Scanfil to reach 7.0% margin already in ’19 (we previously expected 6.6%). We base our TP on Scanfil’s historical multiples, which have valued the company at some 7x EV/EBITDA and 9x EV/EBIT, and thus our updated TP stands at EUR 5.00 (4.75). Our rating remains BUY. We also note Scanfil’s peer group multiples have gained sharply during the last couple of months.

Open report

Detection Technology - Growth story unabated

28.10.2019 - 09.00 | Company update

Detection Technology delivered a healthy Q3 report, which was broadly in line with expectations. We remain positive to the investment case and have slightly adjusted upwards our estimates. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

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Healthy Q3 with strong growth in SBU and softness in MBU as expected

DT’s Q3 figures came in close to expectations. Net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. SBU sales grew 42.3% y/y to EUR 18.6m (EUR 17.9m Evli) due to strong demand especially in airport applications. MBU sales decreased by -27.6% y/y to EUR 8.4m (EUR 10m Evli) due to softening of the medical CT market and the ramp-down of one key MBU customer’s product. R&D costs amounted to EUR 2.6m or 9.7% of net sales.

Small estimate changes - growth drivers remain strong

Post Q3, we have made only minor upward adjustments to our estimates. Demand for new standard CT systems for airports has accelerated, starting with Europe and the US as previously noted. Chinese authorities are also commencing their standardization of airport CT equipment, which will support security outlook even further, likely starting 2021 onwards. The slowdown in medical market remains a question which management does not have a clear answer on, but most likely this is only temporary. Overall, DT’s growth drivers remain strong, especially in China where Beijing’s “Made in China 2025” initiative, has led to double digit growth rates for local Chinese OEM’s that are DT’s clients. Further support for DT’s future sales growth is provided by DT’s new product launches such as Aurora, a lower-end and price competitive product family for SBU, and X-Panel, a CMOS flat panel detector product family for static imaging (e.g. dental).

The strategy update in Q2 report affirmed that DT is committed to continue growth - no change to medium-term financial targets

In conjunction with its Q2 result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy expands the addressable market to an estimated EUR 3 billion in 2025, which will provide plenty of growth opportunity for DT going ahead. DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

Valuation remains attractive, we maintain BUY recommendation

On our estimates, DT is trading at ~20% discount on EV/EBIT and P/E multiples for ’19-20E, which we see as unjustified. Despite the short visibility, we see investment case attractive due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities, which should enable DT to grow faster than the market and maintain above target level margins. Due to its proximity to the fastest growing market China and current valuation, DT could be also become an acquisition target. Our target price translates into an EV/EBIT multiple of 16.8x and 13.4x on our ‘19E and ‘20E estimates, some 6-20% under our peer group median, i.e. still leaving upside potential should investment case materialize as expected. Our rating remains BUY with revised target price of 24.0 euros (prev. 23.5).

Open report

Detection Technology - Q3 result broadly in line

25.10.2019 - 09.45 | Earnings Flash

DT’s Q3 net sales at EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. SBU sales grew +42.3% to EUR 18.6m (EUR 17.9m our expectation) and MBU sales declined -27.6% to EUR 8.4m (EUR 10.0m our expectation). DT’s Q3 EBIT came in at EUR 5.1m vs. our estimates of EUR 4.9m (EUR 5.2m cons).

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  • Group level results: Q3 net sales amounted to EUR 26.9m (+9.5% y/y) vs. EUR 27.9m/27.6m Evli/consensus estimates. Q3 EBIT was EUR 5.1m (19.1% margin) vs. EUR 4.9m/5.2m Evli/cons. R&D costs amounted to EUR 2.6m or 9.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.4m which was below our estimate of EUR 10.0m. Net sales of MBU decreased by -27.6% y/y due to softening of the medical CT market and the ramp-down of one key MBU customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 18.6m vs. EUR 17.9m Evli estimate. SBU sales grew 42.3% y/y due to strong demand especially in airport applications.
  • Outlook update: DT expects growth in net sales, but growth to slow down in Q4 compared to the previous year. Previous guidance was for Q3.
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.

Open report

Vaisala - Strong performance continues

25.10.2019 - 09.00 | Company update

Vaisala delivered a strong Q3 on all fronts but surprisingly kept their guidance intact despite strong YTD performance and good momentum in both W&E and IM. We’ve updated our estimates for the coming years due to better overall growth profile and increasing profitability driven by IM’s continuing good performance. On the back of our raised estimates, we raise our target price to 24.5 euros (prev. 21) and maintain our HOLD recommendation.

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Strong quarter on all fronts, with contribution from W&E

On the back of a good Q2 report, Vaisala delivered an even better Q3, which clearly beat expectations. Orders received increased +37% y/y (+20% organic) to 105.1m (vs. 76.8m Q3’18), with orders received as well as sales growth coming from both business areas and all geographies. Order intake for W&E was +45% (+27% organic), with mostly mid-sized orders, a positive signal. Q3 net sales grew +25% to 105.2m (vs. 100.4m Evli / 99.7m cons.). With the help of strong sales growth (W&E +27%, IM +22%), EBIT was 16.3m (vs. 11m Evli/13m cons), an 15.5% EBIT margin. IM posted good figures, with +22.4% growth (9% organic), an all-time high quarter, and solid 23.6% EBIT margin (24.7% adj. margin). Biggest positive contribution was W&E with +27% (+14% organic) sales growth, and EBIT margin of 13.5% (16% adj. margin).

Outlook unchanged despite strong performance so far

Despite the beat and good figures YTD, Vaisala repeated its FY’19 guidance: sales between 380–400m, EBIT between 25–35m including 10–12m PPA amortization and one-offs. Our pre-Q3 estimates were already in the upper end of the guidance, and now with the result beat we have raised our FY’19E estimates slightly above the guidance. We also increase by ~2% our estimates for 2020E-21E due to better growth profile in both business areas. With the acquired businesses integrated into Vaisala’s sales channel and continued good organic momentum in both W&E and IM, we see targeted 5% sales growth clearly achievable. We estimate that IM share of Vaisala’s EBIT in ‘19E and ‘20E will be around 65-67% (vs. 56-57% in ’17-’18), resulting in ~13-17% EBIT growth and EBIT margins of 10-11% (12-13% adj. for PPA).

Valuation becoming stretched

Vaisala’s share har rallied +70% YTD and +30% since Q2 the report, being now at an all-time high. On our raised estimates, Vaisala is trading at adj. EV/EBIT multiples of 20x and 18.5x for ‘19E and ‘20E, a 20-26% premium to our peer group despite exhibiting a lower growth and profitability profile than our peer group. However, a high valuation and premium are in our view justified due to the stable outlook for W&E and especially IM’s highly profitable growth with possibility of further add-on acquisitions. On the back of our raised estimates, we raise our target price to 24.5 euros (prev. 21) and maintain our HOLD recommendation.

Open report

Consti - Profitability back at healthier levels

25.10.2019 - 08.45 | Earnings Flash

Consti's net sales in Q3 amounted to EUR 81.8m, slightly above our and consensus estimates (Evli/cons. EUR 79.5m). EBIT amounted to EUR 2.1m, in line with our estimates and above consensus (Evli/cons. EUR 2.2m/1.6m). The negative impact of certain projects on profitability was clearly smaller than at the beginning of the year, contributing to the clear improvement in profitability.

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  • Net sales in Q3 amounted EUR 81.8m (EUR 78.9m in Q3/18), slightly above our estimates (Evli EUR 79.5m). Growth in Q3 amounted to 3.7 % y/y. Net sales development was still supported by sustained high volumes of large comprehensive renovation projects in Q3.
  • Operating profit in Q3 amounted to EUR 2.1m (EUR 0.1m in Q3/18), in line with our estimates (Evli EUR 2.2m), at a margin of 2.6 %. The profitability was still affected by old projects of the already discontinued housing repair unit, but the impact was clearly smaller than at the beginning of the year. All business areas were profitable in the third quarter
  • The order backlog in Q3 was EUR 206.4m (EUR 270.0m in Q3/18), down by 23.6 %. The order intake amounted to EUR 37.0m, down 5.7% y/y, reflecting the company’s more disciplined bidding procedures.
  • Guidance reiterated: The Company estimates that its operating result for 2019 will improve compared to 2018.

Open report

Scanfil - Strong operating margin for Q3

25.10.2019 - 08.45 | Earnings Flash

Scanfil’s Q3 revenue, at EUR 152m, missed our EUR 163m estimate by 7%, however the company still managed to beat our EUR 11.4m operating profit expectation by posting a figure of EUR 12.1m.

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  • The EUR 152.3m in Q3 revenue represents 16% y/y increase. The 7% q/q growth nevertheless didn’t meet our estimate.
  • Operating profit came in strong, the EUR 12.1m figure translating to an operating margin of 7.9% (vs 6.7% margin a year ago). Our expectation was for a 7.0% margin.
  • Scanfil says roughly half of the EUR 21m y/y increase in revenue was due to organic growth, the remainder being attributable to the HASEC acquisition closed at the end of Q2.
  • Industrial and Medtec segments performed well, and the strong operating profit was partly attributable to favorable product mix but also thanks to high utilization rate.
  • Scanfil expects the fourth quarter of 2019 to be the best in terms of sales, sees good activity also for the first quarter of next year.
  • Scanfil updates its FY ’19 guidance. The new guidance is EUR 570-590m in revenue and EUR 39-41m in operating profit (previously EUR 580-610m and EUR 39-42m).

Open report

CapMan - Downgrade to HOLD

25.10.2019 - 08.30 | Preview

CapMan will report Q3 results on October 31st. With our expectation of only a limited impact of carried interest and success fees on the quarter, for group results remaining on par with H1/19 levels investment returns will need to be at a good level. In general, the news flow during Q3 implies little out of the ordinary and as such our interest will mainly be on the development of recently launched products and fundraising projects. We retain our target price of EUR 1.95 but downgrade to HOLD (BUY) following a share price increase since our previous update.

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Estimates revisions ahead of Q3

We expect a Q3 revenue of 9.9m (prev. 11.5m) and operating profit of EUR 5.3m (prev. EUR 7.2m). We have lowered our estimates mainly to reflect lower expectations for carried interest from newer funds, now mainly from Access Capital funds, and lower our management fee estimates given no new fund closings. The first closing of the Buyout XI-fund in 6/2019 will however support management fees and we expect to see continued growth. Investment returns pose the biggest uncertainty risk to our estimates and would need to be at a good level for group results remaining on par with H1/19 levels.

Development of newer products of interest

The news flow during Q3 in our view in general does not imply anything out of the ordinary during the quarter. We will be looking for more information regarding on-going fundraising projects and newly launched products as well as any potential remarks on near-term carried interest outlook from the interim report.

HOLD (BUY) with a target price of EUR 1.95

We have made minor downward revisions to our estimates ahead of Q3 and retain our target price of EUR 1.95. With the share price having enjoyed clear increases since our previous update we downgrade to HOLD (BUY).

Open report

Verkkokauppa.com - Profitability improved in Q3

25.10.2019 - 08.25 | Earnings Flash

Verkkokauppa.com’s Q3’19 revenue grew by 3% and was EUR 120.6m vs. Evli EUR 126.7m and consensus of EUR 125.8m. Gross profit was EUR 18.9m (15.7% margin) vs. EUR 18.6m (14.7% margin) Evli view. EBIT was EUR 4.3m vs. EUR 3.7m/3.0m Evli/cons. The company updated its 2019E guidance and expects revenue of EUR 500-525m and EBIT of EUR 11-15m.

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  • Q3 revenue was EUR 120.6m vs. EUR 126.7m Evli view and EUR 125.8m consensus. Sales grew by 3% while market growth was 2.5% (GfK estimate). Revenue growth in Q3 was boosted by successful season sales, campaigns and increased marketing.
  • Q3 gross profit was EUR 18.9m (15.7% margin) vs. EUR 18.6m (14.7% margin) Evli view. The improvement was due to a positive sales mix and better terms and conditions from suppliers.
  • Q3 EBIT was EUR 4.3m (3.6% margin) vs. EUR 3.7m (2.9% margin) Evli view and EUR 3.0m (2.4% margin) consensus. EBIT improvement was mainly due to higher gross margin.
  • Q3 eps was EUR 0.07 vs. EUR 0.06/0.05 Evli/cons.
  • 2019 guidance updated: The company expects 2019E revenue of EUR 500-525m and EBIT of EUR 11-15m.
  • The company also decided on a quarterly dividend of EUR 0.051 per share.

Open report

Vaisala - Strong Q3 result, clear beat

24.10.2019 - 15.00 | Earnings Flash

Vaisala delivered a strong Q3 report, with a solid perfomance all around. Vaisala’s Q3 net sales grew 25% to 105.2 MEUR vs. 100.4 MEUR our expectation and 99.7 MEUR consensus. Q3 reported EBIT was 16.3 MEUR vs. our expectation of 11 MEUR (13 MEUR consensus). Business outlook is unchanged.

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  • Group level results: Q3 net sales grew 25% to 105.2 MEUR vs. 100.4 MEUR our expectation and 99.7 MEUR consensus. Q3 EBIT was 16.3 MEUR vs. our expectation of 11 MEUR (cons. 13 MEUR). EPS was 0.37 (0.23 Evli, 0.27 consensus).
  • Gross margin was 55.3% vs. 55.9% last year
  • Orders received was 105.1 MEUR vs. 76.8 MEUR last year. Orders received increased by 37% and growth without currency impact and acquisitions was 20%.
  • Weather & Environment (W&E) net sales grew 27% (14% excl. FX and M&A) to 69.1 MEUR vs. 66.0 MEUR our expectation. EBIT was 9.3 MEUR (5.0 MEUR Evli). Order intake growth 45% in Weather and Environment, 27% growth excl. FX and M&A.
  • Industrial Measurements (IM) net sales grew 22% (9% excl FX and M&A) to 36.1 MEUR vs. 34.5 MEUR our expectation. EBIT was 8.5 MEUR (6 MEUR Evli). Industrial Measurements order intake grew by 23%, 9% excl. FX and M&A.
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

Open report

Etteplan - Acquisitions boosting growth

24.10.2019 - 09.00 | Preview

Etteplan reports Q3 results on October 31st. The guidance revision in Q2 and steady development track should limit information value from financial figures of the seasonally slower quarter. Macro uncertainties, however, continue to pose a risk on demand. The acquisitions made during mid-2019 will bolster growth while opening some room for estimates deviations. Market outlook comments remain of key interest but will likely remain limited given the near-term uncertainties relating to the trade war and Brexit.

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Acquisitions to boost growth in seasonally slower quarter

Etteplan raised its guidance in Q2, largely due to acquisitions made in mid-2019, expecting revenue and EBIT for 2019 to grow significantly compared to 2018. With the revised guidance and the stable development that Etteplan has shown, results of the seasonally slower Q3 should not be particularly eventful, although the recent acquisitions may likely cause some estimates deviation due to lack of comparison figures. We expect revenue to amount to EUR 59.1m, with a growth of 12.5%. We expect over 10% growth in all service areas, with Engineering Solutions in particular boosted by the acquisitions. We expect an EBITA-margin of 9.3%.

Market outlook comments remain of interest

Our interest in the Q3 results will remain focused on remarks regarding market outlook and any possible comments on the outlook for 2020, as we are rather confident in the 2019 guidance being reached. Given the near-term nature of key uncertainties (Brexit and U.S-China trade war) forward-looking comments will likely still be limited. Some small positive signs have been seen post-Q3 but without agreements the uncertainty will likely continue to have an effect on investment decisions.

HOLD with a target price of EUR 9.6

We have not made changes to our estimates ahead of Q3. We retain our HOLD-rating and target price of EUR 9.6 intact.

Open report

SSH - High expectations for Q4

24.10.2019 - 09.00 | Company update

SSH’s Q3 result missed our expectations and the company now needs a stellar Q4 in order to reach its guidance. SSH is progressing in the right direction, but the pace is slow due to limited growth investment capacity. We maintain our estimates and SELL recommendation with target price of 1.10 euros.

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Result miss puts pressure on nailing Q4 to reach guidance

The Q3 result missed our expectations with sales being 3.6m vs our 5.0m estimate. SSH’s prudent cost control led to lower opex than we had anticipated. Despite this, EBIT missed our expectations due to lower sales, with Q3 EBIT being -0.2m vs. 0.7m our estimate. Software fees were 1.3m (2.4m Evli), professional services were 0.1m (0.3m Evli), and recurring revenue was 2.3m (2.3m Evli). In order to reach FY’19 guidance, SSH needs some 7m sales in Q4, which would be an all-time best quarterly result. According to management, sales pipeline for Q4 is strong and they seem confident that the necessary key deals will be closed in Q4.

Secures €2M EU Horizon 2020 funding for PrivX program

SSH successfully attained a €2m SME grant from the EU for development and marketing of PrivX over the next 24 months. Based on our discussion with management, we note that PrivX is still in a development phase and the new funding will be instrumental to accelerating PrivX’s roadmap, with most of the funding going towards R&D. The funding supports our estimates for the coming years, but we do not make any estimate changes at this point. Management sees critical applications even in sensitive fields, such as banks and financial institutions which are important clients to SSH, eventually transitioning to cloud or private cloud environments, but the transition will be over time and gradual. Therefore, PrivX is adapted for on-premise, with full SaaS version being part of the roadmap.

Maintain SELL recommendation with target price of €1.10

Post Q3 result, we have not made any changes to our estimates. Regardless of the profit warning risk, the underlying question in the investment case is still regarding growth. We note that, SSH is making progress, but the speed of the transition is slow due to limited growth investment capacity. On our ’19-20E estimates, SSH is trading at EV/Sales of 3.1x and 2.7x, which is below the sector and could prompt SSH to become an acquisition target of larger players wanting to enter the space or a consolidation play. However, as a standalone business, we’d like to see stronger growth coming through in the numbers to justify higher valuation. Our target price implies an EV/Sales multiple of 2.2x on our ‘20E estimate, broadly in line with Nordic software peers.We maintain our SELL recommendation and target price of 1.10 euros.

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SSH - Q3 result misses our expectations, guidance unchanged

23.10.2019 - 09.20 | Earnings Flash

SSH Q3 result missed our expectations due to lower than expected software fees. As software fees fluctuate between quarters, one should not read to much of this. CEO sees reaching guidance still possible and outlook for 2019 is unchanged; SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates.

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  • Q3 net sales were EUR 3.6 million (vs. 5.0m our expectation)
  • Software fees were EUR 1.3 million (2.4m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.3 million (2.3m Evli)
  • Q3 operating profit was EUR -0.2 million (vs. 0.7m our expectation)
  • EPS was -0.01 (vs. 0.01 our estimate)
  • Liquid assets were EUR 11.6m (11.2m Q2/19)
  • Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates
  • CEO comment: “Entering the fourth quarter, our sales pipeline is strong, and we maintain our guidance despite the slightly slower than planned growth in the first nine months of the year. Achieving our full year target, however, requires some key customer wins during Q4.”

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Finnair - Market outlook remains volatile

23.10.2019 - 09.15 | Company update

Finnair’s Q3 earnings fell short of expectations. We have cut our estimates for 2019E-2021E after Q3 earnings. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive. We downgrade to “HOLD” with TP of EUR 6.5 (prev. EUR 7.4).

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Profitability weighed down by fuel costs and currencies

Finnair’s Q3 revenue increased by 7.9% and was EUR 870.3m vs. our expectation of EUR 889.2m and consensus of EUR 871.4m. The revenue was boosted by increased passenger numbers (11.9% y/y). Especially the European traffic development was good as well as traffic in North America due to the new Los Angeles route which was opened last March. Finnair’s traffic from Asia to Europe remained at good level, whereas demand from Europe to Asia was softer. Capacity (ASK) increased by 9.5% y/y while RASK decreased by 1.5% y/y. Finnair’s Q3 profitability fell short of expectations as comparable EBIT decreased by ~14% from last year and was EUR 100.7m vs. our expectation of EUR 135.4m and consensus of EUR 121.9m. Profitability was weighed down by fuel costs (incl. hedging), a decline in the dollar-based discount rate on maintenance reserves and negative exchange rate effects. Also, softening demand in cargo impacted Finnair’s Q3 earnings.

Global uncertainties increasing risks

We expect the market outlook to remain volatile in the latter half of the year as the global economies of Finnair’s key markets are slowing down and the uncertainties surrounding global trade, such as Brexit and US-China trade talks continue which could have an impact on air travel and cargo demand. We have already seen some softening in cargo demand especially in Asia and we expect the market environment to remain challenging. Finnair experienced some lower air travel demand in Hong Kong in Q3 and we expect this to continue as long as the disorder continue. We expect Finnair to gain some competitive advantage in short term, especially in the European routes as Norwegian has cut down its capacity growth expectations for 2019 (Norwegian expects capacity growth of 0-5% in 2019). Considering the tight competition, we expect the advantages to last only for a short time.

Guidance for 2019E unchanged

Finnair reiterated its guidance and expects capacity growth of 11%-12% which is mainly due to the new route to Beijing’s Daxing International Airport which will be opened in early November. The company expects revenue to grow at a slightly slower pace than capacity in 2019E. Finnair expects adj. EBIT margin to be between 4.5-6.0% in 2019, assuming no material changes in fuel prices and exchange rates. We expect capacity to grow by 11% in 2019E while we expect RPK growth of 10% and total revenue growth of 8%. Our expectation for 2019E adj. EBIT margin is at the lower end of the guidance at 4.6%.

Estimates cut – downgrade to “HOLD”

After Q3’19 earnings we have cut our 2019E-2021E estimates. We have lowered our 2019E-2021E revenue expectations by ~1% and cut our EBIT estimate for 2019E by 23% and for 2020E-2021E by 12-17%. We now expect 2019E revenue of EUR 3074m (prev. EUR 3104m) while our 2019E adj. EBIT expectation is at EUR 140m (prev. EUR 181m) resulting in EBIT margin of 4.6%. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive. With our new TP of EUR 6.5 (prev. EUR 7.4) Finnair trades on our estimates at its historical average of NTM EV/EBITDA of 3.5x. After estimates cut we downgrade our rating to “HOLD” (prev. “BUY”).

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Suominen - Profit ascent more elusive

23.10.2019 - 09.15 | Company update

Suominen’s Q3 EBIT, at EUR 1.1m, missed our EUR 3.8m estimate by a wide mark. Suominen achieved rather stable volumes compared to our expectations, however this was achieved at the cost of margins. While the soft results were partly due to inventory reductions and reorganization costs, we turn slightly more cautious with respect to margin estimates. Our new TP is EUR 2.25 (2.50), reiterate HOLD.

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Suominen sees nonwovens markets largely stable

Suominen posted EUR 103.4m in Q3 revenue (-1% y/y), close to our EUR 104.4m estimate. The figure was helped to the tune of 3% by the strengthening of USD relative to EUR. Volume losses were moderate, the pricing of Suominen’s nonwovens remaining flat. Suominen’s profitability improvement proved modest compared to our expectations as declining raw materials prices and significant inventory reductions during Q3 led to flat pricing. Suominen recorded a 7.4% gross margin, whereas we expected 9.9%. Suominen says the inventory reductions had a EUR 0.5m negative effect on profitability i.e. the gross margin would have amounted to roughly 8% without such reductions. The company says it is now close to the targeted inventory level. Operating profit was further strained by EUR 0.2m items related to the reorganization of business areas, as Suominen now reports business for the areas Americas and Europe. FX had a negative EUR 0.6m effect through raw materials purchases.

We have adjusted our margin estimates downwards

We remain cautious following the report as margin improvement is proving harder than we expected. In order to reach a 5% operating margin, a level where corresponding returns on capital could be deemed adequate, Suominen needs to achieve both improving (or at the minimum flat) volumes and gross margin north of 10%.

Current valuation reflects modest expectations

While Q3 volumes were better than we expected, we see the softness in margins as another source of uncertainty, and thus the steepness of Suominen’s ongoing profit improvement remains clouded. We retain our HOLD rating, our new TP being EUR 2.25 (2.50).

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Suominen - Inventory reductions strained profit

22.10.2019 - 13.45 | Earnings Flash

Suominen’s Q3 revenue came close to our expectations. However, gross margin fell clearly short of our estimate and consequently operating profit improved only rather modestly in absolute terms relative to the weak comparison period a year ago. Suominen says cash flow was strong during the quarter due to inventory reductions, however this had a negative effect on the operating result.

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  • Q3 revenue stood at EUR 103.4m vs our EUR 104.4m estimate. The strengthening of USD compared to EUR contributed a positive EUR 2.7m, or 2.6%.
  • Gross profit amounted to EUR 7.7m vs our estimate of EUR 10.3m. The 7.4% gross margin was clearly below our 9.9% expectation.
  • Q3 EBIT was EUR 1.1m, whereas we expected EUR 3.8m. In other words, Suominen posted a 1.1% operating margin, compared to our 3.6% expectation.
  • Suominen cites significant inventory reductions during the quarter having had a positive impact on cash flow but a negative impact on the result.
  • Suominen reiterates its 2019 outlook, expecting flat sales and improving operating profit compared to 2018.

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Finnair - Profitability clearly below estimates

22.10.2019 - 09.25 | Earnings Flash

Finnair’s Q3’19 adj. EBIT was EUR 100.7m vs. our expectation of EUR 135.4m and consensus of EUR 121.9m. Revenue was EUR 870.3 vs. our expectation of EUR 889.2 and consensus of EUR 871.4m. Finnair reiterated its guidance. The company expects capacity growth of 11-12% and revenue to grow at a somewhat slower pace than capacity in 2019. Finnair expects its EBIT% to be between 4.5%-6.0% in 2019.

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  • Q3 revenue was EUR 870m vs. EUR 889m/871m Evli/cons.
  • ASK increased by 9.5% in Q3. RASK decreased by 1.5% y/y.
  • Q3 adj. EBIT was EUR 101m vs. EUR 135m/122m Evli/cons. Profitability was negatively impacted by the year-on-year increase in jet fuel price paid (incl. hedging), a decline in the dollar-based discount rate on maintenance reserves and negative exchange rate effects.
  • Q3 comparable EBITDA was EUR 182m vs. EUR 213m our view.
  • Absolute costs in Q3: Fuel costs were EUR 190m vs. EUR 187m our view. Staff costs were EUR 132m vs. EUR 131m our view. All other OPEX combined were EUR 461m vs. EUR 455m our view.
  • Unit costs: CASK was 6.10 eurocents vs. 5.97 eurocents our view

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Talenom - Upgrade to buy

22.10.2019 - 09.05 | Company update

Talenom continued to post solid growth and profitability figures in Q3, with revenue slightly below our optimistic estimates. Talenom gave a guidance for 2020, expecting net sales growth and relative profitability to be in line with 2019, rather similar to our expectations. With the added visibility given by the guidance we set our sights towards 2020, raising our target price to EUR 37.5 (36.0) and upgrade to BUY (HOLD).

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Gave guidance for 2020

Talenom’s net sales in Q3 amounted to EUR 13.5m (Evli 14.2m) and operating profit to EUR 2.4m (Evli 2.5m). A decision to focus staffing services on supporting the core accounting business saw staffing services volumes decline but its profitability improving, although the impact on group figures is minor. Discontinuation of annual payroll reports due to the change in income register will smooth some seasonal variation, with H1 figures expected to gain at the expense of H2 figures. Talenom further gave a guidance for 2020, expecting net sales growth and relative profitability to be in line with 2019.

2019 estimates slightly lower, 2020 largely unchanged

We have lowered our 2019 estimate for net sales to 58.1m (prev. 59.9m) to account for the changes in billing of payroll reports and also seeing some overoptimism in our year end estimates. We expect Talenom to still be able to slightly improve relative profitability in 2020 driven by development of the new bookkeeping production line and scalability. Our 2020-2021 estimates overall remain largely unchanged, as some of the expected net sales growth was shifted to 2020. We expect a sales growth of 19% and EBIT-% of 20.7% in 2020.

Upgrade to BUY (HOLD) with a TP of EUR 37.5 (36.0)

With the added visibility given by the guidance for 2020, we are prepared to set our sights towards 2020. With the narrative of Talenom’s profitable growth story largely unchanged we raise our target price to EUR 37.5, valuing Talenom at a target 2020 P/E of ~24x. With our target price increase and share price declines since our last update we upgrade our rating to BUY.

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Detection Technology - Expecting growth to continue despite MBU headwinds

22.10.2019 - 09.00 | Preview

Detection Technology will report Q3 earnings this Friday, October 25th. We’ll be looking for commentary regarding the market outlook and possible effects of trade politics, with special focus on the extent of the slowdown in medical imaging market growth and the effects of the ramp-down of one of DT’s key medical customer’s product in H2. Despite some short-term headwinds, we remain positive to the investment case. Our BUY rating and target price of EUR 23.5 remain intact ahead of Q3.

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Expecting strong growth in SBU, MBU softness in turn

While the security imaging market is experiencing strong demand due to increase in Chinese investments and increasing CT investments related to new EU and US airport standards, DT noted in its Q2 report that it expects a temporary slowdown in medical imaging market growth. DT has guided for Q3 sales to grow above 10%, with SBU net sales growing and MBU sales decreasing. For Q3, we estimate SBU growing 37% and MBU declining 13% y/y, with total Q3 net sales growing 13.6% y/y to 27.9 MEUR (27.6 MEUR cons). Our Q3 EBIT estimate is 4.9 MEUR (5.2 MEUR cons) compared to 5.1 MEUR in Q3’18.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 14% to 107 MEUR driven by SBU’s return to growth of 28% after a weaker 2018. We expect ‘19E MBU net sales growth to decline 7.6% due to the temporary slowdown in customer demand and the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

BUY rating and TP of 23.5 euros maintained ahead of Q3

Despite the short visibility and trade politics being unpredictable, we see investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our BUY rating and target price of 23.5 euros remain unchanged ahead of the Q3 report.

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Tokmanni - Expecting a good quarter

22.10.2019 - 08.40 | Preview

Tokmanni will report its Q3 earnings on next week’s Wednesday, October 30th. The company had a strong H1 and we expect the good momentum to continue throughout the year. With the 11.2% share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

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Market pick up providing tail wind

Tokmanni’s H1’19 was strong as the company was able to increase its revenue (9.4% y/y) and keep a good EBIT level, particularly in Q2. We expect the good momentum to continue throughout the year as we enter the seasonally stronger H2. According to PTY, revenue of department store and hypermarket chains increased by 5.3% and 7.4% in July-August (3% y/y in H1’19) which indicates good for Tokmanni in Q3’19. We expect Q3’19E revenue of EUR 231.3m (9.8% y/y, LFL growth 3.0%) vs. EUR 229.6m/cons and EBIT of EUR 19.4m vs. 18.7m/cons. In Q3, Tokmanni strengthened its existing private label assortment with a new label Pisara (beauty and cleansing products). The current share of Tokmanni’s own brands as of sales is ~30% and it plays an important part in Tokmanni’s earnings improvement.

Efficiency improvements ongoing

Tokmanni targets to increase its store network to cover more than 200 stores. The company currently has 189 stores and two new stores will be opened during Q4’19. Tokmanni’s long-term target is to achieve comparable EBIT margin of ~9% by improving gross margin and reducing the relative share of current opex. Some results of the efficiency improvement actions were already shown during H1’19 and we expect further gross margin improvements in H2’19E (35.5% H2’19E vs. 34.3% H2’18). We also expect the profitability improvements of the company’s supply chain to be on the right track, although most of the benefits will be fully seen in midterm.

“HOLD” (prev. “BUY”) with TP of EUR 10.2

We have kept our estimates intact ahead of Q3 earnings and expect 2019E sales of EUR 945.9m (8.7% y/y) and EBIT of EUR 67.6m resulting in EBIT margin of 7.1%. With the share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

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Talenom - Slightly below expectations

21.10.2019 - 13.55 | Earnings Flash

Talenom’s first quarter results were slightly below our expectations. Net sales amounted to EUR 13.5m (EUR 14.2m Evli) while the operating profit amounted to EUR 2.4m (EUR 2.5m Evli). Talenom reiterated its guidance for 2019 and gave a financial outlook for 2020, expecting growth and relative profitability to be in line with 2019.

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  • Talenom’s net sales in Q3 amounted to EUR 13.5m (EUR 11.1m in Q3/18), slightly below our estimates (Evli EUR 14.2m). Revenue growth in Q3 was 21.1% y/y.
  • The operating profit in Q3 was EUR 2.4m (EUR 1.9m in Q3/18), in line with our estimates (Evli EUR 2.5m), at a margin of 17.4%.
  • Talenom’s guidance intact: the net sales growth rate is expected to be greater than in 2018 and the operating profit margin to improve compared to 2018
  • Financial outlook 2020: Growth and profitability expected to be in line with 2019. Our estimates: 2020 revenue growth and EBIT-% 18.0% and 20.7% respectively (2019E: 22.5% and 19.6%)
  • Net investments during 1-9/2019 EUR 12.0m compared with 7.1m during 1-9/2018.

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Consti - Careful optimism amid continued uncertainty

21.10.2019 - 09.15 | Preview

Consti will report Q3 earnings on October 25th. We expect to see improved profitability and a better indication of underlying profitability, although risks related to the earnings improvements still remain at elevated levels given the project impact on Q2/19 profitability. The order backlog development is also of key interest. The negative impact of stricter bidding procedures on the order backlog poses a considerable risk of sales declines in 2020, in our view, without improvements in order intake during H2/19.

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Expect profitability improvement but risks still present

During the first half of 2019 Consti’s profitability was materially affected by performance obligations relating to an individual building purpose modification project, which at the end of Q2/19 was essentially completed. Although the project still poses a risk to our estimated profitability improvement in Q3 (Evli EUR 2.2m, Q3/18 EUR -1.4m), of more long-term importance would be the absence of new, large profitability burdening projects in Q3, which is supported by the company’s more selective bidding procedures for larger projects.

Order backlog development of interest

A downside of the stricter bidding procedures has been a weaker development of the order backlog, which at the end of Q2/19 was down 21% y/y, at EUR 227m. Sales growth in 2019 remains supported by a more rapid order backlog conversion while a continued weaker order intake during H2/19 would impose a risk of sales declines in 2020. We expect focus in the second half of 2019 to remain on continued development of the organizational structure and cost savings.

HOLD with a target price of EUR 5.4 (5.8)

Compared to peer multiples, on our estimates valuation is in no way particularly challenging, especially when looking at 2020. However, due to the profitability challenges and the St. George arbitration proceedings the near-term uncertainty continues to remain high and signs of stabilizing profitability in Q3 would be needed. We retain our HOLD-rating with a TP of EUR 5.4 (5.8).

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Verkkokauppa.com - Eyes on competitive outlook

18.10.2019 - 09.20 | Preview

Verkkokauppa.com will report its Q3 earnings on next week’s Friday. As before, our interest is on how the competition has developed over the last months and what impact this has had on margins. We have kept our estimates intact and retain our rating “HOLD” with TP of EUR 3.3 ahead of Q3.

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Profitability pressures expected to continue

Verkkokauppa.com was able to beat the market growth in H1’19 but the growth did not come for free as the company’s profitability development has been lagging behind. We expect the continuing growth investments (e.g. increased marketing expenses) to further hamper Verkkokauppa.com’s profitability in 2019E. Verkkokauppa.com has guided EBIT of EUR 11-17m in 2019E while our expectation is at the lower end of the guidance, at EUR 12.2m (EBIT margin of 2.3%). We expect the competition to remain fierce adding to pressure on profitability. Depending on Q3 earnings, guidance revision for 2019E EBIT might be needed.

H2 has considerable impact on total year-end sales

We expect the competition in the consumer electronics market has continued tight and price driven also in Q3’19. However, Verkkokauppa.com’s historical ability to grow faster than the market and the ongoing growth investments create positive outlook for the future sales development. H2 is normally stronger for Verkkokauppa.com as the holiday season and campaigns are likely to boost sales. Therefore, we expect H2 to have a considerable impact on Verkkokauppa.com’s total sales in 2019E. We expect H2’19E sales of EUR 295.6m (8.4% y/y). Verkkokauppa.com’s guidance for FY2019E total sales is EUR 500-550m while our FY2019E sales expectation is at EUR 519.3m (8.7% y/y).

“HOLD” with TP of EUR 3.3

We have kept our estimates intact ahead of Q3 earnings. We expect Q3’19E sales of EUR 126.7m and EBIT of EUR 3.7m resulting in EBIT margin of 2.9%. We keep our rating “HOLD” with TP of EUR 3.3 ahead of Q3.

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Finnair - Q3 traffic close to expectations

16.10.2019 - 09.20 | Preview

Finnair will report its Q3 result on next week’s Tuesday. The company’s traffic data in Q3 was slightly above our estimates but did not provide any major surprises. Q3 ASK growth was 10% while RPK growth was 12% (Finnair’s 2019E guidance for capacity growth is 11-12% while revenue is expected to be slightly below capacity growth). With the share price correction, our rating is now “BUY” (prev. HOLD) while our target price remains unchanged at EUR 7.4 ahead of Q3.

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No surprises with Q3 traffic data

Finnair’s Q3’19 ASK grew by 10% while we expected ASK growth of 9%. ASK increased especially in North America as a result of the new Los Angeles route which was opened in March 2019 and additional flights to San Francisco. ASK growth in Asia was mainly due to additional frequencies to Hong Kong and Osaka. Finnair’s RPK growth was 12% in July-September vs. our expectation of 10%. Revenue increased especially in the European and North American routes where RPK growth beat ASK growth. Passenger Load Factor increased in all the other market areas expect in Asia where PLF declined by 2.3%. Global uncertainty in world trade and the softening of demand and price pressures have lowered expectations for cargo especially in the Asian market. The Q3 traffic data did not provide any major surprises thus we have kept our estimates intact.

Ease in jet fuel prices during Q3

Jet fuel prices have eased during Q3’19. In Q3, the average spot price of jet fuel in USD declined by 4% from Q2. On a y/y basis, the average Q3 USD price was down by 13%. Similarly, the average spot price in EUR moved down by 3 % q/q and by 9% on a y/y basis.

“BUY” (prev. HOLD) with TP of EUR 7.4

We have kept our Q3’2019E estimates intact after Q3 traffic information. We expect Finnair’s Q3’19E revenue to be EUR 889m while we expect Q3’19E EBIT of EUR 135m resulting in EBIT margin of 15.2%. We expect Finnair’s 2019E total sales to be EUR 3104m (8.9% y/y) while we expect EBIT of EUR 181m. With the share price correction, our rating is now “BUY” (prev. “HOLD”) while our target price remains unchanged at EUR 7.4.

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Suominen - Focus on volumes

16.10.2019 - 09.20 | Preview

Suominen posts Q3 results next week, on Tue, Oct 22. Suominen’s gross margin improved to 9.3% in Q2, and as raw material prices further slipped during Q3 we now expect the company’s gross margin at 9.9% for the quarter. However, we remind Q2 volume losses proved larger than we expected, and thus we retain our cautious view ahead of the report. Our target price remains EUR 2.50, rating HOLD.

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Margin improvement story continues to solidify

The prices of key raw materials (i.e. viscose, polyester and pulp) have extended their soft streak during the recent months. European softwood pulp prices declined by more than 10% during Q3, therefore bringing the total price decline for the past year to about 25%. The price trends are roughly similar for viscose and polyester, whereas polypropylene prices have remained stable since spring. Assuming stable pricing for Suominen’s nonwovens, we have consequently made moderate upwards adjustments to our gross margin (and thus EBIT) estimates. We now expect Q3 gross margin at 9.9% (we previously expected 9.2%). This implies an EBIT of EUR 3.8m, or 3.6% operating margin (previously estimated at EUR 3.1m and 3.0%). As the pricing of raw materials registers with a lag of few months, we expect further improvement for Q4, which brings our new EBIT estimate for FY ’19 to EUR 14m (previously EUR 12m).

Q2 volume losses proved a strain on EBIT

While we are confident regarding additional improvement in gross margin, we note volume losses pose a risk for our EBIT estimates. Even though Suominen posted Q2 gross margin above our estimate (9.3% vs our 8.7% estimate), the 15% volume decline in Q2 led to EBIT falling short of our estimate by almost 20%. We expect volume losses to have amounted to 9% in Q3.

In our view valuation is neutral given the uncertainty

Suominen is currently achieving a turnaround in earnings, and trades ca. 20% below peer group multiples on our estimates for ’20 and ’21. Nevertheless, we see the uncertainty due to volume losses posing a risk for our earnings estimates. We therefore reiterate our EUR 2.50 TP and HOLD rating ahead of the report.

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Marimekko - Raises earnings outlook for FY19E

15.10.2019 - 09.15 | Company update

Marimekko updated its 2019E guidance yesterday. The company expects 2019E comparable operating profit to be higher than in the previous year, approximately of EUR 17m. The company reiterated its guidance for FY19E revenue; revenue is expected to be higher than in the previous year. Marimekko will report its Q3 result on November 6th. We retain our rating HOLD with TP of EUR 30.

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Updated guidance for 2019E

Marimekko raised its earnings estimates for FY19E and reiterated its FY19E revenue guidance. According to the updated outlook, Marimekko expects FY19E comparable operating profit to be higher than in the previous year, amounting to approximately EUR 17 million (previous guidance; comparable operating profit is expected to amount maximum of EUR 15 million). This is mainly due to stronger than estimated sales growth and improved sales outlook in Finland but also better than estimated trend in relative gross margin. Marimekko did not provide much information other than that, so we wait for more color in the Q3 report.

We expect increase in sales in H2’19

We expect Marimekko’s H2’19 net sales to be EUR 69.4 million (16.4% y/y) while we expect H2’19 adj. EBIT to be EUR 10.5 million (H2’18 adj. EBIT of EUR 7.9m), resulting in EBIT margin of 15.1% (H2’18 EBIT margin of 13.3%). We expect sales and profitability to increase especially in Finland and APAC due to stronger sales growth in Finland and higher license revenue from APAC. We also expect the holiday season in the last quarter to have a considerable impact on Marimekko’s total sales in 2019E.

We maintain “HOLD” with TP of EUR 30

We have updated our estimates after the updated guidance. We have increased our 2019E revenue expectation and expect 2019E sales to total EUR 125.6m (previous: EUR 123.4m). We expect 2019E adj. EBIT of EUR 16.8m (previous: EUR 14.7m) resulting in EBIT margin of 13.4% We maintain our rating “HOLD” with TP of EUR 30.

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Gofore - Guidance revision from weaker Q3

14.10.2019 - 09.15 | Company update

Gofore released its Q3 business review on October 11th and revised it guidance for FY2019 net sales, expected to be in between EUR 64-67m (prev. EUR 67-72m). Q3 was burdened by lower sales in July and August, with net sales growth of 16% y/y, and the EBITA-margin as a result lower than in the comparison period (Q3/19: 9.2%, Q3/18: 13.3%). The near-term demand outlook has improved while uncertainty going forward still remains at elevated levels. We retain our HOLD-rating and target price of EUR 8.0.

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Weaker Q3 sales and lowered sales guidance

Gofore’s group net sales in Q3 amounted to EUR 13.3m, up 16 % y/y. Demand during July and August was affected by a delay in project deliveries, as some already signed projects did not pick-up as expected. The lower billing rate saw profitability fall from previous year levels, with a Q3/19 EBITA-margin of 9.2% (Q3/18: 13.3%). Gofore also noted that its UK business sales have decreased considerably during the year, possibly due to uncertainty related to Brexit, and the UK business being clearly loss-making. Gofore further revised its FY2019 net sales guidance to EUR 64-67m (prev. 67-72m) based on the weaker Q3 figures.

Demand recovery to aid end of year figures

We have revised our 2019 sales and EBITA-margin estimates to EUR 65.3m (prev. 67.8m) and 12.6% (prev. 13.6%) based on the Q3/19 figures. The revised guidance range indicates growth of some 18-40% during Q4/19, with the upper range corresponding to monthly levels seen during H1/19. The near-term demand outlook has improved compared with the earlier part of Q3/19, while the volatility in demand seen during 2019 keeps the uncertainty regarding the coming years development at higher levels.

HOLD with a target price of EUR 8.0

On our estimates valuation remains slightly above peers. Gofore continues to be among the top performers based on sales growth and profitability while the increased demand uncertainty remains a cautionary factor. With valuation in our view still quite fair, we retain our HOLD rating and target price of EUR 8.0.

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Aspo - Backed by ESL, lifted further by Telko

11.10.2019 - 09.30 | Company report

Aspo’s H1’19 results were subdued as ESL was hampered by a plethora of one-off problems, while Telko and Leipurin also posted weaker profits. We expect Aspo’s results will improve sharply from H2’19 onwards, particularly due to ESL as the dry bulk carrier’s recent investments start to contribute. We also expect gradual improvement for Telko and Leipurin as both segments are taking actions to address profitability. Our TP is now EUR 9.5 (9.0) due to higher peer multiples raising SOTP valuation; our rating remains BUY.

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We expect ESL to carry Aspo to materially higher results

We estimate ESL’s H2’19 EBIT to almost double compared to H1’19 as the malfunctioning cranes have been fixed, the market for Supramaxes has improved, and acute issues with Baltic Sea steel industry and ports have subsided. For FY ’19 we expect ESL to record EUR 16.6m in EBIT. We estimate the figure to further improve to EUR 23.6m in 2020 as synergies with AtoB@C fully materialize. In our view ESL will remain the cornerstone of Aspo as the segment contributes ca. 60% of the conglomerate’s value.

Telko and Leipurin have plenty of improvement potential

Telko’s operating margin weakened in H1’19 as the distributor carried high inventories and plastics and chemicals prices declined. Although market outlook remains soft we expect profitability to have bottomed out as the company is taking measures to boost efficiency. In our view Telko could prove a source of further upside for Aspo shareholders as there’s good potential for improved profitability. The situation for Leipurin is not unlike that for Telko; Leipurin is developing its operations and H2’19 results are bound to improve due to machinery deliveries. We expect Telko and Leipurin to post a combined EBIT at a level EUR 5.3m higher in 2020 compared to 2019.

Value is anchored to ESL, yet Telko could move the needle

Our updated TP is EUR 9.5 (9.0) as peer multiples have increased, boosting SOTP. Our estimates for next year and beyond do not fully capture the profitability potential of Telko and Leipurin, which could drive further upside beyond ESL. Our rating is BUY.

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SRV - Lowers profit guidance

11.10.2019 - 09.15 | Company update

SRV issued a profit warning on October 10th, estimating that its operative operating profit will be at a loss due to impairments relating to its investments in Russia and decreasing margins in certain projects. We had expected profitability to improve towards the end of 2019 with the completion of a significant number of developer-contracting housing units and the new guidance puts the operative operating profit well below our estimates (Evli EUR 14.7m).

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2019 operative operating profit to be negative

SRV downgraded its operative operating guidance for 2019, estimating that its operative operating profit will be at a loss due to impairments relating to its investments in Russia and decreasing margins in certain projects. Previous guidance put the operative operating profit between EUR 0-27m. SRV’s estimate for completed developer-contracting housing units in 2019 remains unchanged, at 809 units. We had estimated a 2019 operative operating profit of EUR 14.7m, based on the expected large number of completions in Q4/2019.

We expect a 2019 EUR -6.3m operative operating profit

Based on the limited information given we have adjusted our H2/19 operative operating profit estimate for the Construction segment by EUR -11m to account for the weaker margins and costs related to the delay of REDI Majakka. We have further included a EUR -10m impairment charge to Q4/19 relating to the Russian investments, which on a speculative note may relate to the on-going Pearl Plaza negotiations. Our revised operative operating profit for 2019 is at EUR -6.3m. We do not expect a dividend in 2019/2020, with our other estimates unchanged until further clarity from the Q3 results on October 31st.

HOLD with a target price of EUR 1.40 (1.80)

Following the vague guidance revision, uncertainty regarding our end of year estimates is significant, but 2019 will nonetheless be another weak year. We adjust our target price to EUR 1.40 (1.80) following the estimates revisions and retain our HOLD-rating.

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Raute - A record large order for next year

02.10.2019 - 09.30 | Company update

Raute received a big EUR 58m order to be delivered in 2020, alleviating some of the short-term demand concerns that have clouded the outlook recently. We raise our estimates from 2020 onwards but retain our HOLD rating for now as we wait for more signs of improvement in demand outlook. Our new target price is EUR 25.0 (23.5).

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New order more than twice the size of a usual large order

Raute will deliver all machinery and equipment for a greenfield plywood mill to be built in the Kostroma region of Russia. The order, commissioned by Segezha Group, totals EUR 58m and is the largest single order in Raute’s history, a demonstration of Raute’s technological competitiveness and core competence in delivering entire production lines. This is not Raute’s first project delivery for the Russian forestry group. The new project will be delivered during 2020 and the 125,000m3 mill is scheduled to commence operations in the summer of 2021.

We raise our estimates as visibility has improved

Raute says the order will have no impact on 2019 outlook as the company continues to expect both revenue and EBIT to decrease compared to the record year 2018. The EUR 58m new order is very significant in size considering the project value matches Raute’s whole order intake for H1’19 (of which EUR 29m was attributable to project deliveries and the other EUR 29m to services). In other words, while the order is good news for Raute it also highlights the company’s inherent project volume volatility. Raute’s order book, which stood at EUR 72m at the end of Q2’19, covers an exceptionally long period of time as a significant share of deliveries is scheduled for 2020 (and some even for 2021). We adjust our estimates upwards from 2020 onwards. We now expect EUR 149m in ‘20e revenue (previously EUR 128m) and ‘20e EBIT of EUR 11m (previously EUR 9m).

New target price EUR 25.0 (23.5), HOLD rating maintained

Raute’s current EV/EBITDA and EV/EBIT multiples, approximately 6x and 8x respectively, place the company’s valuation on neutral ground in terms of historical averages. We raise our TP to EUR 25.0 (23.5) on the back of our updated estimates yet maintain HOLD rating for now as we wait for more signs of improvement in demand outlook.

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Next Games - Final leg of turnaround commencing

01.10.2019 - 00.00 | Company report

Next Games is through the initiated rights offering commencing the final leg of its turnaround project. Future growth initiatives remain of key importance given the declining revenue trend from live games. We expect growth to accelerate during 2020-2021 following new game launches and profitability to improve but remain at weaker levels.

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Rights offering to finance growth opportunities

Next Games has faced challenges following the launch of Our World, in which the company invested heavily during launch, having failed to meet expectations and seeing declines in the user base due to technical difficulties. As a result the company initiated a turnaround project in late 2018. Q2/2019 saw the company reach targeted cost savings levels and as such also improved profitability. Following changes to its operating model Next Games now has nine projects or prototypes under development in addition to Blade Runner Nexus in soft launch and the Stranger Things -game in pre-production. The company is now seeking to move to the final leg of its turnaround project by securing financing for growth initiatives through an EUR 8m rights offering.

Growth dependent on new launches in the coming years

Having seen a declining trend in gross bookings in its two live games, growth in the coming years is dependent on successful new games launches, with Next Games target to launch at least one new game per year. We expect sales growth to accelerate in 2020 with the expected launch of Blade Runner Nexus in late 2019 and the Stranger Things -game in 2020. The new game launches are expected to impact on profitability, and we expect the EBIT-margin to remain negative until 2021.

HOLD with a target price of EUR 1.0 (1.5)

We adjust our target price to EUR 1.0 (1.5) following the expected dilution from the rights offering, with our minor estimates revisions not having a significant impact. Valuation still quite justifiably emphasizes near-term uncertainties and we consider current valuation levels reasonable.

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Cibus Nordic - Still more yield left to bite

02.09.2019 - 09.30 | Company update

Cibus’ Q2 rental income of EUR 12.6m was a little soft (we expected EUR 12.8m) due to a change in tenancy, while EUR 0.3m in accruals also had a negative impact. However, the fundamentals remain as before, strategy is on track and there is further room for yield compression. We update our TP to SEK 135 (125); rating remains HOLD.

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Cibus is well ahead of its EUR 50m annual acquisition goal

Cibus completed the acquisition of five properties during the quarter (the total number now stands at 139), meaning Cibus has already acquired EUR 45m worth of properties this year, thus bringing the portfolio gross asset value to EUR 862m. The net debt LTV ratio increased to 59.0% during the quarter, up from the previous 56.7%, however Cibus’ average interest rate on borrowings declined by ca. 30bps, to 2.6%. Adjusted EPRA NAV increased slightly to EUR 11.3 (11.2) per share.

Occupancy temporarily lowish due to a tenancy change

Cibus reported a little soft Q2 net rental income due to a change in tenancy as occupancy rate dropped to 94.3% (has typically been above 95%). Another one-off was a EUR 0.3m accruals charge, and thus net rental income stood at EUR 11.5m vs our EUR 12.0m estimate. The most important forward-looking metric, namely net rental income less central administration costs, increased by EUR 2.0m to EUR 46.2m. We see the current portfolio posting EUR 46.7m next year, which translates to a 5.2% yield.

Cibus continues to grow the portfolio, attracts new investors

So far this year Cibus has announced EUR 45m in Finnish daily-goods property acquisitions, meaning the company is now well ahead of its stated annual EUR 50m investment target for the year. The portfolio is now worth EUR 862m in terms of gross asset value, comprising of 139 properties located around Finland and with a total lettable area of some 500,000 sqm. Central portfolio metrics such as occupancy rate (94.3%), weighted average unexpired lease term (5.0 years) and net debt LTV ratio (59.0%) have remained steady. The tenant mix stays anchored to Kesko (54%) and Tokmanni (28%), with S-Group (7%) and others (11%) making up the rest. During the last twelve months the company has been able to improve its cost of borrowing by around 60bps as the interest-bearing liabilities’ average interest rate now stands at ca. 2.6%.

Cibus has also continued developing its own organization with the help of few recruits, and in the long-term may eventually enter the Swedish property market. Funds managed by Sirius Capital Partners sold three quarters of their stake in May, which we see as a positive development as it widens Cibus’ institutional investor base and so makes it easier to arrange e.g. an equity issue in connection with a major portfolio acquisition.

Cibus trades above GAV and NAV, but yield still attractive

Cibus’ shares have rerated during the last year, now trading at a premium on book value. In early 2019 Cibus was trading at ca. 0.95x EV/GAV and 0.85x P/NAV, whereas the respective multiples now stand at 1.05x and 1.10x. We estimate the corresponding yield compression at 75bps. Meanwhile major Nordic Real Estate companies’ yields have also compressed, and Cibus’ absolute yield spread has stayed largely unchanged at ca. 100bps. The high underlying portfolio yield, as well as the resulting 7% dividend yield (itself a function of the property yield, leverage and dividend payout ratio), means Cibus’ shares have further potential. We update our TP to SEK 135 (125), valuing Cibus at a 1.10x P/NAV multiple (1.05x EV/GAV). Our rating stays HOLD.

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Cibus Nordic - Expenses higher than expected

30.08.2019 - 10.45 | Earnings Flash

Cibus’ Q2 rental income stood at EUR 12.6m, in line with expectations. Property expenses were slightly higher than we expected, and thus net rental income, at EUR 11.5m, was less than our EUR 12.0m estimate. Central operating metrics remained largely unchanged.

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  • Q2 rental income amounted to EUR 12.6m vs our EUR 12.8m estimate.
  • Net rental income was EUR 11.5m, whereas we expected EUR 12.0m. Property expenses were some EUR 300k higher than we expected. Annual net rental income capacity now stands EUR 49.9m from Q3 onwards (Cibus previously estimated the figure at EUR 49.3m).
  • Operating income (net rental income minus central administration costs) stood at EUR 10.5m vs our EUR 11.0m projection.
  • The portfolio’s GAV amounted to EUR 862m (a total of 139 properties), while EPRA NAV rose to EUR 11.3 (previously EUR 11.2) per share.
  • Net debt LTV ratio rose to 59.0% (56.7% in Q1’19).
  • Occupancy rate was 94.3% (95.1% in Q1’19).

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Fellow Finance - Growth pick-up taking time

26.08.2019 - 09.15 | Company update

Fellow Finance’s H1 saw a weaker loan volume development, largely due to an increased competition within domestic consumer loans. Larger investments into international growth are expected to be seen in 2020, with some upfront investments to show in 2019, and we expect to see weaker margins but a more rapid growth going into 2020. We retain our HOLD-rating with a TP of EUR 5.0 (5.5)

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Increased competition affecting domestic consumer loans

Fellow Finance’s H1/19 figures in general were quite as expected, with revenue at EUR 7.2m (Evli EUR 7.0m) and the adj. EBIT at EUR 1.4m (Evli EUR 1.3m). Profitability was affected by the bond issue and upfront growth investments. Overall facilitated loan volumes were below expectations, with consumer loans in Finland showing a weaker development due to an increase in competition from other lenders.

Expect more aggressive growth moves in 2020

Based on management comments we expect 2019 to remain a ramp-up year for the international operations, building up a foundation for accelerating growth. We had expected some more aggressive moves already in 2019 but now expect to see this happening in 2020. As such we have lowered our profitability estimates for 2020 due to expected increases in marketing investments while increasing our coming year growth estimates. Following recent recruitments, we expect to see larger moves in Poland in the near term, followed by Germany.

HOLD with a TP of EUR 5.0 (5.5)

We view Fellow Finance at an elevated level of uncertainty following the lowered guidance pre-H1 and the weaker the expected loan volume development. We consider the indicated stronger growth investments towards 2020 a positive, as the weaker loan volume development has mostly been due to domestic consumer loan development, contrary to domestic business financing and international financing, were we have expected the bulk of coming years’ growth. Due to estimates revisions we lower our TP to EUR 5.0 (5.5), retaining our HOLD-rating.

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Fellow Finance - Growth some 30% in H1

23.08.2019 - 09.00 | Earnings Flash

Fellow Finance’s H1/2019 revenue and EBIT were quite in line with expectations, with revenue of EUR 7.2m (Evli EUR 7.0m) and an EBIT of EUR 1.4m (Evli EUR 1.3m). EPS was below our estimates at EUR 0.06 (adj. EPS EUR 0.07, Evli EUR 0.09). Fellow Finance expects revenue in 2019 to grow by over 20 % and the adjusted EBIT to be lower than in 2018 (updated 16.8.2019).

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  • Revenue in H1 amounted to EUR 7.2m (EUR 5.6m in H1/18), quite in line with our estimates (Evli EUR 7.0m). Growth in H1 amounted to 29.6%.
  • Fellow Finance facilitated loans during H1 for a total of EUR 109m (EUR 76.5m in H1/18).
  • EBIT in H1 amounted to EUR 1.4m (EUR 1.7m in H1/18), in line with our estimates (Evli EUR 1.3m).
  • EPS in H1 amounted to EUR 0.06 per share (EUR 0.14 in H1/18), below our estimate of EUR 0.09. The for listing expenses adjusted EPS amounted to EUR 0.07.
  • Guidance: Fellow Finance expects revenue in 2019 to grow by over 20 % and the adjusted EBIT to be lower than in 2018 (updated 16.8.2019).
  • Fellow Finance will during the end of the year continue to expand to new markets.

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Marimekko - Growth strategy expected to succeed

19.08.2019 - 09.15 | Company update

Marimekko’s H1 has been impressive and we expect the good momentum to continue throughout the year. The company has been able to target broader audience and license sales in APAC is expected to increase in H2, which should support revenue growth. We keep “HOLD” with TP of EUR 30 (26).

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Strong Q2 earnings

Marimekko’s Q2 revenue was in line with expectations at EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Revenue growth was good especially in Finland where comparable retail sales increased by 17% y/y and totaled EUR 16.8m vs. 16.7m Evli view. Also, growth in wholesale sales in EMEA region was good. Wholesale sales in Finland decreased by 18% y/y as there were large non-recurring wholesale deliveries in Q2’18. International revenue was EUR 12.4m vs. EUR 14.4m Evli view. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Earnings were supported by increased sales and gross margin improvements, which were impacted by moderate sale campaigns and increased retail sales.

Broader customer segments support growth

Marimekko had a strong H1 as the company’s revenue grew by ~8% and adj. EBIT by ~46 % y/y. We expect the good momentum to continue as the company has been able to target wider customer segments and seeks to improve growth through online store, partner-led retail in Asia as well as by increasing the sales/m2 in its physical stores. Marimekko has approximately 150 stores in 15 countries, of which most of the stores are outside of Finland and the company aims to open 10 new shops or shop-in-shops in 2019. In APAC, Japan is the largest market area but the company sees growth opportunities in other countries as well. Net sales from APAC represented 21% of total sales in H1’19. During the last couple of years, the company’s combined revenue from APAC has been flat but the company has indicated that the revenue from APAC is likely to increase in the future as the strategy is to appeal to broader target audience globally. We expect APAC’s retail revenue in 2019E to increase by ~20% y/y and wholesale sales growth of ~13% y/y. In Q2, Marimekko updated its guidance for 2019, mainly as it expects higher licensing income in APAC during H2’19. The company reiterated its guidance for 2019E revenue and expects the revenue to be higher than in 2018 and expects operating profit to be higher than in 2018, approximately maximum of EUR 15m (previous: operating profit expected to be in the same level as in 2018). The company targets 10% y/y revenue growth and EBIT% of 15% in the long-term. We expect 2019E revenue of EUR 123m (prev. EUR 125m) and EBIT of EUR 15m (prev. EUR 14m), resulting in EBIT% of 11.9%.

We retain ”HOLD” with TP of EUR 30 (prev. EUR 26)

We have kept our underlying estimates largely intact but increased our 20E-21E estimates as we expect broader target audience and improved gross margin levels to support growth. We expect the company’s revenue to grow ~8% y/y in 20E-21E and EBIT growth of ~20% y/y. On our estimates, Marimekko trades at 19E-20E EV/EBITDA multiple of 9.7x and 8.6x which translates into ~50% premium compared to the premium goods peer group. We see Marimekko’s current valuation as stretched, but as we expect the company to transition towards new customer segments and markets, which should accelerate growth and enable the company to reach a new profitability level, we accept the premium. Our EBIT% estimates are already shifting towards the luxury goods peer group which also justifies higher multiples. We keep our rating “HOLD” with new TP of EUR 30 (prev. EUR 26).

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Endomines - Eyeing production start in Q3

19.08.2019 - 09.00 | Company update

Endomines did not produce any gold concentrate in Q2, as expected. Furthermore, no production guidance was given. We have revised our 2019 production estimate slightly downwards to ~3,000oz, expecting a smaller production already in Q3. We revise our TP to SEK 4.8 (4.4) following NPV adjustments, retaining our SELL-rating.

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No production in Q2, production guidance yet to be given

Endomines’ Q2 results were uneventful, as no gold concentrate production occurred during the quarter, as expected, and no new production guidance was given. Costs were limited compared to our expectations and EBITDA as such was SEK -9.3m compared to our estimate of SEK -15.0m. Ramp-up at Friday appears to be progressing rather well given the delays experienced so far. Based on the information given in Q2 we have, however, adjusted our Q3 production estimates further downwards, and now expect 2019 production of ~3,000oz.

Friday ramp-up key in the near-term

Endomines long-term plan is to produce over 40,000oz by the end of 2023, with near-term production relying on the Friday mine followed by the Rescue ore body (production in 2021). With essentially no production currently on-going the successful ramp-up of Friday remains vital to secure cash flows for on-going operations, although the recently completed rights issue substantially alleviated near-term financing concerns.

SELL with a TP of SEK 4.8 (4.4)

Our NPV values Endomines at SEK 4.8 per share, up from SEK 4.4 since our previous update following net debt adjustments based on the Q2 balance sheet and expected rights issue proceeds. We assume a 1,400USD/oz LT gold price, reflecting analyst estimates and the nature of the recent gold price increases. Drivers for long-term gold price through supply/demand remain in place but near-term gold price development remains uncertain following the more short-term macro event driven price increases.

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Fellow Finance - Guidance for 2019 lowered

19.08.2019 - 07.45 | Company update

Fellow Finance lowered its 2019 guidance due to weaker intermediated loan volume development and a more aggressive execution of its international expansion strategy. We have lowered our 2019 adj. EBIT estimate down by some 40%. On our lowered estimates and given the increased uncertainty we downgrade to HOLD (BUY) with a target price of EUR 5.5 (9.0).

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Lowered guidance for sales and profitability

Fellow Finance gave an updated guidance, according to which the 2019 revenue is expected to grow by over 20% (prev. over 30%) while the adjusted operating profit is expected to be lower than in (prev. grow from) 2018. The guidance revision is mainly due to a lower than expected intermediated loan volume and a more aggressive than international expansion strategy. Based on monthly figures the intermediated loans saw good growth during early to mid H1, with the summer months having exhibited a growth pace decline.

Our 2019 adj. EBIT estimate lowered by some 40%

For Fellow Finance to achieve the new guidance a pick-up in intermediated loan volume growth will be needed in H2/19. The more aggressive execution of the international expansion strategy should support volume growth. On our revised estimates we expect a 25% y/y growth in intermediated loan volumes during H2/19 and 2019 sales to grow 22% to EUR 14.6m (prev. 16.5m). The guidance given for operating profit leaves room for notable uncertainty regarding profitability levels. We estimate a 2019 adj. operating profit of EUR 2.6m (prev. 4.5m), down from EUR 3.5m in 2018, based on the expected lower revenue while keeping our cost structure estimates essentially unchanged.

HOLD (BUY) with a target price of EUR 5.5 (9.0)

On our revised estimates valuation does not appear particularly attractive. Fellow Finance will post H1/19 results on August the 23rd, which should provide much-needed clarity on earnings development and outlook. On our clearly lower estimates and increased uncertainty we downgrade to hold ahead of the H1 results with a target price of EUR 5.5 (9.0).

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Endomines - Production guidance update not yet given

16.08.2019 - 10.00 | Earnings Flash

Endomines’ revenue and EBITDA in Q2 amounted to SEK 1.4m (Evli 0.0m) and SEK –9.3m (Evli -15.0m) respectively. There was no gold concentrate production during Q2. Endomines did not give an updated production guidance for Q2.

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  • Endomines did not produce any gold concentrate in Q2.
  • Revenue amounted to SEK 1.4m (42.1m in Q2/18), while we had not estimated any revenue for Q2. The Q2 revenue derived from clean-up gold from the Pampalo mill.
  • EBITDA in Q2 was at SEK -9.3m, above our estimate or SEK -15.0m.
  • Construction of the Mill was ongoing and developmental drifting at the Friday Mine was the focus for Q2.
  • Endomines did not give an updated production guidance for 2019. A production plan is being worked on based on the results of the drilling campaign and test mining as well as the commissioning of the plant and an updated guidance will be given once completed.

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Taaleri - Supportive fee outlook

16.08.2019 - 09.40 | Company update

Taaleri’s H1 earnings were due to the previously given guidance quite unsurprising and segment development corresponded roughly to expectations. A better than anticipated AUM development supports the fee outlook going forward, with 2019 earnings still expected to rely on the Texas wind farm project.

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Favourable AUM development improving WM fee outlook

Taaleri’s had pre-H1 announced an H1 EBIT-margin range of 20-25%, with EBIT at EUR 6.4m (Evli 6.8m), at a 20.6% margin. Segment results corresponded roughly to our expectations, with solid investment returns boosting Financing’s earnings, while Wealth Management earnings were weak, as indicated by the guidance revision. Energy’s earnings remained negative as expected. The in our view most positive information of the first half-year was AUM development, with group AUM up 15.6% to EUR 6.6bn. Uncalled commitments along with the accumulation of AUM towards late H1 is expected to benefit Wealth Management’s fees and continuing earnings going into H2.

2019 earnings still dependent on Texas wind farm project

Taaleri has guided for the 2019 EBIT-margin to be slightly below that achieved in 2018. Compared to H1/19 we expected clear improvements in Wealth Managements operating profits, driven by higher AUM and an increase in performance fees (-0.5m in H1). We expect a decline in Financing, both H2/19 and the coming years, due to expected lower investment returns. The deciding factor for 2019 earnings will be Energy, were the divestment of the Texas wind farm project is expected during H2/19, with SolarWind II fees also expected to boost the operating profitability to a positive level. H1 group earnings were also affected by elevated personnel expenses, which we expect to support earnings improvement in H2.

BUY with a target price of EUR 7.6 (8.0)

Based on the H1 report, which given the favourable AUM development and expected cost base decline in H2 was slightly more positive than we had expected, we retain our BUY-rating with a target price of EUR 7.6 (8.0).

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Pihlajalinna - Aiming for profitability turnaround

16.08.2019 - 09.15 | Company update

Pihlajalinna’s Q2 result fell short of expectations. The company faces profitability issues in many of its units and has launched an efficiency improvement program that aims at annual cost savings of EUR 17m. We keep our rating “BUY” with TP of EUR 12 (prev. EUR 13).

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Q2 earnings weaker than expected

Pihlajalinna’s Q2 earnings fell short of expectations. The company’s revenue was EUR 130m vs. EUR 134m/132m Evli/cons. Revenue grew by 3.5% of which organic growth was 1.5% y/y. Adjusted EBITDA was EUR 10.8m (8.3% margin) vs. EUR 13.3m/13.2m (9.9%/9.9%) Evli/cons. EBITDA was negatively impacted by unequal resourcing of units and general salary increases. Adj. EBIT was clearly below expectations at EUR 2.1m vs. EUR 4.8m/4.6m Evli/cons. In a group level, EBIT was negative in April and May but improved in June. Profitability improved in the Forever fitness center chain and in public specialized care but decreased in outsourced primary care and social care services, private clinics, surgical operations and dental care services. Seasonality impacted the Q2 result as well.

Strong actions to improve profitability

Pihlajalinna’s long-term target is to increase its EBIT margin to over 7%, which so far has seemed rather distant. The company has faced efficiency problems especially with the new clinics which has impacted negatively on the company’s profitability. The company indicated that it has several loss-making clinics. In order to improve its profitability, Pihlajalinna launched an efficiency improvement program that aims to achieve annual cost savings of EUR 17m. The planned cost savings are expected to be realized during 2020. As a result of the efficiency improvement program the company informed that it will merge units but closures of some of the loss-making clinics are also possible. The focus is on operational management. The company estimated that the efficiency improvement program will help to reduce costs in H2’19 by approximately EUR 5m. The program involves a non-recurring item of approximately EUR 8m, which will be allocated to Q3’19 as an adjustment item. Despite of the weak Q2 result the company reiterated its guidance for 2019E and expects revenue to increase from 2018 and EBIT clearly to improve from last year.

High activity in M&A and partnerships

Pihlajalinna has been active in M&A and partnerships in H1’19 but the company has also been able to grow organically. During Q2, the company released a letter of intent on co-operation with Pirkanmaa Hospital District. The partnership seeks to design new and innovative service models with a strong customer focus. The company has also agreed on pilot co-operation with Pohjola Vakuutus. During the review period, Pihlajalinna has further expanded its occupational healthcare network by acquiring Raisio’s Aurinkoristeys occupational healthcare units and the Kouvola Työterveys occupational healthcare unit. Pihlajalinna also opened an occupational healthcare center to Rovaniemi in August. In H2’19, the company seeks to improve its services in its healthcare centers but also in mobile. Improved remote services should further support the company’s efficiency. Pihlajalinna sees that the collapse of social and healthcare service reform has activated municipalities and the company has indicated that it has new possible contracts in the pipeline.

We retain “Buy” with TP of EUR 12 (prev. EUR 13)

As a result of the weak Q2, we have decreased our 2019E estimates. We now expect 2019E revenue of EUR 516m (prev. EUR 525m). We expect adj. EBIT of EUR 20m (prev. EUR 24m) resulting in EBIT% of 3.9% (prev. 4.6%). Despite of the expected EBIT improvement (42.8% y/y) from 2018, 2019E earnings remain uncertain. If the planned efficiency improvements succeed in 2020E we expect a turnaround in profitability and the company to move towards its EBIT% target of 7%. On our estimates, Pihlajalinna trades at 2019E-2020E EV/EBITDA multiple of 7.5x and 6.1x, which translates into ~27% discount compared to the peer group. We keep our rating “Buy” with new TP of EUR 12 (prev. EUR 13).

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Gofore - Uncertain times ahead

15.08.2019 - 09.45 | Company update

Gofore’s H1 results were slightly better than expected, with EBITA at EUR 5.0m (Evli 4.8m). Of key interest were comments regarding market and demand development, which lacked more precise detail but still imply a weakened outlook. We retain our HOLD-rating with a target price of EUR 8.0 (8.5).

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Comments point towards increased uncertainty

Gofore’s H1 results beat our estimates slightly. EBITA amounted to EUR 5.0m (Evli 4.8m), as the impact of the drop in certain customers’ demand during Q2 on margins was smaller than expected. There appears to have been no pattern in the decreased demand per customer segment, which opens up reasons to view the overall market development with further caution. Comments regarding the market development were somewhat lacking in detail and we opt to interpret the information given as likely weaker figures during H2 as filling the gaps caused by the demand drop may prove to be challenging.

Uncertainty driven sales growth estimate revision

We have made revisions primarily to our coming year growth estimates as well as our H2/19 estimates, having lowered our sales estimate to EUR 34.3m and EBITA-% estimate to 12.3% to account for an uncertainty in the demand situation, while our full-year estimates remain mostly intact due to the solid H1 figures. We have also lowered our coming years sales estimates, having lowered our 2018-2021E CAGR estimate by 4pp to 17%.

HOLD with a target price of EUR 8.0 (8.5)

The near-term revenue and earnings development along with the uncertain tone in the market outlook comments in our gives rise to additional concern relating to development in the coming years. We still highlight that Gofore still is and has been among the top performers in its field and as such we continue to justify a valuation premium to peers. Upside nonetheless appears limited and we retain our HOLD-rating but adjust our target price to EUR 8.0 (8.5) to account for the added estimates uncertainty.

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Taaleri - Favourable AUM development amid challenging half-year

15.08.2019 - 09.00 | Earnings Flash

Taaleri’s H1 results were quite in line with our expectations, with group income amounting to EUR 30.9m (Evli 31.1m) and EBIT to EUR 6.4m (Evli EUR 6.8m). AUM development better than we had foreseen, increasing 15.6% y/y to EUR 6.6bn.

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  • Income in H1 amounted to EUR 30.9m (EUR 35.5m in H1/18), in line with our estimates (Evli EUR 31.1m). The group’s continuing earnings declined some 8.6 per cent y/y.
  • EBIT in H1 amounted to EUR 6.4m (EUR 12.4m in H1/18), slightly below our estimates (Evli EUR 6.8m). Taaleri had pre-announced the EBIT -margin in H1/19 to be between 20-25%
  • The Wealth Management segments income in H1 was EUR 17.2m (H1/18 EUR 29.7m) and EBIT EUR 2.0m (H1/18 EUR 14.1m), with our estimates at EUR 18.0m and EUR 2.2m respectively.
  • The Financing segments income in H1 was EUR 10.4m (H1/18 EUR 6.2m) and EBIT EUR 6.1m (H1/18 EUR 2.4m), with our estimates at EUR 10.6m and EUR 6.5m respectively.
  • The Energy segments income in H1 was EUR 1.4m (H1/18 EUR 1.1m) and EBIT EUR -1.6m (H1/18 EUR -0.9m), with our estimates at EUR 2.0m and EUR -0.8m respectively.
  • Income from other operations in H1 amounted to EUR 1.8m (H1/18 EUR -1.5m) and EBIT EUR -0.1m (H1/18 EUR -3.3m), with our estimates at EUR 0.5m and EUR -1.1m respectively.
  • Assets under management at the end of H1/19 amounted to EUR 6.6bn, up 15.6% y/y.

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Aspo - ESL’s EBIT set for strong gain in H2

15.08.2019 - 08.50 | Company update

Aspo’s Q2 didn’t alter the bigger picture much as ESL is still expected to post higher EBIT in H2’19 as investments are paying off. However, Telko’s subdued results were a negative. Our TP is now EUR 9.00 (9.25), rating BUY (HOLD).

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Q2 weaker than expected as Telko was unable to improve

Aspo’s EUR 151m Q2 revenue met our expectations, yet the EUR 4.1m EBIT missed our EUR 5.2m estimate. The miss was largely attributable to Telko’s weak 2.9% operating margin (we expected 4.5%), which declined both q/q and y/y. Telko’s EUR 80.6m Q2 revenue was in line with our estimate, and improved q/q and y/y, however declining plastic raw materials and chemicals prices continued to hurt profitability as Telko’s inventories were high (although have since normalized). The strengthening Russian and Ukrainian currencies had a further negative impact. Leipurin also fell short of our expectations and last year due to the machinery business’ weakness. Meanwhile ESL posted EUR 2.6m in EBIT (we cut our estimate to EUR 1.8m after Aspo warned Q2 will be weak due to a challenging market for the Supramax vessels).

ESL’s EBIT is set to almost double in H2 compared to H1

ESL’s LNG vessels are expected to reach their full potential in H2’19 as the cranes are now functioning normally. AtoB@C is also contributing. The market for Supramaxes has improved with the Baltic Dry Index rebounding sharply from its early 2019 lows. Steel sector shipments have also normalized after Q2, a period hampered by process challenges in Baltic steel mills as well as heavy traffic at Baltic Sea ports. We thus leave our H2’19 estimates for ESL intact (expect EUR 11m in H2’19 EBIT vs EUR 8m in H2’18). We revise our Telko estimates down as the market outlook in both West and East remains cautious. We previously expected Telko to reach 4.5-5.0% EBIT margins in H2’19 but now expect ca. 3.5%. On a more positive note, Aspo says Telko has managed to improve its inventory turnover recently.

Aspo’s H1’19 was subdued, but EBIT should improve considerably in H2’19

ESL’s H1’19 was weak with EBIT amounting to EUR 5.8m vs EUR 6.9m previous year. The results were hampered by the two new LNG vessels’ crane problems (which have since been fixed) as well as challenging market for the two Supramax vessels. Moreover, Q2 was slow for steel industry shipments as Baltic Sea steel mills’ annual maintenance procedures took longer than expected. Baltic Sea ports also faced operational challenges, leading to extended waiting periods for vessels. Meanwhile Telko and Leipurin struggled to improve their profitability in H1’19 due to the former suffering from declining chemicals prices and the latter dragged by slow machinery business. Aspo’s H1’19 EBIT stood at EUR 9m (EUR 11m). We expect Aspo’s EBIT to improve to EUR 16m in H2’19.

The bulk of Aspo’s value continues to tilt towards ESL

Telko’s contribution to our SOTP valuation has dropped as we have lowered our estimates for the chemical distributor. We now expect Telko to manage EUR 10m (EUR 14m) in FY ’19 EBIT. Our TP is now EUR 9.00 (9.25) due to lower SOTP as we expect FY ’19 EBIT at EUR 25m (EUR 28m). Our rating is now BUY (HOLD).

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Marimekko - Good EBIT growth in Q2

15.08.2019 - 08.30 | Earnings Flash

Marimekko’s Q2 revenue increased by 3% and was EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Revenue was mainly driven by improved relative sales margin and sales growth. Marimekko reiterated its guidance for 2019E.

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  • Finland: revenue was EUR 16.8m vs. EUR 16.7m Evli view. Revenue increased by 4%. Retail sales increased by 17%. Wholesale sales decreased by 18%.
  • International: revenue was EUR 12.4m vs. EUR 13.4m Evli view. Revenue increased by 2%. Retail sales decreased by 1% and wholesale sales increased by 6%.
  • Q2 operating profit was EUR 3.7m (12.7% margin) vs. EUR 3.5m/3.2m (11.3%/10.6% margin) Evli/cons.
  • Q2 EPS was EUR 0.32 vs. EUR 0.34/0.30 Evli/cons.
  • Guidance for 2019: net sales in 2019E are forecasted to be higher than in the previous year and adj. EBIT is expected to be higher than in the previous year, amounting at most to approx. EUR 15m.

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Pihlajalinna - Q2 earnings below expectations

15.08.2019 - 00.00 | Earnings Flash

In Q2’19, Pihlajalinna’s revenue amounted to EUR 129.7m vs. EUR 134.0m/132.4m Evli/cons estimates, while adj. EBIT landed at EUR 2.1m vs. EUR 4.8m/4.6m Evli/cons estimates. Organic growth increased by 1.5% y/y. The company reiterated its 2019E guidance.

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  • Q2 revenue was EUR 129.7m vs. EUR 134.0m/132.4m Evli/cons estimates. Revenue grew by 3.5% y/y. Organic growth was 1.5% y/y.
  • Q2 adj. EBITDA was EUR 10.8m (8.3% margin) vs. EUR 13.3m/13.2m (9.9%/9.9%) Evli/cons estimates. Adj. EBITDA increased by 5.6% y/y. Administrative and personnel costs were higher than planned as unequal resourcing and general salary increases impacted costs.
  • Q2 adj. EBIT was EUR 2.1m (1.6% margin) vs. EUR 4.8m/4.6m (3.6%/3.5%) Evli/cons estimates.
  • Q2 EPS was EUR -0.02 vs. EUR 0.1/0.1 Evli/cons.
  • Guidance: consolidated revenue is expected to increase from 2018. Adj. EBIT is expected to improve clearly compared to 2018.
  • The company has launched an efficiency improvement program that aims at annual cost savings of approx. EUR 17m.

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Aspo - Weak Q2, but improvement ahead

14.08.2019 - 10.35 | Earnings Flash

Aspo’s Q2 revenue stood in line with our estimate, however the EUR 4m EBIT fell short of our EUR 5m expectation mostly due to Telko’s relatively low 2.9% operating margin. ESL’s EBIT came in above our estimate. Aspo had previously warned about subdued Q2 for ESL due to a challenging market for the Supramax vessels.

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  • Aspo Q2 revenue amounted to EUR 151m vs our EUR 152m estimate.
  • Q2 EBIT was EUR 4.1m whereas we expected EUR 5.2m.
  • ESL Shipping posted EUR 42.6m in Q2 revenue vs our EUR 39.5m estimate. ESL’s EBIT was EUR 2.6m vs our EUR 1.8m expectation. Aspo had previously warned Q2 to be weak as Supramaxes posted losses (EBIT was EUR 4.3m a year ago).
  • Telko recorded EUR 80.6m in revenue vs our EUR 80.9m estimate, whereas EBIT came in at EUR 2.3m compared to our EUR 3.6m projection. Operating margin was therefore 2.9% i.e. weaker than the 4.1% recorded previous year and clearly off our 4.5% expectation.
  • Leipurin managed EUR 28.0m in Q2 revenue while we expected EUR 31.6m. EBIT stood at EUR 0.6m vs our EUR 0.9m estimate.
  • Aspo guides EUR 24-30m operating profit for 2019 (EUR 20.6m in 2018).

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Etteplan - Narrative largely unchanged

14.08.2019 - 10.00 | Company update

Etteplan’s Q2 results were slightly below our and consensus estimates but at a good level nonetheless. Etteplan upgraded its guidance mainly driven by the acquisitions made. The market comments were mostly unchanged, with some hints of weakened demand. We retain our HOLD rating with a target price of EUR 9.6.

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Below estimates, acquisition driven guidance upgrade

Etteplan’s Q2 results were slightly below our and consensus estimates, but continued to be at a good level nonetheless. Revenue grew 3.7% to EUR 64.3m (Evli/cons. 66.6m/66.4m), with organic growth falling clearly to 1.2%, although impacted by working day differences. Profitability surpassed the target level, with EBITA at 6.5m (Evli 6.9m) for a margin of 10.1%. Etteplan further upgraded its guidance (prev. upgrade in Q1) following the acquisitions made during Q2/Q3, expecting its revenue and operating profit for 2019 to grow significantly (prev. clearly) compared to 2018. Market outlook comments were mostly neutral compared to Q1, with some signs of negative development for instance in China.

No major estimates revisions

Our estimates remain mostly unchanged post-Q2, as we had already included the acquisitions in our estimates. Profitability of the acquired companies had not been given pre-Q2 but management comments implied similar profitability to Etteplan or possibly better when accounting for synergies, in line with our expectations. We expect revenue growth of 11.4% in 2019 (2018: 10.1%) and an EBITA-margin of 9.9% (2018: 9.5%).

HOLD with a target price of EUR 9.6

The prevailing uncertainty in customer activity and the lower organic growth in Q2, although affected by working day differences, gives continued reasons for caution while the upgraded guidance did reduce some near-term uncertainty. With no major changes to our estimates, we retain our HOLD-rating and target price of EUR 9.6.

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Gofore - Slight earnings beat

14.08.2019 - 09.20 | Earnings Flash

Gofore’s EBITA in H1 came in slightly above our expectations, at EUR 5.0m (Evli 4.8m). Revenue was pre-announced at EUR 33.4m, with the organic growth amounting to 16%. Gofore expects net sales in 2019 between EUR 67-72m (unchanged).

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  • Gofore H1/19 net sales amounted to EUR 33.4m (pre-announced), with sales growth in at 35.5% compared to H1/18 figures. Growth was driven by the acquisitions of Solinor and Silver Planet. Organic growth amounted to 16%. The company’s international business net sales amounted to EUR 3.6m, corresponding to 10.7% of total net sales.
  • EBITA in H1 amounted to EUR 5.0m, slightly above our estimates (Evli EUR 4.8m), at a margin of 14.9%. Profitability remained on par with the company’s long-term target (15%) following the strong Q1 figures, as the Q2 EBITA-% fell to 12.6%.
  • Guidance: Gofore expects net sales in 2019 between EUR 67-72m (updated 10.7.2019).
  • The number of personnel at the end of the period was 559 (H1/18: 423).

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Solteq - Showing promising progress

14.08.2019 - 08.15 | Company update

Solteq’s Q2 results were slightly better than our expectations, with net sales at EUR 14.7m (Evli 14.4m) and EBIT at EUR 0.6m (Evli 0.5m). The report mostly implied business as usual, with encouraging comments on order intake development. We have made minor estimates revisions, now expecting a 2019 EBIT-margin of 7.4% (prev. 6.8%). We raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

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Q2 slightly better than expected

Solteq posted Q2 results slightly better than our expectations. Net sales amounted to EUR 14.7m vs. our estimate of EUR 14.4m. Growth picked up slightly in Q2, at 3.0% y/y, with the revenue of the international subsidiaries having grown significantly. The order intake has according to the company continued to develop positively and was larger than in the comparison period. Q2 EBIT amounted to EUR 0.6 vs. our estimate of EUR 0.5m. Product development investments grew to EUR 1.1m (0.6m), with the co’s full year estimate still at EUR 3.5m.

Slight upwards revisions of our estimates

We have made only minor adjustments to our estimates post-Q2. We expect sales in 2019 to grow 3.5% to EUR 58.9m, supported by a favourable order intake development and expect continued solid growth internationally. We expect the operating profit margin in 2019 to improve to 7.4% (prev. est. 6.8%) from 4.3% in 2018, driven by the actions taken to improve operational efficiency during 2018. Solteq has guided for its operating profit in 2019 to grow clearly compared to 2018.

HOLD with a target price of EUR 1.5 (1.4)

On 2019 peer multiples valuation still appears reasonably fair. Although we are not yet prepared to fully emphasize 2020 multiples, with the good progress so far during the year and our slightly raised estimates we raise our target price to EUR 1.5 (1.4) and retain our HOLD-rating.

Open report

Etteplan - Upgrades guidance

13.08.2019 - 13.15 | Earnings Flash

Etteplan delivered solid Q2 results, although slightly below Evli and consensus estimates. Etteplan's net sales in Q2 amounted to EUR 64.3m, slightly below our and consensus estimates (Evli/cons. EUR 66.6m/66.4m). EBITA amounted to EUR 6.5m compared to our estimates (Evli EUR 6.9m). Etteplan upgraded its guidance, expecting the revenue and operating profit (EBIT) for the year 2019 to grow significantly (prev. clearly) compared to 2018.

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  • Net sales in Q2 were EUR 64.3m (EUR 62m in Q2/18), slightly below our estimates (Evli EUR 66.6m). Growth in Q2 amounted to 3.7 % y/y.
  • EBITA in Q2 amounted to EUR 6.5m (EUR 6.2m in Q2/18), slightly below our estimates (Evli EUR 6.9m), at a margin of 10.1 %.
  • Engineering Solutions: Net sales in Q2 were EUR 35.3m vs. EUR 36.4m Evli. EBITA in Q2 amounted to EUR 3.8m vs. EUR 3.9m Evli. The MSI-% in Q2 was 57 % compared to 52 % in Q2/18.
  • Software and Embedded Solutions: Net sales in Q2 were EUR 17.1m vs. EUR 17.9m Evli. EBITA in Q2 amounted to EUR 1.6m vs. EUR 1.8m Evli. The MSI-% in Q2 was 55 % compared to 46 % in Q2/18.
  • Technical Documentation Solutions: Net sales in Q2 were EUR 11.8m vs. EUR 12.4m Evli. EBITA in Q2 amounted to EUR 1.0m vs. EUR 1.2m Evli. The MSI-% in Q2 was 75 % compared to 73 % in Q2/18.
  • Overall development of Etteplan’s business environment remains favourable.
  • Guidance updated: Etteplan expects the revenue and operating profit (EBIT) for the year 2019 to grow significantly (prev. clearly) compared to 2018.

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Taaleri - Eyes on Wealth Management

13.08.2019 - 09.15 | Preview

Taaleri has previously given guidance for an operating profit margin of 20-25% in H1/19, affected by a decline in Wealth Management’s continuing earnings and a postponement of planned projects. We expect the bulk of earnings from Financing following a favourable investment environment during H1. We keep our long-term view intact pre-H1 and retain our BUY-rating, lowering our TP to EUR 8.0 (8.5) to reflect increased Wealth Management uncertainty.

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Co’s H1/19 operating profit margin guidance 20-25%

Taaleri will report H1/19 results on August 15th. Taaleri has previously given guidance for a H1 operating profit margin of 20-25%, mainly following a decline in continuing earnings in Wealth Management and the postponement of planned projects to H2/19. The corresponding full year margin is expected to be slightly lower than in 2018 (33.0%).

Financing main earnings contributor in H1/19E

We expect the bulk of Taaleri’s H1 results to be delivered by Financing, following expected solid investment returns from the favourable market environment during H1. Wealth Management’s continuing earnings are as per company guidance expected to be lower y/y, and we further expect performance fees and investment returns to have been only minor. We see reason for viewing AUM development with caution and will focus our attention in the H1/19 report on the development of Wealth Management. We expect the operating profit of Energy to have remained in the red during H1 but the first closing of the SolarWind II -fund at EUR 220m post-Q2 as well as the expected exit from the Truscott-Gilliland East wind farm are expected to significantly boost both Energy’s and group earnings in H2.

BUY with a target price of EUR 8.0 (8.5).

The development of Wealth Management’s continuing earnings gives some reason for concern. However, with the currently limited information we do not see a basis for extrapolating any long-term conclusions before the H1 report. As such we retain our BUY rating but lower our target price to EUR 8.0 (8.5).

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Solteq - Results quite as expected

13.08.2019 - 08.30 | Earnings Flash

Solteq's Q2 results were slightly above our estimates. Net sales in Q2 amounted to EUR 14.7m (Evli EUR 14.4m), while EBIT amounted to EUR 0.6m (Evli EUR 0.5m). Solteq reiterated its guidance, expecting the operating profit to grow clearly compared to the financial year 2018.

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  • Net sales in Q2 were EUR 14.7m (EUR 14.2m in Q2/18), slightly above our estimates (Evli EUR 14.4m). Growth in Q2 amounted to 3.0 % y/y. Revenue growth of international subsidiaries was significant.
  • Operating profit in Q2 amounted to EUR 0.6m (EUR 0m in Q2/18), above our estimates (Evli EUR 0.5m), at a margin of 3.9 %. The adjusted operating profit amounted to EUR 0.6m (Evli 0.5m), at a margin of 4.3%.
  • Product development investments during Q2/19 increased to EUR 1.1m (0.6m), co’s FY2019 estimate EUR 3.5m.
  • The group’s order intake developed positively during Q2/19 and was clearly better than in Q2/18.
  • Guidance reiterated: Solteq's operating profit is expected to grow clearly compared to the financial year 2018

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Verkkokauppa.com - Competition remains fierce

12.08.2019 - 09.10 | Company update

Verkkokauppa.com’s Q2 result fell short of expectations. The competition is expected to remain fierce and the company’s growth investments are hampering EBIT improvement in 19E. H2 has a high emphasis on the company’s total performance. We downgrade to “HOLD” with TP of EUR 3.3 (prev. EUR 4.7).

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Q2 earnings below expectations

Verkkokauppa.com’s Q2 result was a disappointment as earnings fell short of expectations. However, the company was able to increase its market share despite of the declining consumer electronics market. The company’s revenue grew by 5.0% while GfK estimated 0.5% decline in the consumer electronics market in April-June. Verkkokauppa.com’s revenue totaled EUR 108m vs. EUR 111m/111.5m Evli/consensus. Revenue growth was impacted by increased marketing and campaigns. Gross profit was EUR 15.3 (14.2%) vs. our view of EUR 16.1m (14.5%). Fixed costs (incl. staff costs of EUR 8.1m) totaled EUR 14m vs. our view of EUR 14m. The increase in personnel costs was mainly due to growing personnel costs in IT, retail stores and purchasing. Low gross margin level and continuing marketing expenses dragged the company’s operating profit down, which totaled EUR 0.2m vs. EUR 0.9m/1.3m Evli/consensus.

Growth still prioritized

Verkkokauppa.com prioritizes growth and the company has made extensive investments in marketing from Q4’18 onwards. The company seeks to increase its visibility and brand recognition via tv-commercials as well as through online advertising. Increased marketing expenses are expected to continue throughout the year which will hamper the company’s EBIT improvement in 19E. Verkkokauppa.com targets to increase the share of its private labels which should increase gross margins. The company also informed that the outsourced warehouse with Posti will move to new premises during Q3. According to the company, there are no significant costs related to the moving. We expect 2019E total fixed costs of EUR 59m (9.7% y/y). The company expects the competition to remain fierce and price driven throughout the year. Declining GDP growth is also likely to have an impact on sales (the Ministry of Finance estimates 2019 GDP growth of 1.6%). As consumer electronics market is declining, other product categories are expected to support growth. H2 is critical for the company as sales and profitability are normally higher than in H1. Verkkokauppa.com reiterated its guidance for 2019E and expects revenue of EUR 500-550m and EBIT of EUR 11-17m. We expect 2019E revenue of EUR 519m (prev. EUR 522m) and EBIT of EUR 12m (prev. EUR 13m).

“HOLD” with TP of EUR 3.3 (4.7)

After a weak Q2 we have lowered our 2019E-2020E estimates. Our 19E estimates are now at the lower bottom of the company’s guidance. As continuing growth investments and fierce competition weigh down the company’s EBIT in 2019E we expect 2019E EBIT margin of 2.3% (2018: 2.8%). We expect the market outlook to remain uncertain which adds pressure on EBIT. On our estimates, Verkkokauppa.com trades at 19E-20E EV/EBIT multiple of 9.6x and 7.3x, which translates into ~53% discount compared to the peer group. Due to our weakened estimates and continuing pressure on EBIT we downgrade to “HOLD” with TP of EUR 3.3 (prev. EUR 4.7).

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Scanfil - Expecting further pickup in H2’19

12.08.2019 - 08.55 | Company update

Scanfil didn’t meet our revenue estimate but nevertheless managed to beat in terms of EBIT. Overall Q2 was rather undramatic, yet we note that volumes need to continue to improve during H2’19 if the company is to deliver on FY guidance. We retain our EUR 4.75 TP and our BUY rating.

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Scanfil expects improved customer demand during H2’19

Scanfil posted EUR 143m in Q2 revenue (vs our EUR 158m estimate), thus adding 10% q/q but losing 6% y/y. Revenues were quite evenly spread between the five segments. The y/y revenue decline was mostly attributable to the Consumer Applications segment, which decreased by 29% (a major product will fold due to low demand), however the Communication segment (e.g. base stations) was also soft, declining by 18%. Despite soft Q2 revenue Scanfil managed to top our EUR 10.0m EBIT estimate. The reported EUR 10.3m figure (7.2% EBIT margin vs our 6.3% estimate) testifies to plant network efficiency (strong EBIT margin with a normal product mix). Scanfil notably has a strong record in cost control.

Scanfil writes down Hamburg, closes the HASEC acquisition

Scanfil’s Hamburg unit has underperformed and so the company impaired the plant’s goodwill. The line is now fully impaired (the write-off was EUR 3.6m), but the company still works to expand the unit’s customer base and volumes. Scanfil also closed the HASEC deal near the end of Q2 (the German unit contributed EUR 1.5m to Q2 revenue). Scanfil expects HASEC to contribute EUR 20m in revenue and EUR 1m in EBIT during H2’19. We now expect EUR 321m in H2’19 revenue (EUR 301m) and EUR 22m in H2’19 EBIT (EUR 20m). Scanfil’s updated guidance for FY 2019 is EUR 580-610m in revenue and EUR 39-42m in EBIT (previously EUR 560-610m and EUR 36-41m).

Minor estimate changes as the thesis remains unchanged

Scanfil’s H1’19 was on the slow side (largely due to Q1) in revenue terms, meaning volumes need to improve further in H2’19 if the FY ’19 guidance is to be met. The main risk is on the volume side; in our view Scanfil will have no problem reaching the EBIT target if the revenue goal is met. Scanfil still trades ca. 15-20% below its historical averages. We value Scanfil according to these multiples and thus hold our EUR 4.75 TP and BUY rating.

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Endomines - Friday production further delayed

12.08.2019 - 08.00 | Company update

Endomines’ announced that the ramp-up of production at Friday will be further delayed and the earlier production guidance for 2019 will not be achieved. Recent increases in gold prices are a welcome development but has bloated valuation. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A).

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Production to fall short of 2019 guidance

Endomines announced on August 9th that its production guidance for 2019 (5,000-8,000oz gold) will not be achieved due to reparations of damages to Friday’s tailings pond causing longer than expected delays to production. Ramp-up of the processing plant is expected to take a couple of weeks before being fully commissioned. No new guidance was given. We now estimate a gold production in 2019 of 4,340oz. Although the added delay to production timewise is relatively short, this will cause additional strain on the already limited near-term cash flows.

Sounder financial situation following the rights issue

With the completion of Endomines’ rights issue, having raised gross proceeds of SEK 156m, the company’s financial situation is now at a much sounder level. The raised funds should as such cover the by the company earlier estimated next twelve-month capital need of SEK 100m. Proceeds will mainly be used to short-term debt repayment and ramp-up of Friday as well as start-up of other assets.

SELL (N/A) with a target price of SEK 4.4 (N/A)

Endomines’ share price has seen recent rapid increases, as the gold price has climbed to levels last seen in 2019, driven by macroeconomic uncertainties. Although the rise in gold prices certainly is a welcome development, the current valuation in our view does not reflect the high uncertainty relating to Endomines’ gold production, with Friday having seen several delays and additional costs, and production has not yet commenced. We re-establish our rating with SELL (N/A) and a target price of SEK 4.4 (N/A), in line with our SOTP.

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CapMan - Steaming ahead

09.08.2019 - 09.30 | Company update

CapMan’s Q2 results were above estimates, largely due to Scala’s success fees. The Buyout XI fund held a first closing at EUR 160m, to aid management fees during H2/19 and onwards. The Q2 report gave little reason to change our views on CapMan’s development; on the contrary, we have made upward revisions to our estimates. We retain our BUY-rating with a target price of EUR 1.95 (1.85).

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Earnings boosted by significant Scala success fees

CapMan’s Q2 results beat both our and consensus expectations, with revenue at EUR 13.4m (Evli/cons. 10.8m/11.0m) and EBIT at EUR 5.8m (Evli/cons. 4.5m/4.2m). The stronger earnings were in our view largely due to stronger than expected Scala success fees. The solid Services business operating profit (Act./Evli 4.9m/2.1m) was slightly offset by weaker investment returns, due to weaker performance of certain portfolio companies, according to management of a more temporary nature. The Buyout XI fund held a first closing at EUR 160m, with management fees expected to kick in during Q3.

Solid Services business development

We have revised our 2019 estimates slightly upwards, mainly due to the strong Q2 earnings. We have further raised our estimates for the coming years, with our 2020 operating profit estimate up 10%, reflected mainly through the Services business. Our estimates continue to rely on more rapid accumulation of carried interest starting from H2/19, the timing and materialization of which remains the biggest near-term uncertainty. For 2019 we expect an operating profit of EUR 24.7m, with a diversified contribution split from all business areas.

BUY with a target price of EUR 1.95 (1.85)

Our SOTP implies a fair value of EUR 1.82 per share, which together with peer multiple valuation implies a limited valuation upside. However, when considering the top-class dividend yield and expected ~35% improvement in operating profit in 2020, CapMan in our view remains an attractive case. Following our estimates revisions, we lift our target price to EUR 1.95 (1.85) and retain our BUY-rating.

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Verkkokauppa.com - Weak Q2 earnings

09.08.2019 - 08.45 | Earnings Flash

Verkkokauppa.com’s Q2’19 revenue grew by 5% despite of declining market and was EUR 108m vs. Evli EUR 111m and consensus of EUR 111.5m. Gross profit was 15.3m (14.2% margin) vs. EUR 16.1m (14.5% margin) Evli view. EBIT was EUR 0.2m vs. EUR 0.9m/1.3m Evli/cons. The company reiterated its 2019E guidance.

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  • Q2 revenue was EUR 108m vs. EUR 111.0m Evli view and EUR 111.5m consensus. Sales grew by 5% despite of declining market growth (-0.5% y/y according to GfK). Revenue growth in Q2 was boosted by campaigns and increased marketing.
  • Q2 gross profit was EUR 15.3m (14.2% margin) vs. EUR 16.1m (14.5% margin) Evli view.
  • Q2 EBIT was EUR 0.2m (0.2% margin) vs. EUR 0.9m (0.8% margin) Evli view and EUR 1.3m (1.2% margin) consensus. This was impacted by lower gross profit and increased marketing expenses.
  • Q2 eps was EUR 0.00 vs. EUR 0.02/0.02 Evli/cons.
  • 2019 guidance intact. The company expects 2019E revenue of EUR 500-550m and EBIT of EUR 11-17m.
  • The company also decided on a quarterly dividend of EUR 0.05 per share.

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Scanfil - Strong EBIT despite soft revenue

09.08.2019 - 08.45 | Earnings Flash

Scanfil reported Q2 revenue clearly below our expectations yet managed to beat our operating profit estimate. Operating margin remained strong despite 6% decline in revenue compared to previous year.

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  • Q2 revenue, at EUR 143m, missed our EUR 158m estimate by 10% and declined by 6% compared to previous year (but increased by 10% compared to previous quarter). Scanfil says revenue developed favorably in all segments except Medtec & Life Science.
  • Q2 adjusted operating profit amounted to EUR 10.3m vs our EUR 10.0m estimate. Adjusted operating margin was thus 7.2% vs our 6.3% expectation.
  • The adjustment items include expenses related to the acquisition of HASEC-Elektronik GmbH (EUR 0.4m) and the impairment of Scanfil GmbH’s goodwill (EUR 3.6m).
  • Scanfil adjusts 2019 outlook to reflect the HASEC acquisition it completed at the end of Q2. Scanfil says HASEC will contribute ca. EUR 20m in revenue and EUR 1m in operating profit during 2019 and hence the new FY 2019 guidance is EUR 580-610m in revenue and EUR 39-42m in adjusted operating profit (previously EUR 560-610m and EUR 36-41m).
  • Scanfil also said it will initiate a share repurchase program. The authorization is to purchase a maximum of 300,000 shares, or approximately 0.46% of the total number of shares (the maximum amount to be used is EUR 1.35m). The repurchasing will start on Aug 12, 2019 at the earliest.

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Tokmanni - Good momentum expected to continue

09.08.2019 - 08.05 | Company update

Tokmanni delivered good Q2 earnings. The company focuses on improving profitability in 2019E but will also strengthen its store network in H2 and launch two own brands. Tokmanni reiterated its guidance and expects revenue and EBIT margin to improve from last year. We upgrade to “BUY” with TP of EUR 10.2 (prev. EUR 9.0).

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Strong Q2 earnings

Tokmanni delivered strong Q2 earnings. The company’s revenue increased by 10.2 % and was EUR 240m vs. EUR 236m/234m Evli/consensus. The sales were boosted by new store openings and the timing of Easter. The company was also able to reduce the dependence of weather during the spring season. The company’s gross margin was EUR 84.5m (35.2 %) which was close to our expectation of EUR 83.9m (35.6 %). Gross margin improvement was mainly driven by the structure of sales and reduced waste in groceries. Tokmanni’s Q2 EBIT was 18.7m (7.8 %) vs. EUR 15.8m (6.7 %) Evli and 15.0m (6.4 %) consensus. Operational efficiency improvements impacted positively on the company’s profitability in Q2.

Focus on profitability improvements

Tokmanni’s target in 19E is to improve its profitability through improved gross margin and more efficient operations. The company stated that it will keep its customer promise of low prices thus gross margin improvements are made by increasing the share of own brands and direct import as well as by reducing waste in groceries. The profitability improvements of the company’s supply chain are on the right track, although most of the benefits will be seen later in the future.

Upgraded to “BUY” with TP of EUR 10.2 (prev. EUR 9)

Based on the Q2 result, we have raised our 19E-20E estimates and expect 19E revenue of EUR 946m (prev. EUR 936m) and EBIT of EUR 68m (prev. EUR 62m) resulting in EBIT margin of 7.1 %. We expect 20E revenue of EUR 984m and EBIT of EUR 78m (7.9 %). On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.4x and 11.4x which translates into ~28 % discount compared to the international discount peers but is valued at par to its Nordic peers. The company also offers attractive dividend yield (~7 %) in 19E-20E. We upgrade to “BUY” with TP of EUR 10.2 (prev. 9.0).

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Suominen - Wait to see improving volumes

08.08.2019 - 09.45 | Company update

Suominen’s Q2 unfolded without surprises in terms of prices and input costs i.e. margins were stable. Yet volume losses were larger than we expected, and thus the EUR 104m in Q2 sales missed our EUR 113m estimate and EBIT fell short. We have revised our estimates slightly down; our TP is now EUR 2.50 (2.85), rating HOLD (BUY).

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Margins continued stable, volume losses were larger in Q2

Suominen’s Q2 revenue, at EUR 104m, declined by 6% y/y and missed our estimate by 8%. Strong USD added some 3% y/y, and considering the implemented price increases, we estimate ca. 15% of delivery volumes were lost y/y (we estimate the losses to have amounted to ca. 10% in Q1). We expect Suominen to lose 10% of volumes in ‘19 (expect FY revenue to decline by 1%). We expect stable GM for the rest of ’19, and hence EBIT at EUR 12m. Suominen guides flat revenue and improving EBIT for FY ’19.

Suominen changes its business area structure

Suominen has reorganized its business areas, opting for a geographical split (Americas and Europe) instead of the previous application-based reporting (Convenience and Care). The new structure will be effective from Q3 onwards. Suominen says the new organizational model should further help improve efficiency especially when it comes to optimizing regional capacity utilization. There was scant news about Bethune, although the company said the China-US trade war could potentially help Suominen’s competitive positioning in the US market as Chinese imports are hurt by tariffs. Suominen also noted the EUR 6m capacity improvement investment in its Green Bay, WI, plant will support additional volumes from Q3 onwards. Regarding the European market, Suominen says competition among nonwovens producers remains tight but stable.

Estimates

Suominen has achieved an earnings turnaround in ’19 as improved pricing and stabilizing raw material costs have led to a clear improvement in gross margin from the lows of ’18, when the margin was hit by significantly higher input costs. The implemented price increases have, however, led to volume losses. Even though profitability has improved lately, we expect FY ’19 EBIT margin at a relatively low 2.9%. Going forward Suominen needs to achieve higher volumes in order to reach further improvement in EBIT margin. Following the Q2 report, we have revised our FY ’19 EBIT estimate down to EUR 12m (previously EUR 13m), while our revenue estimate stands at EUR 425m (EUR 436m). For ’20 we expect further improvement in EBIT margin (3.9%), assuming gradual improvement in delivery volumes.

We wait to see evidence of stabilizing (improving) volumes

Although Suominen’s valuation is not demanding (ca. 6x EV/EBITDA ‘19e vs. 6.5x historically), volume uncertainty still remains. As the price hikes pass through during ‘19, we are waiting to see evidence of stabilizing (and improving) volumes that would lead to further EBIT improvement in ‘20. We lower our TP to EUR 2.50 (2.85) due to volume uncertainty, and thus our rating is now HOLD (BUY).

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Tokmanni - Strong Q2 performance

08.08.2019 - 09.05 | Earnings Flash

Tokmanni’s Q2 revenue increased by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus. LFL growth continues to be clearly above our estimates at 5.3 % vs. 2.5 % our expectation. Gross margin was 35.2 % vs. 35.6 % our expectation. Tokmanni reiterated its 2019E guidance.

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  • Q2 revenue grew by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus.
  • Q2 adj. gross profit was EUR 84.5m (35.2 % margin) vs. EUR 83.9.m (35,6 %) Evli expectation.
  • Q2 adj. EBITDA was EUR 34.0m vs EUR 30.8/29.7m Evli/consensus
  • Q2 adj. EBIT was EUR 18.7 (7,8 % margin) vs. EUR 15.8m (6.7 %) Evli expectation and EUR 15.0m (6.4 %) consensus
  • Q2 eps was EUR 0.21 vs EUR 0.18/0.18 Evli/consensus
  • Revenue was driven by the timing of Easter and good sales in spring season. Also, the operational efficiency measures progressed in the right direction during Q2.
  • 2019 guidance intact: revenue will grow in 2019 based on the sales from new openings in 2018 and in 2019. Profitability will increase y/y in 2019E.

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CapMan - Earnings beat through success fees

08.08.2019 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 13.4m, above our estimates (Evli EUR 10.8m), with EBIT also above our estimates (Evli EUR 4.5m), at EUR 5.8m. Scala recorded significant success fees in the quarter, larger than we had anticipated, contributing strongly to the earnings beat.

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  • Revenue in Q2 was EUR 13.4m (EUR 11.4m in Q2/18), above our estimates (Evli EUR 10.8m). Growth in Q2 amounted to 18 % y/y.
  • Operating profit in Q2 amounted to EUR 5.8m (EUR 6m in Q2/18), clearly beating our estimates (Evli EUR 4.5m).
  • Management Company business: Revenue in Q2 was EUR 6.4m vs. EUR 6.7m Evli. Operating profit in Q2 amounted to EUR 0.9m vs. EUR 0.8m Evli.
  • Investment business: Revenue in Q2 was EUR 0m vs. EUR 0m Evli. Operating profit in Q2 amounted to EUR 1m vs. EUR 2.3m Evli.
  • Services business: Revenue in Q2 was EUR 6.9m vs. EUR 3.9m Evli. Operating profit in Q2 amounted to EUR 4.9m vs. EUR 2.1m Evli.
  • Capital under management by the end of Q2 was EUR 3.3b. Of the capital under management EUR 1.9bn was attributable to Real Estate, EUR 1.0bn to Private Equity & Credit and EUR 0.3bn to Infra and other.

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Etteplan - Executing growth strategy

08.08.2019 - 08.00 | Preview

Etteplan will report Q2 results on August 13th. Etteplan has during and after the quarter made acquisitions with a combined number of employees of over 250, expected to have an insignificant impact on Q2 but to aid in achieving the FY2019 guidance amid continued global uncertainty. We expect minor overall margin improvement y/y in Q2 while still remaining cautious to margin development in Technical Documentation Solutions. Following the post-Q1 share price rally we downgrade our rating to HOLD (BUY) with a target price of EUR 9.6.

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Executing its M&A aided growth strategy

Our estimates ahead of Q2 remain intact apart from adjustments made for the acquisitions of Devex Mekatronik (Sweden) and EMP Engineering Alliance (Germany). The two companies combined had revenue of around EUR 26m and over 250 employees in 2018. To our understanding the revenue generated will mainly fall under Engineering Solutions and a smaller share under Software and Embedded Solutions. Our 2019 and 2020 net sales estimates are up by some 3% and 8% respectively. For Q2 we expect net sales and EBITA of EUR 66.6m (Q2/18: 62.0m) and EUR 6.9m (Q2/18: 6.2m).

Market outlook comments of interest

Etteplan expects its revenue and operating profit for 2019 to grow clearly compared to 2018. The acquisitions made will certainly aid in achieving the guidance and reduces 2020 sales growth concerns, but recent macro development still warrants cautionary remarks and our focus in the Q2 report will be on market outlook comments.

HOLD (BUY) with a target price of EUR 9.6

Etteplan’s share price has climbed after the Q1 guidance upgrade and although still at a slight discount to peers, valuation is looking fairer when also considering Etteplan’s historical valuation. We downgrade our rating to HOLD (BUY) and retain our target price of EUR 9.6.

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Pihlajalinna - Focus on profitability

08.08.2019 - 07.55 | Preview

Pihlajalinna reports its Q2 earnings on next week’s Thursday, August 15th. During Q2, the company has actively expanded its service network across the country. The company also announced the launch of an efficiency improvement program in mid-June. We keep our rating “BUY” with TP of EUR 13.0 ahead of Q2.

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Expanding occupational healthcare network continues

Pihlajalinna has grown fast in H1’19 through M&A and expanding the company’s service network. The company indicated earlier that it sees opportunities in expanding its occupational healthcare network as municipalities and other public sector entities are interested in divesting the occupational healthcare providers they currently own. As a result of that, Pihlajalinna has expanded its occupational healthcare network actively in Q2’19 as the company announced the acquisitions of Raisio’s occupational healthcare center Aurinkoristeys and Kouvola’s Työterveys. In addition to acquisitions, the company announced that it will open an occupational healthcare center to Rovaniemi and a healthcare center to Vaasa. The company has also agreed on cooperation with Sydänsairaala and pilot cooperation with Pohjola Vakuutus.

Pihlajalinna seeks annual cost savings of EUR 14m

Pihlajalinna announced in mid-June that the company will launch the preparations of an efficiency improvement program. Through the program, the company seeks to achieve annual cost savings of EUR 14m. The cost savings sought are meaningful as the company’s adj. EBIT in 2018 was EUR 14m. Last year, the company underwent organizational restructuring and in connection with that, conducted codetermination negotiations. The estimated annual cost savings of these were EUR 2.8m. The company stated earlier in Q1’19 that its focus in 2019E is to improve profitability by organic growth, increasing cross-selling and by addressing profitability issues in the new medical service centers. The commence of the newest efficiency improvement program supports the company’s long-term target to reach EBIT margin of 7%, which so far has seemed rather distant. We will update our estimates accordingly once we have more detailed information about the program.

We maintain “BUY” with TP of EUR 13

Our 2019E estimates are intact ahead of Q2 earnings. The company expects 2019E revenue to increase from last year while EBIT is expected to increase notably from last year. We foresee 2019E revenue of EUR 525m (7.6% y/y), while consensus is at EUR 520m and EBIT of EUR 24m (71.4% y/y) vs. consensus of EUR 22.7m. The targeted cost savings add upward pressure on our estimates, but these will be updated once we have more detailed information. We expect Q2’19 revenue of EUR 134m (cons. EUR 132.5m) and EBIT of EUR 4.8m (cons. EUR 4.6m) resulting in EBIT margin of 3.6%. On our estimates, Pihlajalinna trades at 19E-20E EV/EBITDA multiple of 7.2x and 6.6x, which translates into ~25% discount compared to the peer group. We keep our rating “BUY” with TP of EUR 13 ahead of Q2.

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Suominen - Sales miss, profitability stable

07.08.2019 - 13.35 | Earnings Flash

Suominen reported Q2 results with revenue missing our estimate by 8%. However, the company managed a 9.3% gross margin, which was clearly above our 8.7% estimate. At first glance we see no major surprises in the sense that margins have stabilized at higher levels, yet significant nonwovens delivery volumes were also lost. Suominen also reorganized its business areas into a new geographical reporting structure (Americas and Europe).

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  • Q2 revenue amounted to EUR 103.8m vs our EUR 112.7m estimate. Revenue declined by 6% compared to previous year. USD strengthening relative to EUR contributed a positive EUR 3.4m.
  • Gross profit stood at EUR 9.7m vs our EUR 9.8m expectation. Suominen thus managed a 9.3% gross margin, whereas we expected 8.7%.
  • EBIT amounted to EUR 2.7m in Q2 vs our EUR 3.3m estimate i.e. Suominen posted a 2.6% EBIT margin (compared to our 2.9% projection).
  • Until Jun 30, Suominen’s business areas were Convenience and Care. Since Jul 1, Suominen’s business areas are Americas and Europe. More than 60% of Q2 sales were attributable to Americas.
  • Suominen reiterates its 2019 outlook, expecting 2019 sales at 2018 level while guiding improving operating profit.

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Detection Technology - MBU slowdown, but growth story continues

05.08.2019 - 09.15 | Company update

Detection Technology's Q2 result slightly missed our and consensus expectations. MBU outlook remains mixed for the rest of the year, but this is temporary, and we see investment case intact. We maintain BUY rating and target price of 23.5 euros.

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Strong growth in SBU, MBU softness in turn

DT’s Q2 result slightly missed our and consensus expectations with Q2 net sales of EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. SBU sales were clearly better than we expected at 19.4 MEUR (+27.4%, 17.8 MEUR Evli estimate), due to strong demand in China and increasing CT investments related to new EU and US airport standards. MBU Q2 sales were 8.1 MEUR (-11.5% y/y, 10.7 MEUR Evli estimate), which was unexpected since DT in Q1 expected both BU’s to grow in Q2. The decline was attributed to a slowdown in medical CT demand and the sooner than expected ramp down of a key customer’s product. While SBU is now in turn enjoying good demand, the softness in the medical market is expected to be temporary but continuing at least until the end of the year.

Visibility remains low, but overall investment case intact

DT revised its outlook for the rest of the year citing short visibility into customer demand and unpredictable trade politics. DT previously expected total sales to grow during the second half of the year. DT is now guiding for Q3 sales to grow above 10%. Based on the result, we have made only small changes to our headline estimates 2019 and onwards. We expect 2019E net sales to grow 13.7% to EUR 107m driven by SBU’s return to growth of 28% on weak comparables. We expect ‘19E MBU net sales to decline by -7.6% due to the ramp-down of key customer’s product in H2 and slowdown in medical demand. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition in both segments.

Strategy update for 2025 period, no change to medium-term financial targets

In conjunction with the result, DT announced its updated strategy until 2025. The company's new strategic target is to be the growth leader in digital x-ray imaging detector solutions and a significant player in other technologies and applications where the company sees good business opportunities. The company estimates that the market for digital x-ray imaging detector solutions will be around EUR 3 billion in 2025. DT’s previous strategy until 2020 was based on being the leader in computed tomography and line-scan x-ray detectors and solutions. The total market, as per the company's previous strategy, is estimated to be around EUR 700 million in 2020. Given DT’s current estimated 2019E sales of above 100 MEUR, it’s fair to say that DT is a leader in the scope of the previous strategy. The new 2025 strategy’s market scope is broader, but DT’s medium-term financial targets remain unchanged; sales growth at least 15% per annum and operating margin at or above 15% in the medium term.

DT is well positioned to benefit from digitalization since the company’s product portfolio already consists of digital radiography products that are used in digital X-ray solutions. There are also new emerging technologies (e.g. CMOS, multi energy) that DT has invested in with the strategic goal to be the growth leader when the emerging technologies become more adapted. To our understanding, the security X-ray equipment manufacturers have been quick to adopt digitalization. However, medical and industrial equipment manufacturers are at an earlier stage of adopting the technology.

BUY recommendation maintained

On our estimates, DT is trading at discounts on EV/EBIT and P/E multiples for ’19-20E. Although visibility is short and trade politics unpredictable, we see longer term investment case intact and therefore discount unjustified. With our estimates broadly intact, we maintain our BUY recommendation with target price of 23.5 euros. Our target price values DT at EV/EBIT-multiple of 16x and 13x on our ‘19E and ‘20E estimates, which is still clearly lower than peer group despite DT’s strong metrics.

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Detection Technology - Q2 result miss, MBU outlook softer

02.08.2019 - 09.20 | Earnings Flash

Q2 net sales at EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. MBU sales were EUR 8.1m (EUR 10.7m our expectation) and SBU sales were EUR 19.4m (EUR 17.8m our expectation). DT’s Q2 EBIT came in at EUR 4.8m vs. our estimates of EUR 5.4m (EUR 5.1m cons).

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  • Group level results: Q2 net sales amounted to EUR 27.5m (+12.8% y/y) vs. EUR 28.5m/28.1m Evli/consensus estimates. Q2 EBIT was EUR 4.8m (17.5% margin) vs. EUR 5.4m/5.1m Evli/cons. R&D costs amounted to EUR 2.9m or 10.7% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.1m which was below our estimate of EUR 10.7m. Net sales of MBU decreased by -11.5% y/y due to softening demand and earlier than expected ramp down of one key customer’s product.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 19.4m vs. EUR 17.8m Evli estimate. SBU sales grew 27.4% y/y due to strong demand in China.
  • Outlook updated: sales will grow in the SBU business and decrease in the MBU business in the third quarter. The company expects its net sales to increase in the third quarter in line with the company's financial targets. (Previous: the company's total net sales are expected to grow in the second half of the year.)
  • Medium-term business outlook is unchanged: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term.
  • Strategy update: new strategic target is to be a growth leader in digital x-ray imaging detector solutions. DT estimates the market size of digital x-ray detectors to be around EUR 3 billion in 2025. DT’s focus in the 2020 strategy done five years ago was primarily on the CT and line scan x-ray detector and solution markets, which size is estimated to be around EUR 700 million in 2020.

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Aspo - Supramaxes posted losses in Q2

02.08.2019 - 09.15 | Company update

Aspo lowered its FY 2019 guidance yesterday due to ESL Shipping’s weak Q2 result as the dry bulk carrier’s two Supramax vessels operated at a loss. Aspo previously expected 2019 operating profit to be in the EUR 28-33m range, but now guides EUR 24-30m (the company managed EUR 20.6m in 2018). We previously estimated Aspo’s FY 2019 EBIT at EUR 31m; our revised estimate stands at EUR 28m. Our target price is now EUR 9.25 (9.75) per share. Our new rating is HOLD (BUY).

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We update our estimates for ESL Shipping

Aspo says ESL’s Q2’19 EBIT will decline y/y as the two Supramax vessels posted losses. Aspo also states main customers’ shipping volumes (e.g. SSAB) decreased substantially during the summer months, thus weakening operational efficiency. ESL reported EUR 4.3m in Q2’18 EBIT. Whereas we previously expected ESL to post EUR 4.2m in Q2’19 EBIT, we now expect the dry bulk carrier to have generated EUR 1.8m in EBIT during the quarter. We also update our estimates for the coming quarters. We previously expected ESL’s FY 2019 EBIT at EUR 19m, and now estimate EUR 16m. For FY 2020 we project EUR 23m (previously EUR 26m). There was no update concerning the two new LNG vessels, but Aspo has previously said the crane problems have now been fixed and thus we continue to expect ESL to achieve significant earnings improvement during the second half of 2019.

We leave Telko and Leipurin estimates unchanged

We are not making changes to our estimates for Telko and Leipurin this time. Our revised estimates for ESL mean we now expect Aspo to have generated EUR 5.2m in Q2 EBIT (vs EUR 7.1m a year ago). Our previous estimate stood at EUR 7.6m. We now expect Aspo to manage EUR 28m in FY 2019 EBIT (previously EUR 31m). Aspo’s new guidance range for FY 2019 EBIT is EUR 24-30m (previously EUR 28-33m).

Our updated TP is EUR 9.25 (9.75); new rating HOLD (BUY)

Following our model update we now expect Aspo to post EUR 40m in EBIT next year. Our new TP is EUR 9.25 (9.75), reflecting lower SOTP valuation. Our rating is now HOLD (BUY).

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Verkkokauppa.com - Growth investments impacting profitability

02.08.2019 - 09.10 | Preview

Verkkokauppa.com will report its Q2 earnings on next week’s Friday, August 9th. We expect the competition in consumer electronics market has continued tight and price driven. We expect Q2’19 revenue to grow and profitability to remain flat. We keep our rating “Buy” with TP of EUR 4.7 ahead of Q2.

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Marketing expenses hampering EBIT improvement

According to Verkkokauppa.com, the company continues focusing on growth and enhancing consumer experience. The company has made extensive investments in marketing from Q4’18 onwards and has indicated that the investments will continue throughout 2019. We expect these to hamper EBIT improvement this year. Verkkokauppa.com’s guidance for 2019E revenue is EUR 500-550m while EBIT is expected to be between EUR 11-17m. We expect 2019E revenue of EUR 522m (cons. EUR 524m) and EBIT of EUR 13m (cons. EUR 13m). We expect the increased revenue from the Raisio store, which was opened in Q1’18, to stabilize Q2’19 onwards.

Tight competition expected to continue

Despite of the tight competition, the company was able to strengthen its market share in Q1’19 but as the company has indicated, Q2 is normally weaker. As we expect the competition has remained fierce and price driven, we do not expect any improvements in Q2 margins. We expect Q2 revenue of EUR 111m (8.4% y/y) while consensus is at EUR 114m and EBIT of EUR 1m (cons. of EUR 1.4m) resulting in EBIT margin of 0.8%. We expect gross margin of 14.5% in Q2’19 (Q2’18: 14.7%). Possible wholesale/B2B deliveries might further impact gross margin in Q2.

“Buy” with TP of EUR 4.7

We have kept our estimates intact ahead of Q2 earnings. On our estimates, Verkkokauppa.com is trading at 19E-20E EV/EBIT multiple of 10.7x and 7.7x which translates into ~50-70% discount compared to the online-focused Nordic and European peer group. We keep our rating “BUY” with target price of EUR 4.7 ahead of Q2.

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Raute - More orders needed

01.08.2019 - 09.25 | Company update

Raute’s Q2 EBIT missed our estimates, but overall picture remains unchanged. Market uncertainty is postponing investment decisions. We adjust our estimates slightly downwards, lower our TP to 23.5 (25.5). Our rating is now HOLD (BUY).

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Market uncertainty continues

Raute’s Q2 EBIT was EUR 2.3m, missing our estimate of EUR 2.9m. The miss was due to due to a few projects causing extra delay costs. Revenue amounted to EUR 37.0m vs. our EUR 35.6m estimate (EUR 43.7m in Q2’18). While project deliveries stood at a relatively low EUR 18m (vs EUR 30.7m a year ago), services revenue was EUR 19m, i.e. increasing by almost 50% y/y. Raute held its outlook and repeated the market remains uncertain, with current demand mostly attributable to larger as well as smaller projects, while within mid-sized orders there’s unusual silence. Raute says so far it has only seen investment decisions and negotiations being delayed instead of actual cancellations. Activity concerning potential larger projects remains at a good level, and services demand remains stable.

Order book and intake still healthy, but more is needed

Raute’s Q2 order intake, at EUR 26m, declined only slightly compared to the EUR 28m figure a year earlier. Considering Q2’19 did not include any new major capacity projects the figure could even be described as relatively strong. The current EUR 72m order book is clearly below the EUR 120-140m record 2018 highs. The book covers an exceptionally long period of time as a significant share of deliveries is scheduled for 2020 (and some even for 2021). Therefore, Raute needs clear pick-up in orders during H2’19 to reach our previous FY 2019 revenue estimate (EUR 158m). While larger orders may materialize shortly (e.g Russia), we adjust our FY 2019 estimates downwards to reflect the increased uncertainty. We now expect for 2019E EUR 148m in revenue and EUR 10m in EBIT (6.8% margin).

European revenue exposure set to decline due to low orders

Geographical sales split didn’t change much during the second quarter as Europe accounted for roughly 45% of revenue, Russia for 25% and North America ca. 15%. While the split has remained steady compared to last year, Europe’s share is bound to decline significantly in the coming quarters due to much lower order intake during 2019. So far this year European order intake has been a fraction of previous year’s volume (EUR 9m in H1’19 compared to EUR 49m in H1’18). Russia has developed strong, almost doubling order intake in H1’19 (EUR 26m) compared to year earlier (EUR 14m), while North American orders have been stable, increasing by a couple of million to EUR 12m. In other words, Russia and North America are set to generate major portions of revenue next year.

Valuation is low but earnings development uncertain

On our revised estimates Raute trades ca. 4x EV/EBITDA and 6x EV/EBIT ‘19e (compared to their respective 6x and 8x historical averages). Due to uncertain earnings development, we see lower multiples justified. We revise our TP to reflect our slightly lower estimates; our TP is EUR 23.5 (25.5); rate HOLD (BUY).

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Raute - Project delays burden EBIT margin

31.07.2019 - 09.45 | Earnings Flash

Raute’s EUR 37m Q2 revenue topped our estimate slightly, helped by strong services sales. Nevertheless, operating margin remained on the weak side due to the cost burden caused by a few delayed projects. Order book stands some 40% lower than a year ago, however it now spans an exceptionally long period.

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  • Q2 revenue amounted to EUR 37.0m vs our EUR 35.6m estimate (EUR 38.2m consensus).
  • Order intake was EUR 26m compared to EUR 28m a year ago. Order book stood at EUR 72m at the end of Q2 (compared to EUR 127m a year ago). Raute says a significant proportion of the order book is scheduled for 2020 (and a small amount for 2021) i.e. the order book is stretched exceptionally long.
  • Q2 operating profit was EUR 2.3m vs our EUR 2.9m estimate (EUR 2.7m consensus). Operating margin therefore amounted to 6.3% vs our 8.1% expectation (7.1% consensus). A few delayed projects lead to extra costs.
  • Raute says current demand is focused on major new capacity projects as well as services and small-scale improvements, whereas the share of mid-sized projects is exceptionally low and causes fluctuations in order intake. All in all, market uncertainty has increased, causing delays in project negotiations.
  • Raute changed its FY 2019 guidance on Jun 25, expecting revenue and operating profit to decrease compared to previous record-high year.

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Tokmanni - Boom in store openings in Q2

31.07.2019 - 09.00 | Preview

Tokmanni will report its Q2 result on next week’s Thursday, August 8th. The company has opened and relocated stores in a good pace in Q2 and therefore the company should clearly exceed its annual expansion targets in 2019. We expect Q2 LFL growth of 2.5% and continued profitability improvements. We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

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New store openings in Q2

Tokmanni’s target is to increase its store network to above 200 stores and to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. During Q2’19, Tokmanni has reopened the old Ale-Makasiini stores under the Tokmanni brand in Central Finland, which the company acquired in Q4’18. The company has also relocated stores and opened new stores in Tesoma and Loppi in Q2. Due to the active opening pace in H1, Tokmanni will exceed its annual target of approx. five new store openings/year.

Improving profitability in 2019E

Tokmanni is focusing towards improved profitability in 2019E. The company aims to reach ~9% adj. EBIT margin in long-term. Profitability improvements will be made through gross margin and operational efficiency improvements such as pushing OPEX as % of sales down. Some results were shown already in Q1’19 and we expect the same trend to continue in Q2. We expect 2019E EBIT of EUR 62m (~19% growth y/y), while consensus is at EUR 61m.

We keep our rating “HOLD” with TP of EUR 9.0

We have kept our estimates intact and expect Q2 revenue of EUR 236m (cons. EUR 234m) and gross margin of 35.5%. Tokmanni’s LFL growth was exceptionally high in Q2’18 (7.7%). We have taken a more conservative view for Q2’19 LFL growth and expect LFL growth of 2.5%. We foresee Q2 EBIT of EUR 16 (cons. EUR 15m) and EBIT margin of 6.7%. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.8x and 11.8x (~2-5% premium compared to the peer group). We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

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Talenom - Downgrade to HOLD

30.07.2019 - 09.15 | Company update

Talenom’s top- and bottom-line figures in Q2 were quite in line with our estimates, and the larger piece of news was the change of CEO. We have made mostly minor upwards revisions to our estimates due to acquisitions and a faster than anticipated implementation of new automation procedures to the bookkeeping automation line. With valuation becoming stretched due to share price inclines we downgrade to HOLD (BUY) with a TP of EUR 36.0 (35.0)

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Earnings in line, CEO to change

Talenom’s Q2 earnings did not deliver any major surprises, with net sales of EUR 14.8m (Evli 14.4m) and EBIT of EUR 3.2m (Evli 3.2m) well in line with our estimates, with the main news being the change of CEO. Otto-Pekka Huhtala (former deputy CEO) has started as CEO as of the 29.7.2019. Talenom gave a limited update on the Talenom Financing Services, having provided EUR 31m financing during H1/19. The potential for the service area remains promising but we expect an insignificant near-term impact.

Estimates revisions mostly minor

We have made minor upwards revisions to our estimates, with only minor adjustments to our 2019 estimates, now expecting 2019 sales of EUR 59.9m and EBIT of EUR 11.7m. We have made slight adjustments to sales estimates to account for the Wasa Tilit and WT Företagstjänster acquisitions, also raising our 2020E sales growth estimate by 2pp to 18%. Talenom has also started to implement the new instance of automation, thus eliminating dependencies to other third-party accounting software. The implementation schedule is ahead of our previous estimates, prompting a minor adjustment to our H2/19 earnings estimates.

HOLD (BUY) with a target price of EUR 36.0 (35.0)

Talenom has enjoyed substantial share price inclines and although Talenom on our estimates is set to continue to deliver solid sales and earnings growth, valuation is becoming a stretch. Our target price and estimates value Talenom at a 2019 P/E multiple of 28.5x, which we still consider justifiable. We downgrade our rating to HOLD (BUY).

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Suominen - Margin gains, volume losses

30.07.2019 - 09.15 | Preview

Suominen reports Q2 results next week, on Wed, Aug 7. In Q1 the company’s gross margin improved to 8.1% (compared to the 6.2% low in Q4’18) as raw material costs remained stable and price hikes came into effect. We expect the gross margin improvement trend to continue throughout 2019, but the main question concerns volume losses following price hikes. We leave our previous estimates unchanged for now. Our target price still stands at EUR 2.85 per share; our new rating is BUY (HOLD).

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Volume declines in focus following the hiking of prices

In our view Suominen’s declining earnings trend bottomed out in Q1 as price hikes and stabilizing raw material costs drove improvement in gross margin. Q1’19 gross margin stood at 8.1%; we expect Q2 gross margin at 8.7%. However, the company lost significant delivery volumes. We estimate Suominen’s delivery volume losses amounted to some 9% in Q1; we expect losses of similar magnitude for the remainder of 2019. Our expectation for Q2 is EUR 113m in revenue and EUR 3.3m in EBIT.

Expect flat input costs and price hikes to lift ‘19e earnings

While the EURUSD exchange rate has remained steady during the last three months, European softwood pulp prices have declined further, by about 10%. The development is beneficial from Suominen’s point of view, softwood pulp being a key nonwovens raw material. Meanwhile polypropylene prices have increased by a roughly similar percentage. According to Lenzing, viscose and polyester prices remained stable during spring (development until Apr 15). All in all, raw material costs have been flat. We expect ‘19e revenue at EUR 436m and EBIT at EUR 13.3m, assuming stable input costs for the remainder of the year.

We leave our estimates intact ahead of the report

Suominen is valued at ca. 6.0x EV/EBITDA ‘19e (on our estimates) vs historical average of 6.5x. Suominen’s peer group multiples have gained during the last three months, and although there is still uncertainty concerning delivery volumes, we consider the current valuation undemanding. We retain our TP of EUR 2.85 per share, and thus our updated rating is BUY (HOLD).

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Talenom - In line with estimates

29.07.2019 - 13.15 | Earnings Flash

Talenom’s Q2 results were well in line with our estimates, with revenue at EUR 14.8m (Evli EUR 14.4m) and EBIT at EUR 3.2m (Evli EUR 3.2m). Talenom also reported that its CEO will change, with deputy CEO Otto-Pekka Huhtala taking over as CEO from the 29.7.2019.

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  • Talenom’s net sales in Q2 amounted to EUR 14.8m (EUR 12.5m during Q2/18), slightly above our estimates (Evli EUR 14.4m). Q2 revenue growth was at 17.7% y/y.
  • The operating profit in Q2 amounted to EUR 3.2m (EUR 2.6m in Q2/18), in line with our estimates (Evli EUR 3.2m), at a margin of 21.4%.
  • Talenom’s CEO will step as of the 29.7.2019 and will be replaced by current deputy CEO Otto-Pekka Huhtala
  • Talenom’s guidance intact: the net sales growth rate is expected to be greater than in 2018 and the operating profit margin to improve compared to 2018
  • Net investments during the H1/19 amounted to EUR 9.5m (H1/18: 5.5m). The acquisitions of Wakers Consulting and Wasa Tilit and Företagstjänster amounted to EUR 4.2m

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Raute - Market uncertainty justifies caution

29.07.2019 - 09.45 | Preview

Raute reports Q2 results this week, on Wed, Jul 31. The company downgraded its FY 2019 guidance recently, on Jun 25. Raute had previously expected flat revenue and operating profit for FY 2019, but now expects revenue and EBIT to be lower than last year. We keep our target price at EUR 25.5 per share; our rating is now BUY (HOLD).

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We expect strong Q2 EBIT margin due to inventory timings

Even though Raute recently moderated its guidance for FY 2019, we expect Q2 to have been quite strong in terms of operating margin; Raute’s Q1 operating margin amounted to a relatively weak 6.3% due to unfavorable timing of certain inventory-related line items, which the company said were some EUR 0.5- 1.0m in magnitude. We therefore expect Q2 operating margin at 8.1% (vs 7.3% a year ago and 6.3% in Q1). Our EUR 35.6m revenue and EUR 2.9m EBIT estimates for Q2 compare to the respective EUR 38.2m and EUR 2.7m consensus estimates.

Lowered FY 2019 outlook as project deliveries were delayed

Raute lowered guidance on Jun 25 due to delayed schedules of certain challenging project deliveries and postponed negotiations concerning some larger orders not yet closed. Upon lowering its outlook, Raute said it continues to view the operating environment stable and sees healthy activity related to potential mill capacity expansion projects. However, Raute also cited elevated uncertainty due to increased share of smaller customers, whose decision-making is more unpredictable. We expect 2019 revenue to decrease by a double-digit percentage to EUR 158m (EUR 156m consensus) and EBIT to decline to EUR 11m (same as consensus) due to project uncertainties and slower order book development (EUR 84m Q1’19 vs. EUR 142m Q1’18).

Low multiples warranted due to outlook uncertainties

Raute trades around 4x EV/EBITDA and 5x EV/EBIT on our 2019 estimates. We leave our estimates unchanged for now and retain our EUR 25.5 target price. Our new rating is thus BUY (HOLD) as Raute’s share price has declined since our previous update.

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Detection Technology - Expecting good growth, flat EBIT

29.07.2019 - 09.30 | Preview

Detection Technology will report Q2 earnings this Friday, August 2nd. Our focus will be on commentary regarding the market outlook for both security and medical business units. With SBU currently exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the negative effects of the ramp-down of one of DT’s key medical customer’s product in H2. Our rating and target price remain intact ahead of Q2.

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Expecting good growth in both SBU and MBU

DT has guided for double digit growth for both BU’s in Q2. We estimate SBU growing 17% and MBU 16% y/y, which is in line with DT’s Q2 guidance. We expect Q2 net sales of 28.5 MEUR (+16.7% y/y, 28.1 MEUR cons.) and 5.4 MEUR EBIT (+2% y/y), 5.1 MEUR cons.). Our EBIT expectation is flat due to increase in R&D spending. Overall, the outlook for SBU is positive with the security market picking up momentum after a decline in the end of last year. Demand is increasing due to the Chinese security market returning to growth and increasing CT investments related to new EU and US airport standards. The outlook for MBU is however more mixed with one key MBU customer ramping down sales of one of DT’s product in H2. Despite this, H2 net sales are expected to grow compared to last year. With SBU exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the effects of the product ramp-down in H2.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition.

BUY rating and TP of 23.5 euros maintained ahead of Q2

Our estimates, rating and target price of 23.5 euros remain unchanged ahead of Q2 report.

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Consti - Earnings visibility still an issue

29.07.2019 - 08.05 | Company update

Consti’s Q2 results were slightly weaker than expected, as the EBIT of EUR 0.1m fell below our estimates (Evli 0.6m), further impacted by an individual building purpose modification project. The order backlog development raises some concerns for near-term sales growth, but our eyes are still on profitability improvements.

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Project burden still visible in profitability

Consti’s Q2 results fell slightly short of our expectations. Profitability was as expected further burdened by the impact of an individual building purpose modification project, but EBIT in Q2 was still weaker than anticipated, at EUR 0.1m (Evli EUR 0.6m). The revenue of EUR 81.2m was in line with our estimates (Evli EUR 81.3m), aided by the completion of certain larger projects. The order backlog of EUR 227m was down 20.8% y/y due to the high sales and lower orders received.

Order backlog raises some concerns for sales growth

We have made slight revisions to our estimates, mainly to near-term net sales estimates. Consti’s order backlog and orders received development has in our view been relatively meager during H1/19, which coupled with the continued sales growth during H1 opens up some concern for sales development in 2020. We have lowered our 2019-2021E sales CAGR estimate to 1%, with essentially flat growth in 2020. Due to the past profitability challenges we do not however see sales growth as a primary concern and see that Consti’s near-term focus will remain on improving profitability. We expect a notable increase in profitability during H2/19, as the project that burdened H1 is expected to be completed and expect 2019 EBIT of EUR 5.2m.

HOLD with a TP of EUR 5.80

Consti trades below peers, in particular on 2020 estimates when earnings are expected to rebound. Although profitability according to Consti has remained at good levels, when excluding the profitability burdening large projects, we see that weak visibility in the underlying profitability still warrants caution and retain our HOLD-rating with a target price of EUR 5.80.

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Next Games - Welcome turnaround progress

29.07.2019 - 00.00 | Company update

Next Games’ profitability saw improvement during Q2, with the adj. EBIT rising to EUR -0.5m (Q2/18: -2.0m). Revenue grew 65% y/y to EUR 9.4m but was below our estimates mainly due to a lower than expected DAU for Our World. Development of the financial situation saw positive signs, but game launch financing still remains a concern.

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Earnings improvement and mixed Our World progress

Next Games reported decent Q2 results, with EBIT still in the red, at EUR -1.1m, but seeing improvements and in line with our estimates (Evli EUR -1.0m). The adj. EBIT was slightly below our estimates, at EUR -0.5m (Evli 0.1m). Revenue saw growth of 65% y/y to EUR 9.4m, below our estimates (Evli 10.4m) mainly due to a lower than expected DAU for Our World. Q2 did however see the game’s ARPDAU improve to a commendable EUR 0.34 (from IAP’s). Retention issues, however, led to marketing investment levels for the game rising to above planned levels.

Financial situation progress but concerns remain

We have made some adjustments to our estimates, mainly due to having revised our launch timetable estimate for Blade Runner Nexus from Q3/2019 to Q4/2019. Our estimates also include a minor adjustment for marketing revenue from Our World, which based on figures posted in Q2 shows promising revenue potential. We expect revenue in 2019 to grow 21% to EUR 42.5m (prev. 47.8m), while expecting profitability to remain negative, with an adj. EBIT of EUR -3.0m (prev. EUR -0.5m). A key near-term concern remains the launch of Blade Runner and financing of any more substantial marketing investments that are to be expected in conjunction with the launch. A positive sign for the financial situation was the stabilization of the cash balance and a renewed credit limit guarantee.

HOLD with a target price of EUR 1.50

Next Games turnaround project has seen good progress and earnings have seen improvements compared to the near past. With the uncertainty relating to financing of upcoming game launches justifying valuation upside remains a challenge and we retain our HOLD-rating and target price of EUR 1.50.

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Consti - Earnings remain weaker

26.07.2019 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 81.2m, in line with our estimates (Evli EUR 81.3m). EBIT amounted to EUR 0.1m, below our estimates (Evli EUR 0.6m). Profitability continued to be affected by performance obligations of a single building purpose modification project.

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  • Net sales in Q2 were EUR 81.2m (EUR 77.8m in Q2/18), in line with our estimates (Evli EUR 81.3m). Growth in Q2 amounted to 4.4 % y/y. Growth was aided by an increase in volume of large comprehensive renovation projects.
  • Operating profit in Q2 amounted to EUR 0.1m (EUR 1.7m in Q2/18), below our estimates (Evli EUR 0.6m), at a margin of 0.1 %. The profitability was still burdened by remaining performance obligations of an individual building purpose modification project, that was essentially completed by the end of Q2/19. The impact was included in our estimates but was larger than anticipated.
  • The order backlog in Q2 was EUR 227m (EUR 286m in Q2/18), down by 20.8 %. The order intake amounted to EUR 57.4m, down 35.2% y/y, reflecting the company’s more disciplined bidding procedures.
  • Guidance reiterated: The Company estimates that its operating result for 2019 will improve compared to 2018.

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Next Games - Healthy earnings improvement

26.07.2019 - 08.40 | Earnings Flash

Next Games' net sales in Q2 amounted to EUR 9.4m, below our estimates (Evli EUR 10.4m). EBIT amounted to EUR -1.1m, in line with our estimates (Evli EUR -1.0m) and the adj. EBIT to EUR -0.5m (Evli EUR 0.1m). TWD: OW boasted an impressive ARPDAU of EUR 0.34 (from IAP’s) during the quarter, while challenges with retention led to higher than planned marketing investments levels.

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  • Net sales in Q2 were EUR 9.4m (EUR 5.7m in Q2/18), below our estimates (Evli EUR 10.4m). Growth in Q2 amounted to 65 % y/y.
  • Operating profit in Q2 amounted to EUR -1.1m (EUR -2.4m in Q2/18), in line with our estimates (Evli EUR -1m), while adj. EBIT amounted to EUR -0.5m (Evli EUR 0.1m). Monthly fixed costs in Q2 amounted to EUR 1.2m following successful implementation of the savings program (co’s target EUR 1.1-1.2m).
  • DAU during Q2/19 was 350k (Q2/18: 306k). MAU was 1.16m (Q2/18: 0.98m). ARPDAU was EUR 0.28 in Q2/19 (Q2/18: EUR 0.2).
  • TWD: NML - DAU 190k (Q2/18: 287k), MAU 540k (Q2/18: 884k), ARPDAU EUR 0.22 (Q2/18: 0.21).
  • TWD: OW - DAU 155k, MAU 602k, ARPDAU EUR 0.34 (from IAP’s).
  • TWD: OW boasted an impressive ARPDAU of EUR 0.34 (from IAP’s) during the quarter, but challenges with player retention led to marketing investments being at a higher level than planned.
  • With the new operating model, the company now has nine new concepts or prototypes in development.
  • The company’s cash balance stood at EUR 4.7m at the end of the quarter compared to EUR 4.8m at the end of the first quarter of 2019.

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Exel Composites - Improvement amid breezy conditions

24.07.2019 - 09.30 | Company update

Exel Composites achieved an 8.5% adjusted operating margin in Q2, a profitability level some 200bps above our and consensus expectations. Exel’s recent decision to retain its ambitious long-term financial targets also speaks volumes about the company’s conviction on wind energy growth potential. So far development in 2019 has been encouraging, although the targets represent a gap which will not be closed for a while yet. We retain our BUY rating; our target price still stands at EUR 5 per share.

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Wind energy sector continued to support volumes

Muted development extended within the Industrial Applications segment and Asia-Pacific region as telecommunications sector volumes remained weak. The Rest of the World region more than doubled its H1’19 revenues y/y due to the DSC acquisition; the transaction also boosted the Construction & Infrastructure segment thanks to the U.S. unit’s wind energy exposure. DSC remained unprofitable in Q2 (cost measures’ fruits should be visible already during Q3).

Financial targets remain stiff compared to current figures

Exel lately confirmed its long-term financial targets for 2019-22, continuing to target adjusted operating margin at a level above 10% while aiming for ROCE north of 20%. Exel’s Q2 recorded the respective figures at 8.5% and 14.1%. Q2 gross margin was strong at 63% i.e. somewhat above the typical level. We continue to expect the company’s ongoing volume shift to wind energy applications will put slight pressure on gross margin; hence the realization of profit-based targets depends on continued strong volume growth. Exel also introduced a net gearing target (at or below 60%), according to which the company should more than halve its indebtedness from the current 123% level. Exel retained its guidance for FY 2019 (expects higher revenue and adj. EBIT).

Current valuation level means there’s room for upside

We leave our revenue estimates largely intact but revise our operating margin estimates slightly upwards. Exel currently trades below 7x EV/EBITDA ‘19e (on our estimates) vs the historical 8-9x levels. Our rating remains BUY, our TP at EUR 5.

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Innofactor - Starting to show earnings stability

24.07.2019 - 09.15 | Company update

Innofactor’s Q2 results did not present any surprises and both net sales (Act./Evli EUR 16.7m/16.8m) and EBITDA (Act./Evli EUR 1.1m/1.0m) were well in line with our estimates. With a sales decline during H1/19 Innofactor will need to deliver a pick up in sales during H2/19, which should be made possible by the solid order backlog and new recruitments and actions to turn the sales growth in Denmark and Sweden back on track. We retain our BUY-rating with a target price of EUR 0.80.

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Q2 results well in line with our expectations

Innofactor’s Q2 results did not present any surprises and were well in line with our estimates. Revenue declined 2.1% y/y to EUR 16.7m (Evli EUR 16.8m) while EBITDA improved to EUR 1.1m (Evli EUR 1.0m). Profitability continues to be aided by the actions taken during H2/18, as the revenue per employee increased by some 8%. The improved profitability also saw the operating cash flow increasing to EUR 2.1m in H1/19 (H1/18: EUR 0.4m).

Sales growth uplift needed during H2/19

Our estimates remain unchanged post-Q2, expecting net sales of EUR 64.0m and an EBITDA of EUR 4.7m in 2019. Innofactor has estimated for its net sales in 2019 to increase from 2018 and EBITDA to amount to EUR 4.0-6.0m. We expect net sales in 2019 to increase on slightly, by 1.3% from 2018. With net sales in H1/19 2.0% below H1/18 a pick-up in sales growth is required during H2/19. According to management sales growth is supported by the order backlog and recent larger new recruitments. Denmark and Sweden are expected to show growth in sales by Q4.

BUY with a target price of EUR 0.80

On our estimates Innofactor trades at a discount to peers, namely on EV/EBITDA and purchase price amortization adjusted multiples. With our estimates and views on Innofactor unchanged post-Q2 we retain our BUY-rating and target price of EUR 0.80.

Open report

Exel Composites - Positive development continued

23.07.2019 - 10.45 | Earnings Flash

Exel Composites reported Q2 revenue at EUR 26.5m, in line with our expectations. Adjusted operating profit, at EUR 2.2m, was above our estimate. The company’s cost savings program is delivering good results.

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  • Q2 revenue amounted to EUR 26.5m vs our EUR 26.7m estimate (consensus at EUR 27.4m).
  • Q2 adjusted operating profit stood at EUR 2.2m vs our EUR 1.7m expectation (consensus at EUR 1.8m). The 8.5% adjusted operating margin was clearly above our 6.3% estimate, as well as the consensus.
  • The 4.8% increase in revenue y/y was mainly attributable to the acquisition of DSC (completed in May 2018). The wind energy industry continued to support volumes. The telecommunications sector remained weak.
  • The acquisition of DSC was reflected in the increase in revenue within the Rest of the World region. Asia- Pacific revenues declined due to telecommunications volumes. European revenue remained flat y/y.
  • The cost savings program is proceeding according to plan. The company expects to fully realize the EUR 3m annual savings target in 2020. DSC remained in the red during Q2.
  • Guidance for full year 2019 remains unchanged as the company expects revenue and adjusted operating profit to increase compared to previous year.

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Innofactor - In line with expectations

23.07.2019 - 09.15 | Earnings Flash

Innofactor’s Q2 results were in line with our estimates. The net sales in Q2 amounted to EUR 16.7m (Evli EUR 16.8m), while EBITDA amounted to EUR 1.1m (Evli EUR 1.0m).

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  • Net sales in Q2 were EUR 16.7m (EUR 17m in Q2/18), in line with our estimates (Evli EUR 16.8m). Net sales in Q2 declined -2.1 % y/y.
  • Operating profit in Q2 amounted to EUR 0.2m (EUR -0.6m in Q2/18), in line with our estimates (Evli EUR 0.1m), at a margin of 0.9 %.
  • EBITDA in Q2 was EUR 1.1m (EUR 0m in Q2/18), in line with our estimates (Evli EUR 1m), at an EBITDA-margin of 6.8 %.
  • Order backlog at EUR 44.2m, up 87% y/y, aided by several significant orders signed during the first half of 2019.
  • Guidance reiterated: Innofactor’s net sales in 2019 is estimated to increase from 2018 and EBITDA is estimated to grow up to EUR 4.0–6.0 million

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Marimekko - Updated guidance for 2019E

23.07.2019 - 09.15 | Preview

Marimekko will report its Q2 result on August 15th and the company updated yesterday its guidance for FY19E. The company expects 2019E EBIT to be higher than in previous year, approximately maximum of EUR 15m. The company reiterated its guidance for revenue; revenue is expected to be higher than in previous year. We retain our rating “HOLD” with TP of EUR 26 (25) ahead of Q2.

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Updated guidance ahead of Q2

Marimekko updated its 2019E guidance ahead of its Q2 result. The company reiterated its FY19E revenue guidance but updated its guidance for FY19E comparable operating profit. According to the new guidance for 2019E, revenue is expected to be higher than in previous year while operating profit is expected to be higher than in previous year at maximum of EUR 15m (previous: 2019E operating profit expected to be in the same level as in 2018). Marimekko did not provide much information other than that. Increased EBIT guidance for 2019E is mainly due to increased licensing income in APAC. The company also expects H2’19 costs to be higher than in H2’18.

Sales expected to increase in Q2

We expect Marimekko’s Q2 total sales to be EUR 31.1m (10.4% y/y) while we expect Q2’19E adj. EBIT of EUR 3.5m (2018 adj. EBIT of EUR 3.1m) resulting EBIT margin of 11.2% (2018 EBIT margin of 11.1 %). Marimekko’s business is cyclical and H2 and especially the outcome of Q4 holiday sales have a high impact on Marimekko’s total sales and profitability. The company also became aware of grey export in Asia in Q1’19 and the actions taken might have an impact on sales and earnings.

We retain “HOLD” with TP of EUR 26 (25)

We have updated our estimates after the guidance update. We have increased our FY19E revenue expectation to EUR 125m (previous EUR 118m) and adjusted our cost estimates to be in line with the new guidance. We expect 2019E adj. EBIT to be EUR 14.2m (previous estimate EUR 12.5m). We keep our rating “HOLD” with TP of EUR 26 (previously EUR 25).

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Vaisala - Performance on track

22.07.2019 - 09.00 | Company update

Vaisala delivered a good Q2 result with a clear EBIT beat. The outlook for 2019 remains positive as Vaisala enters H2 which is seasonally stronger for W&E. The acquisitions of Leosphere and K-Patents are bearing fruit and we see both accelerating sales further when fully integrated into Vaisala’s sales channel. We raise our target price to 21 euros (prev. 20) but maintain HOLD recommendation.

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Acquired businesses bearing fruit

Vaisala’s Q2 net sales were 96.1 MEUR vs. 94.2 MEUR our expectation (93.5 MEUR consensus). Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). The EBIT beat was driven by slightly better sales growth and 4 percentage points higher gross margin (54% vs. 50% Q2/18) in both business units, which was a result of product and project profitability, and currency tailwind. W&E’s net sales growth was 16.7% and it came mostly from wind lidars. IM net sales growth was 26%, with K-Patents contributing around 12% of the growth. The integration of Leosphere is now complete and K-Patents is expected to be integrated during Q3, therefore sales synergies should start to become more visible during H2.

H2 seasonally stronger for W&E, estimates revised upward

After the solid Q2 result, Vaisala is on track to deliver in H2, which is seasonally stronger for W&E. Post Q2 result, we have adjusted slightly upward both our sales and EBIT estimates for this year and coming years reflecting the confidence we have in Vaisala’s strategy. We expect 2019E net sales to be 392 MEUR (12% growth yoy) and reported EBIT to be 35 MEUR (46 MEUR adjusted for PPA and one-offs), representing 9% EBIT margin (12% adj. EBIT margin). Our EBIT estimates are now in the upper end of the company’s 2019 guidance. For 2020-21E, we expect 4-5% net sales growth, and we estimate EBIT margin to gradually improve from 9% 2019E towards 11% 2021E (adjusted EBIT margin from 12% 2019E towards 13% in 2021E).

HOLD maintained with revised TP of 21 euros (prev. 20)

On our adjusted EBIT estimates, Vaisala is trading some 10-15% under our peer group on EV/EBIT multiples. Reflecting our estimates revisions, we raise our target price to 21 euros (prev. 20) but maintain HOLD recommendation.

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Vaisala - Clear Q2 beat, with good contribution from acquired businesses

19.07.2019 - 12.15 | Earnings Flash

Vaisala’s Q2 net sales at 96.1 MEUR vs. 94.2 MEUR our expectation and 93.5 MEUR consensus. Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). Adjusted EBIT was 9.4 MEUR vs. our 6.2 MEUR adjusted EBIT expectation.

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  • Group level results: Q2 net sales at 96.1 MEUR vs. 94.2 MEUR our expectation and 93.5 MEUR consensus. Q2 EBIT was 7.2 MEUR vs. our expectation of 3.2 MEUR (4.5 MEUR consensus). Adjusted EBIT was 9.4 MEUR vs. our 6.2 MEUR adjusted EBIT expectation. EPS was 0.14 (0.06 Evli, 0.08 consensus).
  • Gross margin was 54.2% vs. 50.1% last year
  • Order received was 98.0 MEUR vs. 71.1 MEUR last year
  • Weather & Environment (W&E) net sales was 63.2 MEUR vs. 60.2 MEUR our expectation. EBIT was 0.6 MEUR (-1.5 MEUR Evli)
  • Industrial Measurements (IM) net sales was 34.8 MEUR vs. 34.0 MEUR our expectation. EBIT was 7.5 MEUR (4.7 MEUR Evli)
  • CEO comment: “Vaisala’s second quarter orders received and net sales were strong in all geographical areas. Around half of the order growth came from acquired companies. Excellent growth of orders received in Weather and Environment Business Area reached 49%. This growth was generated by medium-sized orders and especially in sounding and wind lidar businesses.”
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

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Consti - Expecting weaker earnings quarter

19.07.2019 - 08.15 | Preview

Consti will report Q2/19 earnings on July 26th. A key uncertainty factor still remains any potential profitability impacts of the building purpose modification project that affected Q1 earnings. With the project having been on-going still post-Q1 we remain conservative in our profitability estimates but still expect Q2 EBIT to be slightly positive, at EUR 0.6m, and net sales at EUR 81.3m. We retain our HOLD rating with a target price of EUR 5.8 (6.0).

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Expect project burden impact on Q2 earnings

Consti’s Q1 EBIT was barely negative, at EUR -0.4m, due to performance obligations of an individual building purpose modification project. As the project has been on-going also during Q2, we expect a continued negative impact on profitability. We estimate a Q2 EBIT of EUR 0.6m. We expect slight y/y sales growth to EUR 81.3m. Although the order backlog declined slightly in Q1 sales remain supported by strong Q1 growth and order intake as well as an expected faster order backlog conversion.

Risk levels still highish but declining

Consti has in our view been showing signs of lower project pipeline risks after having struggled with project management issues since the latter half of 2017. H1/19 has seen the completion and near or expected completion of several significant projects. The share of more demanding building purpose modification projects in the order backlog has also decreased. The likelihood of new major surprises in our view is declining, while we note that the arbitration proceedings relating to the St. George project are still on-going.

HOLD with a target price of EUR 5.8 (6.0)

Consti trades at a discount to its peers, which we consider partly justifiable given profitability challenges and a still weaker near-term earnings visibility. We retain our HOLD rating with a target price of EUR 5.8 (6.0).

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Finnair - Weaker 19E profitability expectations

18.07.2019 - 09.15 | Company update

Finnair’s Q2 profitability fell short of expectations. The company issued new FY19E guidance for profitability. Global market uncertainties and weaker outlook for cargo business are likely to impact H2’19. We have cut our 19E-20E adj. EBIT estimates after Q2 result. Despite of the sizeable drop in share price we do not see valuation being particularly attractive considering the weakening profitability trend. Hence, we retain “HOLD” with TP of EUR 7.4 (prev. 8.0).

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FY19E outlook remains volatile

Finnair expects EBIT% of 4.5%-6.0% for 2019E, which is clearly weaker than 2018 EBIT% of 7.7%. Increased fuel costs and high irregular maintenance costs in Q2 as well as weak profitability Q1 are burdening profitability expectations for FY19E. The operating environment is expected to remain volatile and continued uncertainties in global trade, such as Brexit and US-China trade talks could have an impact on air travel and cargo.

Good capacity growth in 2019E

Finnair’s capacity growth in Q2 (+14.8%) was good and the company strengthened its market share in both Asia and Europe. Finnair updated its guidance for 19E capacity growth as the new route to Beijing’s Daxing International Airport will be opened in early November. The company expects capacity growth to be 11%-12% (previously 10%) and revenue growth slightly below that in 2019E. Our capacity growth estimate is 11%, while we expect revenue to grow 9% in 2019E.

“HOLD” with TP of EUR 7.4 (prev. 8.0)

As a result of updated FY19E guidance and weak H1 profitability we have decreased our 2019E EBIT expectation from EUR 203m to EUR 181m resulting EBIT% of 5.8% (prev. 6.5%). We see revenue of EUR 3104m for 2019E. Considering the weakening profitability trend and market outlook uncertainties we do not see valuation being particularly attractive for 2019E-2020E. With our new TP of EUR 7.4 (prev. 8.0) Finnair trades on our estimates at its 3yr historical average NTM EV/EBITDA of 3.4x. We retain our rating “HOLD”.

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SRV - Profitability remains under pressure

18.07.2019 - 09.00 | Company update

SRV’s profitability in Q2 was clearly weaker than we had expected following margin reductions in certain construction projects. We adjust our 2019E operative operating profit estimate downward to EUR 14.7m (prev. 21.1m). We retain our HOLD rating with a TP of EUR 1.8 (1.9)

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Weaker margin projects pushed profits back in to the red

SRV’s Q2 earnings were weak, with the operative operating profit at EUR -3.1m compared to our estimate of EUR 2.9m. Q2 saw the completion of a low number of developer-contracted housing units and as such a y/y revenue decline to EUR 207.4m, in line with our estimate of EUR 209.8m, which had an impact on profitability. Earnings were further affected by construction margin reductions in three projects, expected to be completed by the end of this year, totaling EUR 6.8m, along with other minor non-recurring items.

2019 earnings to be dictated by Q4 housing completions

Our estimates remain intact apart from minor H2/19 adjustments and a revision for 2019 profitability due to the weaker than expected Q2. For 2019E we estimate revenue of EUR 1,026m (prev. 1,029m) and an operative operating profit of EUR 14.7m (prev. 21.1m). Earnings in 2019 are heavily skewed towards Q4 due to developer-contracting housing unit completion timing, with REDI Majakka accounting for some half of the expected completions. We continue to expect a divestment of Pearl Plaza in 2019, although not included in our earnings estimates as the possible transaction would according to SRV have no significant impact on group profits.

HOLD with a target price of EUR 1.80 (1.90)

Valuation based on peer multiples appears more than challenging, in particular on EV metrics due to the high leverage, while our SOTP offers some leeway due to the shopping centres not reflected through earnings comparison. Caution due to weak near-term earnings visibility following a sequence of negative surprises is also warranted and we retain our HOLD rating, adjusting our TP to 1.80 (1.90) following our estimates revision.

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SSH - Tall order for H2

18.07.2019 - 09.00 | Company update

SSH delivered a decent Q2 result that was in line with our expectations. The good Q2 result sets the company up for the seasonally stronger H2, but SSH will need to execute well in order to reach its 2019 guidance. We maintain our SELL recommendation and target price of 1.10 euros.

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Q2 result in line with our expectations

SSH’s Q2 result was in line with our expectations. Q2 net sales were EUR 4.0 million (vs. 4.4m our expectation), and operating profit was EUR 0.4 million (vs. 0.4m our expectation). Software fees were EUR 1.7 million (1.9m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.2 million (2.2m Evli). There were no larger UKM perpetual deals during Q2, but SSH did sign several PrivX deals with larger corporations, e.g. Western Union. Revenue impact of PrivX is however still expected to be modest this year. Noteworthy also that during Q2 SSH entered into a global partnership with Tech Mahindra, a large global IT services company.

Estimates unchanged, focus on execution in H2

In order to reach its 2019 guidance (>10% growth in software business), SSH needs to execute well in H2. Sales need to grow about 30% in H2 from last year, which is a tall order and it will depend heavily on closing larger UKM deals. Based on yesterday’s result, we have not made any changes to our estimates. We expect 2019E net sales to decline -6% to 17.2 MEUR (reaching guidance though) and 2019E EBIT to be 0.6 MEUR thanks to efficient cost control. Our estimates for the coming years are also intact, with net sales growth expectations for 2020E and 2021E at 11% and 12% and gradually improving EBIT. Our sales estimates reflect the company’s current short and mid-term guidance.

No change in recommendation

On our estimates, SSH is trading at 2019-20 EV/Sales multiples of 3.3x and 2.9x. As noted previously in our reports, we’d like to see the results of SSH’s strategy materialising somewhat in the growth figures in order to justify higher valuation multiples. We maintain SELL recommendation with target price of 1.10 euros.

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Finnair - Q2 result below our estimates

17.07.2019 - 09.35 | Earnings Flash

Finnair’s Q2’19 adj. EBIT was EUR 47m vs. our expectation of EUR 65m and consensus of EUR 62m. Sales was EUR 793m. Finnair’s Q2 number of passengers rose to a new Q2 record and the company’s market share strengthened in both Asian and European markets. The growth development of cargo and travel services was not as favorable in Q2. Finnair issued its guidance for 2019E. The company expects capacity growth of 11-12% and revenue to grow at a somewhat slower pace than capacity in 2019. Finnair expects its EBIT% to be between 4.5%-6.0% in 2019.

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  • Q2 revenue was EUR 793m vs. EUR 806m/799m Evli/cons.
  • ASK grew by 14.8% in Q2. RASK growth decreased by 3.8%.
  • Q2 adj. EBIT was EUR 47 m vs. EUR 65m/62m Evli/cons. This was impacted by a EUR 13m increase in fuel price and exceptionally higher maintenance costs.
  • Q2 comparable EBITDA was EUR 126m vs. EUR 143m our view.
  • Absolute costs in Q2: Fuel costs were EUR 181m vs. EUR 174m our view. Staff costs were EUR 137 m vs. EUR 137m our view. All other OPEX combined were EUR 441m vs. EUR 370m our view.
  • Unit costs: CASK was 6.06 eurocents vs. 6.02 our view while CASK ex fuel was 4.59 eurocents vs. our view of 4.61

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SRV - Weaker margin projects burden EBIT

17.07.2019 - 09.15 | Earnings Flash

SRV’s Q2 earnings overall were weaker than expected. Revenue was in line with our expectations (Act./Evli EUR 207.4m/209.8m) as Q2 saw the completion of fewer developer-contracted housing units. The operative operating profitability was negative at EUR -3.1m (Evli 2.9m) and clearly weaker than expected, seemingly mainly due to an underestimation of the impact of weaker margin projects.

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  • SRV’s revenue in Q2 amounted to EUR 207.4m (Q2/18: EUR 235.8m), in line with our estimates and below consensus estimates (EUR 209.8m/220.0m Evli/cons.). Revenue in Q2 declined some 12% y/y. Revenue was as expected weaker due to the completion of fewer developer-contracted housing units.
  • The operating profit in Q2 amounted to EUR -3.1m (Q2/18: EUR -5.5m), clearly below both our and consensus estimates (EUR 3.6m/2.4m Evli/cons.), at an operating profit margin of -1.5%. The operative operating profit amounted to EUR -3.2m (Evli EUR 2.9m). The deviation seems to arise mainly from an underestimation of the impact on weak margin projects.
  • The order backlog remained largely unchanged at EUR 1,667.2m (Q2/18: EUR 1,716.7m)
  • SRV issued an EUR 58.4m hybrid bond, of which EUR 20.5m was used to repay an existing hybrid bond and EUR 37.9m for early repayment of existing notes.

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SSH - Q2 in line with our expectations

17.07.2019 - 09.15 | Earnings Flash

SSH Q2 result was in line with our expectations. Outlook for 2019 is unchanged; SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

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  • Q2 net sales were EUR 4.0 million (vs 4.4m our expectation)
  • Software fees were EUR 1.7 million (1.9m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.2 million (2.2m Evli)
  • Q2 operating profit was EUR 0.4 million (vs 0.4m our expectation)
  • EPS was 0.00 (vs. 0.00 our estimate)
  • Liquid assets were EUR 11.2m (12.3m Q1/19)
  • Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

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Gofore - Revised net sales guidance

12.07.2019 - 09.15 | Company update

Gofore revised its guidance for FY2019 net sales on the 10th of July, expected to amount to EUR 67-72m (prev. guidance EUR 71-79m). The revised guidance is mainly due to unforeseen reductions in demand of some of Gofore’s largest customers. We expect some impact on H1 billing rates but full-year margins to remain at healthy levels. We retain our HOLD rating with a target price of EUR 8.50.

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FY 2019 sales guidance EUR 67—72m (prev. 71-79m)

Gofore revised its FY2019 sales guidance to EUR 67-72m (prev. EUR 71-79m) due to reduced demand among some of its largest customers. Based on monthly net sales figures the revision was not completely unexpected, with figures during Q2 in particular being weaker than our estimates. The reduced demand to our understanding stems from a cooling down of customer digitalization investment eagerness and the permanence is difficult to judge. The sales growth in 2019 is nonetheless expected to remain solid, at 32-42% based on the guidance range.

Expect some impact on H1 billing rates

We estimate FY2019 net sales at 69.9m (prev. 73.3m). Growth is supported by several significant orders as well as the Silver Planet and Mango Design acquisitions, with an expected impact on revenue on an annual basis of closer to EUR 10m. Pick up in public sector spending with the recently-elected Finnish government may also offer further growth opportunities going forward. We expect the weaker revenue in Q2 to impact on billing rates and as such on margins but the strong Q1 EBITA-margin (17.2%) will support overall margins in H1. We expect an EBITA margin of 13.7% in 2019.

HOLD with a target price of EUR 8.50

Compared to peer multiples the current valuation does not appear to offer any notable near-term valuation upside. With the rapid sales growth and healthy margins Gofore in our view still remains an attractive case and we retain our HOLD rating with a target price of EUR 8.50.

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Finnair - Strong passenger numbers support sales

10.07.2019 - 08.50 | Preview

Finnair’s traffic data in April-June indicates Q2’19 revenue of EUR 806m. We expected Q2 revenue of EUR 785m while consensus was at EUR 778m. Capacity growth in Q2 was above the company’s 2019E guidance (14.8% vs. 10% 2019E guidance) and our Q2 expectation of 12%. Fuel price continued to move up in Q2. We maintain our rating “HOLD” with to TP of EUR 8 ahead of Q2.

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Strong passenger number growth and improved load factor

Finnair’s passenger numbers in Q2 grew by 13% y/y and hit the monthly all-time company record in June with 1.4m passengers in total. Overall capacity (ASK) grew by 14.8% y/y which was above our expectation of 12%. Capacity increase was mainly supported by three new A350-aircrafts that entered the service in December 2018, February 2019 and April 2019 and by one new A321-aircraft that was added to European routes. In North America, capacity increased following the new Los Angeles route and frequency additions to San Francisco. Sold capacity (RPK) growth was in line with the capacity growth at 14.7% y/y and clearly beat our growth expectation of 10%. Q2 passenger load factor (PLF) improved from Q1 and was 82.5% (-0.1% y/y growth vs. our expectation of -1.4% y/y).

Fuel price continued to move up in Q2

Jet fuel price development has continued in line with Q1. In Q2, the average spot price of jet fuel in USD moved up by 4% from Q1. On a y/y basis, the average Q2 USD price was down by 8%. Similarly, the average sport price of jet fuel in EUR moved up by 5% q/q and was down by 3% on a y/y basis.

“HOLD” with TP of EUR 8

As a result of Finnair’s strong April-June traffic data we have increased our Q2 revenue expectation from EUR 785m to EUR 806m (12% y/y) while keeping other estimates intact. We foresee Q2 adj. EBIT of EUR 65m (8.0% margin). We maintain our rating “HOLD” and TP of EUR 8 intact ahead of Q2.

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Verkkokauppa.com - E-commerce taking market share

28.06.2019 - 09.00 | Company report

Verkkokauppa.com is a growth story with good fundamentals and solid business model. The company continues focusing on growth and enhancing consumer experience. We see Verkkokauppa.com’s mid-term outlook remaining favorable, despite of the tightened competition.

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Growth company with strong focus on consumer experience

Verkkokauppa.com’s revenue CAGR in 2010-2018 was 13.5%, which has been mainly supported by competitive pricing, strong online positioning, new product categories as well as the new Raisio store. The competition has continued fierce and price-driven, forcing the market to consolidate and smaller competitors exit the market. With a small physical footprint, the company has an efficient and scalable cost base enabling competitive pricing and strong reliance against competition. The company has strong net cash position which enables investments in growth. Verkkokauppa.com has made extensive investments in marketing from Q4’18 onwards and focuses on improving consumer experience. These investments should support further growth but will hamper EBIT improvement this year.

Growth expected to continue despite of tight competition

We see Verkkokauppa.com’s outlook for mid-term favorable and expect the company to continue growing in FY19-21E with annual growth of ~9%. We see that if consumer migration to online shopping continues strong, the company’s scalable cost base will support improvements in profitability. We expect EBIT to be flat at EUR 13m in 2019E but to improve in 2020E-2021E. The biggest concerns are related to the Finnish GDP growth which is expected to slow down in 2019-2020 and to fierce competition in the market.

“Buy” with TP of EUR 4.7

We have not made changes to our estimates. On our estimates, Verkkokauppa.com is trading ~45% EV/EBIT discount vs. peer group in 2019E-2020E. We value Verkkokauppa.com’s base case at EV/EBIT multiple of 11x. Our recommendation remains BUY with TP of EUR 4.7

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Solteq - Initiating coverage with HOLD

27.06.2019 - 00.00 | Company report

Solteq has during the past years sought to shift its focus towards own cloud-based software products and services from a more IT-services oriented past. The strategic approach coupled with an increased focus on expansion internationally and new product development investments offer growth opportunities and margin improvement potential but the early stages of Solteq’s transition warrants caution. We initiate coverage of Solteq with a HOLD-rating and a target price of EUR 1.40.

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Shifting focus towards own products and related services

Solteq is striving to transition from its more IT-services oriented past towards a company focused on own software products and related services, with strengths within commerce related solutions. Growth is sought from expansion internationally and product development investments such as autonomous service robotics solutions, while actions taken to enhance operational efficiency have and continue to aid margins.

Expect margin improvement and moderate growth

We expect a sales CAGR of near 3.5% between 2018-2021E, not including likely acquisitions, which have been elemental in achieving an average growth rate of over 10% p.a. since 2010. Operating profit margin development has been aided by actions to enhance operational efficiency and we expect further improvement to 6.8% in 2019E (2018: 4.3%).

Initiating coverage with HOLD and TP of EUR 1.40

We initiate coverage of Solteq with a HOLD-rating and a target price of EUR 1.40. Our valuation relies mainly on public Nordic IT-services oriented peer multiples. Based on our estimates and current valuation the 2019E and 2020E EV/EBIT and P/E multiples do not imply any notable upside, with the multiples generally in line with peers. Main drivers for valuation upside would in our view be faster revenue growth and margin improvement through a more rapid shift in the product mix and growth internationally. Investments into autonomous service robotics solutions are also a yet unproven but potentially very lucrative bet.

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Raute - Moderated guidance for 2019

26.06.2019 - 09.25 | Company update

Raute has downgraded its 2019 guidance. The company now expects 2019 revenue and operating profit to decline compared to the record highs set in 2018. Raute previously guided flat 2019 figures. We don’t see the profit warning as a major negative development relative to our own expectations as we have previously acknowledged Raute is unlikely to reach similarly lofty figures anytime soon. Our rating remains HOLD; we adjust our TP to EUR 25.5 (27.0).

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Raute doesn’t see marked changes in environment

Raute refrains from issuing too specific guidance due to the company’s project-like business. We understand the previous flat guidance covered a relatively wide revenue and profitability range, and we continue to expect double-digit revenue decline in 2019. We expect quarterly revenues at levels close to Q1’19 for the remainder of the year. We lower our 2019 operating margin expectation slightly, to 7.1% (we previously expected 7.4%). In comparison, Raute averaged 8% operating margin in 2017-18. The company cites delays in challenging project deliveries and postponement of larger order negotiations as the reason for lowered guidance. Raute still views the operating environment stable, and sees healthy activity related to possible capacity expansion projects. The company has several large projects pending. On the other hand, Raute highlights additional uncertainty stemming from the increased share of smaller customers, the types of whose decision-making isn’t as straightforward as those of the likes of more established and traditional customers, such as UPM. Raute will assess the need for possible adaptation measures only later in the summer along with the realization of certain orders.

Multiples are undemanding amid uncertainties

Raute continues to trade at low multiples (4.3x EV/EBITDA ‘19e and 5.5x EV/EBIT ‘19e on our estimates). However, the investment cycle for plywood and LVL industries is probably past its peak and demand volumes are shifting to smaller customer accounts, thus making any predictions of potential investment project realizations doubly more difficult. We retain our HOLD rating and adjust our target price to EUR 25.5 (27.0) per share.

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Scanfil - Expect further robust results

18.06.2019 - 09.25 | Company report

We expect Scanfil to remain one of the contract electronics manufacturers with better positioning amid a perennially competitive market for outsourced industrial electronics production. We view Scanfil’s strength premised on quality control, competitive pricing and good relationships with its key customers. In our view Scanfil’s valuation is at an attractive level as the current multiples represent a discount of some 20% compared to its own historical averages. We rate the shares BUY, TP at EUR 4.75 per share.

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Scanfil remains well-positioned strategy-wise

While Scanfil’s short-term success is dependent on its most important customers’ products (the ten largest accounts generate ca. 60% of revenues), and these large industrial OEMs often face cyclical demand, Scanfil’s plant network can serve accounts both in the early stages of a product cycle and industrial electronics that are already being manufactured at high volumes, meaning Scanfil is able to nurture initially small customers and in the longer perspective graduate them to more significant revenues. However, such development demands patience as it will take a few years to reach a couple of million in annual sales (and this is only a fraction of the tens of millions required to be recognized as a major Scanfil customer).

Scanfil set to grow both organically and inorganically

Scanfil targets organic growth of ca. 3% in 2019-20 and a slight improvement in operating margin (7% in 2020). In our view these remain realistic targets, although success could be hampered by the softening of demand for a major customer product. Scanfil is still committed to screening the German market for acquisition targets (after announcing a deal in May).

Both Scanfil and its peers valued at undemanding multiples

Scanfil has historically traded at EV/EBITDA and EV/EBIT multiples above 7x and 9x, while the company is currently valued at 5.7x and 7.4x (based on our 2019 estimates). This 20% discount is in line with the recent peer group development. We rate Scanfil BUY, our target price being EUR 4.75 per share.

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Vaisala - CMD notes: Roadmap for profitable growth

17.06.2019 - 08.45 | Company update

Vaisala held its CMD last Friday, where the company provided insight into its businesses and updated strategy. Based on the CMD and updated financial targets, we see Vaisala’s roadmap for profitable growth as attainable and we have made smaller upward adjustments to our sales estimates. We maintain HOLD recommendation with new target price of 20 euros (prev. 18).

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Updated financial targets – more emphasis on growth

Vaisala targets an average annual growth exceeding 5% and EBIT margin exceeding 12%. Earlier Vaisala’s objective was growth with an average annual growth of 5%, and to achieve 15% EBIT margin. The slightly more ambitious growth target is based on both organic and non-organic opportunities, with key areas of growth being liquid measurements, new industrial instruments, digital solutions, and wind lidars. The recent acquisitions of Leosphere (wind lidars) and K-Patents (liquid measurements), provide growth areas for both W&E and IM segments.

Roadmap for profitable growth

We have made minor upward changes to our sales estimates based on the presented roadmap and new financial targets. We expect 2019E net sales to be 390 MEUR (12% growth yoy, driven by Leosphere and K-Patents acquisitions) and EBIT to be 31 MEUR (43 MEUR adjusted for PPA and one-offs), representing 8% EBIT margin (11% adj. EBIT margin). For 2020-21E, we expect above 4% net sales growth, and we estimate EBIT margin to gradually improve from 8 % 2019E towards 10% 2021E (adjusted EBIT margin from 11% 2019E towards 12% in 2021E). Non-organic growth is very likely (although not reflected in our estimates), hence we see above 5% growth very achievable.

HOLD maintained with TP of 20€ (prev. 18)

On our estimates, Vaisala is trading close to par with our peer group on adjusted EV/EBIT multiples. On EV/Sales multiples, Vaisala is trading below peers, reflecting the potential valuation upside should Vaisala succeed in accelerating its profitable growth. We raise target price to 20 euros (prev. 18) but maintain HOLD recommendation.

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Endomines - Rights issue on-going

17.06.2019 - 00.00 | Company update

The subscription period of Endomines’ rights issue commenced on June 14. Endomines is seeking to raise gross proceeds of SEK 165m. The proceeds of the rights issue are intended to be used to repay debt and interest of existing debt and development of its assets in Idaho, as well as exploration along the Karelian Goldline and for general corporate costs.

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Seeking to raise SEK 165m

Endomines is through a rights issue seeking to raise gross proceeds of around SEK 165m, with expenses related to the rights issue estimated at SEK 10m. Endomines has estimated that its current financial position does not cover the capital needs for the following twelve months. Trading in subscription rights will take place during the 14-25 June 2019 while subscription using the subscription rights will take place from the 14th of June to the 1st of July, 2019.

Proceeds mainly to cover debt and project development

Of the proceeds some SEK 36m would be used to repay debts and interest relating to the TVL Gold acquisition. The larger share of the proceeds from the rights issue are intended to be used for development of its projects in Idaho. To our understanding some of the proceeds would be used for further development of the Friday mine while the bulk would be allocated to development of the Rescue, Kimberly, and Unity projects. Furthermore, part of the proceeds would be used to continue exploration along the Karelian Goldline as well as to cover general corporate costs. The cost allocation and project timelines are described in further detail in figures 1 and 2.

Rating withdrawn during rights issue

Evli Bank is the financial advisor of the rights issue, and although a segregation of duties is followed, we refrain from expressing our views on the rights issue. Our estimates have not been revised to include any new information given in the prospectus and we withdraw our rating and target price (prev. HOLD, TP SEK 6.0). We will publish an updated view after the rights issue.

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SSH - CMD notes: High ambitions

11.06.2019 - 11.20 | Company update

SSH held a CMD yesterday, where the company offered insight into its business and outlined its long-term ambitions. The recently announced SSH200 Growth Vision aims at EUR 200m net sales during the 2020’s, with primary growth engines being UKM and PrivX. We do not make any changes to our estimates or recommendation at this moment.

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Addressable market not lacking in size or growth potential

To reach EUR 200M in sales by 2029, SSH would need to grow around 24% annually. From the underlying market’s perspective this is achievable, given the strong growth profiles in the markets. According to SSH, the Enterprise Key Management market is estimated to be USD 3.5 bln and expected to grow annually 21% by 2024. Looking at PrivX’s market, the Privileged Access Management is estimated to be USD 6 bln, with 30% annual growth expectations by 2023.

The SSH200 Growth Vision

The growth engines for the vision are UKM and PrivX. SSH estimates that there are thousands of potential customers for UKM, with deal sizes ranging from a hundred thousand up to millions of euros. PrivX poses an even bigger opportunity, but currently the number of customers is small, and sales ramp up is still very much on-going. SSH does not expect any material revenue impact from PrivX this year, nor was the company ready to give any estimate on the number of customers or ARR it expects to have from PrivX in the coming years.

No changes to estimates and recommendation

SSH maintained its 2019 guidance (>10% growth from software business) and mid-term target (similar or faster growth than market). Apart from previously announced partnerships and alliances, SSH did not specify what concrete new measures it would take to accelerate growth or what investments it requires. Based on yesterday’s CMD, we note that the vision is bold, but we’d like to see growth materializing in the figures. Thus, we have not made any changes to our estimates or recommendation. Our estimates reflect the company’s current short and mid-term guidance.

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Innofactor - Upgrade to BUY

05.06.2019 - 09.30 | Company update

Innofactor revised its guidance for EBITDA, expecting EBITDA in 2019 in between EUR 4-6m, compared to EUR -1.0m in 2018. The sales guidance remains intact, with sales expected to increase from 2018 (EUR 63.1m). Our revised EBITDA estimate for 2019 is EUR 4.6m (prev. EUR 4.0m). With the alleviated earnings uncertainty and our slightly revised estimates we raise our rating to BUY (HOLD) with a target price of EUR 0.80 (0.60).

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2019 EBITDA guidance range EUR 4-6m

Innofactor revised its guidance for EBITDA while keeping the sales guidance intact. Under the new guidance Innofactor expects sales to increase from 2018 (EUR 63.1m) and EBITDA to be in between EUR 4-6m (prev. increase from 2018), compared to EUR -1.0m in 2018. To our understanding the revised guidance was not triggered by any extraordinary items but instead mainly due to increased visibility into the full year development.

Our 2019 EBITDA estimate at EUR 4.6m

Based on Q1 figures and historical development, with Q4 typically being strong, the mid-range of the guidance would certainly be achievable. The upper range of the guidance appears challenging but would, when considering the impact of IFRS 16 changes, imply similar EBITDA levels as Innofactor has achieved pre-2017. Innofactor’s Q1 showed promising development but with two weaker years behind we opt to stay more on the cautious side of the guidance range and adjust our 2019 EBITDA estimate to EUR 4.6m (prev. 4.0m).

BUY (HOLD) with a target price of EUR 0.80 (0.60)

On 2019E EV/EBITDA valuation is only slightly below peers. As the guidance range offers increased visibility into 2019 development we shift some more focus on 2020E multiples. On the 2020E multiples valuation looks more attractive, in particular when considering the PPA adjusted multiples. We upgrade to BUY (HOLD) with a target price of EUR 0.80 (0.60).

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Innofactor - Still warrants caution

03.06.2019 - 09.30 | Company update

Innofactor’s Q4 earnings release did not in our view bring any major surprises and the results were only slightly below our estimates. Significant evidence of a turnaround remains to be seen, although the guidance and order backlog give some support for improving figures in 2019. We retain our HOLD-rating with a target price of EUR 0.45 (0.40).

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Signs of improvements seen, evidence still lacking

Innofactor’s Q4 results were slightly below our estimates, with revenue and EBITDA at EUR 15.9m (Evli 16.4m) and EUR -0.9m (Evli -0.7m), and due to the profit warning issued in January did not bring any major surprises. In our view the results still did not show solid evidence of a major turnaround. The guidance given was at least at this point still vague, with net sales and EBITDA in 2019 expected to increase from 2018 levels, which given the 2018 results should clearly be viewed as a minimum requirement. A positive sign for 2019 was the order backlog, which was reported for the first time, standing at around EUR 32m, up some 40% y/y.

Estimates intact apart from IFRS 16 adjustments

Our estimates remain largely intact post Q4, apart from IFRS 16 revisions to EBITDA of approx. EUR 1m. We continue to expect Innofactor to reach a barely positive EBIT in 2019. We expect profitability improvements mainly from a higher billing rate, supported by the order backlog and a smaller headcount. Sale of Dynasty product family updates are expected to support early 2019 but we expect overall stronger profitability during H2. Although potential for larger profitability improvements exists we still remain cautious due to the weak track during previous years and operations in Denmark continue to cause headaches.

HOLD with a target price of EUR 0.45 (0.40)

With IFRS 16 adjustment causing possible comparability issues with EV/EBITDA multiples we adjust EV/EBIT multiples for purchase price amortizations to arrive at 2019E and 2020E multiples of 12.5x and 6.7x respectively, compared to peer median multiples of 10.9x and 10.0x. We retain our HOLD-rating with a target price of EUR 0.45 (0.40).

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Pihlajalinna - CMD notes

20.05.2019 - 09.15 | Company update

Pihlajalinna hosted the 2019 CMD last Friday. The focus of the event was on increased health and social care costs, cooperation of private and public sectors as well as the digitalization of health care. Pihlajalinna did not make any changes to its ‘19E guidance nor its long-term financial targets. We maintain our rating “Buy” with TP of EUR 13.

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Need of new solutions for arranging services

The finances of Finnish municipalities have continued to deteriorate and municipalities are forced to find new solutions to balance their increased health and social care costs. Cooperation with private sector is no longer purely voluntary. As Pihlajalinna stated in Q1, municipalities’ activity has increased after the failure of the SOTE reform, despite of the restriction law.

New opportunities on occupational healthcare

Pihlajalinna has been able to use its network to expand services across the country. The company sees opportunities in expanding its occupational healthcare network as municipalities and other public sector entities are interested in divesting the occupational healthcare providers they currently own. The company targets to expand in basic-level specialized care and non-urgent specialized care as the public sector has made cuts in operations and centralized specialized care in fewer units.

Focusing on profitability improvements in 2019E

Pihlajalinna’s plan is to improve its profitability by organic growth, increasing cross-selling, and by addressing profitability issues in the new medical service centers. Pihlajalinna will also improve its customer service experience by bringing new digital solutions to the market, which will also be a significant profitability driver in the future.

Guidance for 2019E intact

Pihlajalinna reiterated its guidance for 2019E; to increase its revenue and EBIT in 2019E from 2018 levels. The company did not make changes to its long-term targets and expects EBIT % of 7% in long-term. We keep our estimates intact. We maintain our rating “Buy” with TP of EUR 13.

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Innofactor - Profitability improving

20.05.2019 - 09.00 | Company update

Innofactor’s profitability improved in Q1, aided primarily by the cost savings program from Q4/18 and a higher revenue per employee. Prerequisites for further improvements remain, as the personnel base has decreased while the order backlog remains at healthy levels. We retain our HOLD-rating with a target price of EUR 0.60 (0.45).

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Improved profitability in Q1

Innofactor’s profitability in Q1 improved in line with our expectations, with EBITDA amounting to EUR 0.9m, at a margin of 5.4%. Revenue fell slightly short of our expectations, affected partly by a smaller impact of the timing of Dynasty product sales than we had expected. Profitability was aided primarily by the restructuring efforts and cost savings done during Q4/18 but also by a higher revenue per employee (+9.2% y/y). The adoption of IFRS 16 had a EUR 0.3m positive impact on EBITDA.

Prerequisites for improving profitability in place

The level of impact on profitability of the cost savings efforts that were executed during Q4/18 was largely visible in Q1 figures. Focus will remain on improving profitability and further increases of the revenue per employee remains a key source for improvement in our view. The prerequisites certainly exist, as the number of personnel has decreased 10% y/y while the order backlog is up some 85% y/y. The positive development has still been largely attributable to operations in Finland, as challenges in both Denmark and Sweden have persisted and remain a key uncertainty. We have made only minor adjustments to our estimates post Q1, with our 2019 revenue and EBITDA estimates at EUR 64.0m and EUR 4.0m respectively.

HOLD with a target price of EUR 0.60 (0.45)

Innofactor trades at a 2019E EV/EBITDA of 9.5x, in line with peers. Given the challenges Innofactor has faced and an elevated level of uncertainty we would normally consider this quite a stretch. With signs of improving profitability and more attractive 2020E multiples we are however prepared to give Innofactor the benefit of the doubt and retain our HOLD-rating with a target price of EUR 0.60 (0.45).

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Marimekko - Investing in growth in 2019E

17.05.2019 - 08.20 | Company update

Marimekko’s Q1 result hit all-time record and beat our estimates. Growth was mainly boosted by strong retail sales in Finland and wholesale sales in APAC. Even though adj. EBIT in 2019E is expected to remain flat, annual growth is likely to continue with good momentum. We upgrade our rating to “Hold” (“Sell”) and our TP to 25 (22).

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Growth on the right track

Q1 revenue growth was 13% y/y and totaled EUR 27.1m. This was driven by wholesale sales growth in APAC and retail sales growth in Finland where LFL-growth was 12% y/y. As APAC wholesale sales was mainly impacted by deliveries that were transferred from Q4’18 to Q1’19, we expect wholesale sales to normalize during 2019E. In Finland, similar sized, non-recurring promotional deliveries as in 2018 (in Q2 and Q4 especially) are not expected to occur in 2019E. The company’s total sales are expected to grow from last year.

Investments in growth will increase 2019E expenses

Marimekko’s plan for 2019E is to invest in growth, which increases expenses. Major part of the investments will be used to revamp store network. Marketing expenses are expected to increase in 2019E as well as investments into IT and digitalization. These will weigh down adj. EBIT in 2019E but are likely to boost growth in the upcoming years. Marimekko has also become aware of grey exports in Asia, which could incur further costs.

Upgraded to “Hold” (“Sell”) with TP of 25 (22)

We have updated our estimates to take into account the IFRS 16 changes but kept the underlying 2019E figures mostly intact. We expect 2019E sales of EUR 118m (6% growth) and EBIT of EUR 13m (’18 EUR 12m). We have increased our growth expectations for ‘20E with sales growth of 7% y/y. On our estimates, Marimekko trades at EV/EBITDA 19E-20E multiple of 9.1x and 8.0x, which translate into 19% and 13% premium compared to the premium goods peer group. Investments in 2019E should support future growth but we are not ready yet to put emphasis on ‘20E-‘21E. We upgrade to “Hold” (“Sell”) with TP of 25 (22).

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Marimekko - Q1 result beats our estimates

16.05.2019 - 09.15 | Earnings Flash

Marimekko’s Q1 revenue increased by 13% and was EUR 27.1m vs. EUR 25.3m Evli view. Adj. EBIT was EUR 2.6m vs. EUR 1.2m Evli view. Revenue was mainly driven by strong wholesale sales in APAC and increased retail sales in Finland. Operating result was boosted by increased sales and improved gross margin. Guidance for 2019E is kept intact.

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  • Finland: revenue was EUR 12.8m vs. EUR 12.1m our expectation. Revenue grew by 7% y/y, split to 12% own retail and -1% wholesale. Own retail sales growth was driven by well performed regular-priced sales and the favorable trend in the domestic market. Wholesale was lower than last year as wholesale sales for the corresponding period included nonrecurring promotional deliveries, of which there were none this year.
  • International: revenue was EUR 14.3m vs. EUR 13.1m our view. Revenue increased by 18% y/y, mainly driven by wholesale sales in APAC region where the increase was 21%, as Q4’18 deliveries were transferred to Q1’19. Net sales increased also in all the other areas. In Japan, net sales grew by 18% of which retail sales growth was 13%.
  • Adj. EBIT was EUR 2.6m EUR vs. EUR 1.2m our view. Operating result was impacted by increased sales and improved gross margin. Net effect of IFRS 16 on operating result was +125 thousand. It is notable that our estimates do not reflect the IFRS 16 changes yet.
  • Guidance: Marimekko reiterated its guidance and expects 2019E revenue to increase from last year while adj. EBIT is expected to remain flat.

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Cibus Nordic - Property income as expected

16.05.2019 - 09.05 | Company update

Cibus’ Q1 developed without surprises as NOI, at EUR 12.1m, was 1.7% above our estimate. Cibus is now well on track to achieving the annual target of EUR 50m in dailygoods property acquisitions this year. At the end of Q1 the portfolio GAV stood at EUR 821m and is expected to reach EUR 850m by the end of Q2 as already announced deals will be closed. We update our estimates to reflect the situation as expected from Q3 onwards. We update our TP to SEK 125 (120) per share while our rating remains HOLD.

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No significant changes in key metrics during Q1

Valuation per sqm (EUR 1,740), EPRA NAV (EUR 11.2 per share) and net LTV ratio (57%) all improved a bit. Occupancy rate declined by a percentage point to 95%. Cibus’ average borrowing rate now equals 2.8%, and there is still room for improvement as the third senior debt facility is yet to be refinanced. The EUR 135m bond is trading above par and Cibus is likely able to refinance at a rate more than 100bps below the current coupon.

The portfolio WAULT remains stable at 5.0 years

The portfolio is stable in terms of the weighted average unexpired lease term. The measure has proved steady at around 5.0 years as the portfolio has an even number of leases coming up for renewal each year. The leases are typically extended with the same terms for the next 5 years. Cibus also continues with its plans to develop the organization while monitoring the Swedish property market even if there are yet no concrete entry plans.

We update estimates based on earnings capacity for Q3

Cibus has so far this spring announced EUR 30m in acquisitions; these are reflected in the current earnings capacity figure for Jun 30 (the deals will close in Q2). We therefore update our estimates from Q3 onwards. Cibus now trades close to par in terms of EV/GAV and P/NAV. In our view a slight premium (somewhere in the 0-10% range) can be justified as the valuation methodology for individual daily-goods properties doesn’t capture the risk diversification effect Cibus can achieve with its property portfolio (currently numbering 132 assets). We update our target price to SEK 125 (120) per share and retain our HOLD rating.

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Cibus Nordic - Income slightly above our estimate

15.05.2019 - 11.00 | Earnings Flash

Cibus’ Q1 net rental income came in a bit above our expectations. Q1 earnings capacity was unchanged, but is expected to increase by about 3% by the end of Q2 as recently announced acquisitions will be closed.

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  • Net rental income amounted to EUR 12.1m vs. our EUR 11.9m estimate.
  • Central administration expenses totaled EUR 1.0m vs. our expectation of EUR 0.9m. EBIT therefore stood at EUR 11.2m vs. our EUR 11.0m projection.
  • Gross asset value was EUR 821m (EUR 816m previously).
  • EPRA NAV was booked at EUR 11.2 (11.1) per share.
  • Occupancy rate stood at 95.1% (96.0%).
  • Net LTV amounted to 56.7% (58.4%).
  • The current NTM earnings capacity (in terms of net rental income minus central administration expenses, or EBIT) stood unchanged at EUR 44.2m as of Mar 31, 2019. Cibus expects the figure increase to EUR 45.6m by Jun 30, 2019 as the recently announced property acquisitions will be included in the portfolio.

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Innofactor - Net sales slightly lower, operating margin in line

14.05.2019 - 09.30 | Earnings Flash

Innofactor reported Q1 net sales of EUR 16.1m and EBITDA of EUR 0.869m. Net sales missed our estimate of EUR 17.1m, but EBITDA was in line with our expectation of EUR 0.8m. Innofactor commented that measures for improving profitability, carried out near the end of 2018, have started to take an effect in the first quarter as planned. Innofactor expects net sales and operating margin (EBITDA) in 2019 to increase from 2018 (2018: net sales EUR 63.1m EBITDA EUR -1.0m)

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  • Q1 net sales were approximately EUR 16.1 million (2018: 16.5) vs. EUR 17.1m our expectation
  • EBITDA was EUR 0.869 (+155% yoy), vs. EUR 0.8m our expectation.
  • The order backlog was EUR 41.0 million (2018: 22.2), which shows an increase of 85%.
  • Innofactor got several significant orders in the first quarter, for example, Traficom VISA, approximately EUR 0.5 million; a decision-making system for the City of Espoo, approximately EUR 1.5 million; and a membership management project for a Swedish organization, approximately EUR 1.3 million
  • Guidance maintained; Innofactor’s net sales and operating margin (EBITDA) in 2019 is estimated to increase from 2018, during which the net sales were EUR 63.1 million and operating margin was EUR -1.0 million

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Verkkokauppa.com - Focusing on growth in 2019E

13.05.2019 - 08.50 | Company update

As competition is likely to remain tight and price-driven, we are not expecting margins to improve in 2019E. Investments in marketing should bring more visibility and support sales growth. We retain our rating “BUY” with TP of EUR 4.7.

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Attractive pricing and marketing likely to support sales

Verkkokauppa.com was able to increase its market share, driven by solid revenue growth of 13% y/y (revenue of EUR 116m) in Q1. In 2019E, the company still seeks to win market share and compete with low prices. The company has made investments into marketing and targets to reach larger audience by new campaigns and tv-commercials. Vekkokauppa.com also continuously aims to improve the user experience online and in mobile. With these investments, we expect revenue growth to continue in ‘19E.

No expectations of margin improvements in 2019E

Verkkokauppa.com’s Q1 operating profit decreased by 14% y/y and was EUR 2.3m. This was mainly due to lower gross margin and increased marketing expenses. Revenue growth in 2019E is unlikely to come for free and price-driven competition adds pressure on the margin. Gross margin is also impacted by wholesale/B2B sales which varies by each quarter. As investments into marketing are expected to continue, we believe OPEX will remain at higher level in ‘19E. The revenue from Apuraha continued to grow and was EUR 0.83m (EUR 0.67m) in Q1. Apuaraha financing is expected to continue growing and supporting margins also in 2019E.

Retaining “Buy” with TP of EUR 4.7

We have slightly adjusted our estimates with 2019E sales totaling EUR 522m (prev. EUR 519m), gross margin of 14.7% and EBIT of EUR 13m (prev. EUR 14m). The company reiterated its guidance for 2019E and expects revenue of EUR 500-550m and EBIT of EUR 11-17m. On our estimates, Verkkokauppa.com trades at 11.9x and 8.7x EV/EBIT in ’19-‘20E, which translates into 67% and 49% discount compared to the online focused Nordic & European peers. We retain our rating “Buy” with TP of EUR 4.7.

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Verkkokauppa.com - Strong revenue growth in Q1’19

10.05.2019 - 09.00 | Earnings Flash

Verkkokauppa.com’s Q1’19 revenue was EUR 116m compared to EUR 114m Evli and EUR 117m consensus estimates. Sales grew by 13% y/y. Adj. EBIT was slightly below Evli/cons. estimates at EUR 2.3m. Verkkokauppa.com reiterated its guidance for 2019E.

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  • Q1 revenue was EUR 115.8m vs. EUR 113.9m Evli view and EUR 116.5m consensus. Sales grew by 13% y/y. Revenue growth was driven mainly by marketing improvements, effective campaigning and sales from Raisio store. The market remained competitive and price-driven and grew by 4.9% in January-March, according to GfK.
  • Q1 gross profit was EUR 17.4m (15.0% margin) vs. EUR 17.8m (15.6% margin) Evli view.
  • Q1 adj. EBIT was EUR 2.3m (2.0% margin) vs. EUR 2.5m (2.2% margin) Evli view and EUR 3.0m (2.6% margin) consensus. Slightly lower operating profit y/y was mainly due to lower gross margin and increased marketing investments.
  • 2019E guidance is intact: Verkkokauppa.com expects revenue to be between EUR 500-550m and operating profit of EUR 11-17m.

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Endomines - Downgrade to HOLD

09.05.2019 - 09.10 | Company update

Endomines’ revenue in Q1 was limited to SEK 2.1m due to lack of production at Friday and as such profitability remained weak, with EBIT at SEK -13.0m. Ramp-up of production at Friday is expected in Q2. With Endomines’ financial situation becoming a concern we downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

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Friday production expected in Q2

Endomines’ Q1 revenue and EBIT amounted to SEK 2.1m and -13.0m respectively. Ore production at the Friday mine is on-going but due to damage to the processing facility no new gold concentrate was produced and revenue was only generated from sales of remaining concentrate from Pampalo. Ramp-up of gold concentrate production at the Friday site is expected to start in Q2. Although the concentrate production was delayed Endomines has remained on schedule with the mining of ore and retained its 2019 guidance production for Friday of 5,000-8,000 oz gold concentrate.

Financial situation concerning

Endomines’ financial situation has increased causes for concern. The liquid funds at the end of the period amounted to SEK 7.8m, despite issuance of the EUR 3.7m bond, as Q1 cash flow after investments amounted to SEK -46.7m. The situation should be alleviated with the ramp-up of production at Friday, with the larger investments also having been done. With the additional costs of the processing plant at Friday the financial situation is in our view now even more fragile and Endomines can’t really afford more setbacks in production start-up without additional financing.

HOLD (BUY) with a target price of SEK 6.0 (8.0)

Endomines is in our view in a delicate situation financially and the need for additional financing, at least to finance any new projects, seems inevitable. Endomines already issued a rather expensive bond and further financing will likely not come easily or cheap. We downgrade to HOLD (BUY) with a target price of SEK 6.0 (8.0).

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Aspo - Value increasingly reliant on ESL

09.05.2019 - 09.00 | Company update

Aspo posted a 3.5% EBIT margin, missing our expected 4% level as Telko and Leipurin disappointed. Telko suffered from declining plastic raw materials and chemicals prices, while Leipurin’s Q1 fell short due to timing of Easter and machine sales. However, we see ESL proceeding on track. Our rating stays BUY; we update our TP to EUR 9.75 (9.50).

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ESL’s operations on track towards higher EBIT

ESL’s Q1 was expectedly subdued as the two new LNG vessels’ cranes were being repaired. The warranty repairs were mostly finished by the end of Q1. Aspo says some parts are still being changed, but the ships are expected to be fully operational in Q2. However, we note that it will likely be a few more months before maximum efficiency is achieved, and consequently we do not expect ESL to reach its full operating profit potential in Q2. We estimate ESL to post EUR 6m EBIT in Q3, seeing the annual EBIT potential from thereon at around EUR 25m.

Telko now includes Kauko; Leipurin slow due to timings

The old Telko beat our EUR 63.6m revenue estimate, posting EUR 65.8m in Q1 sales (EUR 71.9m w/ Kauko). The comparable y/y growth amounted to 14% (11% w/ Kauko). Q1 sales growth was high y/y due to the slowness of the comparison period (itself impacted by exceptionally cold weather which affected Russian and Ukrainian construction). Volume growth was strong, however the price levels of plastic raw materials continued to decline, hurting margins. The prices declined by 5-6% q/q and 7- 10% y/y (margins on raw materials held in storage will be particularly impacted). Meanwhile chemicals prices declined by 10% q/q and 3% y/y. As a result, the old Telko managed a 3.6% EBIT margin (3.8% in Q1’18). Telko targets EBIT margin at 6-7% in ‘20. The target may prove challenging, and we don’t expect improvement on last year’s 4.5% margin (old Telko) this year.

Our expectations for ESL remain unchanged

We expect large EBIT growth in ‘19-20 as ESL’s new ships’ contribution will fully materialize. We lower our estimates for the other businesses slightly, update our TP to EUR 9.75 (9.50) as higher peer multiples lift SOTP valuation. Our rating stays BUY.

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Etteplan - A good start for the year

09.05.2019 - 08.00 | Company update

Etteplan’s Q1 saw all business areas achieving margins near the financial target of a 10% EBITA-margin. With a good order backlog development during the beginning of the year Etteplan also raised its guidance for 2019. We expect a 2019 revenue and EBITA of EUR 258.6m and 26.0m respectively. We retain our BUY rating with a target price of EUR 9.6 (9.0).

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Good performance across the board and guidance upgrade

Etteplan’s Q1 results were good across the board, with especially profitability beating our estimates, driven by better than expected profitability in Engineering Solutions and Technical Documentation Solutions. Revenue also saw good growth of 11.3% in the quarter following a continued good demand situation despite market uncertainties. Etteplan upgraded its guidance, expecting the revenue and operating profit for 2019 to grow clearly (prev. only grow) compared to 2018.

Technical Documentation Solutions still faces challenges

Etteplan’s Q1 results showed little weakness, as although the on-going trade war did have some impact on the development in China, the significant new orders signed, the guidance upgrade and customer order backlog development alleviate some of the near-term uncertainty. The Technical Documentation Solutions business area remains the likely subpar performer due to elevated costs related to a larger project in Germany. Our revised revenue and EBIT estimates are 258.6m and 23.4m respectively, implying an increase of 9.4% and 12.4% from 2018 figures.

BUY with a target price of EUR 9.6 (9.0)

On our estimates Etteplan trades at a 26% and 12% discount on 2019E peer median EV/EBITDA and P/E. With our increased estimates and lesser near-term uncertainty we raise our target price to EUR 9.6 (9.0), valuing Etteplan at a P/E and EV/EBITDA of 13.5x and 7.6x respectively, and retain our BUY-rating.

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Etteplan - Earnings beat and guidance upgrade

08.05.2019 - 13.20 | Earnings Flash

Etteplan’s Q1 results beat expectations especially for profitability, with EBIT at EUR 5.8m (EUR 5.2m/5.1m Evli/cons.) and revenue at EUR 65.6m (EUR 63.5m/64.0m Evli/cons.). Performance was solid across all business areas. Etteplan upgraded its guidance and now expects its revenue and operating profit for the year 2019 to grow clearly compared to 2018.

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  • Etteplan’s net sales in Q1 amounted to EUR 65.6m (EUR 59.0m in Q1/18), slightly above our estimates (Evli EUR 63.5m). Sales growth in Q1 amounted to 11.3% y/y (organic growth 7.0%).
  • EBITA in Q1 was EUR 6.4m (EUR 4.9m in Q1/18), above our estimates (Evli EUR 5.8m), at a margin of 9.8%.
  • Engineering Solutions: Net sales in Q1 were EUR 35.6m vs. EUR 35.5m Evli. EBITA in Q1 was EUR 3.7m vs. EUR 3.2m Evli.
  • Software and Embedded Solutions: Net sales in Q1 were EUR 17.3m vs. EUR 16.4m Evli. EBITA in Q1 was EUR 1.7m vs. EUR 1.7m Evli.
  • Technical Documentation Solutions: Net sales in Q1 were EUR 12.5m vs. EUR 11.6m Evli. EBITA in Q1 was EUR 1.2m vs. EUR 0.9m Evli.
  • Guidance upgraded: Etteplan expects its revenue and operating profit for the year 2019 to grow clearly (added) compared to 2018.

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Aspo - Sales above our estimate

08.05.2019 - 10.45 | Earnings Flash

Aspo’s Q1 net sales grew 23% y/y, reaching EUR 142m and thus exceeding our EUR 137m estimate. Group operating margin, at 3.5%, fell a little short of our 4.0% expectation. ESL’s top line came in 9% above our estimate (operating margin was in line with our expected 7.2%). In other words, Telko’s and Leipurin’s profitability fell short of our expectations.

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  • Group Q1 net sales amounted to EUR 142m vs. our EUR 137m estimate.
  • Aspo posted EUR 4.9m in EBIT vs. our expectation of EUR 5.4m. Group operating margin therefore amounted 3.5% (vs. our 4.0% estimate).
  • ESL Shipping revenue was recorded at EUR 44m vs. our EUR 40m expectation. ESL managed EBIT at EUR 3.2m (7.3% margin), whereas we expected EUR 2.9m (7.2% margin).
  • Telko posted EUR 72m in net sales (including Kauko) vs. our EUR 69m combined estimate for Telko and Kauko. Meanwhile EBIT stood at EUR 2.4m vs. our EUR 2.5m projection.
  • Leipurin sales were EUR 26m, while we expected EUR 28m. Leipurin achieved EUR 0.5m EBIT (our estimate was EUR 1.0m).
  • Kauko is now included within the Telko figures (effective Jan 1, 2019).
  • Previous guidance stays valid as Aspo expects 2019 EBIT at EUR 28-33m (EUR 20.6m in 2018).

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Endomines - Concentrate production missing in Q1

08.05.2019 - 09.20 | Earnings Flash

Endomines’ revenue and EBITDA in Q1 amounted to SEK 2.1m (Evli 8.0m) and SEK -11.5m (Evli -3.9m) respectively, below our estimates mainly due to our estimates not accounting for the processing plant damage during Q1 and revenue only generated from sale of remaining Pampalo concentrate. No gold concentrate was produced at Friday in Q1 but production is expected to commence in Q2.

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  • Endomines did not produce any gold concentrate in Q1. The revenue was generated by sales of remaining Pampalo gold concentrate. Gold concentrate production at Friday has been delayed due to damage to the tailings area of the processing plant. Concentrate production is expected to commence in Q2.
  • Revenue amounted to SEK 2.1m (29.4m in Q4/18), below our estimates of SEK 8.0m due to our estimates not having accounted for the processing plant damage.
  • EBITDA in Q1 was at SEK -11.5m, below our estimates of SEK -3.9m, mainly due to the lower revenue.
  • Friday’s processing plant repairs expected to amount to USD 400,000 and to take four to six weeks to complete.
  • Guidance reiterated: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. Endomines anticipates production of 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.

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Talenom - Solid performance to continue

07.05.2019 - 09.15 | Company report

Talenom has seen success in achieving well above market growth while simultaneously vastly improving profitability, relying on technological advances to automate processes and enhance efficiency. We continue to see room for near-term margin improvement, while the fragmented bookkeeping services market offers continued room for growth.

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Focusing on rapid organic growth

Talenom has taken a different approach from the mainly inorganic growth focused competitors in the fragmented bookkeeping services market by successfully focusing on organic growth, having achieved a sales CAGR of 14% during 2015-2018. Growth has been enabled by Talenom’s separation of accountants and sales force, which we expect to continue supported by benefits of digitalization and the market fragmentation. We expect a sales CAGR of 17% during 2018-2021E.

Margin improvements from process efficiency

Talenom has invested heavily in improving the efficiency of its bookkeeping production line. Through centralization of bookkeeping tasks and automation of processes the company has been able to decrease resource needs, resulting in sizeable improvements in margins. We expect further development in 2019 to give a slight boost to margins, with our 2019E operating profit margin estimate at 19.5% (2018: 17.5%).

BUY with a target price of EUR 35.0

We retain our BUY rating and target price of EUR 35.0. Our target price values Talenom at 27.5x 2019E P/E, slightly above our business support services peer group, which we consider warranted due to the highly recurring nature of revenue and stability of the bookkeeping services market. The high valuation is further supported by earnings growth through both sales growth and margin improvements (Evli 2019E sales growth +20.9% and EBIT margin +2 %p).

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Pihlajalinna - ‘19E focus on improving profitability

06.05.2019 - 09.15 | Company update

Pihlajalinna’s Q1 earnings were close to expectations. After a weak ’18, the company was able to improve its profitability and increase its organic growth. Pihlajalinna’s focus in 2019E is to take further actions to improve its operating profit. We keep our rating “BUY” with new TP of EUR 13 (12).

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Profitability improvements continue in 2019E

In Q1, Pihlajalinna improved its operating profit with adjusted EBIT margin of 3.0% (-0.1% in Q1’18). Revenue growth was supported by new customer relationships in occupational healthcare but also by the new partnership with Fennia. Organic growth was 2.8% in Q1. In 2019E, the company continues focusing to improve profitability especially in clinics with weaker profitability levels. The company will also strengthen its services locally in mobile. Pihlajalinna’s interest is to expand its cooperation with municipalities and expand its occupational healthcare network in ‘19E.

SOTE collapsed but change is still needed

The health and social services reform collapsed in March. It is still unsure, whether the new government will start again with the SOTE reform but municipalities still need to find solutions for finding balance of financing health and social services. After the collapse of the reform, Pihlajalinna sees activity from municipalities has increased and expects that there is demand for their healthcare services.

We keep our rating “BUY” with new TP of EUR 13

Pihlajalinna targets to increase its revenue and EBIT in 2019E from 2018 levels. We foresee EBIT of EUR 24m (4.5% margin) and EUR 25m (4.6% margin) in ’19-‘20E. As Q1 revenue was above our expectations, we have increased our revenue expectation in 2019E to EUR 525m (previous EUR 515m). On our estimates, Pihlajalinna trades in 2019-2020E EV/EBITDA multiple of 7.3x and 5.9x. which translates into 23% and 26% discount compared to peer group. We maintain “BUY” with TP of EUR 13.

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Exel Composites - Q1 tailwinds

06.05.2019 - 08.50 | Company update

Exel Composites recorded Q1 sales and EBIT above our estimates as organic growth came in higher than we expected, while DSC also contributed more than we had projected. We make minor adjustments to our estimates. We retain our target price of EUR 5 per share. Our rating remains BUY. Exel is valued at ca. 7x EV/EBITDA ‘19e.

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Q1 topped our estimates due to high wind energy volumes

Exel recorded an 8% organic growth in Q1. DSC (a U.S. company acquired in Apr 2018) contributed another 18%, bringing the total top line increase to 26% y/y. Construction & Infrastructure revenues doubled due to the DSC contribution (the unit has a high wind energy exposure) and strong organic wind energy growth. European sales were stable; the growth was attributable to Rest of the World and APAC geographies. Industrial Applications revenues declined by 18% y/y as the telecommunications market continued challenging.

Cost program helped to lift EBIT from the recent lows

Exel recorded Q1 adj. operating margin at 7.2% (vs. 8.3% a year ago). The margin averaged 2.5% in H2’18 as the DSC acquisition diluted profitability. Exel says it managed cost savings according to its own plans, expecting DSC to reach break-even profitability during 2019. In addition to improving DSC’s performance, Exel has implemented cost savings throughout the group e.g. by closing the German plant in April. Exel expects further synergy savings between the company’s two Chinese production plants, both located in the city of Nanjing. The group-wide cost savings program targets EUR 3m in annual savings and the measures are expected to be fully effective in 2020.

We make minor revisions, reiterate BUY rating and TP

Our growth and profitability estimates do not change materially. We continue to expect Exel to achieve an organic top line growth of around 7% in the coming years, and therefore gradual improvement in operating margins. Our rating remains BUY, our target price being EUR 5 per share.

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Raute - Profitability drop due to inventories

06.05.2019 - 08.30 | Company update

Raute recorded Q1 revenues at a healthy EUR 41.3m level (vs. EUR 35.3m a year ago), yet EBIT margin declined as timing of certain inventory-related items was unfavorable. Order intake, at EUR 32m, more than halved as the comparison period was also rather unfavorable in this regard. We retain our HOLD rating and EUR 27 target price.

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Timing of certain inventory items dragged profitability

According to Raute, the low recorded Q1 EBIT was due to certain exceptional cost items (related to timing of inventories). The company says these amounted to the tune of EUR 0.5-1.0m. As a result, EBIT margin fell to 6.3% (7.8% a year ago). We continue to expect Raute to achieve EBIT margin at slightly above 7% in the coming quarters. Raute’s 2019 guidance remains unchanged.

Russia’s share of order intake high due to a large order

Earlier this spring, Raute announced a relatively large order to be delivered to Russia. The order, valued at over EUR 12m, is for Plyterra’s plywood mill machinery. The order will be delivered in Q1’20. The order pushed Russia’s share of Q1 order intake to 57% (without the order the share would have been around 30%). Raute continues to see Russia and Eastern Europe as promising markets, highlighting Ukraine and Poland as specific countries with good potential. Overall, Raute says the environment has remained stable. There is healthy activity concerning potential capacity expansion projects as well as other larger orders. Demand for maintenance and spare parts continues at a brisk level, signaling high mill capacity utilization rates. Modernization project orders remained low. One source of uncertainty is the rising portion of demand from smaller customers, whose decision-making processes Raute is unable to predict to the same extent as those of a larger customer (e.g. UPM).

Our estimates remain intact, TP at EUR 27 per share

Raute is unable to give very specific guidance. We expect ‘19 sales to decline by some 10% compared to the very high ’18 benchmark figure. We make relatively small adjustments to our estimates based on the report. Our rating remains HOLD, target price at EUR 27 per share.

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Raute - Sales beat, operating margin lower

03.05.2019 - 10.00 | Earnings Flash

Raute managed a 17% y/y top line growth in Q1. Order intake remained at a healthy level considering there were no major mill-scale orders. However, EBIT fell in both absolute and relative terms due to some exceptional cost items (while the comparison period also included some positive items).

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  • Q1 net sales amounted to EUR 41.3m vs. our EUR 32.3m estimate.
  • Order intake was EUR 32m compared to EUR 68m a year ago. The orders mainly consisted of smaller items. Technology services orders grew strongly. Order book totaled EUR 84m (vs. EUR 142m a year ago).
  • Operating profit stood at EUR 2.6m vs. our expectation of EUR 3.5m. Exceptional cost items burdened operating profit.
  • The company managed an operating profit margin of 6.3%, whereas we expected 10.9%.
  • Raute maintains its 2019 outlook, expecting 2019 net sales and operating profit at a similar level compared to the previous year. Overall, activity has remained at a good level.

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Exel Composites - Wind energy pushed top line

03.05.2019 - 09.30 | Earnings Flash

Exel Composites’ Q1 exceeded our expectations. Actual revenues topped our estimate by 12%, and the company also surprised in terms of EBIT margin.

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  • Net sales totaled EUR 27.1m vs. our projected EUR 24.3m. Revenue grew by 26% y/y thanks to the Construction & Infrastructure segment, which was driven by wind energy. Organic growth was recorded at 8.3%.
  • Growth in Construction & Infrastructure as well as Other Applications made up for the decline in Industrial Applications. The telecommunications market continued to be challenging.
  • The wind energy growth and the consolidation of DSC contributed to higher Rest of the World and Asia- Pacific revenues. European sales remained roughly flat.
  • EBIT amounted to EUR 2.0m, beating our EUR 1.4m estimate. EBIT margin was 7.2% vs. our 5.9% expectation. The improvement was due to operational leverage, but also owed to improved efficiency achieved with the help of the cost savings program.

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Etteplan - Upgrade to BUY

03.05.2019 - 09.00 | Company update

Etteplan reports Q1 results on May 8th. We expect continued good margin development in Engineering Solutions, and Software and Embedded Solutions. Project delivery challenges are expected to continue to have an impact on margins in Technical Documentation Solutions. With valuation looking more attractive due to peer multiple elevation we upgrade to BUY (HOLD) with a TP of EUR 9.0.

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Expect stable development

Our estimates ahead of Q1 remain largely intact, with some minor adjustments mainly to incorporate the transition from EBIT from business operations to EBITA as Etteplan’s measure for operational profitability following updated strategic and financial targets in April. Our group level Q1 revenue and EBITA estimates are at EUR 63.5m and EUR 5.8m respectively. We expect continued good margins in Engineering Solutions and Software and Embedded Solutions while still remaining cautious to margin improvement in Technical Documentation Solutions due to project delivery challenges in Germany.

Uncertainty has decreased but remains a key topic

The uncertainty relating to the development of the global economy remains a key topic as the development of macroeconomic indicators and sentiment has been mixed but in general more positive considering the uncertainty during the latter half of 2018. Both customer engineering companies’ and peers’ valuation have been on the rise during 2019. The order intake among engineering companies has also been positive, with the aggregate value for a selection of customer companies up some 7% y/y.

BUY (HOLD) with a target price of EUR 9.0

The valuation of peer companies has been on the rise during 2019, while Etteplan has been largely unaffected, and as such trades on a discount compared to peers. On 2019E P/E Etteplan trades at an in our view unjustifiably large discount of ~20%. We retain our target price of EUR 9.0 but upgrade our rating to BUY (HOLD).

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Pihlajalinna - Q1 revenue above our expectations

03.05.2019 - 08.55 | Earnings Flash

In Q1’19, Pihlajalinna’s revenue amounted to 132.5m vs. EUR 126m/128m Evli/cons estimates, while adj. EBITDA landed at EUR 12.6m vs. EUR 13,0m/13,0m Evli/cons estimates. Organic growth improved y/y. Revenue growth was supported by new customer relationships in occupational healthcare and the insurance company partnership with Fennia.

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  • Q1 revenue was EUR 132.5m vs. EUR 126m/128m Evli/cons estimates. Revenue grew 11.2 y/y%.
  • Growth from M&A was 8.3%. Most significant M&A transactions were the acquisitions of Doctagon and the Forever fitness center chain as well as the acquisition of Terveyspalvelu Verso.
  • Q1 organic growth was 2.8% (EUR 3.4m)
  • Q1 adj. EBITDA was EUR 12.6m (9.5% margin) vs. EUR 13,0m/13,0m (10.3%/10.1%) Evli/cons estimates. Adj. EBITDA increased by 81.6% % y/y. Profitability improved significantly especially in occupational healthcare services, public sector specialized care and private clinic operations.
  • Q1 adj. EBIT was EUR 3.9m (3.0% margin) vs. EUR 5,0m/4,7m (4,0%/3,7%) Evli/cons estimates.
  • Guidance for 2019E: Revenue is expected to increase from the 2018 level and adjusted EBIT is expected to clearly improve from last year.

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Verkkokauppa.com - Competition expected to remain tight in ‘19E

03.05.2019 - 07.55 | Preview

Verkkokauppa.com will report its Q1 earnings on May 10th. As before, our interest is on how competition has developed in the beginning of the year. We have kept our estimates for 2019E intact and retain our rating “BUY” with TP of EUR 4.7 ahead Q1.

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Guidance for 2019E wide

Verkkokauppa.com updated its guidance in February. The guidance seems quite wide; with 10-20% annual revenue growth, operating profit between EUR 11-17m and 2.5-4.5% EBIT margin. Our revenue estimate for 2019E is EUR 519m which lands on the lower half of the range of EUR 500-550m, guided by the company. We expect Q1 revenue of EUR 114m/116m cons. with adj. EBIT of EUR 2.5m/3.0m cons.

Launch of a new product category

In March, Verkkokauppa.com launched a new product category: sporting equipment for more than ten ball games, such as football, floorball and golf. The new range added some 1300 new products to the company’s product range. Verkkokauppa.com aims to lower the prices of the sporting equipment and accessories and be one of the market leaders within the category in the next 3-5 years. Based on Finnish Commerce Federation, Finnish online shopping 2019E growth is expected to be ~9%. Price competition is expected to remain tight and challenging throughout 2019E.

We keep rating “BUY” with TP of EUR 4.7

Verkkokauppa.com published its IFRS 16 updated figures for 2017-2018 earlier in Q1 and our estimates reflect the changes. We have kept our estimates intact. On our estimates, Verkkokauppa.com is trading at 2019-‘20E EV/EBIT multiples of 11.3x and 8.9x, which translate into 70% and 49% discount compared to the peer group. We keep our rating “BUY” with target price of EUR 4.7 ahead Q1.

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Detection Technology - SBU back in business

29.04.2019 - 09.10 | Company update

DT’s Q1 result was in line with our expectations. The updated outlook and comments regarding SBU market support our positive view on DT. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (prev. 19).

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Good start to the year, SBU back on track

Q1 result was in line with our expectations. Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. SBU sales grew 22.9% to EUR 14.5m vs. EUR 13.6m Evli estimate. MBU sales were EUR 8.6m vs. EUR 8.8m Evli estimate. R&D costs were EUR 2.5m, up 28% as indicated earlier. SBU market demand has picked up, with increasing CT investments starting in US airports. We have estimated the upcoming airport related EU and US standards to offer DT additional sales in the range EUR 20-30m in the coming years. See our report for more details.

EBIT growth taking a breather this year, longer-term investment case intact

Based on the SBU market pick up, we have moderately raised our sales estimates for ’19-21E. We expect ‘19E net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting mix, as well as increased pricing competition. Despite flat EBIT this year, longerterm investment case is intact. We see DT’s investments this year securing its growth and profitability drivers for the coming years.

Maintain BUY recommendation with new TP of 23.5 (19)

On our estimates, DT is trading at discounts on EV/EBIT, EV/EBITDA and P/E multiples for ’19-20E. We see discount as unjustified given the attractive longer-term investment case. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (19).

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SRV - Biggest troubles now behind

29.04.2019 - 08.30 | Company update

SRV’s operative operating profit remained barely positive, at EUR 0.5m, despite notable FX impact and one-off items burden. SRV specified its guidance for the operative operating profit, implying a range of EUR 0-27m. Our revised estimate for 2019 stands at EUR 21.1m (prev. 32.7m), attributable to a re-evaluation of the impact of on-going lower margin projects. We retain our HOLD-rating with a target price of EUR 1.9 (2.0)

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Earnings impacted by approx. EUR 3m one-offs

SRV’s Q1 revenue amounted to EUR 222.6m, supported by increased housing unit completions. The operative operating profit fell below expectations, at EUR 0.5m, primarily due to approx. EUR 3m expense entries for REDI Majakka’s water damage and the dissolution of the VTBC fund. The operating profit was aided by a stronger ruble and amounted to EUR 3.3m. SRV further specified its operative operating profit guidance for 2019, expecting it to be positive but below the EUR 27m operative operating profit in 2017.

Downwards revisions on our estimates

We have lowered our 2019 revenue estimates by approx. 5% to EUR 1,029m, mainly through lowered business construction estimates. We have also lowered our operative operating profit estimates to EUR 21.1m (prev. 32.7m) in accordance with the specified guidance. We note that in our pre-Q1 estimates we underestimated the impact of on-going lower margin projects, which are expected to continue to have an effect during 2019. With the delay of REDI Majakka we expect a bulk of housing units to be completed in late-2019 and such our estimates, especially for earnings, are heavily skewed towards Q4/19.

HOLD with a target price of EUR 1.9 (2.0)

The introduction of IFRS 16 and the treatment of plot leases, causes severe comparability uncertainty for peer multiples, as for SRV the change increased net interest-bearing debt by more than 50%, and for now we refrain from relying on per multiples. With the downward revisions of our estimates we lower our target price to EUR 1.9 (2.0) and retain our HOLD-rating.

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Next Games - Making headway

29.04.2019 - 08.00 | Company update

Next Games Q1 EBIT and adjusted operating result amounted to EUR -2.4m and -1.3m respectively, while revenue grew 104% y/y to EUR 9.8m. The company’s cost savings program started to show, and further notable progress is expected in Q2. We retain our HOLD-rating with a target price of EUR 1.5

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Positive TWD: Our World signs

Next Games’ Q1 results saw profitability remaining in the red, with EBIT at EUR -2.4 (Evli -2.1m) and the adjusted operating result at EUR -1.3m. Q1 revenue grew 104% y/y to EUR 9.8m. TWD: No Man’s Land continued on a steady pace while implementation of new sales strategies in TWD: Our World saw the games ARPDAU and daily conversion rates improve towards the end of the quarter and reached an ARPDAU of EUR 0.31 in March (Q1: EUR 0.26). Management comments point towards a prolonged soft launch period for Blade Runner Nexus due to the nature of the game mechanics. Our estimates assume launch during Q3/2019.

Cost savings starting to show

Next Games’ expects to achieve annual cost savings in fixed costs of approximately EUR 6.5m and monthly fixed costs excluding game marketing investments to amount to EUR 1.1-1.2m during 2019 after achieving the targeted cost savings. As the held consultation proceedings still affected Q1 results, a reduction in the cost base is expected to be seen in Q2. On our revised estimates we expect an EBIT and adjusted operating result of EUR -4.8m and EUR -0.5m respectively in 2019. Actions taken to stabilize the operational cash flow saw the company’s cash position start to stabilize during the quarter.

HOLD with a target price of EUR 1.5

Next Games has made progress in scaling down its cost base and we expect further progress in Q2. A major boost in revenue would be necessary for further improving profitability which despite positive signs from Our World and the expected Launch of Blade Runner Nexus still seems challenging in the near-term. we retain our HOLD-rating with a target price of EUR 1.5

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Consti - Single project still causing troubles

29.04.2019 - 07.30 | Company update

Consti’s Q1 saw good sales growth of 18%, while performance obligations relating to a building purpose modification project kept earnings in the red, with a Q1 EBIT of EUR -0.4m. With the project still on-going the earnings outlook for 2019 continues to appear somewhat meagre, despite otherwise decent profitability development.

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Solid sales growth but earnings still slightly negative

Consti’s first quarter revenue beat expectations, growing 18.0% y/y to EUR 73.5m supported by strong sales growth in Housing Companies. Profitability only just remained negative, with EBIT at EUR -0.4m, with remaining performance obligations relating to a building purpose modification project still affecting results. Pick up in order intake compared to H2/18 aided in pushing the order backlog to a healthy EUR 237.8m. Stricter tendering criteria in Building Technology continued to weigh in on revenue and order backlog but management considers the quality of the order backlog to have improved.

On-going project still casting a shadow on 2019 earnings

With the good growth in Q1 we adjust our 2019 revenue estimate to EUR 337m (prev. EUR 324.1m) while the stagnant order backlog development prompts us to remain cautious on growth in the mid-term. We expect growth above all in the Housing Companies and Public Sector business areas. With the profitability burdening building purpose modification project still on-going (expected completion during Q2/19) we lower our Q2 EBIT estimates while keeping our H2/19 estimates intact for a 2019 EBIT estimate of EUR 5.9m (prev. EUR 7.1m).

HOLD with a target price of EUR 6.0

On our estimates Consti trades in line with the construction company peer group on 2019E P/E but on a significant discount on 2020E multiples. With the profitability burdening on-going obligations and uncertainties relating to Consti’s earnings capacity under a healthier project pipeline, without major negative margin projects, we retain our HOLD-rating with a target price of EUR 6.0

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Tokmanni - Focus on improving profitability in ‘19E

26.04.2019 - 10.00 | Company update

Tokmanni’s focus in 2019E is to increase profitability and profit margin. Tokmanni’s revenue and LFL growth grew well in Q1 driven by campaigns and clearance sales. We see valuation of being moderate. Hence, we retain TP of EUR 9.0, but downgrade our rating to “HOLD”

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LFL growth was clearly above expectations

Tokmanni’s Q1 revenue grew by 8.3% and was EUR 188m vs. EUR 186m our expectation. LFL growth continued to be high with 4.1 % growth vs. 1 % our view. Sales was driven by clearance sales, Nettopäivät campaign and the change in assortment of newly-aqcuired Ale-Makasiini stores. Sales development was particularly good in clothing and tool products categories. At the same time, discounted prices weighed down gross margin (31,2% vs. 33,3% our view). Tokmanni’s target is to increase its gross margin and profitability and reduce the relative share of fixed costs in 2019E.

Focus on new store openings and increase in profitability

Tokmanni’s target to expand its store network has been efficient. In Q1’19 Tokmanni’s store network was 188 stores (175 stores in Q1’18). Tokmanni reiterates its guidance and targets to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. Tokmanni has agreed on opening of seven new stores and two relocated stores during 2019, hence, Tokmanni will exceed its targets in 2019E.

Retaining TP of EUR 9 with “HOLD”

Tokmanni’s figures were impacted by the changes of IFRS 16. We have updated our figures to reflect the changes. Based on Q1 results, we have slightly adjusted upwards our estimates. We now see revenue of EUR 936m and EBIT of EUR 63m for 2019E compared to previous estimates of EUR 921m and EUR 58m. In 2019E Tokmanni trades at 13x EV/EBIT which is some 18% discount to Nordic grocery focused peers. We retain our TP of EUR 9, but downgrade our rating to “HOLD”.

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Detection Technology - Q1 result in line, updated outlook

26.04.2019 - 09.20 | Earnings Flash

Q1 net sales at EUR 23.1m (+19.3% y/y) vs. EUR 22.3 m/22.6m Evli/consensus estimates. MBU sales were EUR 8.6m (EUR 8.8m our expectation) and SBU sales were EUR 14.5m (EUR 13.6m our expectation). DT’s Q1 EBIT came in at EUR 3.9m, which is in line with our estimates of EUR 4.1m (EUR 4.0m cons).

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  • Group level results: Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. R&D costs amounted to EUR 2.5m or 10.8% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.8m. Net sales of MBU increased by 13.8% y/y due to continued good demand from key customers and successful shipments.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 14.5m vs. EUR 13.6m Evli estimate. SBU sales grew 22.9% y/y due to increased demand for security solutions.
  • Updated outlook: sales of both business units will grow in line with the company's financial targets in the second quarter. The company expects demand to decline in the MBU business in the second half of 2019, as a significant customer will ramp down production of a device that uses DT's solution. Despite this, the company's total net sales are expected to grow in the second half of the year. There is uncertainty regarding demand, and the intensification of competition might be reflected in product prices.
  • Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

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Scanfil - Slow start for the year

26.04.2019 - 09.10 | Company update

Scanfil’s Q1 EBIT, at EUR 6.8m, came in below our EUR 8.0m estimate, while the EUR 130m sales topped our EUR 125m estimate. Scanfil did warn Q1 would be slow due to a few major customers and still expects clear pick-up in activity in Q2. We leave our growth and margin estimates unchanged, retaining our TP of EUR 4.75 and BUY rating.

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The 7% y/y revenue decline was due to two segments

Scanfil reorganized its segments in the beginning of 2019. The new structure includes Communication (previously Networks & Communications; 14% of Q1 sales), Consumer Applications (parts of Urban Applications and Other Industries; 18% of Q1 sales), Energy & Automation (some contracts added from other segments; 20% of Q1 sales), Industrial (parts of Urban Applications and Other Industries; 28% of Q1 sales), and Medtec & Life Science (21% of Q1 sales) segments. The Q1 revenue decline was attributable to the Consumer Applications (35% y/y decrease) and Communication (20% y/y decrease) segments. The other three segments’ revenues were either flat or increasing. Scanfil also expects Consumer Applications’ top line to grow in 2019 despite the plan to halt the production of a single major product where demand has been low since Q3’18.

Q1 EBIT margin low due to volumes and product mix

Scanfil managed a meagre 5.3% operating margin in Q1 (7.4% a year ago) owing to both low sales volumes and a suboptimal product mix. Although Scanfil has now posted substandard margins for two consecutive quarters (Q4 EBIT was similarly low due to product mix), we continue to expect 6-7% operating margins going forward. Scanfil targets 7% operating margin.

Our target price remains unchanged at EUR 4.75 per share

Scanfil’s peer group valuation multiples have stayed largely flat since the previous earnings report. Scanfil currently trades at 6.1x EV/EBITDA ‘19e and 7.8x EV/EBIT ‘19e, a valuation level in line with the peer group. Moreover, as we see no changes to Scanfil’s longer term outlook, we retain our target price of EUR 4.75 per share and leave our rating BUY.

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Consti - EBIT still slightly negative

26.04.2019 - 09.05 | Earnings Flash

Consti’s Q1 EBIT was in line with consensus but slightly below our estimates, at EUR -0.4m (EUR 0.1m/-0.3m Evli/cons.). Consti’s Q1 revenue of EUR 73.5m beat both our and consensus estimates (EUR 64.4m/62.4m Evli/cons.). Consti’s order backlog amounted to EUR 237.8m.

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  • Net sales in Q1 amounted to EUR 73.5m (EUR 62.3m in Q1/18), beating both our and consensus estimates (EUR 64.4m/62.4m Evli/cons.). Sales growth in Q1 was 18.0 % y/y.
  • EBIT in Q1 amounted to EUR -0.4m (EUR -0.2m in Q1/18), slightly below our estimates but in line with consensus (EUR 0.1m/-0.3m Evli/cons.). EBIT remained negative due to performance obligations relating to a building purpose modification project while profitability development otherwise was mainly positive.
  • The order backlog at the end of Q1 was EUR 237.8m, down 5.0 % y/y.
  • Guidance reiterated: Consti estimates that its operating result for 2019 will improve compared to 2018.

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Next Games - Revenue miss, EBIT negative as expected

26.04.2019 - 08.30 | Earnings Flash

Next Games Q1 revenue and EBIT amounted to EUR 9.8m (Evli EUR 12.0m) and EUR -2.4m (Evli EUR -2.1m) respectively. Next Games expects to achieve annual savings of approx. EUR 6.5m from its cost savings program. The company’s cash position was at EUR 4.8m at the end of the quarter.

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  • Next Games’ revenue in Q1 amounted to EUR 9.8m, below our estimates of EUR 12.0m. Revenue growth y/y on was 104%.
  • EBIT in Q1 amounted to EUR -2.4m, slightly below our estimate of EUR -2.1m. The adjusted operating profit amounted to EUR -1.3m. As a result of the company’s cost savings program, annual savings of approx. EUR 6.5m compared to H2/18 averages are to be achieved.
  • TWD: No man’s land: DAU during Q1 was 225k (Q4/18: 253k). MAU during Q1 was 669k (Q4/18: 728k). ARPDAU was EUR 0.22 during Q1 (Q4/18: 0.25).
  • TWD: Our world: DAU during Q1 was 211k (Q4/18: 223k). MAU during Q1 was 982k (Q4/18: 759k). ARPDAU was EUR 0.26 during Q1 (Q4/18: 0.28).
  • The company’s cash position at the end of the quarter amounted to EUR 4.8m and has according to the company began to stabilize.
  • Next Games expects to get at least two games into testing phase during 2020.

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CapMan - Outlook remains positive

26.04.2019 - 08.00 | Company update

CapMan posted solid Q1 results, although slightly below our estimates. Of particular interest were comments relating to carried interest, with potential materialization from H2/19 onwards. The fundraising of the newest Buyout fund is progressing well, while Infra has also seen positive development, with AUM now at EUR 270m. We retain our BUY-rating with a target price of EUR 1.85 (1.80)

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Comparable operating profit at a solid EUR 5.6m

CapMan’s Q1 results fell slightly below our estimates, with group turnover at EUR 9.3m (Evli 10.7m) and operating profit of EUR 4.7m (Evli 5.5m). The comparable operating profit, excluding one-off costs relating mainly to the acquisition of JAM Advisors, amounted to EUR 5.6m. The combined revenue of the Management Company business and Services business grew 27% y/y. No significant carried interest was booked during the quarter, but Scala success fees aided the Services business turnover. The operating profit was aided by a EUR 1.5m fair value change of the company’s market portfolio, with EUR 20m of the portfolio remaining at the end of the quarter.

Positive comments on carried interest outlook

Management comments regarding the carried interest outlook were positive. Carried interest materialization already during H2/19 appears plausible and potential in the coming years remains solid in both private equity funds and real estate. Near-term interest also remains on the progress of fundraising of the new Buyout fund and development of the first Infra fund, with total AUM in Infra already at EUR 270m, while management also hinted on new projects in the pipeline.

BUY with a TP of EUR 1.85 (1.80)

We have made no major revisions to our estimates post-Q1. We expect an operating profit of EUR 23.4m, supported by carried interest during the latter half of the year. Although uncertainties with carried interest are always present, the encouraging management comments alleviate some uncertainty concerns. We retain our BUY-rating with a target price of EUR 1.85 (1.80).

Open report

SRV - Results quite in line, guidance specified

26.04.2019 - 00.25 | Earnings Flash

SRV’s Q1 results were in general quite in line with our and consensus estimates. The operating profit was EUR 3.3m (EUR 3.8m/2.8m Evli/cons.) and operative operating profit EUR 0.5m (Evli 4.8m). Revenue was EUR 222.6m (EUR 224.7m/232.7m Evli/cons.). SRV specified its guidance, adding that the operative operating profit is expected to be lower than in 2017 (EUR 27m).

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  • SRV’s revenue in Q1 amounted to EUR 222.6m (EUR 215.7m in Q1/18), quite in line with our and consensus estimates (EUR 224.7m/232.7m Evli/cons.). Growth in Q1 amounted to 3.2% y/y.
  • The operating profit in Q1 amounted to EUR 3.3m (EUR -8.7m in Q1/18), slightly below our estimates but above consensus (EUR 3.8m/2.8m Evli/cons.), at an operating profit margin of 1.5 %. The operative operating profit amounted to EUR 0.5m (Evli EUR 4.8m) and includes an expense entry of approx. EUR 3m relating to REDI Majakka’s water damage and the dissolution of the VTBC fund.
  • The order backlog strengthened to EUR 1,782.5m (Q1/18: EUR 1,634.0m)
  • Guidance specified: SRV expects the full-year consolidated revenue for 2019 to grow compared to 2018 (EUR 959.7m). The operative operating profit is expected to improve compared to 2018 (EUR -10.0m) and to be positive, but lower than operative operating profit in 2017 (EUR 27m).
  • SRV is investigating the possibility to strengthen its balance sheet through the issuance of a new hybrid bond with an estimated size of EUR 45-60m.

Open report

Tokmanni - LFL growth continues to be impressive

25.04.2019 - 09.30 | Earnings Flash

Tokmanni had revenue of EUR 188,1m, which beats EUR 186/184m Evli/consensus estimates by ~ 1 %. LFL growth continues to be clearly above estimations at 4.1% vs. 1% our expectation. Strong revenue and LFL growth were driven by Nettopäivät campaign, change of assortments of Ale-Makasiini stores and clearance sales. Gross margin was 31,2 % vs. our 33,3% expectation. Due to the changes of IFRS 16, adj. EBITDA of 12.8 is not comparable with our estimate of 5.1. Tokmanni 2019E guidance reiterated; profitability and adj. gross margin are expected to increase from last year.

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  • Q1 revenue was EUR 188m vs. EUR 186m/184m Evli/cons, ~1 % above estimates. Revenue grew by 8.3% y/y, driven by 4.1% LFL growth (Evli LFL expectation 1%) and new openings.
  • Q1 adj. gross profit was EUR 58.8m (31.2% margin) vs. EUR 62.0m (33,3%) Evli expectation.
  • Q1 adj. fixed costs in total were EUR 46.8m (24.9% of revenue) vs. EUR 57.8m (31.1% of sales) Evli view.
  • Q1 adj. EBITDA was EUR 12.8m (6.8% margin) vs. EUR 5.1m (2.7%) Evli and EUR 5.3m (2.9%) consensus.
  • 2019 guidance intact: revenue will grow in 2019 based on new openings in 2018 and in 2019. Profitability (adj. EBITDA margin) will increase y/y in 2019E.

Open report

CapMan - A solid start to the year

25.04.2019 - 09.00 | Earnings Flash

CapMan’s Q1 results were slightly below our estimates. Group turnover amounted to EUR 9.3m (Evli EUR 10.7m) and the operating profit amounted to EUR 4.7m (Evli 5.5m), while the comparable operating profit was at EUR 5.6m. CapMan continued reallocation of its market portfolio capital, with EUR 20.0m remaining. Capital under management rose to EUR 3.2bn.

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  • Group turnover in Q1 amounted to EUR 9.3m (EUR 7.3m in Q1/18), below our estimates (Evli EUR 10.7m). No significant carried interest was booked during the quarter.
  • Operating profit in Q1 was EUR 4.7m (EUR 4.1m in Q1/18), below our estimates (Evli EUR 5.5m). Operating profit excl. IAC was EUR 5.6m
  • Management Company business revenue in Q1 was EUR 6.4m vs. EUR 7.2m Evli. Operating profit in Q1 was EUR 0.8m vs. EUR 1.8m Evli.
  • Investment business: Revenue in Q1 was EUR 0.0m vs. EUR 0.2m Evli. Operating profit in Q1 was EUR 3.9m vs. EUR 2.9m Evli.
  • Services business: Revenue in Q1 was EUR 2.9m vs. EUR 3.3m Evli. Operating profit in Q1 was EUR 1.8m vs. EUR 1.3m Evli.
  • Capital under management by the end of Q1 was EUR 3.2bn. Of the capital under management EUR 1.9bn was attributable to real estate funds, EUR 0.9bn to private equity funds and EUR 0.3bn to Infra.
  • CapMan continued reallocation of its market portfolio funds and had EUR 20.0m remaining at the end of Q1.

Open report

Scanfil - Sales beat, EBIT subdued

25.04.2019 - 09.00 | Earnings Flash

Scanfil missed our Q1 EBIT estimate of EUR 8.0m, the figure coming in at EUR 6.8m. The company said earlier Q1 will be relatively slow, citing low demand among a few significant customers. Scanfil continues to expect customer demand to pick up during Q2, holding on to its earlier guidance for the year.

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  • Q1 revenue amounted to EUR 130m vs. our expectation of EUR 125m. Revenue declined by 7% y/y due to customer-specific considerations.
  • The sales decrease was attributable to the Consumer Applications and Communication segments. Other customer segments’ revenues were stable or developed positively.
  • Q1 EBIT stood at EUR 6.8m (5.3% margin) vs. our estimate of EUR 8.0m (6.4% margin). The operating profit declined by a third on an annual basis due to lower turnover and unfavorable product mix.
  • Scanfil retains 2019 guidance for EUR 560-610m in revenue and EUR 36-41m in EBIT. The company expects Q2 to be much stronger in terms of revenue and EBIT.

Open report

Pihlajalinna - Profitability expected to increase in Q1

25.04.2019 - 08.20 | Preview

Pihlajalinna will report its Q1 earnings on May 3rd. As before, profitability and new contract pipeline are of interest but also comments on the failure of SOTE reform and its impacts. Our estimates reflect the IFRS 16 changes. We keep our rating “BUY” with target price of EUR 12.0 ahead of Q1.

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No major pipeline changes in Q1

Pihlajalinna expects its profitability and organic growth to increase in 2019E. The company will continue its expansion especially into regional capitals in 2019E-2020E. However, the failure of SOTE reform keeps the pipeline uncertain as municipalities’ eagerness to strike new contracts is impacted by SOTE. Provision of occupational healthcare services for Stora Enso started in Jan 2019 (we estimate value at EUR ~4m).

Acquisition of fitness centers continued in Q1

Pihlajalinna has expanded its services into wellbeing and preventative occupational healthcare. The company bought Forever fitness center chain in Feb 2018. The acquisition of Leaf Areena in Turku further expanded Pihlajalinna’s wellbeing services and the first Forever LITE fitness center was opened in Tampere in late 2018. Following the strategy, Pihlajalinna acquired FIT1 chain in Q1’19, adding five new fitness centers to its portfolio.

Retaining “Buy” with TP of EUR 12 ahead of Q1

Pihlajalinna published its restated financials for 2018 with IFRS 16 changes. Right-of-use assets increased by EUR 86.7m and interest-bearing debt by EUR 88m. We have updated our model to be in line with the restated figures but kept the underlying estimates unchanged. We expect Q1 revenue of EUR 126m and adj. EBITDA of EUR 13 (10.1 % margin). We expect profitability to increase in 2019E from last year’s weaker results caused by high start-up costs, transfer and M&A fees as well as high public specialized care costs. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q1.

Open report

Vaisala - Focus on integration and execution in H2

25.04.2019 - 08.15 | Company update

Vaisala’s Q1 missed our estimates, but overall our expectations for full year 2019E remain intact. After two recent acquisitions and subsequent increase in operating expenses, Vaisala needs to succeed in integrating the acquired business. Strong received orders and pick up in larger projects support outlook. We maintain HOLD recommendation with target price of 18 euros.Vaisala’s Q1 missed our estimates, but overall our expectations for full year 2019E remain intact. After two recent acquisitions and subsequent increase in operating expenses, Vaisala needs to succeed in integrating the acquired business. Strong received orders and pick up in larger projects support outlook. We maintain HOLD recommendation with target price of 18 euros.

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Q1 miss, but order book and projects support outlook

Vaisala’s Q1 result miss was due to lower than expected seasonal net sales in Weather & Environment. W&E net sales were 49.6 MEUR vs. 55 MEUR our expectation, while Industrial Measurements net sales were 34.6 MEUR vs. 33 MEUR our expectation. On Group level, Q1 EBIT came in at 0.0 MEUR vs. our expectation of 2.3 MEUR. Despite Q1 miss, the outlook for both BU’s looks supportive with strong orders received (+30%) and recent pick up in larger W&E projects (15 MEUR Argentina and 7 MEUR Sweden deals announced).

Estimates unchanged, OPEX increase to weigh on 2019E EBIT

Post Q1, our estimates are unchanged. We expect 2019E net sales to be 382 MEUR (10% growth yoy) and EBIT to be 31 MEUR (41 MEUR adjusted for PPA and one-offs), representing 8.1% EBIT margin (10.8% adj. EBIT margin). Estimated EBIT decline in 2019E is due to acquisitions related increase in operating expenses, which we estimate to increase roughly 16% to 172 MEUR (vs. 148 MEUR 2018).

HOLD maintained with target price of 18 euros

On our estimates, Vaisala is trading at adjusted EV/EBIT and EV/EBITDA multiples of 17x and 14x for 2019E, which is 4-8% lower than our peer group. Looking at 2020E multiples, valuation looks slightly more attractive given our estimated EBIT improvement, but we are not ready to put emphasis on next year due to the on-going process of integrating the acquired businesses. We see current valuation as fair, thus we maintain HOLD and target price of 18 euros.

Open report

Finnair - Global traffic expected to grow in ‘19E

25.04.2019 - 08.15 | Company update

Finnair’s Q1’19 results fell short of expectations. Comparable EBIT was EUR -16.2m vs. -6m our view. Especially passenger growth in China was low. The company expects increased competition due to increased capacity especially on routes between Europe and Asia. Finnair reiterates its guidance: 10 % capacity growth in 2019 and revenue growth of slightly slower. We keep our “HOLD” rating with TP of EUR 8.0.

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Q1: costs and fuel weighed down the result

Finnair’s revenue was in line with our expectation (EUR 673m vs. 679m our view). The company’s Q1 adj. EBIT was clearly below expectations at EUR -16.2m vs. EUR -6m Evli and EUR -6m cons. Compared to our estimates the loss was driven by increased costs. Operating costs (excl. fuel and staff costs) were EUR 353m vs EUR 339 our view. Increase in OPEX was driven by higher passenger and handling costs as well as increased aircraft materials and overhaul costs. Fuel costs increased from the year end but was below our expectations (EUR 145m vs. 155m our view).

Competition expected to increase in 2019

Finnair guides 10 % ASK growth in 2019 with passenger revenue slightly behind. This will be driven by Feb-2019 delivered A350 and a second A350 which will be delivered in Q2’19. Added capacity will be mostly put to Asian routes. Finnair expects increased competition due to added capacity especially on routes between Europe and Asia. Based on Q1 results, we have made small adjustments to our cost estimates but revenue remains intact. We expect EBIT 2019E to be EUR 195m (previous estimate EUR 203m).

Retaining “Hold” with TP of EUR 8

It is notable that the peer multiples might not reflect the changes of IFRS 16 yet which makes the comparison challenging. On our estimates Finnair trades at an EV/EBITDA of 3.4x and P/B of 1.1x in FY19E-20E, while generating ROCE of ~7% with a WACC of 8.9. We see valuation as fair and hence retain “Hold” with TP of EUR 8.0.

Open report

Suominen - Improvement on the cards

25.04.2019 - 08.00 | Company update

Suominen has disappointed expectations several quarters in a row. The company now posted EUR 3.0m Q1 EBIT, a figure clearly above our EUR 2.0m estimate. The earnings beat was driven by improved gross margin; the product of price hikes and stabilizing raw materials costs. Volume outlook is still uncertain, yet in our view Suominen’s earnings have now bottomed out. We increase our target price to EUR 2.85 (2.40) per share, while retaining our HOLD rating.

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2019 volume outlook remains uncertain

The company has managed to improve its gross margin through price hikes, however this has meant losing volumes. We expected the company to lose Q1 volumes by around 5% y/y. Therefore the 9% Q1 volume decline we estimate from the disclosed figures came as a negative surprise. We had previously expected volume declines of around 8% for the remaining quarters of 2019, while estimating 7% volume decline for the whole year. We now expect 2019 volumes to decline by 9%.

History suggests 11-12% gross margin potential

Suominen achieved an 8.1% Q1 gross margin (vs. our 7.0% expectation and 7.4% a year ago). The GM had previously touched the low of 6.2% in Q4’18. We expect the 2019 GM to improve to 8.7% as higher prices continue to pass through. We estimate Suominen to reach a roughly 11% GM by 2021 as the recent years’ oversupply situation balances out. According to our analysis, this would imply an EBIT margin of ca. 5% in 2021E.

We increase our target price to EUR 2.85 per share

We expect Suominen to reach 3.1% EBIT margin in 2019, while estimating further margin upside to the tune of 200bps by 2021 on the back of stabilizing nonwovens market. In our view a 5% EBIT margin is a reasonable assumption in a long-term valuation context. However, given the company’s recent challenges we are not yet ready to fully weight this long-term potential in our TP. We do note that the 5% margin assumption would justify a share price materially above EUR 3 per share. Suominen now trades at 6.1x EV/EBITDA ‘19e, a 20% discount to peer multiples.

Open report

Suominen - The results look promising

24.04.2019 - 16.00 | Earnings Flash

Suominen posted Q1 adj. EBIT, at EUR 3.0m (vs. our EUR 2.0m estimate), substantially above our expectations. The company’s gross profit (and margin) improved due to higher prices and stabilizing input costs. Volumes were lost, yet the results point to Suominen having achieved a turnaround in earnings.

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  • Q1 revenue amounted to EUR 110m vs. our estimate of EUR 116m. Revenue grew by 3% y/y (EUR 3.2m in absolute terms). The EUR/USD exchange rate accounted for EUR +4.7m, quite in line with our EUR 4.3m positive expectation. This means organic growth was roughly EUR -1.5m. We expected clearly positive organic growth (around EUR 4m), estimating improved pricing would outweigh volume losses.
  • Gross profit totaled EUR 8.9m (8.1% margin) vs. our EUR 8.0m (7.0% margin) projection.
  • In other words, even though Suominen lost substantial volumes, price hikes and stabilizing input costs helped the company to achieve a major profitability improvement.
  • Adj. EBIT reached EUR 3.0m (2.7% margin) vs. our EUR 2.0m (1.8% margin) estimate.
  • Suominen retains its 2019 guidance for flat revenue and improving adj. EBIT.
  • The company also announced the appointment of Mr. Toni Tamminen as CFO (effective 30 Jul 2019).

Open report

Vaisala - Q1 below our expectations

24.04.2019 - 14.20 | Earnings Flash

Vaisala’s Q1 net sales at 84.2 MEUR vs. 87 MEUR our expectation and 88.5 MEUR consensus. Q1 EBIT was 0.0 MEUR vs. our expectation of 2.3 MEUR. Adjusted EBIT was 3.0 MEUR vs. our 5.0 MEUR adjusted EBIT expectation.

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  • Group level results: Q1 net sales at 84.2 MEUR vs. 87 MEUR our expectation and 88.5 MEUR consensus. Q1 EBIT was 0.0 MEUR vs. our expectation of 2.3 MEUR. Adjusted EBIT was 3.0 MEUR vs. our 5.0 MEUR adjusted EBIT expectation
  • Gross margin was 53.2% vs. 51.3% last year
  • Orders received was 113 MEUR vs. 87.1 MEUR last year
  • Weather & Environment (W&E) net sales was 49.6 MEUR vs. 55 MEUR our expectation. EBIT was -4.3 MEUR
  • Industrial Measurements (IM) net sales was 34.6 MEUR vs. 33 MEUR our expectation. EBIT was 4.6 MEUR
  • CEO comment: “Integration of Leosphere is proceeding according to plan and integration of K-Patents has started well during the first quarter. We expect to complete these integration projects during the second half of this year.”
  • Business outlook for 2019 unchanged: 2019 net sales to be in the range of EUR 380–400 million and operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.

Open report

Finnair - EBIT below expectations

24.04.2019 - 10.05 | Earnings Flash

Finnair’ Q1 adj. EBIT was clearly below what we expected at EUR -16.2 vs. our expectation of EUR -6m. Consensus was at -6m. Finnair 2019E guidance reiterated; 10% capacity growth and revenue growth somewhat behind capacity. Especially transfer traffic between Asia and Europe grew well as well as cargo. Finnair expects the competition to increase especially between Europe and Asia and in Asian traffic as the capacity increases. Finnair’s figures were largely impacted by IFRS 16 changes.

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  • Q1 revenue was EUR 673m vs. EUR 679m/680m Evli/cons.
  • ASK grew by 10.4 % whereas RASK decreased 4.9 % in Q1.
  • Q1 adj. EBIT was EUR -16m vs. EUR -6m/-6m Evli/cons. The difference is caused by increased expenses and higher price of fuel compared to the previous year.
  • Q1 comparable EBITDA was 60m vs. 75m our view. Pre-tax profit was -49m vs. -31m our view. The difference comes partly from financial expenses that were EUR 31.6m vs. EUR 25m our view.
  • Absolute costs: Fuel costs were EUR 145m vs EUR 155m our view. Staff costs were EUR 130 vs. 128m our view. All other OPEX combined were EUR 429m vs. 339m our view.
  • Unit costs: CASK was 6.46 eurocents vs. 6.42 our view while CASK ex fuel was 5.02 eurocents vs. 4.97 our view.

Open report

Talenom - Smooth sailing

24.04.2019 - 08.45 | Company update

Talenom’s Q1 earnings brought no larger surprises. The acquisition of Sweden-based Wakers Consulting and the upgraded guidance greatly reduced two of the in our view main uncertainties and the outlook continues to look solid. We retain our BUY-rating with a TP of EUR 35 (24.5).

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No larger surprises in Q1 results

Talenom’s Q1 results did not deviate substantially from our estimates, with revenue at EUR 14.8m (Evli 14.7m) and EBIT at EUR 3.4m (Evli EUR 3.2m). Talenom revised its guidance earlier in Q1 and expects net sales growth in 2019 to increase (prev. remain at a similar pace) compared to 2018 (18.0%) and the operating profit margin to improve (prev. improve slightly) (2018: 17.5%). The hidden gem in our view is the profitability guidance upgrade, as the improvement is expected to stem from development of the accounting production line during H2/19, which we expect to support margin improvement in 2020.

Viewing expansion with caution

Talenom acquired Wakers Consulting during Q1, opening up its first operations outside Finland. The characteristics of the acquired firm in our view proves to show a continued healthy sense of risk aversity, as by size Wakers Consulting is not far from what we would consider a minimum for soundly being able to implement the intended organically driven growth strategy. Management comments on expansion plans imply limited investment needs and erases the in our view biggest uncertainties related to the expansion.

BUY with a target price of EUR 35 (24.5) per share

We have pre-Q1 been cautious to margin improvement potential, which now looks probable also in 2020 through accounting line development during H2/19. Although share price inclines have stretched valuation, with the lower expansion and margin improvement uncertainty we are prepared to accept higher multiples and value Talenom at 27.5x and 22.1x 2019E and 2020E P/E respectively, for a TP of EUR 35 (24.5), reiterating our BUY-rating.

Open report

Talenom - Minor earnings beat

23.04.2019 - 13.50 | Earnings Flash

Talenom’s first quarter results were quite in line with our expectations. Net sales amounted to EUR 14.8m (EUR 14.7m Evli) while the operating profit was slightly above our estimates, at EUR 3.4m (EUR 3.2m Evli). The guidance was revised already earlier during Q1 and Talenom expects net sales growth to be greater than in 2018 and the operating profit margin to improve compared to 2018.

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  • Talenom’s net sales in Q1 amounted to EUR 14.8m (EUR 12.7m in Q1/18), in line with our estimates (Evli EUR 14.7m). Q1 revenue growth was at 16.1% y/y.
  • The operating profit in Q1 was EUR 3.4m (EUR 2.6m in Q1/18), above our estimates (Evli EUR 3.2m), at a margin of 23.3%.
  • Talenom revised its guidance after the acquisition of Wakers Consulting during Q1, now expecting the net sales growth rate to be greater than (prev. same rate) in 2018 and the operating profit margin to improve (prev. improve slightly) compared to 2018
  • Net investments during Q1 increased to EUR 10.5m due to adoption of IFRS 16, with the adjusted net investments (excl. IFRS 16) at EUR 2.3m compared to 3.3m in Q1/18.

Open report

Tokmanni - LFL growth expected to normalize

18.04.2019 - 09.15 | Preview

Tokmanni will report its Q1 earnings on April 25th. Last year’s LFL growth was surprisingly high and for Q1’19 we expect LFL growth to normalize. Tokmanni’s Q1 revenue should be driven by the positive retail growth in early 2019. We retain our “Buy” rating with TP of EUR 9.0

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Store network growing fast in 2019

Tokmanni’s store network was 186 at the end of 2018 and in Q1’19 the store network grew by four new stores in Northern Finland through acquisitions. In February Tokmanni agreed on the opening of three new stores in 2019 and on one store reopening. Tokmanni’s revised target is to increase its store network to cover more than 200 stores, which implies of five new store openings or relocated stores each year. With this year’s store network growth Tokmanni should clearly exceed its yearly target.

LFL growth expected to normalize in Q1

As retail market is highly seasonal, Q1 is normally weaker than other periods. Tokmanni’s LFL growth hit records in 2018 with annual LFL growth of +5.6%. In Q1’18 Tokmanni’s reported LFL growth was as high as of 6,1%. We have kept our expectations conservative in 2019E and foresee of LFL growth of 1%. We have retained our gross margin expectation for Q1 at 33,3% even though Tokmanni’s target is to increase the gross margin in 2019.

Retaining estimates intact with “Buy” and TP of EUR 9

We foresee Q1 revenue of EUR 186m (7.2% growth y/y, of which LFL 1.0%) and adj. EBITDA of EUR 5.1m. (EUR 0.9m Q1’18). We retain “Buy” rating with TP of EUR 9.0. On our estimates Tokmanni trades 10.7x and 9x EV/EBIT in FY19-20E (prior IFRS 16 changes) and offers attractive dividend yield in FY19-20E. Our estimates do not reflect IFRS 16 changes yet but will be updated when Q1 results are out.

Open report

SSH - Strategy proceeding but painfully slow

18.04.2019 - 09.05 | Company update

SSH’s Q1 result missed our expectations due to lackluster software fees in the period. Q1 net sales were 2.7 MEUR and operating loss was -1.3 MEUR vs. our expectation of 3.6 MEUR net sales and -0.9 MEUR operating loss. We maintain SELL recommendation with revised target price of 1.10 euros (previously 1.60).

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Q1 miss puts pressure on closing licensing deals

Q1 net sales missed our estimates due to the lack of larger licensing deals in the period. Software fees were EUR 0.5 million (1.1m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli). Although there is still plenty of time left to catch up for the miss, this puts pressure on closing several larger licensing deals in the coming quarters to reach the guided 10% growth for 2019E. According to management UKM pipeline looks good.

Strategy proceeding but painfully slow

No material new news was provided in conjunction with result regarding sales ramp up of PrivX and NQX. PrivX remains at the heart of SSH’s growth strategy, but revenue is not expected to be material yet. We have made small downward changes to our estimates after the Q1 result. We estimate SSH’s 2019E net sales to decline -7% to 17.1 MEUR (reaching guidance though) and 2019E EBIT to be 0.2 MEUR. Our estimates for the coming years are also broadly intact, with net sales growth expectations at 12% for 2020E and 2021E and EBIT improving towards 2021E.

Risk/reward still not attractive, SELL maintained

On our estimates, SSH is trading at 2019-20 EV/Sales multiples of 3.0x and 2.6x. Given the slow growth pace, lack of profitability and uncertainty to our sales estimates, we see valuation still challenging from a risk/reward perspective. We maintain SELL recommendation with revised target price of 1.10 euros (previously 1.60). Our target price is based on EV/Sales multiples of 2.5x and 2.2x on our 2019 and 2020 estimates.

Open report

SSH - Q1 result below our expectations

17.04.2019 - 09.15 | Earnings Flash

SSH Q1 result was below our expectations. No larger licensing deals were announced during Q1, which led to Software fees being clearly lower than last year. Comparables were high, due to last year’s Q1 figures including 1 MEUR Sony related patent income.

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  • Q1 net sales totaled EUR 2.7 million (3.6m our expectation)
  • Software fees were EUR 0.5 million (1.1m Evli), Professional services were EUR 0.1 million (0.3m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli)
  • Q4 operating loss was EUR -1.3 million (-0.9m our expectation)
  • EPS was -0.04 (vs. -0.03 our estimate)
  • Liquid assets were EUR 12.3m (vs. 12.6m Q1/18)

Business outlook for 2019 unchanged: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates

Open report

Finnair - Capacity growth as expected

17.04.2019 - 09.15 | Preview

Finnair’s capacity growth in Q1 was in line with the guidance for 2019E (10.4% vs. guidance 10%) and with our Q1 expectation of 11 %. Passenger growth on the other hand was weaker than expected. We have implemented the IFRS 16 changes to our estimates and kept Q1 expectations mainly intact. We keep our rating “HOLD” and target price of EUR 8.0 ahead the Q1.

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Soft start in Q1 traffic information

Finnair’s traffic continued soft in Q1. Overall capacity (ASK) grew by 10.4 %, which is somewhat in line with our 11 % expectation. Sold capacity (RPK) growth was only 4.2 % which stayed clearly below our estimation of 7 %. As a result of that, passenger load factor (PLF) continued decline by 4.6 % percentage points in Q1 to 78,3 %. Largest drop was in Asia (-6.2pp) but also in Europe (-3.2pp) and domestic (-3.2pp).

Fuel prices rising from its lowest point

Jet fuel prices reached its lowest point during the turn of the year but has increased since then. Average price moved on q/q basis by -7% in EUR and by -8% in USD compared to the average prices of 4Q18. Also, on a y/y basis the prices moved by -3% in USD when compared to the average price of 1Q18. However, the average price in EUR was 5% higher.

IFRS 16 changes implemented to our estimates

The effects of IFRS 16 to Finnair’s financials are noteworthy. Lia-bilities in 2018 increased by 1,1b euros and assets by 992 million euros. 2018 EBIT improved from EUR 169m (margin 6,0 %) to EUR 218m (margin 7.7%). We have kept Q1 estimates largely un-changed apart from the changes caused by IFRS16 and the changes in the accounting principle of aircraft frame components. We expect Finnair’s Q1 revenue to be EUR 679m (6 % growth) while foreseeing adj. EBIT of -6m (margin -0.9 %). We keep our rating “HOLD” and TP (EUR 8.0).

Open report

Detection Technology - Expecting to fire on both cylinders in Q1

17.04.2019 - 08.20 | Preview

Detection Technology will report Q1 earnings next week on Friday April 26th. We expect both business units to perform well in Q1, with SBU growth coming back on track and MBU’s good momentum continuing. Our focus will be on the expected pick up of the security market and market comments. Our rating and TP remain intact ahead of Q1.

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Security market expected to pick up again

DT said in their Q418 result that they saw signs of security market picking up again and overall the beginning of the year is expected to be strong in all markets. Consequently, DT expects double digit sales growth in the first half, but second half is however more uncertain, with of one of MBU’s major customers ramping down manufacturing of a certain device. We expect both BU’s to perform well in Q1, with SBU growing 15% and MBU 17% yoy. We expect Q1 net sales to be 22.3 MEUR (19.3 MEUR Q118) and Q1 EBIT to be 4.1 MEUR (3.7 MEUR Q118). Consensus is expecting Q1 net sales of 22.6 MEUR and EBIT of 4.0 MEUR.

Varex acquiring Direct Conversion AB for 75 MEUR

DT’s peer company, Varex Imaging, recently announced its intent to acquire 90% of Direct Conversion AB for a price of 75 MEUR for the whole company. The Swedish company had net sales of 16 MEUR in 2018, which means a 4.7x EV/Sales deal multiple. This further proves the potential seen in direct conversion and photon counting, an area which DT is also investing in with its asset purchase deal of the French MultiX.

BUY rating and TP of 19 euros maintained ahead of Q1

For 2019E, we expect DT’s net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on slightly weaker comparables. We expect 2019E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Our rating “BUY” and TP EUR 19.0, remain unchanged ahead of Q1.

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Suominen - Results finally on the horizon?

16.04.2019 - 09.10 | Preview

Suominen reports Q1 results next week, on Wed, Apr 24. Q4 proved another miss in a long series, however there are tentative signs pointing to earnings having bottomed out. The company has hiked prices since last autumn (although volumes are likely to be lost as a result), and raw materials pricing pressure has become a less acute problem with all the major inputs registering double-digit price declines during the last six months.

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Focus will be on the gross margin and volume dynamics

Gross margin continued to decline in Q4, hitting a low of 6.2%. We expect the Q1 gross margin at 7.0% (vs 7.4% a year ago). With the onset of nonwovens price hikes and recent declines in raw materials prices the gross margin is bound to increase, yet it is hard to say to what extent volumes might have been lost. We are forecasting 5% y/y volume decline for Q1. We expect Q1 revenue at EUR 116m (8% y/y increase) and adj. EBIT at EUR 2.0m, or 1.8% margin (vs EUR 1.5m and 1.5% a year ago). Our forecast could be topped on the gross margin level as input prices have been weaker than expected. However, we leave our operative estimates unchanged as the gross margin positives and volume negatives should cancel each other out on the absolute gross profit level.

First quarter with the new CEO behind the wheel

Mr. Petri Helsky (previously CEO of Metsä Tissue) has held the seat as Suominen’s President & CEO since Jan 7. Suominen guides flat revenue and improving adj. EBIT for 2019. We expect 2019 revenue to increase by 3% (mostly due to FX), and EBIT at EUR 12.5m (EUR 4.6m) as gross profit is set to improve.

Estimates remain largely intact, FX basically flat

We retain our HOLD rating and target price of EUR 2.40 per share ahead of the Q1 report. We stay cautious for now despite expected gross margin improvement as it is unclear how much volume might be lost. Peer group multiples have gained sharply in recent months, meaning there is solid upside potential should Suominen manage to turn around earnings trajectory in 2019.

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Exel Composites - Initiating coverage with BUY

12.04.2019 - 09.20 | Company report

Exel Composites has grown mainly through acquisitions in recent years. Organic growth has been weak due to challenges in telecommunications and infrastructure markets. Moreover, the company’s EBIT margin, at ca. 5% last year, has declined to way below the desired level. A recent acquisition further cut profitability. Volume visibility is limited, yet we take a constructive view based on Exel’s repositioning towards the wind energy sector, where longterm fundamentals are strong and carbon fiber reinforcements are gaining further market share.

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The wind energy sector is now Exel’s top customer industry

The wind energy sector recently claimed the position as Exel’s most important customer industry. Exel has selected wind turbine blade reinforcements as the main application to drive order volumes. We estimate this market to grow at low double-digit rates in the coming years, and thus expect Exel to be able to add EUR 3-5m in sales p.a. within the segment. According to our analysis, operational leverage should help Exel to achieve a 7% EBIT margin in 2021 (up from adjusted 2018 operating margin of 5.2%) despite a 100bps gross margin decline due to the increased share of lower margin wind energy sector deliveries.

Execution is key, the company needs to win large accounts

In our view Exel is to gain from volume tailwinds within select customer industries and thus set to grow especially within the Construction and Infrastructure segment. While efficiency measures such as the cost reduction program targeting EUR 3m in annual savings by 2020 are important for improving the operating margin, we recognize higher volumes as the main value driver. To move the needle, Exel should add such new customers that could generate annual revenues in the EUR 5m ballpark.

Our rating is BUY, target price EUR 5 per share

We initiate coverage with BUY based on our multiple and DCF analysis. Our target price implies a 2019E EV/EBITDA multiple of 8x vs. historic average of almost 9x and the peer group currently trading at around 9-10x.

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Consti - Time to regain profitability

29.03.2019 - 00.00 | Company report

Consti has had project management related issues, which has dented earnings during the past year, and has been taking measures to improve profitability. We expect margin recovery, although risks to future earnings still remain. We downgrade to HOLD (BUY) with a target price of EUR 6.0.

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Leading renovation company seeking to regain profitability

Consti is a market leader in the less cyclical Finnish renovation market, where the demand outlook remains good due to among other things an ageing building stock. Consti’s performance has during the past years however been hampered by internal project management and execution related issues, which has left a dent in profitability. Consti has been implementing changes towards a more customer-centric organization and to increase operational efficiency, expected to also aid profitability through cost-savings.

Expecting margin recovery

We expect Consti’s focus to be on improving margins and as such estimate only slight sales growth for the coming years, with our estimated 2018-2021E sales CAGR at 2.2%. Sales growth has been affected by the implementation of stricter tendering criteria, which we expect to continue to have an effect, but on the other hand has a reductive effect on possible further unprofitable projects. A larger share of the unprofitable projects have been completed but open risks still remain. We expect profitability to be supported by a lesser impact of the unprofitable projects along with an alleviation of the pressure from subcontractors and suppliers following boom years in building construction volumes. Our EBIT-margin estimate for 2019E is 2.2%.

HOLD (BUY) with a target price of EUR 6.0

Consti trades at a 22%/31% discount on 2019E EV/EBIT to our mainly Nordic construction and building installations and services peer groups. With and elevated risk profile due to internal project management issues and the on-going arbitration proceedings in the Hotel St. George project we consider a discount justifiable. We value Consti at 9.2x 2019E EV/EBIT for a target price of EUR 6.0 and downgrade to HOLD (BUY).

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CapMan - Gaining momentum

20.03.2019 - 09.00 | Company report

CapMan has been continuing to show signs of its business moving in the right direction, having successfully launched several important funds and signed new and additional mandates and recently seen AUM again passing the EUR 3bn mark. 2018 saw earnings fall due to negative returns on the non-core market portfolio but the earnings outlook for 2019 onwards remains attractive with core business area earnings picking up pace. We retain our BUY rating with an ex-div target price of EUR 1.80 (1.75).

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Additional earnings stability through increased fee income

CapMan is seeking to create a healthier earnings base, with the role of volatile carried interest decreasing and the more stable fee income increasing. CapMan is further seeking to expand its investor base, currently consisting mainly of local tier 1 investors. 2018 in our view was a year of clear signs of the business improving as intended, although profitability fell due to negative returns on the non-core market portfolio. Several important funds have been launched in the past few years along with the signing of new and additional mandates, for instance the additional EUR 320m BVK mandate, that will have a positive impact on growth and earnings in early 2019 and over time.

Dividends an important part of the investment case

CapMan has raised the absolute DPS now six years in a row and revised its dividend policy, targeting to annually increase DPS. We expect CapMan to distribute a dividend of EUR 0.13 per share in 2019E, corresponding to an estimated dividend yield of 7.7%.

BUY with a target price of EUR 1.80 (1.75)

Our sum-of-the-parts approach implies a fair value of EUR 1.75 per share. On earnings-based multiples, primarily P/E, valuation compared to the three by size comparable peers appears fair. The dividend yield on our estimates however shows a clear disparity, with CapMan’s dividend yield on our estimates approx. 20% above the peers. We retain our BUY-rating with an ex-div (post equity repayment of EUR 0.06) target price of EUR 1.80 (1.75).

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Innofactor - Slightly below estimates

05.03.2019 - 09.30 | Earnings Flash

Innofactor’s Q4 earnings were as expected negative and the results as a whole were slightly below our estimates. Innofactor’s net sales in Q4 amounted to EUR 15.9m (Evli 16.4m) and EBITDA was -0.9m (Evli -0.7m). Innofactor expects its net sales and EBITDA in 2019 to increase from 2018 levels (EUR 63.1m and EUR -1.0m respectively). Innofactor reported an order backlog of EUR 32m, up some 40% y/y.

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  • Innofactor’s net sales in Q4 were EUR 15.9m, slightly below our estimates of EUR 16.4m. Sales growth in Q4 was -7.3 % y/y.
  • The EBITDA in Q4 amounted to EUR -0.9m, falling slightly below our estimates (Evli EUR -0.7m), at an EBITDA-margin of -5.7 %. The weaker profitability was according to Innofactor due to weaker Dynasty product sales, weaker than anticipated revenue in Denmark and some project write-downs.
  • Guidance: Innofactor’s net sales and EBITDA in 2019 are expected to increase from 2018 levels, when the net sales and EBITDA amounted to EUR 63.1m and EUR -1.0m respectively.
  • Dividend proposal: Innofactor’s BoD proposes that no dividend be paid for 2018 (Evli EUR 0.0).
  • Operating cash flow during 2018 was EUR -0.6m.
  • Active personnel at the end of the period 550 (2017: 601)
  • Order backlog at around EUR 32m, up around 40% y/y. Has not previously been reported.

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Aspo - Larger EBIT gain to materialize in ‘20

01.03.2019 - 13.15 | Company update

We met with Aspo’s management to discuss near term outlook for ESL and Telko. Based on the discussions, we revise our estimates for 2019-20. While in our view Aspo companies are on a steady track towards higher EBIT margins, we acknowledge that our estimates have been too optimistic, especially for 2019. We update our projections to reflect the fact that the earnings improvement trajectory for ESL and Telko is likely to play out over a longer period than we previously expected.

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We now expect flat H1’19 EBIT for ESL Shipping

Whereas we previously expected close to EUR 7m quarterly EBIT for ESL starting from the beginning of Q2’19, we now expect the second quarter to stay relatively muted (EUR 4m EBIT). Compared to our initial expectations, we now see it will take longer for ESL to reach the two new LNG vessels’ optimal performance level. While the crane issue should be fixed by the end of Q1, it will be a few more months before operational efficiency will achieve the desired standards. We expect ESL to demonstrate more significant EBIT improvement during the second half of 2019, and we estimate a quarterly EBIT above EUR 6m to be feasible after 2019.

Telko’s 2019 EBIT margin to improve by 30bps

Telko’s EBIT margin improved by 40bps in 2018, reaching 4.5%. Whereas we previously expected further margin expansion to the tune of 100bps in 2019, we now moderate our estimate to equal a 30bps increase. Procurement efficiency will improve slower than we estimated earlier. Telko’s stated target for 2020 is an EBIT margin of 6-7%. We now expect Telko to reach this target only during the last quarter of 2020.

Our rating is BUY, target EUR 9.50 (9.75) per share

Aspo now trades at 13.6x our 2019e EBIT. We update our target price to EUR 9.50 (9.75) per share based on SOTP and DCF valuations. Our rating remains BUY.

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Cibus Nordic - Property income to grow further

28.02.2019 - 09.15 | Company update

Cibus updated its dividend policy. Dividend payments will now increase on a quarterly basis (at a 5% annual pace). While there have been no major changes in the underlying portfolio fundamentals, the company has managed to increase its cash flow by 10% since the March 2018 IPO due to acquisitions and refinancing activities. The portfolio now holds 132 Finnish properties with a gross asset value of EUR 816m; 2019 pipeline might add another EUR 50m.

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NOI capacity unchanged at EUR 47.8m, income at EUR 31m

Profit from property management was 1.5% below our expectations. Administration costs were higher during Q4, amounting to EUR 1.4m vs the budgeted EUR 0.9m cost. The higher expenses were attributable to the CEO departure. Cibus has now shifted to financial year that follows the calendar year. Dividends will be paid out on a quarterly basis; the first 2019 payment has a June record date. From now on, Cibus targets a 5% annual increase in dividends. In our view, Cibus has ample capacity to increase its annual payments. The proposed 2019 distribution of EUR 0.84 per share implies a total dividend of EUR 26.1m, or a 7.8% yield. We have estimated that the current portfolio has an annual distribution capacity amounting to close to EUR 30m. Cibus estimates its operating income capacity at EUR 31m, up from the previous EUR 30.6m figure.

EPRA NAV amounted to EUR 11.1 (11.2) per share

The central portfolio metrics were basically flat. Occupancy rate improved slightly to 96.0% (95.8%), with LTV at 58.4% (58.3%). Cibus has increased its bank financing to EUR 354m (EUR 325m), while the margin has decreased by 20bps, to 1.9%, and the weighted average tenor increased to 2.9 years (2.3).

Our target still stands at SEK 120, downgrade to HOLD

Our expectations for Cibus’ portfolio remain unchanged. We expect Cibus’ 2019 acquisition pipeline (approximately EUR 50m) to comprise mainly of grocery properties let to Kesko. We are waiting to see the acquisitions materialize. We retain our target price of SEK 120 per share and update our rating to HOLD (BUY).

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Marimekko - Downgraded to “Sell”

28.02.2019 - 08.55 | Company update

Marimekko’s soft international sales in Q4 were largely attributed to timing issues of wholesale deliveries . While growth appears to remain on the right track also in 2019E, flat adj. EBIT in 2019E is not enough to carry the recent clear increase in valuation multiples – “Sell” (”Buy”).

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15% int. revenue drop largely attributed to timing issues

Marimekko’s international revenue declined by 15%, or by EUR 2.0m in Q4. This was driven primarily by APAC (-26%, EUR -1.4m) but also by EMEA (-11%, EUR -0.3m) and North America (-12%, EUR -0.3m). Management attributed to decline in APAC largely to a timing issue, as certain wholesale deliveries were postponed to Q1’19. The decline in EMEA and Norther America was also largely attributed to timing of wholesale deliveries.

Finland still strong and a bit better than we expected in Q4

Revenue in Finland grew by +12%, split to +8% own retail (own retail LFL +6%) and +22% wholesale. Wholesale was supported by non-recurring promotional deliveries, but retail revenue continued good growth, even though comps are tougher.

Adj. EBIT in 2019E weighted down by growth investments

Marimekko guides revenue to grow and adj. EBIT to remain flat in 2019E. Revenue will be flat in Finland, as non-recurring promotional deliveries will not reach the level of 2018. Revenue in APAC is expected to grow, supported by start of online sales in China and new stores. Despite revenue growth adj. EBIT will remain flat, as marketing and other growth spend is increased to spur growth in 2019E and beyond. CAPEX will also increase with store refurbishments, IT and HQ premise improvements.

Downgraded to “Sell” (“Buy”), ex-div TP intact at EUR 22

We have slightly cut estimates for 2019E. On our estimates Marimekko now trades at a clear premium to the peer group. While growth appears to remain on the right track also in 2019E, flat adj. EBIT in 2019E is not enough to carry the recent clear increase in valuation multiples, in our view. We downgrade to “Sell” (“Buy”) and keep our ex-div TP at EUR 22.

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Cibus Nordic - Dividend proposed at EUR 0.84 (0.80)

27.02.2019 - 11.35 | Earnings Flash

Cibus disclosed a new dividend policy with quarterly increases. From now on, the company targets a 5% annual increase in dividends.

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  • Rental income for the Jul-Dec 2018 period amounted to EUR 25.0m, and NOI totaled EUR 23.4m. Occupancy rate was 96%.
  • The portfolio had a year-end gross asset value of EUR 816m.
  • Cibus expects to make acquisitions to the tune of EUR 50m during 2019.
  • The quarterly increasing dividend means that the first partial payment will be EUR 0.2062 per share, the second EUR 0.2087 per share, the third EUR 0.2113 per share and the fourth EUR 0.2138 per share.
  • NOI capacity remains at EUR 47.8m.
  • Since the March 2018 IPO, acquisitions and refinancing have helped cash flow to improve by 10%. While the portfolio is currently exclusively invested in Finnish properties, Cibus restates its long-term plan to enter other Nordic markets.

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Marimekko - Weak international sales

27.02.2019 - 09.00 | Earnings Flash

Marimekko’s Q4 revenue was EUR 29.7m vs. EUR 31.6m/31.1m Evli/cons expectations, while adj. EBITDA landed at EUR 2.2m vs. EUR 2.3/2.6m Evli/cons views. International sales surprisingly declined by as much as 15% in Q4, explained in part by a timing issue of deliveries in APAC. However, international revenue declined somewhat in others markets as well. Dividend is in line. Guidance is mostly as expected, although the flat adj. EBIT guidance looks somewhat cautious vs. our estimates: we have expected adj. EBIT of EUR 13.1m in 2019E vs. EUR 12.2m in 2018A. Consensus for 2019E has been EUR 12.4m.

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  • Finland: revenue was EUR 18.3m vs. EUR 17.6m our expectation. Revenue grew by +12% y/y, split to +8% own retail (own retail LFL +6%) and +22% wholesale.
  • International: revenue was EUR 11.4m vs. EUR 14.0m our view. Int. revenue decreased by 15% y/y, driven primarily by APAC (-26%), but also EMEA (-11%) and North America (-12%). Sales in APAC were weakened by a timing issue related to deliveries.
  • Adj. EBITDA was EUR 2.2m vs. EUR 2.3m/2.6m Evli/cons.
  • 2018 dividend: EUR 1.85 per share, consisting of EUR 0.60 ordinary and 1.25 extra. Dividend is in line.
  • 2019E guidance: revenue will increase, while adj. EBIT will be flat in 2019E. We have expected adj. EBIT of EUR 13.1m in 2019E vs. EUR 12.2m in 2018A. Consensus for 2019E has been EUR 12.4m.

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Finnair - Delivering on Asian strategy

27.02.2019 - 08.25 | Company report

Finnair’s Asian strategy has proven successful and the remaining seven A350s deliveries in 2019-2022E support strategy execution and growth further. Evolution of competition in short-to-mid-term remains a key risk, in our view. We expect earnings to weaken slightly in 2019E and consider valuation as largely fair. We retain “Hold” rating.

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A350 fleet carries from Asia to Europe via shortest route

Finnair’s strategy is based on the geographic location of Helsinki hub, as the shortest route from (North-East) Asia to Europe goes over Helsinki. Finnair is able to serve most Asian routes in 24h rotations, which enables high utilization rate of planes and reduces the need for additional crew. New A350s, 12/19 of which were delivered by the end of 2018, are an essential part of the Asian strategy and form the cornerstone of cost management as they have higher seat capacity, lower maintenance cost and better fuel efficiency vs. the replaced A340s. The remaining seven A350s will be delivered in 2019-2022E, enabling further growth.

New A350s enable growth and balance capacity in 2019E

For 2019E Finnair guides 10% capacity growth (largely based on new A350s) and revenue growth slightly behind capacity. New capacity will be mostly put to Asian routes. This should enable further growth and improve weakened PLFs in European traffic, as a good part of capacity adds in 2018 was short-haul. Key risks for 2019E are demand and competition: demand could soften with economic growth, while competition is expected to increase in traffic between Europe and Asia and in intra-European traffic. Fuel is no longer at record levels, although hedged price should continue to edge up. At present we see adj. EBIT, excl. impact of IFRS 16, to weaken slightly in 2019E, assuming steady fuel.

Valuation appears fair - “Hold” reiterated

On our estimates Finnair’s current P/E multiples are 10.8x for 2019E and 9.7x for 2020E, vs. the 3yr historical NTM average of 10.1x. On P/B Finnair trades 1.2-1.1x when the EUR 200m hybrid removed from equity, while generating ROCE of 8.8% in FY19E vs. our WACC of 8.9%. Overall, Finnair’s current valuation appears largely fair to us. We hence retain “Hold” rating with an ex-div TP of EUR 8.0 (7.3). Our TP values Finnair close to par with Finnair’s 3yr historical NTM P/E (10.1x) on our FY19E estimates.

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Pihlajalinna - More favorable outlook for 2019E

25.02.2019 - 09.10 | Company report

Pihlajalinna’s organic growth, profitability and outlook for 2019E improved towards the end of 2018. The new contract pipeline improved somewhat, and clarity on SOTE in the coming weeks might increase activity in the municipality field, further boosting the pipeline. We think valuation looks attractive considering the recovery in margins and somewhat more promising outlook.

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Profitability recovered to reasonable levels

Pihlajalinna’s profitability weakened in 2018 with to weak H1, but recovered to reasonable level in H2 as cost savings from co-determination negotiations kicked in, negative EBITDA-contribution from new clinic openings contracted and as organic growth turned back to positive territory in H2 with insurance revenue drop levelling off. Improved performance of H2 supports the outlook for 2019E, for which co. guides adj. EBIT to improve significantly. While competition has increased in certain service areas and cities, Pihlajalinna’s altered expansion plan and OP’s retreat from expansion plans should reduce risk of further capacity increases burdening profitability in the mid-term.

Growth prospects somewhat brighter; clarity on SOTE needed

Pihlajalinna started production of residential services in Laihia in Sep 2018. Provision of occupational healthcare services for Stora Enso started in Jan 2019. Additionally co. has been negotiating with Laitila, Ruovesi and Kristiinankaupunki, although at present each remain undecided. Overall, municipalities’ eagerness to strike new contracts remains impacted by the lack of clarity on how the SOTE reform turns out. Improved clarity on SOTE in the coming weeks might improve activity in the municipality field. Additionally, Pihlajalinna’s geographical reach has expanded in 2017-2018, improving its positioning to win new business.

“Buy” with TP of EUR 12 intact

On our estimates Pihlajalinna is now valued 8.4x EV/EBITDA in FY19E, which translates into 10% discount to its own 3yr NTM historical average (9.3x) and to 16% discount to the peer group. We think valuation looks attractive considering the recovery in margins and a more promising outlook since H2’18. We retain “Buy” rating with TP of EUR 12. Our TP values the shares 9.0x EV/EBITDA on 2019E estimates, close to 3yr historical avg (9.3x).

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Gofore - Downgrade to HOLD

20.02.2019 - 09.30 | Company update

Gofore’s profitability in H2 fell below our estimates (EBITA EUR 3.0/4.1m act./Evli) largely due to a lower billing rate. Growth is expected to continue to be rapid in 2019, with net sales guidance of EUR 71-79m (2018: 50.6m). We have lowered our profitability estimates, expecting EBITA-margins of around 13.5% in the near to mid-term. With fairer valuation on our revised estimates we downgrade to HOLD (BUY) with an ex-div TP of EUR 8.5 (9.8).

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Profitability impacted by a lower billing rate

Gofore’s profitability in H2 fell below our expectations, with EBITA at EUR 3.0m (Evli EUR 4.1m), at an EBITA-margin of 11.5%. The weaker profitability was largely due to a lower billing rate, with wage inflation, the integration of Solinor, and the sales mix also having an impact. Gofore’s guidance for net sales in 2019 is EUR 71-79m, revised from the previous EUR 65-73m mainly due to the acquisition of Silver Planet, with no profitability guidance given.

Margin development uncertainty remains

We have raised our sales estimates to account for the Silver Planet acquisition, while lowering our profitability estimates. Although some elements of the weaker profitability in H2 in our view could be seen as temporary, we take a more conservative stance to margin development and expect EBITA-margins slightly below the 15% long-term financial objective. We expect the Silver Planet acquisition to have a minor positive impact on margins. Our revised estimates for 2019 net sales and EBITA are 73.3m (prev. 67.5m) and 9.8m (prev. 10.4m) respectively. Our estimates assume EBITA-margins of around 13.5% in the near to mid-term (prev. ~15.5%).

HOLD (BUY) with an ex-div target price of EUR 8.5 (9.8)

On our revised estimates Gofore trades at a slight premium on 2019E EV/EBITDA. We continue to see a premium to peers as justifiable due to the expected rapid growth but with our lowered estimates valuation appears fairer. We downgrade to HOLD with an ex-div target price of EUR 8.5 (9.8).

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Gofore - Profitability below expectations

19.02.2019 - 09.30 | Earnings Flash

Gofore’s EBIT in H2 amounted to EUR 2.6m, falling below our estimate of EUR 3.8m due to among other things a lower billing rate and increase in subcontracting. Gofore expects net sales in 2019 between EUR 71-79m. The dividend proposal is at EUR 0.19 per share (Evli 0.18).

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  • Gofore H2 net sales amounted to EUR 25.9m, with sales growth in H2 at 32.2% compared to H2/17 figures. The company’s international business net sales amounted to EUR 5.7m, corresponding to 11.3% of total net sales.
  • EBIT in H2 was EUR 2.6m, falling below our estimates (Evli EUR 3.8m), at an EBIT-margin of 9.9%. Profitability was affected by a somewhat lower billing rate during the autumn and integration of acquired companies along with an increase in subcontracting and volume of low-margin cloud capacity.
  • Guidance: Gofore expects net sales in 2019 between EUR 71-79m. The guidance before the acquisition of Silver Planet was EUR 65-73m.
  • Dividend: Gofore’s BoD proposes a dividend of EUR 0.19 per share (Evli 0.18).
  • The number of personnel at the end of the period was 495 (2017: 374).

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Verkkokauppa.com - Upgraded to “Buy”

19.02.2019 - 09.00 | Company update

While Verkkokauppa.com’s revenue growth is unlikely to come for free in 2019E either, we think normalizing OPEX growth and increasing margin support from Apuraha should support an earnings improvement after two years of flattish development, even if price pressure tightens further. We upgrade to “Buy” (“Hold”) , TP of EUR 4.7 (4.2).

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Q4: strong growth via market share take, but not for free

Verkkokauppa.com’s Q4 revenue growth (+22%) remained solid from Q3 (+11%). Some part of the 22% growth was due to increased wholesale/B2B deliveries as we expected, but most of the growth was attributed to clearly increased market shares in the B2C market. Strong growth in a flattish market (+0.7% in Q4 according to GfK) did not come for free, however: the gross margin declined to 14.7% from 15.8% y/y, while OPEX grew by 22%, due to increased marketing and the Raisio store.

Guidance for 2019E EBIT is wide, reflecting uncertainties

Verkkokauppa.com guides 5-15% revenue growth and 11-17m EBIT for 2019E. EBIT was EUR 13.3m in 2018A. Vague guidance appears to reflect uncertainties related to potentially softening demand and competition. While visibility into how competition evolves remains short, we expect OPEX growth to normalize in 2019E as Raisio’s ramp-up costs will be reflected in comps.

Apuraha financing should grow further, supporting margins

Apuraha financing grew in 2018: company-financed Apuraha income was reported at EUR 3.1m in 2018 vs. EUR 1.5m in 2017. We understand the company will continue to increase Apuraha financing, which would support margins.

Upgraded to “Buy” (“Hold”), ex-div TP of EUR 4.7 (4.2)

We have converted our model to IFRS (16) reporting from 2017 onwards. Additionally, we no longer assume a 5th store opening in our 2020E estimates. On our estimates the shares trade 11.4x and 9.0x EV/EBIT in 2019-2020E. While growth will most likely not come for free in 2019E either, normalizing OPEX growth and increasing margin support from Apuraha should support an earnings improvement after two years of flattish development, even if price pressure tightens further. We upgrade to “Buy”.

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Finnair - Visibility remains short

18.02.2019 - 09.15 | Company update

Finnair’s Q4 was surprisingly strong, but guidance for 2019E indicates the operating environment will remain at least as tough as in H2. Valuation appears largely fair to us – we hence retain “Hold” rating.

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Q4: fuel and yield behind the earnings beat

Finnair’s Q4 adj. EBIT came in well above estimates at EUR +9m vs. EUR -9m Evli and EUR -6m cons. Compared to our estimates the beat was driven by somewhat stronger revenue (EUR 683m vs. EUR 671m) and fuel costs, which were EUR 10m less than what we expected. On the revenue side the beat was driven by unit revenues –RASK declined less than we expected, and yield surprisingly grew by 3.5% while we expected yield decline to continue as increased competition had been flagged during H2.

Increasing competition and potentially softer demand

For 2019E Finnair guides ASK growth of 10% and revenue growth slightly behind ASK. We expected only 5% ASK growth for 2019E. Finnair will receive both of its 2019-delivered new A350s during H1, on top of which the Dec 2018 -delivered A350 will contribute to ASK growth. Added capacity will be mostly put to Asian routes. However, at the same time competition is expected to increase further with capacity increases, especially on routes between Europe and Asia and in intra-European traffic, even though Norwegian’s planned capacity cuts may impact Finnair positively on some routes. At the same time, demand is seen to be at risk of softening with slowdown in economic growth. Increasing competition and potentially softer demand keep visibility short even though fuel appears to have stabilized.

Retaining “Hold”

On our estimates Finnair trades at an EV/EBITDA discount, but at a P/E premium to its primary peers. On P/B Finnair trades 0.9x in FY19E, or 1.1x when the EUR 200m hybrid removed from equity, while generating ROCE of ~8.5% in FY19E, close to our WACC (8.9%). We continue to think valuation does not look too attractive and hence we retain “Hold” rating with TP of EUR 7.3 (6.8). Our TP values the shares at par with Finnair’s 3yr historical P/E on our FY19E estimates.

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Scanfil - Q4 softness unlikely to persist

18.02.2019 - 09.05 | Company update

Scanfil’s Q4 EBIT didn’t meet our expectations. However, the weakened operating margin was attributable to Scanfil’s account idiosyncrasies. Certain contracts with above average profitability lacked volumes in Q4. Overall, the company sees business continuing as before, and we expect organic revenue growth to add around EUR 20m in 2019. 2020 sales target stands at EUR 600m. We update our target price to EUR 4.75 (4.60); our rating stays BUY.

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Individual contracts determine quarterly segment results

Although Other Industries segment grew 18% in 2018, the segment’s Q4 results were weak due to a significant decrease in demand from a certain notable customer. Urban Applications Q4 top line declined by 12% y/y due to one or two accounts’ seasonal variation. In other words, the Q4 EBIT margin weakness was entirely attributable to a couple of accounts that are above average in terms of profitability. Broadly speaking, demand continued to develop positively and the company’s guidance for 2019 is in line with our earlier expectations. While individual accounts may have large impact on specific segment results, we expect MedTech, Life Science and Environmental Measurement to be the most stable performer. Conversely, within a segment such as Networks and Communication, it is hard to say when larger order volumes may materialize (i.e. when a standard such as 5G starts to have an impact).

Scanfil expects Q1 to be slower, demand to pick up in Q2

Scanfil says the year will have a sluggish start; the company expects clear demand pick up during the second quarter. The company is adding new customers particularly in Sweden. In addition to organic growth, initiatives such as a EUR 50m acquisition in e.g. Germany are not off the table.

Our rating is BUY, update target to EUR 4.75 (4.60)

Our long-term expectations for Scanfil are intact. Increased peer multiples provide lift for valuation, and thus we update our target price to EUR 4.75 (4.60) per share.

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Pihlajalinna - Limited surprises

18.02.2019 - 08.35 | Company update

Pihlajalinna’s Q4 financials were close to estimates and guidance did not surprise. While new outsourcing contracts from previous or ongoing negotiations remains uncertain, the expanded geographical reach should improve prerequisites for growth in other areas as well. We think valuation continues to look attractive. We retain “Buy” rating with TP of EUR 12.

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Profitability at reasonable level in Q4

Pihlajalinna’s adj. EBITDA margin improved y/y in Q4, after improving to flat y/y level in Q3 from weaker H1. However, of the EUR 2.6m y/y adj. EBITDA improvement EUR 2.4m was explained by improved profitability in public specialized care, which seemed to be largely due to service provider refunds from hospital districts related to cost accruals. Amount of these refunds has fluctuated a lot historically. Profitability thus looked better than it was in underlying terms, but it was still at a reasonable level in our view.

Not much new to tell of the new contract pipeline

Pihlajalinna has been in negotiations over new potential contracts with Laitila, Ruovesi and Kristiinankaupunki. While decisions from some of these were expected by the end of 2018, each remains undecided. Overall, municipalities’ eagerness to strike new contracts remains impacted by the uncertainty related to the SOTE reform. Activity could increase if SOTE fails in the coming weeks, but overall visibility for how municipal activity develops is not great, in our view. Yet with the expanded clinic network the company should be better positioned to win new business for example in occupational healthcare, in our view.

Retaining “Buy” with TP of EUR 12

On our estimates Pihlajalinna trades 7.7x and 6.8x EV/EBITDA in FY19-20E, respectively. We think valuation continues to look attractive. We retain “Buy” rating with TP of EUR 12.

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Next Games - Shroud of uncertainty yet to lift

18.02.2019 - 00.00 | Company update

Next Games’ had pre-announced Q4 revenue and EBIT of EUR 11.3m and EUR -1.6m and the most significant news was the discontinuation of a games project that had proceeded to production. We have lowered our 2019 and 2020 revenue estimates by 15 % and 21 % respectively. We retain our HOLD rating with a target price of EUR 1.5 (2.0)

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One project discontinued, another started

Next Games revenue and EBIT in Q4 amounted to EUR 11.3m and EUR -1.6m. Profits improved significantly from the Q3 operating loss of EUR 10.3m, that was burdened by TWD: Our World marketing cost, but remained negative due to product development costs. Next Games announced that the game project with Universal Games and Digital Platforms has been discontinued. The project had proceeded to production and was after Blade Runner: Nexus the game furthest in the pipeline. Next Games started a new game project, that currently does not have an external IP attached to it, focusing on a new game concept.

2019/2020 revenue estimates lowered by 15%/21%

We have lowered our 2019 and 2020 revenue estimates by 15 % and 21 % respectively due to the discontinued game project and lowered Our World estimates. Although ARPDAU metrics in particular improved favourably during Q4 (both NML and OW), we have yet to see signs of significant growth in OW active users, which would be much needed for sales and profitability improvement. The new games pipeline still remains decent, with two projects tied to a third-party IP along with the new game concept project in concepting and Blade Runner: Nexus in soft launch. We expect profitability in 2019 to improve due to the savings program but to remain negative, with our estimate at EUR -5.3m.

HOLD with a target price of EUR 1.5 (2.0)

The near-term uncertainty in our view remains high due to the estimated negative profitability in 2019 and Next Games’ decreased cash position. We retain our HOLD rating with a target price of EUR 1.5 (2.0).

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Taaleri - Opportunities but also concerns ahead

15.02.2019 - 09.45 | Company update

Taaleri’s H2 results were affected by the impact of market volatility on Financing and Wealth Management. Fundraising has begun for the second SolarWind fund, with target investment capital at EUR 300m. New product launches are expected also in PE funds and Financing. Market turbulence remains a concern for the performance of Wealth Management.

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Market volatility impacted on segment results

Taaleri’s group income in H2/2018 amounted to EUR 37.3m (Evli 37.9m) and EBIT to EUR 11.5m (Evli EUR 10.7m). Wealth Management’s profitability declined to EUR 2.7m (H2/17: EUR 8.8m) mainly due to lower performance fees and investment income but lower costs mitigated part of the impact. Profitability in Financing also fell due to lower investment income while the insurance operations continued to report solid results. The group results were aided by the impact of the listing of Fellow Finance.

Fundraising for second SolarWind fund started

Taaleri has started fundraising for its second SolarWind fund, seeking to raise investment capital of EUR 300m. Taaleri will most likely seek to sell the Truscott-Gilliland wind project to the fund during 2019, which would significantly boost Energy’s profitability. New product launches are also to be expected in Wealth Managements PE funds and Financing. The market turbulence has increased concerns relating to the performance of Wealth Management and AUM development was somewhat dissatisfactory, partly due to the write down of the geothermal fund. We have revised our estimates and now expect group income and revenue of EUR 74.8m and 23.4m respectively. We have not yet included estimates for the likely sale of the Truscott-Gilliland wind project but include it through our SOTP.

BUY with a TP of EUR 8.5 (11.4)

On our estimates and revised valuation metrics, with the multiples for Wealth Management lowered due to the increased uncertainty, our SOTP-value is EUR 8.9 per share while peer EV/EBIT valuation suggests an implied price of EUR 8.0. We retain our BUY rating with a target price of EUR 8.5 (11.4).

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Finnair - Strong earnings

15.02.2019 - 09.45 | Earnings Flash

Finnair’ Q4 adj. EBIT was clearly better than we expected at EUR +9m vs. our expectation of EUR -9m. Consensus was at -6m. Compared to our estimates the beat looks to be driven by EUR 10m lower fuel costs, and by better revenue. For 2019E Finnair guides 10% capacity growth and revenue growth somewhat behind capacity. We have expected 5% growth for both and hence there is upside to our estimates. Finnair also expects competition to tighten, especially in EU-Asia routes and in short-haul traffic. Dividend is close to estimates. Overall, a good report.

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  • Q4 revenue was EUR 683m vs. EUR 671/674m Evli/cons.
  • Q4 adj. EBIT was EUR +9m vs. EUR -9m/-6m Evli/cons views. Compared to our estimates the beat looks to come from lower fuel costs and better revenue in Q4.
  • Absolute costs: actual fuel cost (incl. hedging) was EUR 145m vs. EUR 155m our view. Staff costs were EUR 102m vs. 102m our view. All other OPEX combined were EUR 364m vs. 364m our view.
  • Unit costs: CASK was 6.43 eurocents vs. 6.49 our view, while CASK ex fuel was 5.05 eurocents vs. 5.01 our view. CASK in fixed FX and excl. fuel declined by 4% y/y.
  • Dividend is EUR 0.274 per share vs. 0.30/0.26 Evli/cons.
  • 2019E guidance: Finnair expects capacity growth of about 10% and revenue growth somewhat behind capacity. Adj. EBIT guidance will be provided with Q2 earnings, as usual.

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Raute - Flat guidance above our expectations

15.02.2019 - 09.30 | Company update

While we are cautious with our estimates for the next few years, expecting declining sales and EBIT, the company guides flat sales and EBIT for 2019. Meanwhile Raute’s balance sheet is strong enough for the distribution of EUR 1.40 per share as 2018 dividends. The 5.5% dividend yield, along with other valuation metrics, reflects the company’s current cyclical positioning where further growth is not expected. Excluding a development such as a major entry into the Chinese market, we continue to estimate declining sales for the time being. Our cautious stance is supported by the fact that Raute’s order book seems to have peaked in early 2018.

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Demand still buoyant, yet uncertainty is rising

Raute disclosed already in January that 2018 sales and EBIT would be higher than previously expected. Consequently, yesterday’s results presentation provided little new concrete information. Many of Raute’s pre-existing customers have already invested heavily during the past few years. While the major markets have been developing positively and Raute’s customers’ mills have been running at high utilization rates, we are waiting to see how the company’s order book will develop during the first months of 2019.

We maintain our HOLD rating and EUR 27 target price

Raute’s flat guidance for 2019 gives us pause to consider if our own estimates are too pessimistic. Yet we are not updating our projections this time. We will revise our estimates if Raute’s order intake for the beginning of 2019 comes in higher than we are currently expecting.

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Verkkokauppa.com - Wide guidance range for EBIT

15.02.2019 - 09.10 | Earnings Flash

Verkkokauppa.com Q4 headline financials were known before this morning’s earnings release. Hence the information content of the Q4 report is mostly in the dividend and guidance. Dividend proposal is EUR 0.198 per share, marginally above estimates. Guidance implies 5-15% revenue growth for 2019E. EBIT in 2019E is to be between EUR 11-17m (2018A with IFRS: EUR 13.3m) – this is a wide range and leaves room for weakening. It is not specified whether guidance includes estimated impact of IFRS 16, but considering the upper range it looks to be included. Guidance should not surprise estimates, in our view.

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  • Dividend was EUR 0.198 vs. EUR 0.19 Evli and cons.
  • Guidance for 2019E: revenue is expected to be between EUR 500-550m and EBIT between EUR 11-17m (2018A with IFRS: EUR 13.3m). Revenue range implies growth of 5-15% for 2019E.
  • Wholesale deliveries increased y/y, and were partly behind the strong sales growth in Q4 as we expected. However most of growth is attributed to successful Black Friday campaign and Christmas season. The gross margin remained at fairly good level of 14.7% vs. 15.8% last year.
  • Headline financials were known prior to the Q4 report, as figures were pre-announced.
  • Apuraha’s earnings impact specified: company-financed customer financing grew in Q4 and proceeds totaled EUR 0.9m (EUR 0.5m y/y) including both interest income and fee income.
  • Financial targets were updated: annual revenue growth 10-20% (intact), growing EBIT and EBIT margin between 2.5-4.5%, and growing dividend. Previously co. targeted for adj. EBITDA margin between 3-5%.

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Aspo - Teething problems with cranes

15.02.2019 - 09.05 | Company update

Aspo’s Q4 EBIT didn’t meet our expectations as ESL Shipping suffered from serious technical problems with cranes. Both MS Viikki and MS Haaga, the two new LNG vessels, were impacted, leading to inefficient operation. The warranty repairs should be completed by the end of Q1’19. Telko’s Q4 results were in line with our estimates, while Leipurin fell short. We update our rating to BUY (HOLD).

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ESL is on path to EUR 25-30m EBIT in the coming years

The deployment of ESL Shipping’s new LNG vessels has been slowed down by both ships’ mechanical problems with cranes. The problem concerns all the six cranes. In the meantime, other ESL ships have been filling in the slack for the SSAB contract. The crane supplier, Cargotec MacGregor, is expected to fix the problem by the end of Q1. In other words, the first quarter of 2019 will be similarly sluggish for both vessels. While this is an inconvenient setback, the company expects the vessels to meet the high requirements starting from the second quarter. ESL Shipping has a target of net sales above EUR 200m and an EBIT margin of 12-15% by 2020. We expect ESL to reach an EBIT of EUR 23m in 2019 and EUR 28m next year. We previously expected comparable figures of EUR 25m and EUR 29m.

Telko should accelerate margin gains during 2019

Aspo has set Telko a 2020 sales target of EUR 300-350m, while the EBIT margin should be in the 6-7% range. One of the key measures for reaching this profitability level is the improvement of procurement efficiency. The company expects to see results regarding the planning and rationalization of raw material purchases by the end of 2019. Telko was able to reach an EBIT margin of 4.5% in 2018, improving by about 40bps.

Aspo long-term outlook intact, higher multiples boost SOTP

Our expectations for ESL and Telko are unchanged. Valuation multiples have lifted since late December, when Aspo revised its outlook for the final quarter. As a result, we see the sum-of-the-parts valuation providing added support for the shares. We raise our target price to EUR 9.75 (9.25) and upgrade to BUY rating.

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Next Games - Game project discontinued

15.02.2019 - 08.45 | Earnings Flash

Next Games Q4 revenue and EBIT amounted to EUR 11.3m and EUR -1.6m respectively (pre-announced). Next Games announced the termination of collaboration on the game project with Universal Games and Digital Platforms. The company concluded consultation proceedings.

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  • Next Games’ revenue during H2 amounted to EUR 24.8m (pre-announced). Revenue growth y/y on was 90 %. Revenue in Q4 amounted to EUR 11.3m
  • EBIT in H2 amounted to EUR -12.0m. Next Games pre-announced H2 figures (FAS). Next Games has adopted IFRS reporting in its 2018 financial statements bulletin. EBIT in Q4 amounted to EUR -1.6m.
  • TWD: No man’s land: DAU during Q4 was 253k (Q3/18: 275k). MAU during Q4 was 728k (Q3/18: 800k). ARPDAU was EUR 0.25 during Q4 (Q3/18: 0.24).
  • TWD: Our world: DAU during Q4 was 223k (Q3/18: 386k). MAU during Q4 was 759k (Q3/18: 2.1m). ARPDAU was EUR 0.28 during Q4 (Q3/18: 0.25).
  • Next Games and Universal Games and Digital Platforms have agreed to terminating their collaboration on the game project that had proceeded to production.
  • The company concluded consultation proceedings and the company’s headcount will decline to 117 from 143.
  • The company initiated a new project that does not have an external IP attached to it at the moment.

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Scanfil - EBIT below our expectations

15.02.2019 - 08.45 | Earnings Flash

Scanfil’s Q4 results didn’t reach our estimates. We expected an EBIT margin of 6.0%, while the company delivered 5.4%. Nevertheless, the full year saw robust growth and operating profit development. The BoD proposes a dividend of EUR 0.13 per share for 2018 (vs our expectation of EUR 0.14).

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  • Q4 sales increased by 6.3% compared to Q3, supported by almost all customer segments. Energy and Automation, Medtec and Life Science and Other Industries segments achieved over 10% growth.
  • The quarterly decrease in operating margin was mainly due to significantly decreased demand from a few notable customers, and partly due to seasonal variation.
  • The demand decline was restricted to a few customers. Overall, demand has remained steady. Customers’ forecasts are looking strong.
  • Guidance: Scanfil estimates 2019 revenue will be EUR 560-610m, expects operating profit will amount to EUR 36-41m. These figures are in line with our estimates.
  • Scanfil’s target is to reach EUR 600m sales in 2020 and an EBIT margin of 7%.

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Pihlajalinna - Little surprises

15.02.2019 - 08.35 | Earnings Flash

Pihlajalinna’s Q4 revenue and adj. EBITDA were close to both our and consensus estimates. Profitability improved y/y, but looks to be largely explained by service provider refunds, which have involved a lot of fluctuation historically. Organic growth remained positive (+1.3%) from Q3. Dividend proposal is EUR 0.10 per share, marginally better than expected. Guidance for 2019E looks to be largely reflected in consensus: revenue is to improve while adj. EBIT is to improve clearly. Overall, the Q4 report looks just fine.

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  • Revenue was EUR 127m vs. EUR 127m/125m Evli/cons estimates. Revenue grew by 17.6% y/y, of which 16.3% was due to M&A. This implies organic growth of +1.3%. Organic growth was similar to Q3 (+1.1%).
  • Adj. EBITDA was EUR 11.1m (8.7% margin) vs. EUR 10.9m/11.2m (8.6%/8.9%) Evli/cons estimates. Adj. EBITDA improved by EUR 2.6m y/y, of which EUR 2.4m looks to be explained by service provider refunds from hospital districts for public sector specialized care cost accruals. Volumes and profitability of clinic and surgical operations were lower y/y, due to the competitive situation and patient guidance by insurance companies. New clinics still had a negative EBITDA contribution (as expected), but this now lower than in previous quarters at EUR -0.4m in Q4.
  • Dividend is EUR 0.10 per share vs. EUR 0.08 Evli and EUR 0.09 consensus.
  • Guidance for 2019E looks to be largely reflected in consensus: Revenue will increase and adj. EBIT will improve clearly.

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Fellow Finance - Upgrade to BUY

15.02.2019 - 07.20 | Company update

Fellow Finance’s H2 revenue and EBIT amounted to EUR 6.4m (Evli 6.7m) and EUR 1.7m (Evli 1.7m) respectively. Fellow Finance expects revenue in 2019 to grow over 30% and the adjusted operating profit to grow compared to 2018. Consumer loans in Finland still accounted for the majority loan volume but international operations and business financing saw growth picking up. We upgrade to BUY (HOLD) with a TP of EUR 9.0 (8.0).

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Revenue grew 38.2% and adj. EBIT 41.7% in 2018

Fellow Finance’s H2 revenue and EBIT amounted to EUR 6.4m (Evli 6.7m) and EUR 1.7m (Evli 1.7m) respectively. Full year revenue growth amounted to 38.2% and fee income growth to 50.1%. Fellow Finance estimates revenue in 2019 to grow over 30% and the adjusted operating profit (2018: EUR 3.5m) to grow compared to 2018. Focus in 2019 will be on continuing the expansion in Europe and broadening the product offering to investors. Fellow Finance expanded its services to Denmark during early 2019. In absolute terms growth in 2018 still derived mainly from Finland but growth was also solid in particular in Germany, were the company’s services only kicked off properly in the latter half of 2018. Growth in business financing has also been good, with the relative share of loan volume at 27%.

Expect continued solid growth and margins

We have made only slight adjustments to our near-term estimates. We expect sales of EUR 16.5m in 2019, with growth of 38%, and adjusted EBIT of EUR 4.5m. We expect relative profitability to be slightly below 2018 levels driven by rapid expansion of services to new markets and ramp-up of existing ones but above the long-term strategic goal of 25%.

BUY (HOLD) with a TP of EUR 9.0 (8.0)

On 2019E figures valuation appears challenging but with signs of pick-up in international operations and a good outlook for business financing we are prepared to emphasize 2020E peer multiples. We value Fellow Finance at 16.4x 2020E P/E, closer to the payment processing and financing platform peers, for a target price of EUR 9.0 (8.0) and upgrade to BUY (HOLD).

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Endomines - Minor bumps on the ramp-up road

15.02.2019 - 07.00 | Company update

Endomines commenced mining operations at the Friday-mine. Equipment delivery delays have put production ramp-up slightly behind schedule. Production of gold concentrate at the Friday-mine in 2019 is estimated at 5,000-8,000oz. The leasing rights to the Unity mine were acquired, which we expect to be the next area of focus in Idaho along with the adjacent Rescue property. Endomines commenced the sale of a EUR 5m bond, which we expect to cover near-term needs but anticipate a need for additional financing.

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Friday gold production 5,000-8,000oz in 2019

Endomines’ gold production in Q4 amounted to 27.9kg (98.7kg), impacted by the suspension of mining operations at Pampalo. Revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Mining operations at the Friday-mine have commenced but production has seen slightly behind schedule due to delays in equipment deliveries at the processing plant. The project’s capex estimate was revised to USD 9.5-10m (prev. 7.7m) due to cost overruns. Production of gold concentrate in 2019 is estimated at 5,000-8,000oz.

Acquired additional assets, seeking to secure financing

Endomines acquired leasing rights to the Unity mine adjacent to its Rescue property. We expect the company’s development operations during 2019 to focus on Unity/Rescue along with Friday. We have shifted our production estimates as we view any significant production figures (apart from Friday) to be achieved during 2020 unlikely. Endomines commenced the sale of an up to EUR 5m bond with associated warrants (strike price EUR 0.90). Although the financing covers at least the near-term investment needs we expect Endomines to need additional financing to develop additional assets.

BUY with a target price of SEK 8.0 (7.2)

The gold price saw favourable development during H2/2018, returning to above 1,300USD/oz levels, driven by the increased market uncertainty. Our revised estimates put our NAVPS at SEK 8.5. We retain our BUY-rating with a target price or SEK 8.0 (7.2).

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Fellow Finance - EBIT above expectations

14.02.2019 - 11.25 | Earnings Flash

Fellow Finance’s H2/2018 revenue and EBIT amounted to EUR 6.4m (Evli EUR 6.7m) and EUR 2.3m (Evli EUR 1.7m) respectively. Fellow Finance expects revenue in 2019 to grow by over 30 % and the adjusted EBIT to grow compared to 2018. The dividend proposal is EUR 0.04 per share (Evli EUR 0.10).

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  • Revenue in H2 amounted to EUR 6.4m (EUR 4.7m in H2/17), slightly below our estimates (Evli EUR 6.7m).
  • Fellow Finance facilitated loans during 2018 for a total of EUR 172m (Evli 164m).
  • EBIT in H2 amounted to EUR 2.3m (EUR 1.5m in H2/17), above our estimates (Evli EUR 1.7m). The adjusted EBIT amounted to EUR 2.5m excluding expenses related to the company’s IPO.
  • EPS in H2 amounted to EUR 0.0 per share. The for listing expenses adjusted EPS amounted to EUR 0.14.
  • Dividend: Fellow Finance’s BoD proposes a dividend of EUR 0.04 per share (Evli EUR 0.10)
  • Guidance: Fellow Finance expects revenue in 2019 to grow by over 30 % and the adjusted EBIT to grow compared to 2018.
  • Fellow Finance expanded its service offering to Denmark during early 2019, now having a presence in five countries.

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Aspo - ESL operating profit disappoints

14.02.2019 - 10.50 | Earnings Flash

Back in December, Aspo restated its 2018 EBIT guidance. The company announced that the figure will land at the lower end of the initial range. ESL and Telko both topped our Q4 revenue estimates, while ESL’s operating profit failed to match our expectations (even after we adjusted our estimate following the December profit warning).

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  • Group headline figures: Q4 net sales amounted to EUR 156.6m vs our EUR 154.0m estimate. Q4 EBIT stood at EUR 2.6m vs our EUR 3.9m expectation.
  • ESL Shipping: Q4 sales recorded at EUR 46.4m vs our EUR 42.2m estimate. Q4 EBIT came in at EUR 4.2m vs our EUR 5.3m estimate.
  • Telko: Q4 revenue amounted to EUR 69.5m vs our EUR 68.8m estimate. EBIT stood at EUR 3.4m, exactly as we expected.
  • Leipurin: Q4 sales totaled EUR 31.6m vs our EUR 33.0m estimate. EBIT was EUR 0.8m vs our EUR 1.1m estimate.
  • Kauko: sales were EUR 9.1m vs our EUR 10.1m estimate. EBIT (including the impairment loss) was EUR -4.4m vs our EUR -4.8m expectation.
  • Guidance: Aspo guides 2019 EBIT at EUR 28-33m. This compares to the EUR 25.4m 2018 figure adjusted for the EUR 4.8m impairment loss on Kauko’s goodwill. ESL Shipping aims at net sales of more than EUR 200m and an EBIT margin of 12-15% by 2020.
  • The BoD proposes 2018 dividend per share at EUR 0.44, to be paid in two installments.

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Raute - Optimistic guidance and dividend

14.02.2019 - 09.40 | Earnings Flash

Raute already disclosed in January that 2018 sales and EBIT would be higher than previously expected. Raute confirmed the previously announced strong numbers. The proposed dividend came in slightly above our estimate, while the company expects flat figures for 2019. Our stance for 2019 and beyond has been more cautious as the market has been going through a very favorable cycle.

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  • Q4 sales amounted to EUR 54.2m vs EUR 39.4m a year ago.
  • Q4 operating profit stood at EUR 3.4m vs EUR 3.1m a year ago.
  • Q4 order intake was EUR 28m vs EUR 60m a year ago.
  • Order book amounted to EUR 95m vs EUR 110m a year ago.
  • Raute proposes that a dividend of EUR 1.40 (EUR 1.25) per share be paid for financial year 2018. The amount was slightly above our EUR 1.35 per share estimate.
  • Guidance: Raute expects 2019 net sales and operating profit to stay at similar levels compared to 2018. The company cites high order book and sustained brisk demand.

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Endomines - No major surprises

14.02.2019 - 09.30 | Earnings Flash

Endomines’ revenue and EBITDA in Q4 amounted to SEK 7.9m (Evli 5.4m) and SEK -6.1m (Evli -6.4m) respectively. Endomines expects to produce 5,000-8,000 oz gold (~156-249kg) in concentrate during 2019. Endomines further announced that it has commenced the sale of a up to EUR 5 million senior secured bonds and warrants.

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  • Endomines gold production in Q4 amounted to 27.9kg (98.7kg), affected by the suspension of the Pampalo mine in October. Milled ore amounted to 7,559 tonnes (39,692), at head grades of 2.6g/t (3.0g/t). Cash cost was 948 USD/oz (1,264).
  • Revenue amounted to SEK 7.9m (28.5m in Q4/17), above our estimates of SEK 5.4m.
  • EBITDA in Q4 was at SEK -6.1m (Evli -6.4m) and EBIT at SEK -14.2m (Evli -11.7m).
  • Total cash flow was SEK -43.5m (1.8m).
  • Guidance: Annual gold production at the Friday mine in Idaho, USA, is expected to be approximately 9,000oz at a cash cost of 650-900 USD/oz, depending on the area of production, over the life time of the mine. In the first quarter of 2019, Endomines has commenced ramp-up of the mine and anticipates producing 5,000 – 8,000oz gold (~156-249kg) in concentrate during the year.
  • Endomines has commenced the sale of a up to EUR 5 million senior secured bonds and warrants. The bond carries a coupon of 12.0 per cent and has 3-year maturity. The number of the associated warrants is 5,555,555 and their exercise price is EUR 0.90 per warrant.

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Vaisala - Pressure on profitability in 2019

14.02.2019 - 09.00 | Company update

Vaisala’s dividend proposal was in-line with expectations, but outlook was slightly weaker than expected. Due to increase in R&D and sales & marketing spend, we’ve cut our EBIT estimates for 2019. We maintain HOLD recommendation with new target price of EUR 18 (prev. 19).

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Outlook for 2019

Vaisala expects market for traditional weather solutions to be flat in 2019, while market for industrial measurement solutions is expected to continue to grow in all regions. Increasing investments in R&D and sales & marketing are expected to burden profitability in 2019. Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract. The new outlook with an adjusted EBIT range of EUR 35-47m was slightly weaker than what we had expected; our previous EBIT estimate of EUR 45m (46m cons) being in the higher end of the range.

Estimates revised down for 2019

We expect Vaisala’s 2019E net sales to be EUR 385m representing +10% growth y/y. Sales growth will be driven by the recent acquisitions, Leosphere and K-Patents, which we estimate to add around 24 MEUR and 12 MEUR to top line in 2019E. We’ve adjusted our 2019E EBIT estimates downwards to reflect increase in R&D and sales & marketing spend. We estimate 2019E reported EBIT to be EUR 31m (EUR 42m adjusted for EUR 11m PPA and one-off expenses). For 2020-21 we expect 3.6% and 4.3% growth, with operating margin improving to 11.6% and 11.8% respectively.

HOLD maintained with new TP of 18 (prev. 19)

On our revised estimates Vaisala is trading at EV/EBIT and EV/EBITDA multiples that are ~10% lower than our peer group, but we see this as fair given the near-term weaker outlook. We maintain HOLD recommendation with TP of EUR 18 (prev. 19).

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Taaleri - Market volatility visible in segment results

14.02.2019 - 09.00 | Earnings Flash

Taaleri’s group income in H2/2018 amounted to EUR 37.3m (Evli 37.9m) and EBIT to EUR 11.5m (Evli EUR 10.7m). EBIT in Wealth Management declined largely due to declines in performance fees while the market volatility affected investment income in Financing. Group EBIT was aided by the listing of Fellow Finance.

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  • Income in H2 amounted to EUR 37.3m (EUR 42.3m in H2/17), in line with our estimates (Evli EUR 37.9m). The group’s continuing earnings grew 5.4 per cent.
  • EBIT in H2 was EUR 11.5m (EUR 11.6m in H2/17), slightly above our estimates (Evli EUR 10.7m). Taaleri had pre-announced the EBIT -margin in 2018 to be at similar levels to 2017.
  • The Wealth Management segments income in H2 was EUR 19m (H2/17 EUR 30.7) and EBIT EUR 2.7m (H2/17 EUR 8.8m). EBIT was affected by declines in performance fees.
  • The Financing segments income in H2 was EUR 6.3m (H2/17 EUR 10.1m) and EBIT EUR 2.5m (H2/17 EUR 6.0m). EBIT was affected by weaker income from investment activities.
  • The Energy segments income in H2 was EUR 1.2m (H2/17 EUR 1.0m) and EBIT EUR -1.4m (H2/17 EUR -0.9m).
  • Income from other operations in H2 amounted to EUR 10.3m (H2/17 EUR 0.9m) and EBIT EUR 7.7m (H2/18 EUR -1.9m). EBIT positively impacted by the listing of Fellow Finance (EUR 13.8m) and negatively impacted by the write-off on a geothermal project (EUR -3.1m)-
  • Assets under management at the end of H2/18 amounted to EUR 5.7bn
  • Dividend: Taaleri’s BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.29)

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SSH - Growth remains an issue

13.02.2019 - 09.10 | Company update

SSH’s Q4 result missed our expectations. On a positive, the company issued an outlook for 2019 and proclaimed the end of further litigation. We see current valuation as stretched given the relatively low and uncertain sales growth, thus we downgrade to SELL with target price EUR 1.6 (prev. 1.8).

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Q4 misses our expectations

SSH Q4 missed our expectations, with net sales being EUR 6.4m (7.2m Evli) and EBIT being EUR 1.3m (1.8m Evli). The miss was due to abnormally low underlying software fees (0,6m excluding 1.5m license deal in Q4). Excluding patent income (2.7m) and a few larger license deals (2.8m), growth in 2018 would have been ~10% negative.

Outlook for 2019 given

In 2019 SSH expects double digit percentage growth from its core software business exceeding the projected annual cyber security market growth of approximately 10 %. In the medium term, SSH expects similar or faster growth and will also explore avenues for accelerated growth through inorganic growth opportunities. We had previously modeled 16% growth for 2019E based on the attractive growth opportunity apparent in the PAM market.

Estimates cut, slow growth with prudent cost control ahead

We’ve cut our net sales estimates for 2019-2021. We expect net sales in 2019E to be EUR 17.5m (-4% decline y/y) due to absence of patent income. For 2021E and 2022E we model 11% and 12% net sales growth respectively. No growth this year and slight growth in the coming years coupled with less litigation costs and a prudent cost control, means SSH will slowly start reaching organic profitability. We estimate EBIT of EUR 0.8m and EUR 1.9m in 2020 and 2021.

Downgrade to SELL with TP of 1.6 (prev. 1.8)

On our revised estimates, SSH is trading at EV/Sales 2019-20 of 3.9x and 3.5x. Our DCF indicates fair value of EUR 1.6. We see valuation as stretched given the uncertainty in sales growth, thus we downgrade to SELL with target price of EUR 1.6 (prev. 1.8). Our target price represents EV/Sales of 3.4x and 3.1x for 2019 & 2020.

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SSH - Q4 result below expectations, outlook provided

12.02.2019 - 09.25 | Earnings Flash

SSH Q4 result was below our expectations. On a positive, company is providing business outlook for 2019 and medium term.

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  • Q4 net sales totaled EUR 6.4 million (7.2m our expectation)
  • Software fees were EUR 2.1 million (2.9m Evli), Professional services were EUR 2.1 million (2.0m Evli), and Recurring revenue was EUR 2.2 million (2.3m Evli)
  • Q4 operating profit was EUR 1.3 million (1.8m our expectation)
  • EPS was 0.03 (vs. 0.04 our estimate)
  • Business outlook for 2019: SSH expects double digit percentage growth from software business (software fees, professional services, and recurring revenue) at comparable exchange rates, exceeding the projected annual cyber security market growth of approximately 10 %.
  • In the medium term, SSH expects similar or faster growth and will also explore avenues for accelerated growth through inorganic growth opportunities. Possible significant quarterly variation in revenue growth is still to be expected due to timing of larger deals over the financial year.

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Vaisala - Outlook for 2019 disappoints

12.02.2019 - 00.00 | Earnings Flash

Vaisala had previously announced preliminary Q4 results, so the focus was on dividend proposal and outlook. The outlook guides for clearly lower EBIT than what we or consensus were expecting.

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  • Dividend proposal is 0.58 (0.55 Evli / 0.58 consensus)
  • Business outlook for 2019: Vaisala estimates its full-year 2019 net sales to be in the range of EUR 380–400 million and its operating result (EBIT) to be in the range of EUR 25–35 million including EUR 10–12 million acquisition related amortization and one-off expenses related to a lease contract.
  • Our estimates for 2019E are net sales of EUR 387m (382m cons.) and EBIT of EUR 45m (46m cons.)

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Tokmanni - Towards improving profitability in 2019E

11.02.2019 - 08.55 | Company update

Tokmanni’s focus is shifting towards improving profitability in 2019E. We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

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Q4 was just fine

Tokmanni’s Q4 revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. However, adj. EBITDA missed estimates by EUR 3m, driven by one-off costs due to a product recall in the quarter (adj. EBITDA impact EUR -1.4m) and other one-off costs related to integration of the acquisitions carried out in late 2018. Integration costs should not have a meaningful impact on Q1’19, we understand. The negative impact of the product recall on gross profit was estimated at EUR 1.1-1.2m – excluding this the gross margin would have been in line with our estimate of 34.8%. Overall, Q4 looked just fine.

Focus shifting towards improving profitability in 2019E

Tokmanni’s 2018 was about improving customer trust by investing in prices, marketing and selections. In 2019E focus is shifting towards improving profitability by increasing the revenue share of direct imports (ie. increasing the gross margin) and pushing OPEX as % of sales down. Certain real estate - related costs have already been negotiated down.

Now targeting above 200 stores

Tokmanni updated its financial targets to reflect IFRS 16. These included no drama, but at the same time the target for the store network was revised to “above” 200 stores vs. “about” 200 stores previously. This is based on a view that demand will be sufficient.

Retaining Buy” with ex-div TP of EUR 9

We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

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Etteplan - Remaining on track

08.02.2019 - 21.45 | Company update

Etteplan posted good Q4 results, although slightly below our estimates, with net sales at EUR 62.9m (Evli 66.0m) and EBIT at 5.7m (Evli 6.2m), affected at least partly by the impact of vacation timing and activities of two major customers in December. The market outlook remains encouraging and Etteplan expects revenue and operating for 2019 to grow compared to 2018. Our estimates remain largely unchanged and we retain our HOLD-rating with a target price of EUR 9.0.

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Market outlook and guidance remaining favourable

Etteplan posted good Q4 results, although falling slightly below our estimates due at least partly to the impact of vacation timing and activities of two major customers in December. The Technical Documentation continued to see challenges while Embedded Systems and IoT saw solid development, as actions to improve profitability have taken effect. Etteplan expects the revenue and operating profit for the year 2019 to grow compared to 2018. Comments regarding the market outlook were encouraging, as Etteplan continues to see favorable development in all market areas but with demand growth in Europe expected to slow down slightly. The BoD’s dividend proposal for 2018 is EUR 0.30 per share, in line with expectations.

Estimates largely unchanged post-Q4

Our estimates remain largely unchanged post-Q4. We have raised our estimates for profitability for Embedded Systems and IoT after the solid performance in Q4. We expect net sales and EBIT BO of EUR 251.6m and EUR 24.7m respectively, with margins near Etteplan’s strategic target of 10%. We do not expect the growth target of 15% to be reached without acquisitions.

HOLD with a target price of EUR 9.0

On our estimates Etteplan trades largely in line with peers on 2019E EV/EBIT and P/E. With our estimates largely unchanged we retain our HOLD-rating with a target price of EUR 9.0.

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Tokmanni - Adj. EBITDA misses due to one-offs; dividend beats; guidance in line

08.02.2019 - 12.40 | Earnings Flash

Tokmanni’s revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. Adj. EBITDA misses estimates (EUR 28.2m vs. EUR ~31m Evli and cons), driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by prerarations related to the purchase of stores in Northern Finland. Dividend is a bit better than expected, while guidance for 2019E is unsurprising. Tokmanni updated its financial targets to reflect IFRS 16, and now targets “above” 200 stores vs. “about” 200 stores previously. Overall, the report looks just fine.

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  • Q4 revenue was EUR 268m vs. EUR 267/269m Evli/cons. Revenue grew by 8.0% y/y, driven by 4.7% LFL growth (Evli exp. 4.0%) and new openings.
  • Q4 adj. EBITDA was EUR 28.2m (10.5% margin) vs. EUR 31.0m (11.6%) Evli and EUR 31.3m (11.7%) consensus. The miss is driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by preparations related to the purchase of stores in Northern Finland.
  • 2018 dividend: EUR 0.50 vs. EUR 0.45/0.47 Evli/cons.
  • 2019 guidance is unsurprising: Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Consti - Upgrade to BUY

08.02.2019 - 09.00 | Company update

Consti’s Q4 EBIT remained negative in Q4 at EUR -2.2m, impacted further by the impact of a building purpose modification project. Consti initiated a program to improve profitability and is also renewing it segment reporting. Consti expects the operating profitability to improve in 2019 compared to 2018. We upgrade to BUY (HOLD) with a TP of EUR 6.0

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Renewing segment reporting

Consti’s Q4 results were further burdened by costs relating to a demanding building purpose modification project and EBIT was negative at EUR -2.2m, below our expectations (Evli EUR -1.0m). Consti estimates that its operating result for 2019 will compared to 2018 (EUR -2.1m). Consti launched a program to improve profitability and will renew its segment reporting with the intention of moving towards a customer-oriented organisation structure. The current segments will be re-organised into customer specific business areas, which is intended to among other things benefit in sales by offering a larger part of the relevant services from one entity. The program’s costs are estimated at approx. EUR 0.5m with the aim of achieving savings of EUR 2m from 2020 onwards.

Estimates mainly intact post-Q4

Our earnings estimates remain mainly intact post-Q4, with our sales estimates up by some 3%. We continue to expect profitability improvements in 2019 as the effects of the projects that impacted 2018 diminishes, although we note that risks related to the projects are not all resolved. We further expect the slow-down in new construction to alleviate some of the supply chain pressure and enable margin improvement.

BUY (HOLD) with a TP of EUR 6.0

On our estimates Consti trades at a 33%/28% discount on 2019E EV/EBITDA and EV/EBIT. We note that there are risks associated with our estimated profitability improvement, but we see the measures taken during recent years, including among other things stricter tendering processes, to support profitability. We upgrade to BUY (HOLD) with a target price of EUR 6.0.

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Consti - Revenue beat, earnings below expectations

07.02.2019 - 09.00 | Earnings Flash

Consti’s EBIT was below expectations, at EUR -2.2m (EUR -1.0m/-1.3m Evli/cons.), while Q4 revenue of EUR 96.8m was higher than expected (EUR 87.0m/87.8m Evli/cons.). Consti estimates that its operating result for 2019 will improve compared to 2018. The BoD proposes that no dividend be paid.

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  • Net sales in Q4 amounted to EUR 96.8m (EUR 86.3m in Q/17), beating both our and consensus estimates (EUR 87.0m/87.8m Evli/cons.). Sales growth in Q4 was 12.1 % y/y.
  • EBIT in Q4 was EUR -2.2 (EUR -2.6m in Q4/17), falling below both our and consensus estimates (EUR -1.0m/-1.3m Evli/cons.). EBIT was negative due to weaker than expected profitability in the housing repair unit included in the Building Facades business area.
  • Technical Building Services: Net sales in Q4 were EUR 31.0m vs. EUR 30.1m Evli.
  • Renovation Contracting: Net sales in Q4 were EUR 28.5m vs. EUR 24.1m Evli.
  • Building Facades: Net sales in Q4 were EUR 42.5m vs. EUR 36.8m Evli.
  • Order backlog at the end of Q4 was EUR 225m, down 0.3 % y/y.
  • Guidance: Consti estimates that its operating result for 2019 will improve compared to 2018.
  • Dividend: Consti’s BoD proposes that no dividend be paid for 2018 (Evli/cons. expectation no dividend)
  • Consti announced the initiation of a cost savings program with a target of EUR 2m annual savings, expected to be achieved by 2020.

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SSH - Expecting a solid Q4

07.02.2019 - 08.45 | Preview

SSH will report Q4 earnings next week on Tuesday, the 12th of February. We expect a solid Q4 result driven by patent license agreement and UKM license deal. Our focus in the Q4 report will be on strategy execution and actions to further accelerate SSH´s growth in 2019. Our HOLD rating and target price of EUR 1.80 remain intact ahead of Q4.

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Expecting a solid Q4 result driven by patent and UKM deals

SSH announced in the end of last year that it had entered into a patent license agreement with a leading provider of patent risk management solutions. SSH has received a one-time payment of approximately EUR 1.75m which will be recognized in Q418. In addition, SSH previously announced a UKM license deal with a major global retail company, which is expected to contribute roughly EUR 1.5m in revenue in Q4.

Raising estimates for Q418, estimates for 2019 unchanged

We raise our Q4 estimates to take into account the EUR 1.75m patent license agreement. We now expect Q4 net sales to be EUR 7.2m (prev. 5.4m) and Q4 EBIT to be EUR 1.8m (prev. 0.3m). Our estimates for 2019 and onwards remain intact. We expect FY2018E net sales to be EUR 19.1m (vs. 16.2m 2017) and EBIT to be EUR 1.0m (vs. -1.8m 2017).

HOLD rating and target price of 1.80 euros maintained

Our focus in the Q4 call will be on strategy execution and actions to further accelerate SSH´s growth in 2019. We’re also keen on hearing an update on PrivX sales development, as SSH announced several partnerships regarding PrivX during the end of last year. We do not expect SSH to give any revenue or earnings guidance for 2019 (guidance ceased in 2017). We maintain our HOLD rating and target price of EUR 1.80 ahead of Q4.

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SRV - Leaving first unprofitable year behind

07.02.2019 - 08.15 | Company update

SRV’s Q4 profitability was below our expectations mainly due to additional REDI shopping centre costs. We continue to expect significant profitability improvement in 2019 but have lowered our estimates due to expected slower shopping centre development in Russia and continued higher construction costs during 2019. We retain our HOLD-rating with a TP of EUR 2.0 (2.4).

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Weak profitability in Q4

SRV’s Q4 earnings fell below our estimates, with operating profit at EUR 0.1m (Evli EUR 7.8m). The operating profit was affected by EUR 11.1m additional costs from the REDI shopping centre along with an EUR 4m impairment charge in International Operations but aided by the EUR 14m capital gain of the sale of SRV Kalusto. The operational profitability in Operations in Finland, adjusted for the REDI impact, remained rather weak despite the high revenue and many completed developer-contracting housing units, affected by weaker margins in certain projects.

2019 profitability estimates lowered

SRV expects revenue to grow in 2019 compared to 2018 and the operative operating profit to improve compared to 2018 and be positive. The profitability in 2019 is expected to be affected by higher construction costs due to long-term procurement agreements. We have lowered our 2019E operative operating profit estimate to EUR 32.7m (EUR 40.2m) due to both expected lower profitability in International Operations from slower shopping centre development in Russia and Operations in Finland due to the expected higher construction costs.

HOLD with a target price of EUR 2.0 (2.4)

On our revised estimates valuation looks challenging based on peer multiples, with SRV trading at a larger premium to peers, but is still supported by our SOTP. The balance sheet remains excessive, although some EUR 90m in capital employed was released during the year and with the uncertainty regarding shopping centre divestments we retain our HOLD rating with a TP of EUR 2.0 (2.4).

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Etteplan - Expecting revenue and operating profit growth to continue

07.02.2019 - 00.00 | Earnings Flash

Etteplans Q4 revenue (EUR 62.9m/66.0m Act./Evli est.) and EBIT (EUR 5.7m/6.2m Act./Evli est.) fell slightly below our estimates but remained at good levels nonetheless. Etteplan expects its revenue and operating profit for the year 2019 to grow compared to 2018. The BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.30).

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  • Net sales in Q4 were EUR 62.9m (EUR 58.5m in Q4/17), slightly below our estimates (Evli EUR 66m). Growth in Q4 amounted to 7.5 % y/y.
  • EBIT in Q4 was EUR 5.7m (EUR 4.6m in Q4/17), below our estimates (Evli EUR 6.2m), at a margin of 9.1 %.
  • Engineering services: Net sales in Q4 were EUR 34.6m vs. EUR 37m Evli. EBIT BO in Q4 was EUR 3.3m vs. EUR 3.8m Evli.
  • Embedded systems and IoT: Net sales in Q4 were EUR 16.5m vs. EUR 16.2m Evli. EBIT BO in Q4 was EUR 2.0m vs. EUR 1.7m Evli.
  • Technical documentation: Net sales in Q4 were EUR 11.7m vs. EUR 12.8m Evli. EBIT BO in Q4 was EUR 1.0m vs. EUR 1.2m Evli.
  • Etteplan sees its business environment continuing to develop favorably in all market areas while demand growth in Europe is expected to slow down slightly due to political uncertainty.
  • Dividend proposal: Etteplan’s BoD proposes a dividend of EUR 0.30 per share (Evli EUR 0.30).
  • Guidance: Etteplan expects its revenue and operating profit for the year 2019 to grow compared to 2018. The guidance is in line with our expectations

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SRV - Profitability below expectations

06.02.2019 - 09.10 | Earnings Flash

SRV’s Q4 profitability fell below our expectations, with the operating profit at EUR 0.1m (Evli EUR 7.8m). Revenue was EUR 299.8m (Evli 299.6m). Profitability was burdened by additional costs from the REDI shopping centre and impairment charges in International Operations. SRV expects revenue to grow in 2019 compared to 2018 (EUR 959.7m) and the operative operating profit to improve compared to 2018 (EUR -10.0m) and be positive.

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  • Revenue in Q4 was EUR 299.8m (EUR 338.7m in Q4/17), in line with our estimates (Evli EUR 299.6m). Growth in Q4 amounted to -11.5 % y/y.
  • Operating profit in Q4 was EUR 0.1m (EUR 11.2m in Q4/17), below our estimates (Evli EUR 7.8m), at a margin of 0 %. The operative operating profit amounted to EUR 1.5m and was affected by rising costs, additional REDI costs of EUR 11.1m, an impairment of EUR 4m in International Operations, and a EUR 14m capital gain for the sale of SRV Kalusto.
  • The order backlog strengthened to EUR 1,832m (2017: EUR 1,574.9m)
  • Guidance: SRV expects the full-year consolidated revenue for 2019 to grow compared to 2018 (EUR 959.7m). The operative operating profit is expected to improve compared to 2018 (EUR -10.0m) and to be positive. A total of 809 developer-contracted housing are estimated to be completed in 2019 (526 in 2018).
  • Dividend proposal: SRV proposes that no dividend be paid for FY2018.

Open report

Talenom - Upgrade to BUY

05.02.2019 - 09.30 | Company update

Talenom’s Q4 results were quite in line with our estimates, with net sales and operating profit at EUR 12.5m and EUR 1.5m respectively (Evli EUR 12.6m/EUR 1.3m). Talenom’s guidance exceeded our expectations, with net sales growth expected to remain at 2018 levels (18.0%) and the operating profit margin to increase slightly. We upgrade to BUY (HOLD) with an ex-div TP of EUR 24.5 (19.2)

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Upbeat guidance

Talenom’s Q4 results were quite in line with our estimates, with revenue at EUR 12.5m (Evli 12.6m) and EBIT at EUR 1.5m (Evli EUR 1.3m). The dividend proposal is EUR 0.55 per share (Evli EUR 0.50). Talenom’s guidance for 2019 is for net sales growth to remain at a similar pace to 2018 (18.0%) and the operating profit margin to improve slightly (2018: 17.5%), exceeding our expectations of slightly slower sales growth and flattish operating margin development.

Franchising network expansion supporting growth

In absolute figures, net sales growth is mainly expected from new bookkeeping customers. Talenom signed a large number of new franchising contracts during the latter half of 2018, which is expected to increase inflow of new customers during 2019. Growth in other businesses is expected to continue to be rapid, in our view driven largely by staffing services. We expect profitability improvements from further increases in the efficiency of bookkeeping services. We have raised our 2019E and 2020E net sales growth and operating profit estimates by 3%pts/15% and 5%pts/21% respectively. Our 2019E net sales and operating profit estimates are at EUR 57.5m and EUR 10.6m respectively.

BUY (HOLD) with an ex-div target price of EUR 24.5 (19.2)

Talenom trades at a 2019E P/E of 19.8x. We have previously viewed P/E levels of around 20x as reasonable but with the growth expected to remain strong and operating profit margins to increase we justify slightly higher valuation levels. We value Talenom at 21x 2019E P/E for an ex-div target price of EUR 24.5 (19.2) and upgrade to BUY (HOLD).

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Talenom - Guiding continued strong growth

04.02.2019 - 13.45 | Earnings Flash

Talenom’s fourth quarter results were quite in line with our expectations. Net sales amounted to EUR 12.5m (EUR 12.6m Evli) while the operating profit beat our estimates slightly, at EUR 1.5m (EUR 1.3m Evli). The dividend proposal for 2018 is EUR 0.55 per share (EUR 0.50 Evli). Talenom expects net sales growth to continue at a similar pace as in 2018 (18.0%) and the operating profit margin to improve slightly compared to 2018.

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  • Net sales in Q4 were EUR 12.5m (EUR 10.7m in Q4/17), in line with our estimates (Evli EUR 12.6m). Growth in Q4 amounted to 16.5% y/y.
  • The revenue from additional services in Q4 amounted to EUR 3.4m, with a growth of 62.8%.
  • Operating profit in Q4 was EUR 1.5m (EUR 0.9m in Q4/17), above our estimates (Evli EUR 1.3m), at a margin of 11.8 %. Talenom had pre-Q4 guided 2018 operating profit to be in the range of EUR 8.2-8.7m, with actual 2018 figures at EUR 8.5m
  • Dividend proposal: Talenom proposes a dividend of EUR 0.55 per share (Evli EUR 0.5).
  • Guidance for 2019: Talenom expects net sales growth to continue at a similar pace as in 2018 (18.0%) and the operating profit margin to improve slightly compared to 2018.
  • Net investments during 2018 amounted to EUR 9.5m compared to EUR 7.4m in 2017.

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Detection Technology - Outlook favorable with attractive pockets of growth

04.02.2019 - 08.30 | Company update

Detection Technology’s Q4 result was in line with our expectations. Post Q4, our estimates for 2019E and 2020E remain intact. DT is trading at a discount, which we see as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

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Q4 result in line with our expectations

DT’s Q4 net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which was in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal was 0.38, which was lower than our estimate of 0.45.

Outlook favorable with attractive pockets of growth

Our estimates for 2019E and 2020E remain intact post Q4. We expect DT’s 2019E net sales to grow 7.5% to EUR 100.9m driven by SBU’s return to growth of 11.5% on weak comparables. We expect MBU net sales growth to be flat due to the ramp-down of key customer’s product. We estimate 2019E EBIT to be EUR 18.9m (19.1m 2018) and EBIT margin to decrease to 18.8% from 19.7% level of 2018 due to higher R&D costs (30% higher vs. 2018). Despite our modest sales growth and flattish margin expectations for 2019E and the uncertainty around the extent of the ramp-down impact on MBU in H2, DT has several interesting pockets of growth (such as the MultiX acquisition, CMOS flat panel detectors for dental applications, and the Aurora product family for lower mid SBU clients), which are not reflected in our estimates but if materialized, offer clear support for the investment case.

Upgrade to BUY and target price of 19 euros (16.5)

On our estimates, DT’s 2019E-2020E EV/EBIT, EV/EBITDA and P/E are roughly 30%, 20%, 20% respectively below our peer group median. Despite a small cap discount, we see discount as unjustified given the attractive longer-term investment case. We raise our recommendation to BUY with a target price of 19 euros (16.5).

Open report

Detection Technology - Q4 result in line, outlook stable

01.02.2019 - 09.30 | Earnings Flash

Q4 Net sales amounted to EUR 25.7m (-6.8% y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. MBU sales were EUR 10.1m (EUR 10.8m our expectation) and SBU sales were EUR 15.5m (EUR 15.0m our expectation). DT’s Q4’18 EBIT came in at EUR 4.9m, which is in line with our estimates of EUR 5.2m (EUR 5.8m cons). Dividend proposal is 0.38, which is lower than our estimate of 0.45.

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  • Group level results: Q4 net sales amounted to EUR 25.7m (-6.8% % y/y) vs. EUR 25.8m/27.7m Evli/consensus estimates. Meanwhile, Q4 EBIT was EUR 4.9m (19.2% margin) vs. EUR 5.2m/5.8m Evli/cons. R&D costs amounted to 9.3% of net sales.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.1m which was slightly above our estimate of EUR 10.8m. Net sales of MBU increased by 24.3% y/y due to well-developed demand from key customers.
  • Security and Industrial Business Unit (SBU) had net sales of EUR 15.5m vs. EUR 15.0m Evli estimate. SBU sales declined by -19.9% y/y due to Chinese transport infrastructure projects being on hold and intensified competition.

Outlook: DT expects sales to grow in both business units and geographically in all markets and believes that the company will achieve double-digit revenue growth. However, the second half of the year will be challenging for MBU sales, because one of DT’s major customers will ramp down manufacturing of a device that uses a DT solution.

Medium-term business outlook is unchanged: Detection Technology aims to increase sales by at least 15% per annum and to achieve an operating margin at or above 15% in the medium term.

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CapMan - Picking up the pace with M&A

01.02.2019 - 00.00 | Company update

CapMan’s Q4 results were as expected weaker and in line with our expectations, despite our underestimation of the negative impact on the market portfolio. The acquisition of JAM Advisors (60%) is seen by CapMan as a means to expanding its customer base but we expect CapMan to also seek to rapidly grow the business. We retain our BUY rating with an ex-div TP of EUR 1.75 (1.80).

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Weaker results, raises dividend

CapMan’s Q4 results were quite in line with our expectations, with revenue of EUR 8.9m (Evli 8.2m) and EBIT of EUR -2.9m (Evli -2.8m). Despite having underestimated the market portfolio decline positive fair value changes in especially Real estate and Infra aided Investment business returns. The dividend proposal is EUR 0.12 per share as expected (2017: 0.11).

Acquisition of the majority of JAM Advisors

CapMan announced the acquisition of 60% of JAM Advisors, to be paid for with 5.11m CapMan shares. The company, established in 2012, had EUR 3.3m revenue in 2018 and EBITDA was barely positive. Valuation appears reasonable as it is to be expected that CapMan will seek for rapid expansion of the business, likely also internationally. CapMan will also use JAM Advisor’s customer network to expand its own offering towards tier 2 and 3 investors.

BUY-rating with an ex-div target price of EUR 1.75 (1.80)

CapMan has during Q4, through among other things the additional BVK mandate and second Infra mandate, seen AUM growth of EUR over 400m, that will contribute with over EUR 4m annual fee income. Together with the acquisition of JAM Advisors this will boost revenue and profitability in 2019 and we have raised our 2019 estimates for revenue and operating profit by 13% and 5% respectively. We expect management fee growth of 23% in 2019. Despite the negative Q4 earnings from the impact of the non-core market portfolio CapMan is in our view continuing to show solid progress. With valuation still looking attractive we retain our BUY rating with an ex-div target price of EUR 1.75 (1.80).

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CapMan - Earnings weaker as expected

31.01.2019 - 09.15 | Earnings Flash

CapMan’s Q4 results were weaker as expected due to the market volatility. A dividend of EUR 0.12 per share is proposed (Evli EUR 0.12). AUM grew to over EUR 3bn driven by the additional BVK mandate. CapMan further announced the acquisition of 60% of analysis and wealth management company JAM Advisors.

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  • Income in Q4 was EUR 8.9m (EUR 8.8m in Q4/17), above our estimates (Evli EUR 8.2m).
  • Operating profit in Q4 was EUR -2.9m (EUR -3.4m in Q4/17), quite in line with our estimates (Evli EUR -2.8m).
  • Management Company business revenue in Q4 was EUR 6.2m vs. EUR 6m Evli. Operating profit in Q4 was EUR 0.5m vs. EUR -0.1m Evli.
  • Investment business: Revenue in Q4 was EUR 0.2m vs. EUR 0.2m Evli. Operating profit in Q4 was EUR -4m vs. EUR -3.2m Evli.
  • Services business: Revenue in Q4 was EUR 2m vs. EUR 2m Evli. Operating profit in Q4 was EUR 0.8m vs. EUR 1m Evli.
  • Dividend proposal: CapMan proposes a dividend of EUR 0.12 per share (Evli EUR 0.12).
  • Guidance: CapMan does not provide a numeric guidance for 2019.
  • Capital under management by the end of Q4 was EUR 3.0bn. Of the capital under management EUR 1.9bn was attributable to real estate funds, EUR 0.8bn to portfolio companies and EUR 0.3bn to Infra and Credit.
  • CapMan announced that it has acquired 60% of analysis and wealth management company JAM Advisors. The acquisition will provide opportunities for CapMan to expand into new customer segments. The company’s turnover in 2018 was approx. EUR 3.3m and EBITDA barely positive.

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Etteplan - Outlook in focus

30.01.2019 - 09.15 | Preview

Etteplan reports Q4 results on February 7th. With signs of slower growth in the global economy the market outlook and guidance are of key interest. We expect the Q4 results to show good performance, with our revenue and EBIT BO estimates at EUR 66.0m and 6.7m (Q4/17: 58.5m and 5.4m) respectively. We expect a dividend proposal of EUR 0.30 per share. With valuation looking fairer after share price inclines we downgrade to HOLD (BUY) with a target price of EUR 9.0.

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Comments on market outlook and guidance of key interest

The growth in the global economy has been showing signs of slowdowns due to among other things the US-China trade war and changes in GDP growth forecasts for the near-term have been seeing a slightly declining trend. An adverse shift in engineering companies’ willingness to make investments would have an effect on the engineering services sector. As the effect of any weaker demand is not yet clearly comprehensible Etteplan’s comments on the market outlook along with the guidance for 2019 are of key interest. Despite increased uncertainty we still expect guidance to reflect growth in revenue and operating profit.

Expect DPS proposal of EUR 0.30

Our estimates ahead of Q4 remain intact. Our Q4 revenue and EBIT BO estimates are at 66.0m and 6.7m respectively. Etteplan has not specified a dividend policy but as the dividend has typically corresponded to around 50 % of EPS, we expect a dividend proposal of EUR 0.30 per share.

HOLD (BUY) with a target price of EUR 9.0

Etteplan’s share price has seen increases during 2019 and valuation when comparing to peers seems fair. We value Etteplan at 8.8x 2019E EV/EBITDA. We downgrade our rating to HOLD (BUY) with a target price of EUR 9.0.

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Pihlajalinna - Profitability and pipeline in focus

29.01.2019 - 09.10 | Preview

Pihlajalinna will report its Q4 earnings on Feb 15th. Profitability development and news flow regarding the new contract pipeline are of interest, as before. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q4.

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Company lost two small contracts during Q4

Kymijoen Työterveys, which Pihlajalinna acquired in early 2018, lost two customer contracts (Kouvola and Kotka) in Q4, following tendering processes. Contracts were transferred to Terveystalo from start of 2019. Personnel of Kymijoen Työterveys was given protection against dismissal for two years. Pihlajalinna plans to utilize the resulting personnel surplus in other undersupplied regions as well as in its other private service provision within the region. Management has estimated that the revenue impact of the two lost contracts is about EUR -2m in total annually. We assume the negative earnings impact at EUR 1m+ for 2019E.

Terveyspalvelu Verso acquired in Q4

Pihlajalinna executed on its altered expansion plan by acquiring Terveyspalvelu Verso, which produces occupational healthcare services at 17 clinics in Northern Savo region. Price tag was not disclosed. Transaction was completed at the end of Q4.

We expect profitability to improve in Q4

Pihlajalinna’s profitability and organic growth showed signs of turning to better in Q3, supported by a streamlined cost structure and the drop of insurance revenue leveling out. We expect cost savings to continue supporting profitability and foresee adj. EBITDA margin improving y/y in Q4.

Rating and TP unchanged ahead of Q4

We expect Q4 revenue of EUR 127m (growth 18%) and adj. EBITDA of EUR 10.9m (margin 8.6%) vs. EUR 8.5m (margin 7.9%) last year. We expect a dividend to be cut to EUR 0.08 vs. EUR 0.16 last year, due to higher leverage and lower earnings in 2018E. Our rating and target price (“Buy”, TP EUR 12) are unchanged ahead of Q4.

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Innofactor - Second profit warning for 2018

28.01.2019 - 09.30 | Company update

Innofactor issued a second profit warning, expecting net sales to decline from 2017 and EBITDA to be negative, from previously having expected net sales to be at a similar level to 2017 (EUR 65.7m) and EBITDA in between EUR 0.0-1.3m. Our revised 2018 net sales and EBITDA estimates are at EUR 63.7m and -0.9m respectively. We retain our HOLD-rating with a target price of EUR 0.4.

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Lowered guidance for 2018

Innofactor issued its second profit warning for 2018 on January 25th. Innofactor now expects its net sales to decline from 2017 and EBITDA to be negative. Innofactor’s previously expected its net sales to be at a similar level to 2017 and the operating margin to be positive but weaker than in 2017. Innofactor’s net sales and EBITDA in 2017 amounted to EUR 65.7m and EUR 1.3m respectively. The weaker than expected sales is according to Innofactor due to the timing of customer’s purchases related to the Dynasty product family along with lower sales in Denmark. Profitability is affected by the lower sales along with some write offs related to project deliveries, of which to our understanding the lower sales have a bigger impact. Innofactor further held co-operation negotiations during Q4 that is expected to have affected profitability.

Expect improvements in 2019

Following the updated guidance, we have revised our 2018 estimates, with our net sales and EBITDA estimates at EUR 63.7m and EUR -0.9m respectively, with our other estimates largely intact. We expect to see a minor improvement in sales going into 2019 and a more notable profitability improvement, mainly from the organizational changes made in late 2018.

HOLD with a target price of EUR 0.4

On our estimates valuation continues to appear justifiable on EV/EBITDA multiples, as the improvement we expect to see in profitability in 2019 is still well below historically seen levels. We retain our HOLD-rating with a target price of EUR 0.4.

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CapMan - Weaker finish to otherwise solid year

24.01.2019 - 09.15 | Preview

CapMan will report Q4 results on January 31st. We expect Q4 to based on earnings be a weaker end to an otherwise solid year, driven by the impact of the market volatility on CapMan’s trading portfolio. Our revised Q4 estimates for revenue and operating profit are at EUR 8.2m and EUR -2.8m respectively. We expect a dividend of EUR 0.12 per share. We retain our BUY-rating with a target price of EUR 1.80 (1.75).

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Market volatility to weigh on Q4

We expect CapMan to report weaker Q4 earnings due to the effect of market volatility on the trading portfolio during the quarter. CapMan has been shifting funds from the trading portfolio to own funds, with some EUR 20m transferred during H1/18, but was still at near EUR 60m at the end of Q3. As to our understanding some 60% of the portfolio is hedged, we expect an EUR 3m fair value loss. We also do not expect any notable carried interest or success fees for the quarter. We have revised our Q4 revenue and operating profit estimates to EUR 8.2m (10.0m) and EUR -2.8m (5.0m) respectively. Although we anticipate a weaker result in 2018 compared to 2017, we expect CapMan to increase dividends to EUR 0.12 (2017: 0.11) per share.

BVK mandate addition to support management fee growth

During Q4 CapMan reported the increase of the BVK mandate to EUR 820m (prev. 500m), which we expect to have an additional earnings contribution of around EUR 1.5m p.a. The whole mandate is to our understanding close to being fully invested and will boost management fees from 2019 forward.

BUY-rating with a target price of EUR 1.80 (1.75)

Looking at 2019E and 2020E P/E multiples, coupled with the high dividend yield, valuation in our view does not yet appear challenging, with a ~15% discount to peers on P/E. We retain our BUY-rating with a target price of EUR 1.80 (1.75).

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Detection Technology - Focus on outlook for 2019 and China

24.01.2019 - 08.50 | Preview

Detection Technology will report Q4 earnings next week on Feb 1st. Our focus will be on the latest comments regarding China and the overall medical and security market outlook for 2019. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price remain intact ahead of Q4.

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SBU net sales to decline in Q4, MBU still going strong in Q4

Due to a slowdown in China’s security market and tightening competition, DT has said it expects SBU sales to decline y/y in Q4’18, in contrast to the earlier guided single-digit y/y growth for H2’18. The visibility is limited due to the suspension of many Chinese infrastructure projects. We expect SBU Q4 net sales to be 15.0 MEUR (vs. 19.4 MEUR Q417). We expect continued good growth in MBU with Q418E net sales of 10.8 MEUR (vs. 8.1 MEUR Q417).

2019 outlook in focus, especially comments on China

DT expects net sales to grow moderately at the beginning of 2019. This estimate is based on the growth outlook for the overall X-ray imaging market, which is similar for 2019 as 2018, according to DT. In the Q4 call we look forward to hearing an update on the outlook and the Chinese market, as well as any new news regarding the recently released Aurora X-ray detector family (expected to support SBU’s net sales at end of 2019).

Estimates unchanged ahead of Q4, HOLD rating and target price of 16.5 euros maintained

We expect Q4 net sales to be 25.8 MEUR (vs. 27.5 MEUR Q417) and Q4 EBIT to be 5.2 MEUR (vs. 7.0 MEUR Q417). Thus, we expect 2018E net sales to grow 6% to 94.1 MEUR from last year’s 89 MEUR and EBIT to decline 3% from last year (19.3 MEUR 2018 vs. 19.9 MEUR 2017) due to lower SBU sales and higher R&D costs. We expect a dividend of EUR 0.45, which corresponds to a 40% EPS payout and 3% dividend yield. Our rating and target price, “HOLD” and target price EUR 16.5, remain unchanged ahead of Q4.

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Tokmanni - Expecting growth in revenue, earnings and dividend

23.01.2019 - 09.05 | Preview

Tokmanni will report its seasonally strong Q4 earnings on Feb 8th. As usual LFL growth and margins are of interest. We expect revenue and earnings to grow with continued LFL growth and stable gross margin. We foresee the dividend at 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.

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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.

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Verkkokauppa.com - Guidance downgrade by surprise

18.01.2019 - 08.35 | Preview

Verkkokauppa.com downgraded its guidance yesterday for 2018E adj. EBITDA. The warning came as a surprise, even if major turmoil took place in the wider retail industry in Q4. We have cut estimates for Q4 and for 2019-2020E.

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Guidance downgraded for adj. EBITDA

Verkkokauppa.com downgraded its guidance yesterday and gave preliminary figures for full-year revenue and adj. EBITDA. FY18E revenue was EUR 477m, in line with the guided range of EUR 460-500m and somewhat above EUR 467-468m Evli and consensus estimates. However, adj. EBITDA landed at EUR 10.2m, below previously guided range of EUR 11-14m and below EUR 12.7m Evli and cons expectation. Full-year figures imply Q4 revenue of EUR 155m (growth 22%) and adj. EBITDA of EUR 3.4m (EUR 5.9m y/y). Adj. EBITDA for Q4 thus lands at its lowest level since 2014. Seasonally strong Q4 has thus clearly disappointed. Tight price competition and higher marketing costs were mentioned as negative contributors in 2018E.

We expect wholesale volumes to have increased y/y in Q4

Federal Customs Service of the Russian Federation announced on Dec 7th that starting from Jan 2019 the duty-free limit for private goods imports will be reduced to EUR 500 from EUR 1000 previously. We expect this to have supported wholesale volume sales for Verkkokauppa.com in Q4 and consider this as a likely contributor to the Q4 revenue beat.

Estimates cut - target price to EUR 4.2 (4.7)

We have cut 2019 and 2020E estimates by 12% and 9% respectively. We continue to expect a growing dividend of EUR 0.19 vs. EUR 0.18 for 2017. This represents 122% of EPS, but can be backed by the sizeable net cash position. We cut target price to EUR 4.2 (4.7), which corresponds to 12x 2019E EBIT. Our “Hold” rating is intact. Our estimates do not yet reflect the upcoming IFRS 16 changes.

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Raute - Higher sales, lower order intake

17.01.2019 - 09.10 | Preview

Raute announced 2018 sales and EBIT to be higher than previously expected. The company reported 2018 sales at EUR 181m and EBIT at EUR 14.9m. Our respective estimates previously stood at EUR 171m and EUR 15.1m. The higherthan- estimated sales were the result of strong execution throughout the entire delivery chain during the last months of the year. Services sales were also higher than estimated. However, the order book amounted to EUR 95m vs. our estimate of EUR 114m.

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Higher revenue negated by lower margin and order intake

Stronger than expected Q4 project deliveries (EUR 39m vs. EUR 33m in the previous quarter, according to our estimates) pushed the company to book a record quarter. On the other hand, the released figures reflect a lower EBIT margin on project deliveries. We estimate the Q4 project deliveries EBIT margin at below 5%, while previously the business has averaged margins above 6%. It should be noted that the lower margin may be due to possible conservative assumptions by the company regarding the unfinished projects. Whereas Q4 sales came in EUR 10m higher than our expectations, the order intake fell short by EUR 9m (at EUR 28m vs. our estimate of EUR 37m).

We maintain HOLD with a TP of EUR 27.0 (27.5)

All in all, we don’t see material changes in the company’s operating environment. We continue to expect negative sales and EBIT development for the next couple of years following a very strong investment cycle by Raute’s customers. Our estimates for 2019 sales and EBIT remain at EUR 149m and EUR 12m, respectively. We make no significant changes to our longer-term estimates and maintain our HOLD rating, lowering our target price as peer valuation multiples have declined during the recent months. In our view an EBIT level of around EUR 10m and EV/EBIT multiple of 8x remain the relevant yardsticks for long-term over-the-cycle valuation.

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Vaisala - Positive profit warning

15.01.2019 - 09.20 | Preview

Vaisala issued a positive profit warning yesterday, with operating result being better than previously guided (EBIT range 30-36 MEUR). Operating profit for 2018 was 39 MEUR vs. 35.5 MEUR our estimates. Net sales for 2018 was 349 MEUR vs. 349 our estimate. W&E net sales in Q4 were 78 MEUR vs. 78 MEUR our estimates, IM net sales in Q4 were 31 MEUR vs. 30 MEUR our estimates. Most of the profitability beat was due to better than expected profitability in W&E, were EBIT was 10 MEUR vs. 5.2 MEUR our estimates (IM EBIT 6 MEUR vs. 5.5 MEUR our estimate).

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Favorable mix in W&E and higher sales in IM impacted EBIT

In the fourth quarter 2018, operating result was higher than estimated due to higher than estimated gross profit and other operating income. In W&E, gross margin was higher than estimated due to favorable sales mix. In IM, net sales were higher than estimated resulting in higher operating result. Other operating income included EUR 1.5 million of reversal of earn-outs and other contractual liabilities related to acquisitions in the recent years.

2019E growth mainly non-organic, TP 19 and HOLD recommendation maintained

We estimate Vaisala’s net sales to grow 11% to 387 MEUR in 2019E. Growth is mainly driven by the Leosphere and K-Patents acquisitions (adding 24 MEUR and 12 MEUR to top line in 2019E). We estimate 2019E EBIT to be 45 MEUR. On our estimates Vaisala is trading at 2019/20E at P/E 20.4 and 17.9, which is ~17% higher than peer group. On our estimates, EV/EBIT multiples for 2019/20E are 14.5 and 12.8 respectively, which are in line with peer group. We await some more color from the Q4 call, especially regarding China and the W&E project outlook. We retain our HOLD recommendation and target price of 19 euros.

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Consti - 2018 earnings to be in the red

15.01.2019 - 09.00 | Preview

Consti issued a profit warning, expecting the operating result for 2018 to be negative and decline compared to 2017. The profitability in Q4 will be burdened by higher than expected costs of a building purpose modification project. We expect EBIT of EUR -1.0m (prev. 1.5m) in 2018. We do not expect Consti to distribute dividends for FY 2018. We retain our HOLD-rating with a target price of EUR 6.0 (7.5).

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Lowered guidance

Consti lowered its guidance, now expecting the operating result to be negative and decline (prev. grow) compared to 2017, when the operating result was EUR -0.4m. Consti’s Q4 results will be negative due to weaker than expected profitability in the housing repair unit included in the Building Facades business area. The profitability issues relate to higher than expected costs of a building purpose modification project. The project will be finalized during H1/2019.

2018E EBIT EUR -1.0m (1.5m)

We have cut our Q4 profitability estimates, with both our Q4/18 and 2018E EBIT estimates now at EUR -1.0m (prev. 1.5m). Due to the weaker result we have revised our dividend estimate and do not expect Consti to distribute dividends for FY 2018. We have cut our 2019E EBIT estimate and now expect EBIT of EUR 7.0m (8.7m). We anticipate further profitability impacts of the building purpose modification project during 2019E but continue to expect notable profitability improvements as the projects that have burdened profitability are completed.

HOLD with a target price of EUR 6.0 (7.5)

On our estimates Consti trades at a 2019E EV/EBIT of 8.4x, at a ~10/20 % discount to the Construction peers and Building Installations and Services peers. Given the profitability challenges and weaker visibility into near-term profitability we see the discount as justified and retain our HOLD-rating with a target price of EUR 6.0 (7.5).

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Next Games - Upbeat Q4 figures, initiating savings program

11.01.2019 - 09.00 | Company update

Next Games released preliminary Q4 figures and announced an intention to streamline operations, expecting annual cost savings in the range of EUR 4-8m. Next Games is still reviewing financing options but no update on the situation was given with the releases. Financing remains a concern but with a stronger than expected cash position we upgrade to HOLD (SELL) with a target price of EUR 2.0 (1.8).

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Q4 losses smaller than anticipated

Next Games announced preliminary Q4 figures. Revenue amounted to EUR 11.3m (Evli EUR 12.2m) while EBITDA amounted to EUR -1.3m (Evli -3.6m). The gross margin improved more than we had expected, at 37% in Q4 (-11% in Q3). User acquisition and marketing costs relating to Our World have normalized, which helped boost the gross margin. The company’s cash position at the end of Q4 was EUR 7.3m.

Seeking to streamline operations

Company management has been authorized to initiate a program to review the company’s cost structure, including consultation proceedings covering the entire organization. The company estimates annual cost savings in the range of EUR 4-8m during the full year 2019. Next Games is further still looking into alternatives to strengthen its financial position.

HOLD (SELL) with a target price of EUR 2.0 (1.8)

We have revised our estimates, with our 2019E sales estimate lowered to EUR 67.2m (prev. 73m) due to expected lower Our World revenue and EBIT estimate raised to EUR -5.7m, to account for the cost savings program and lower than expected UA costs. Although the financing situation remains a concern, we view the situation as less dire than previously anticipated. We expect the cost savings program to further alleviate the financing situation but will likely have some impact on new game launches. We upgrade to HOLD with a target price of EUR 2.0 (1.8).

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Finnair - Soft traffic continued

10.01.2019 - 09.15 | Preview

Finnair’s traffic came in below our (and consensus) expectations in Q4 and the company appears to have slightly missed its FY2018 guidance ranges for capacity growth (14.8% vs. guidance “above 15%”) and passenger growth (11.6% vs. guidance 12-13%). We have cut Q4 estimates with weaker than expected traffic, whereas our 2019E estimates remain largely unchanged.

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Q4 traffic softer than we expected

Finnair’s traffic continued soft in Q4. Overall Q4 capacity (ASK) grew by 9% vs. our 12% expectation, while sold capacity (RPK) grew by only 4% vs. our 10% expectation. Thus passenger load factor (PLF) declined quite notably by 3.4 percentage points in Q4 to 76.9%. This was driven by weakening PLFs in European (- 3.6pp), Asian (-3.5pp) and domestic (-3.0pp) traffic. Finnair flagged in Q3 that competition had tightened especially in the Nordics, which is a likely contributor to soft traffic performance. Finnair stopped reporting unit revenue (RASK) with end-quarter monthly traffic, but we expect it to have continued to decline in Q4.

Fuel price eased somewhat q/q in Q4

As a positive the price of jet fuel eased in November and December, after climbing to a multi-year high in October. On a q/q basis average price moved by -5% in USD and by -3% in EUR compared to average price of Q3. Yet average price for Q4 was still 15% higher y/y in USD and 18% higher in EUR.

Q4 estimates cut

We have cut Q4 estimates and expect Finnair’s Q4 revenue to be EUR 671m (4% growth), while foreseeing adj. EBIT at EUR -9m (margin -1.4%). We foresee FY2018 revenue growth at the low-end of the guided “about 10-11%” range. Our rating (“Hold”) and TP (EUR 6.8) remain intact, with 2019E estimates largely unchanged.

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Aspo - Guides EBIT at the range’s low-end

19.12.2018 - 09.05 | Company update

Aspo announced the restructuring of its subsidiary Kauko. Effective in 2019, Aspo will no longer report Kauko as a separate segment. The corporate action does not come as a major surprise, yet Aspo also restated its 2018 EBIT guidance at the lower end of the initial range. We adjust our estimates for Kauko accordingly, while making small adjustments to ESL’s estimates due to the new LNG vessels taking longer than initially expected to reach their full operational efficiency.

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Kauko plays a minor role in the sum-of-the-parts analysis

According to the plan, Kauko’s energy solutions business will be either sold off or terminated, while the offering for mobile knowledge work as well as Kauko’s administration will be restructured. The energy solutions business generates approximately one third of Kauko’s revenue. It was expected that Aspo might take more concrete measures regarding Kauko as the subsidiary has not been able to reach its targets. We recognize the announced EUR 5m goodwill impairment in Kauko’s Q4 EBIT.

We expect ESL’s acquisitions to lift 2019 EBIT to EUR 25m

We make slight adjustments to ESL’s estimates, reflecting the longer learning curve for the new LNG vessels to reach their full operational efficiency (Q4 EBIT EUR 1.2m lower than previously expected, 2019 EBIT lower by EUR 0.4m). Nevertheless, the new LNG vessels and the acquisition of AtoB@C are expected to be major contributors to next year’s EBIT growth. Our EBIT estimates for Telko and Leipurin remain unchanged.

Lower peer multiples cut our target to EUR 9.25 (EUR 10)

Overall, we don’t see any significant changes in Aspo’s operations. We expect Aspo’s 2018 EBIT at EUR 21.9m (including the EUR 5m impairment of Kauko). We retain our HOLD rating but decrease our target price to EUR 9.25 (EUR 10). The change in our target price mainly reflect’s Telko’s lowered peer multiple, while the write-down of Kauko figures only as a minor loss in the sum-of-the-parts valuation.

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Talenom - Issued positive profit warning

13.12.2018 - 09.00 | Company update

Talenom raised its guidance for FY2018 EBIT, expecting EBIT to be in the range of EUR 8.2-8.7m. The raised guidance is mainly due to increased operational efficiency through technological improvements and to our understanding also due to some postponement of investments in the company’s internationalization plans. We retain our HOLD-rating with a target price of EUR 19.2 (18.5).

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Guidance for 2018 EBIT raised

Talenom raised its guidance for FY2018 EBIT, expecting EBIT to be in the range of EUR 8.2-8.7m (prev. EUR 7.4-8.0m). The sales guidance remains intact, with sales growth expected to clearly exceed previous year levels. The improved profitability outlook is mainly due to increased operational efficiency through technological improvements. To our understanding some investments relating to the company’s internationalization plans were postponed, which we expect in part to have contributed to the raised guidance. Our revised 2018 EBIT estimate is at EUR 8.4m.

Remain cautious to margin improvement

We continue to remain cautious to margin improvement in the near term. Talenom still has room to improve margins through enhanced operational efficiency. We continue to expect Talenom to establish a presence outside Finland next year, most likely in Sweden, which would put some pressure on margins through up-front personnel costs.

HOLD with a target price of EUR 19.2 (18.5)

We retain our HOLD rating with a target price of EUR 19.2(18.5). On our estimates and target price Talenom trades at a target P/E and EV/EBIT for 2019E of 19.4x and 16.3x, levels that we have previously consider reasonable.

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Innofactor - Waiting for signs of a turnaround

11.12.2018 - 08.30 | Company report

Innofactor has in the near past seen sales growth declines and profitability being burdened by internal problems. Actions to decrease organizational levels and improve decision-making are being taken and we expect profitability to see some recovery in 2019, while signs of accelerated sales growth remain to be seen. We retain our HOLD rating with a target price of EUR 0.40 (0.55).

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Sales growth uncertainty

Innofactor has seen sales declining in the near past due to weaker sales activity, with the organizational structure having had an effect. Actions have been taken to decrease the organizational levels and improve decision-making, but we remain wary to sales growth being remedied in 2019 and expect flat sales growth.

Market outlook remains supportive

The Nordic IT-services market has seen healthy growth in recent years and is expected to continue in the coming years. Furthermore, Microsoft has shown solid performance within enterprise solutions, expected to grow at a double-digit pace.

Expect to see margin improvement

The weaker sales in the near past along with other factors have had a negative effect on profitability. Organizational actions being taken are expected to have both a direct and indirect positive effect on profitability from 2019 onward and we expect to see margin improvement in the coming years.

HOLD with a target price of EUR 0.40 (0.55)

On our estimates valuation is quite in line with peers on 2019E EV/EBITDA while on 2020E multiples valuation appears more attractive. As profitability has been an issue in the near past and evidence of significant margin improvements are still lacking we emphasize the 2019E peer EV/EBITDA multiple and value Innofactor at 8.6x 2019E EV/EBITDA, giving a target price of EUR 0.40 and HOLD-rating.

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Tokmanni - CMD: strategy and targets reaffirmed

05.12.2018 - 09.10 | Company report

Tokmanni’s CMD provided an update into the company’s strategic focus areas and targets. The CMD reaffirmed that the sourcing improvement potential, which has been key to our investment case, remains intact and is of high importance in management’s agenda. We continue to expect margins to improve in upcoming years and hence retain “Buy” rating with TP of EUR 9 for the shares.

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Targeting EUR 1bn in sales by 2020E

Tokmanni targets EUR 1bn in sales by 2020E with further store network expansion and LFL growth. After the recent Ale- Makasiini acquisition the store count is now 186 stores vs. the target of 200 stores. At the targeted expansion pace (12,000m2 or ~5 stores annually) the target of 200 stores will be reached within the next few years. Growth plans beyond this were not addressed.

EBITDA to 10% via improved sourcing and OPEX scalability

Tokmanni continues to target 10% adj. EBITDA margin. This does not include impact of upcoming IFRS 16. The target implies 2- 3% margin improvement compared to the level reached in recent years. 1-2% of this is to come from the gross margin, which is to improve primarily driven by increased direct sourcing and by increased share of private label products in the mix. The targeted gross margin improvement is in line with what we had already incorporated into our estimates and it reaffirms the validity of further sourcing improvement potential. OPEX scalability should contribute the remaining 1-1.5%. Positive LFL growth is expected to be a key driver behind OPEX scalability.

Maintaining “Buy” on margin improvement potential

We have included the acquired Ale-Makasiini into our estimates, but for other parts our estimates remain broadly intact. We expect earnings to improve in 2019-2020E driven primarily by gross margin improvements via more efficient sourcing. We consider valuation moderate against the margin improvement potential and hence retain “Buy” rating for the shares.

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CapMan - CMD notes

29.11.2018 - 09.00 | Company update

CapMan’s CMD revolved around the strategic changes that have taken place during the past few years and CapMan’s position going forward. Key emphasis will, based on our take on the CMD, lie on earnings stability, asset diversification, and broadening of the investor base.

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Multi-asset manager

CapMan’s CMD clearly signaled the continued strive towards an increasing Nordic presence and to a larger extent becoming a multi-asset manager. In our view key areas of interest will be the fairly recently established areas of Growth equity and Infra. The presented performance metrics for exits in CapMan Growth are impressive, with significant further potential going forward. The Infra fund has had a good start and a second mandate, still subject to approval, has been signed.

Broadening of investor base

Another strategic area of focus lies in the broadening of the investor base. Currently some 85 % of AUM stems from local tier 1 investors. CapMan is seeking to increase the share of tier 2 and 3 investors along with international tier 1 investors. Targeting investors with smaller ticket sizes could likely be reflected in new product launches similar to the open-ended NPI fund.

Seeking earnings stability, carry potential remains

CapMan’s financial objective remain unchanged. Currently the average ROE of 20 % in our view remains the most challenging. Realization of mid- to long-term carry potential remains a key factor but CapMan is also seeking to increase the share of fee income to achieve more stability in earnings.

BUY with a target price of EUR 1.75

Our estimates remain unchanged, with earnings expected to improve in the coming years. The effect of recent market uncertainty on CapMan is in our view currently mostly neutral. We expect several new products to be launched during 2019 and the uncertainty could impact on fundraising, although fund track records remain supportive. We retain our BUY-rating and target price of EUR 1.75.

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Etteplan - More than just an engineering company

29.11.2018 - 09.00 | Company report

Etteplan has seen favourable development in the past few years following improving market conditions. Market uncertainty has increased recently and we expect organic growth figures to slow down going in to 2019. Acquisitions remain essential in achieving the 15 % average growth target. Margins are close to the 10 % EBIT from business operations target, under some pressure but with room for improvements. We retain our BUY-rating with a target price of EUR 9.0 (9.5).

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Market uncertainty casting a shadow on sales growth

Etteplan’s revenue in 2017 and during Q1-Q3/2018 increased by 16.8 % and 11.1 %, of which organic growth amounted to 10.4 % and 7.6 %, supported by improved market conditions from early 2017 onward. With some uncertainty relating to market development visible we expect organic growth to slow down going in to 2019 and achieving the target of an average growth of 15% would in our view require further acquisitions.

Margins near 10 % target

Etteplan has during 2018 been able to achieve group EBIT from business operations margins of close to the 10 % target (9.1 % during Q1-Q3/2018). A key driver for profitability has been Engineering Services due to the good demand situation and improved operational efficiency. We see some pressure on the already exceptionally good margins in the service area, while Embedded Systems and IoT as well as Technical Documentation in our view still have room for margin development.

BUY with a target price of EUR 9.0

Compared to peer 2019E and 2020E multiples Etteplan trades at a discount. Increased uncertainty in coming years market development warrants some caution but the ’19- ‘20E discount of ~20 % to peer ‘19E and ‘20E EV/EBITDA does not appear justified. We value Etteplan at 8.8x 2019E EV/EBITDA, giving a target price of EUR 9.0 (9.5) and BUY recommendation.

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Cibus Nordic - A routine trip for groceries

28.11.2018 - 09.10 | Company update

Cibus’ quarterly results closely reflected the company’s earnings capacity. We update our estimates to account for the acquisition of six properties the company announced in early November. The add-on properties are expected to contribute ca. EUR 2m in annual rental income. We retain our BUY rating and target price of SEK 120 per share.

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The portfolio now includes 132 properties

Following the company’s latest acquisition of six Finnish daily-goods properties (all let to Kesko and Tokmanni), the portfolio now has a total lettable area of some 477,000 sqm and NOI capacity of EUR 47.8m. The latest add-on portfolio was acquired at a total cost of EUR 30m, the acquisition yield estimated at 6.5%. Consequently, Cibus’ portfolio gross asset value currently stands at around EUR 815m. After subtracting the central administration and net financial costs, Cibus now has capacity to pay ca. EUR 30m in annual dividends. The dividend guidance currently remains at EUR 0.2 per share per quarter, or EUR 24.9m on an annual basis.

EPRA NAV increased to EUR 11.2 (11.0) per share

Going forward, Cibus’ financial year will follow the calendar year. This means the company’s next year-end report will be published in late February 2019 for the period covering the second half of 2018. Meanwhile board member Jonas Ahlblad will serve as an interim CEO until a new CEO has been appointed. During the coming months we are expecting the company to announce the refinancing of two bank loans. Cibus might increase its borrowings and use the proceeds to acquire additional daily-goods properties in Finland. We expect the completed refinancing to meaningfully cut the company’s average borrowing rate, which currently stands close to 3%.

Retain BUY rating with TP of SEK 120 per share

We update our estimates to reflect the latest add-on acquisition. We expect the company to announce further portfolio acquisitions during the next quarters. We retain our BUY rating and target of SEK 120 per share.

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Cibus Nordic - No surprises; updated earnings capacity provides color on the latest transaction

27.11.2018 - 11.40 | Earnings Flash

Cibus’ Jul-Sep 2018 quarter proceeded in-line with estimates. Net rental income and operating income came in as guided by the company’s earnings capacity. From now on, dividends will be paid on a quarterly basis.

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  • Operating income during the quarter, at EUR 7.2m, was consistent with the annual earnings capacity previously communicated by the company for the period (EUR 28.8m).
  • Cibus previously announced an acquisition of six daily-goods properties in Finland at a cost of EUR 30m. The updated earnings capacity hints at an acquisition yield of ca 6.5%, i.e. an increase of EUR 2.0m in rental income. Correspondingly, the annual NOI capacity now stands at EUR 47.8m vs. EUR 45.8m previously. The six recently acquired properties are all let to Kesko and Tokmanni.
  • Going forward, Cibus will pay dividends quarterly. Moreover, Cibus’ financial year will now follow the calendar year, meaning that the company’s next year-end report will be published in Feb 2019 for the period Jul-Dec 2018. Meanwhile board member Jonas Ahlblad (Sirius Capital Partners) will serve as an interim CEO until a new CEO has been appointed.

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Gofore - Upgrade to BUY

22.11.2018 - 09.30 | Company update

Gofore specified guidance for 2018 and gave an outlook on net sales for 2019, at EUR 50-52m (prev. 48-52m) and EUR 65-73m respectively. The long-term financial objectives remain unchanged. The demand outlook in broad has remained good. On our revised estimates we expect net sales of EUR 67.5m and EBITA of EUR 10.4m in 2019. On our estimates Gofore trades at a nearly 20 % discount to peers on ‘19E EV/EBIT, which we do not consider justified. We upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

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Guidance for 2018 specified and 2019 forecast given

Gofore’s BoD specified guidance for 2018, expecting net sales to be EUR 50-52m (prev. 48-52m). An outlook for 2019 was also given, according to which net sales are expected to grow to EUR 65-73m, excluding any potential acquisitions in 2019. The long-term financial objectives remain unchanged, at 15-25 % net sales growth in the next few years and an EBITA margin of 15 %. The demand situation has in broad remained good and growth is expected across the board of customer areas.

2019E net sales EUR 67.5m and EBITA EUR 10.4m

We have revised our estimates, now expecting net sales of EUR 67.5m (prev. 62.9m), to include for the Solinor acquisition. Our revised EBITA estimate is EUR 10.4m (prev. 9.6m). Our 2019E net sales estimate is on the lower side of the 2019 outlook, leaving sales growth upside along with any potential acquisitions. The availability of skilled professionals remains a limiting factor and the lower range of the 2019 outlook would imply limited organic growth when accounting for the Solinor acquisition.

BUY (HOLD) with a target price of EUR 9.8 (9.2)

Valuation levels have seen declines following recent market uncertainty but, on our estimates, Gofore trades on a nearly 20 % discount to peer on ‘19E EV/EBIT. Having been among the strongest performers both in sales growth and profitability we do not see the discount as justifiable and upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

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Fellow Finance - Initiating coverage with HOLD

22.11.2018 - 08.15 | Company report

Fellow Finance is a P2P lending platform with high scalability at the core of its business model, seeking rapid organic and profitable growth domestically and internationally, with a proven track of growth and profitability. We initiate coverage with HOLD and a target price of EUR 8.0.

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Seeking rapid and profitable growth

Fellow Finance is a P2P consumer and business lending platform aiming at rapid organic and profitable growth domestically and internationally. The company has during its rather short existence been able to achieve solid growth while retaining good profitability. The financial targets by the end of 2023 are net sales of over EUR 80m, an EBIT-margin of over 25 per cent, annual loan facilitations of EUR 1.5 billion, and to facilitate loans in ten countries in Europe. The alternative financing market generally still accounts for only a small share of total lending but companies like Fellow Finance are seeking to challenge the traditional financial markets through innovation and technology.

Business model relies on highly scalable platform

Fellow Finance’s business model relies on its self-developed platform, which enables high scalability. The platform further enables expansion into new markets and launching of new products with little investment. Fellow Finance’s subsidiary Lainaamo functions as a financing company and acts as a market maker when entering new markets.

Initiate coverage with HOLD and target price of EUR 8.0

We initiate coverage of Fellow Finance with a HOLD rating and target price of EUR 8.0. Our valuation is based mainly on payment processing and financing platform peer multiples, emphasizing 2019E P/E ratios. Our target 2019E P/E of 21.9x values Fellow Finance above the lending platform peers, that on average have a lower expected growth rate and profitability. The internationalization plans offer significant upside but in our view Fellow Finance still needs to show proof of international success.

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Endomines - Ramp-up phase ahead

15.11.2018 - 09.15 | Company update

Endomines’ gold production in Q3 amounted to 81.6kg and revenue to SEK 25.9m. EBITDA remained barely positive at SEK 0.6m, aided by higher head grades and lower costs due to suspension of the mining operations. Production at the Friday mine is expected to begin in December 2018. We retain our BUY rating with a target price of SEK 7.2 (7.8).

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EBITDA positive despite mining operation suspension

Endomines gold production amounted to 81.6kg in Q3. Production figures were aided by the high head grades of 3.9g/tonne. Revenue and EBITDA in Q3 were SEK 25.9m and 0.6m respectively. Mining operations at the Pampalo mine were suspended in mid-September, which along with the higher head grades contributed to a positive EBITDA, despite lower volumes. Gold production during 1-9/2018 was 303.5kg, with another 15kg produced in October and the total 2018 output expected to exceed 320kg.

Limited new information in the earnings release

Endomines’ third quarter earnings release contained limited new information regarding the Idaho projects. The start-up timetable of the Friday mine was updated, with production anticipated to start in December. Details on the progress of the exploration activities in the vicinity of Pampalo were given, noting some samples with anomalies warranting further evaluation. Endomines had earlier specified the expected cash costs of the Friday mine, estimated to be around USD 650-900 per oz following ramp-up. We have updated our estimates for the cash costs for Friday and expect levels of around 900 USD/oz during 2019 and a decrease to 700-800 USD/Oz levels towards later production phases.

BUY with a target price of SEK 7.2 (7.8)

Following our revised estimates, we lower our target price to SEK 7.2 (7.8) but retain our BUY rating. The gold price has hovered at around 1,200 USD/oz following declines in Q3 but has seen slight upward pressure following recent stock market uncertainty.

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Endomines - EBITDA remained positive

14.11.2018 - 09.15 | Earnings Flash

Endomines’ revenue and EBITDA amounted to SEK 25.9m and SEK 0.6m respectively. Initial production at Friday is anticipated to commence in December 2018 but no substantial volumes are expected until 2019.

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  • Endomines had pre-announced Q3 production figures, with gold production of 81.6kg (94.1kg). Milled ore amounted to 26,876 tonnes (37,422), at head grades of 3.9g/t (3.0g/t). Cash cost was 768 USD/oz (1,081).
  • Revenue amounted to SEK 25.9m (26.7m in Q3/17), above our estimates of SEK 21.1m, driven by the higher head grades.
  • EBITDA in Q3 was at SEK 0.6m (Evli -11.4m) and EBIT at SEK -11.2m (Evli -21.7m), with depreciations and write-downs of assets of SEK -11.8m. The suspension of mining activities in mid-September and higher revenue contributed to the higher than anticipated EBITDA. Adjusted EBITDA, excluding costs associated with the TVL acquisition and co-operation negotiations amounted to SEK 4.3m.
  • Total cash flow was SEK -27.7m (1.6m).
  • Guidance: Gold production in January-October amounted to 318.5kg. Total output from Pampalo, including additional gold recovery in connection with maintenance of the processing facility, is expected to exceed 320kg.
  • Initial production at Friday is anticipated to commence in December 2018. No substantial production volumes are expected before the year-end.

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Next Games - Downgrade to SELL

06.11.2018 - 09.15 | Company update

Next Games Q3 results were weak and highlighted the volatility in earnings stability when developing and launching new games. The company’s cash assets have taken a big dent and with the existing games not being able to finance the development of new games Next Games is looking into other funding options. With the financing situation overshadowing the long-term potential we downgrade to SELL with a target price of EUR 1.8 (8.5).

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Our World launch burdened results

Next Games Q3 results were weak, with EBIT at EUR -10.7m. Profitability was significantly affected by user acquisition and marketing costs relating to Our World, released in mid-July, along with development costs. Revenue in Q3 was EUR 13.4m (NML 5.6m, Our World 7.8m). Our World saw a good start after release, but a growing number of active users lead to technical issues and a weaker second half of the quarter. The technical issues have decreased, and key metrics saw stabilization towards the end of the quarter. A new license agreement was signed during the quarter and Next Games now has four games in development.

Financial situation in focus

With the larger than anticipated loss in Q3, impacted by the weaker sales of Our World, Next Games is looking into options for securing its financing. The company’s cash balance at the end of the quarter was EUR 8.8m along with an unused credit limit of EUR 5m. Next Games did not comment further on the types of financing sought, but we note that the effect of dilution in the case of a share emission at current share prices could be significant.

SELL (BUY) with a target price of EUR 1.8 (8.5)

At the current development pace and with only two live games the need for financing in the near future appears evident. We now expect clearly deeper losses and we emphasize the financing risk. We downgrade to SELL (BUY) with a TP of EUR 1.8 (8.5).

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Marimekko - Maintaining “Buy”

05.11.2018 - 08.50 | Company update

Marimekko had a strong Q3 and the company is now on an improved growth trajectory, following own actions that are now bearing fruit. We consider Marimekko’s outlook as being positive and retain “Buy” rating for the shares.

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Guidance gives room for only EUR 1.4m EBIT in Q4

Marimekko had a very strong Q3. Performance remained solid in most markets. Despite strong Q3 guidance of max EUR 12m adj. EBIT in 2018E was kept intact. EUR 10.6m has been reached after Q3, implying guidance gives room for only EUR 1.4m for Q4. Earnings in Q4 are to be weakened by a revenue timing issue (part of revenue was timed from Q4 into Q3) and higher costs.

Shares could reach EUR 30 level if EBIT margin meets 15%

Marimekko revised its financial targets. Most notable change is in EBIT margin target, which is now 15% vs. 10% earlier. The 10% will be reached in 2018E. If 15% was reached, our DCF model and multiple exercises imply shares could reach EUR ~30 level, even without assuming higher growth than currently.

Extra dividend of EUR 1.25 to be distributed

Marimekko board proposes to distribute an extra dividend of EUR 1.25 per share, which is EUR ~10m. This corresponds to the divestment proceeds of the Herttoniemi real estate. Net cash was EUR 17m at the end of Q3. The remaining EUR 7m is reserved for general business development needs.

Maintaining “Buy” with an ex-div TP of EUR 22 (18)

We have raised FY19-20E estimates and expect a dividend of EUR 1.85 (0.60 ordinary + 1.25 extra) to be distributed for FY18E. We continue to see Marimekko’s outlook to be positive and valuation attractive. Our TP of EUR 22 (18) values the shares at 12.7x EV/EBIT with our 2019E estimates, or at 11% premium to the peer group, justified by a clear turn in sales and further margin upside upon continued growth.

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CapMan - On a healthy development track

02.11.2018 - 09.15 | Company update

CapMan’s Q3 results were good and the EBIT of EUR 4.8m beat our estimates (Evli EUR 4.1m). In our view the Q3 progress continued to show a move towards realizing built up long-term potential and developing into a healthier business in terms of earnings stability. We retain our BUY-rating with a target price of EUR 1.75.

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Q3 EBIT beat, first closing of Infra fund

CapMan’s Q3 earnings beat our expectations, with EBIT at EUR 4.8m (Evli EUR 4.1m). The earnings were driven by CapMan Growth Fund’s successful exit from Fluido. Revenue in Q3 was EUR 7.2m, below our estimates of EUR 8.6m, as no major carried interest was booked. CapMan further announced the first closing of CapMan Infra’s Nordic midcap infrastructure fund, with committed funds of EUR 115m.

Showing continued healthy development

CapMan in our view is nearing a point were some of the long-term potential is starting to realize and the business is becoming healthier in terms of recurring earnings, as opposed to high quarterly variability witnessed in previous years. Management comments regarding the NRE I-fund were positive, with foreign investor interest remaining good and on-going discussions regarding properties. The BVK mandate is set to reach full utilization in 2019 along with the Infra fund expected to reach the target of raising EUR 300+m, which along with growth in other on-going newer ventures will benefit fee income. The NPI-fund saw slower growth amid internal sales focus on the Infra-Fund, with investor demand still remaining good. Although predictability of materialization of carried interest is low, we continue to see good potential for 2019.

BUY with a target price of EUR 1.75

It is worth noting that the recent stock market uncertainty, were it to increase further, would undoubtedly also affect CapMan. In our view the risks due to the PE exposure are smaller and mainly long-term, as market uncertainty could affect ability to raise funds and exit timing and valuations. We retain our BUY-rating with a target price of EUR 1.75.

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Next Games - Earnings flash - EBIT deep in the red

02.11.2018 - 09.00 | Earnings Flash

Next Games’ Q3 results fell significantly off expectations, with EBITDA at EUR -10m (EUR -2.0m Evli/cons.), driven by investments into the Our World -game. Revenue beat expectations, at EUR 13.4m (EUR 11.5m Evli/cons.). Next Games is considering options to strengthen its financial status.

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  • Next Games’ revenue in the second quarter came in at EUR 13.4m (EUR 11.5m Evli&cons). Revenue growth y/y on was 110 %. Q3 was the first quarter with Our World significantly contributing to revenue.
  • EBITDA in Q3 was as expected negative, but the magnitude of the loss was significantly larger than our and consensus expectation, at EUR -10.0m and EBIT EUR –10.7m. Development costs during Q3 amounted to EUR 2.0m. The No Man’s Land -game remained profitable, with EBITDA of EUR 1.0m, while the large negative results were mainly affected by investments into promoting the Our World -game, with the game’s EBITDA at EUR -7.7m. According to management both games are currently operated at positive EBITDA but the combined revenue is not enough to cover games in development.
  • The company is considering options to strengthening its financial status as a part of its risk-management plan.
  • The number of employees grew to 143.
  • DAU during Q3 was 669k compared to Q3/17 figures of 371k. MAU was 3.2m compared to 1.14m during Q3/17. ARPDAU (EUR) was 0.26 compared to 0.21 during Q3/17. Key metrics saw significant growth due to the launch of the Our World -game.
  • Next Games announced that it has signed a new license agreement with a leading partner in the entertainment industry.

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Pihlajalinna - Upgraded to “Buy”

02.11.2018 - 08.25 | Company update

Pihlajalinna profitability turned to positive in Q3. Growth prospects now also look better, with new contracts and a more promising pipeline. We think valuation is now attractive against improving growth and profitability prospects. We upgrade to “Buy” (“Hold”) with TP of EUR 12.

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Profitability turned to the better

The main surprise in Pihlajalinna’s Q3 report was better than expected profitability. Adj. EBITDA margin was at last year’s level in Q3, after weakening clearly in H1. Organic growth also turned positive (+1%), after being negative in H1 (-2%). Profitability is still not at the targeted level, but the worst should now be behind. Management sees potential to improve profitability both in the private and public sides of the business.

Growth prospects now look brighter

Pihlajalinna started production of residential services in Laihia in Sep 2018, with an annual value of about EUR 5m. Provision of occupational healthcare services for Stora Enso will start in Jan 2019 (we estimate value at EUR ~4m). Negotiations for provision of residential services with about EUR 5m value are ongoing in Laitila. Ruovesi is considering joining Pihlajalinna’s existing Mänttä-Vilppula contract, with potential value of some EUR 15m, and a decision from the Kristiinankaupunki tendering should arrive by the end of the year.

Less risk of profitability pressure

Pihlajalinna altered its expansion plan and no longer expects to open new surgical units this or next year. Expansion will be primarily based on M&A and potential municipal projects, rather than new larger clinic openings. Additionally, OP recently announced its retreat from expansion plans. These reduce the risk of added capacity burdening profitability in the mid-term.

Upgraded to “Buy” (“Hold”), TP intact at EUR 12

On our estimates Pihlajalinna now trades 8.6x and 7.2x EV/EBITDA in FY19-20E, which translate into 12-17% discount to the peer group. We consider valuation attractive against improving growth and profitability prospects and upgrade to “Buy” (“Hold”) with an intact TP of EUR 12.

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Marimekko - Very strong Q3; distributes extra dividend; revises financial targets

01.11.2018 - 09.10 | Earnings Flash

Marimekko’s Q3 headline numbers are very strong for both revenue and profits. The company keeps 2018E guidance intact, but the max EUR 12m limit for adj. EBIT gives room for only EUR 1.4m adj. EBIT in Q4, which would be weaker than what has been reached during the last two years. Extra dividend of EUR 1.25 is proposed, and financial targets are revised.

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  • Finland: revenue was EUR 17.2m vs. EUR 16.2m our expectation. Revenue grew by +14% y/y, split to +11% own retail (own retail LFL +9%) and +24% wholesale. Strong retail sales growth was implied by the guidance upgrade in Sep 2018. Wholesale growth of 24% was primarily due to non-recurring promotional deliveries.
  • International: revenue was EUR 12.7m vs. EUR 12.3m our view. Revenue increased by +4% y/y, driven primarily by growth in EMEA (+20%). Growth in APAC excl. royalties was also strong at 14%.
  • Adj. EBITDA was EUR 6.9m (margin 23.2%) vs. EUR 4.5m our view and EUR 5.2m consensus. The beat is driven primarily by stronger than expected revenue, good trend in retail sales in Finland and growth in regular-priced sales.
  • Extra dividend: Board proposes of EUR 1.25 per share.
  • New financial targets: EBIT margin 15% (prev: 10%), net debt/EBITDA max 2.0x (new), annual sales growth over 10% (intact), dividend at least 50% of EPS (intact).
  • 2018 guidance intact: revenue and adj. EBIT will increase y/y. Adj. EBIT will be max EUR 12m. Marimekko expects revenue to grow in Finland and in APAC. License revenues are expected to remain flat in 2018E. Marketing costs will increase.

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Pihlajalinna - Profitability beats

01.11.2018 - 08.40 | Earnings Flash

Pihlajalinna’s revenue is in line, but profitability improved more than expected. Organic growth also now turned positive and was +1.1%, after being negative in H1. Guidance for 2018E is intact.

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  • Revenue was EUR 116m vs. EUR 117m/116m Evli/cons estimates. Revenue grew by 17.0% y/y, of which 15.9% was due to M&A, implying organic growth of +1.1%. Organic growth was -1.8% in H1.
  • Adj. EBITDA was EUR 10.7m (9.2% margin) vs. EUR 9.6m/9.7m (8.2%/8.4%) Evli/cons estimates. Adj. EBITDA improved by EUR 1.7m y/y, of which EUR 1.6m came from M&A. Profitability was hurt by EUR -0.8m start-up costs related to new clinics, while we had incorporated EUR -0.6m. Profitability excl. the clinics’ impact thus improved more than we expected, supported by profitability improvements in occupational healthcare and higher volumes of diagnostics.
  • Guidance for 2018E is intact: Revenue will increase clearly from 2017 level (2017A: EUR 424m) especially due to M&A transactions. Adjusted EBIT is expected to fall short of the 2017 level (2017A: EUR 20m).

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CapMan - Continued solid earnings

01.11.2018 - 00.00 | Earnings Flash

CapMan’s posted good Q3 results. EBIT was EUR 4.8m vs. Evli EUR 4.1m. The exit from Fluido significantly contributed to earnings. Net sales were EUR 7.2m (Evli 8.6m) and no larger carried interest was booked. CapMan held the first closing of its Nordic mid cap infrastructure fund, receiving commitments of EUR 115m.

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  • CapMan’s Q3 net sales amounted to EUR 7.2m, below our estimates of EUR 8.6m. No larger carried interest was booked in Q3. Management Company and Service businesses fees grew 24 % during Jan-Sep 2018.
  • EBIT in Q3 amounted to EUR 4.8m, above our estimates of EUR 4.1m. The Management Company business EBIT was EUR 0.8m, Service business EBIT EUR 0.6m, Investment business EBIT EUR 3.8m, and Other EUR -0.4m. The exit from Fluido had a significant positive impact on Q3 earnings.
  • Capital under management by the end of Q3 was EUR 2.7b. Of the capital under management EUR 1.7b was attributable to real estate funds and EUR 0.8b to portfolio companies and EUR 0.2b in Infra and Credit.
  • The first closing of CapMan Infra’s Nordic mid cap infrastructure fund was held. The fund received commitments of EUR 115m. CapMan’s commitment to the fund is EUR 30m. Target size of EUR 300m is believed to be reached next year.

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Etteplan - Continued improvement

31.10.2018 - 09.20 | Company update

Etteplan’s Q3 results on group level were quite in line with our estimates. Engineering services and Embedded Systems and IoT continued to improve, while Technical documentation saw continued problems in Germany. The market outlook remains favourable albeit with increased uncertainty. We retain our BUY-rating with a TP of EUR 9.5 (10.0).

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Continued improvements

Etteplan’s Q3 results were on group level quite in line with our expectations. Revenue amounted to EUR 52.6m (Evli EUR 54.5m) and EBIT from business operations EUR 4.8m (Evli EUR 4.7m). Engineering services continued on a very good track, with sales growth of 11.4 % and an EBIT BO margin of 10.0 %. The measures to improve profitability in Embedded Systems and IoT have shown results and the EBIT BO margin increased to 9.8 % (7.4 % in Q3/17). Technical documentation was weighed down by continued challenges in Germany, with the EBIT BO margin at 8.0 %.

Market outlook remains favourable, increased uncertainty

No major changes were noted in the market outlook, although uncertainty has increased, and Etteplan expects a favourable end of the year. We have not made any major changes to our estimates. We remain cautious to improvements in profitability in Engineering services due to already solid levels. We expect improvement in Technical documentation as the problems in Germany appear to have been alleviated. Embedded Systems and IoT has seen improvements but still lies below previously achieved levels. The availability of professionals in the area is limiting growth and we see continued M&A activity in the area as likely. Our 2018 net sales and EBIT BO estimates are EUR 239.5m and EUR 22.9m respectively.

BUY with a target price of EUR 9.5 (10.0)

Etteplan trades on a ~20 % and ~15% discount on 19E EV/EBITDA and P/E, which we do not consider as justifiable. We retain our BUY-rating with a target price of EUR 9.5 (10.0)

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Innofactor - Still a lot to prove

31.10.2018 - 00.00 | Company update

Innofactor’s Q3 results were below our estimates, mainly on profitability, with EBIT at EUR -1.2m (Evli -0.3m). Focus lies on reorganization and with the measures taken Innofactor expects a positive impact on EBITDA of 2.4m from 2019 onwards. We retain our HOLD rating with a TP of EUR 0.55 (0.70).

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Profitability affected by lower sales

Innofactor’s Q3 results fell below our estimates. Revenue amounted to EUR 13.8m (Evli 14.2m) while EBIT fell to EUR -1.2m (Evli -0.3m). The low profitability was at least partly due to the lower sales. Innofactor completed cooperation negotiations and combined with reorganizations expects a positive impact on EBITDA of EUR 2.4m from 2019 onwards. Reorganizations are expected to contribute EUR 1.0m, to be achieved through reorganizing tasks, enabling more customer work hours. The Finnish delivery organization is being scaled down from seven to four organizational levels. The Finnish organization will further be reorganized into smaller self-organized teams. To our understanding one key goal is to enhance decision making especially in sales.

Profitability upside potential, sales growth a question mark

We expect EBITDA to turn positive in Q4, which typically is a stronger quarter for Innofactor. Our 2018 sales and EBITDA estimates are at EUR 65.1m and EUR 0.3m respectively. The organizational actions being taken in our view give prerequisites for improved profitability in 2019. The scaling down of the organization alone should prove beneficial, as the organization has been growing faster than sales. We remain conservative on sales growth in 2019, as we expect the changes to have some negative short-term impact and with the sales track recently Innofactor still has a lot to prove.

HOLD with a target price of EUR 0.55 (0.70)

The reorganization measures, if successful, would provide some breathing room for Innofactor, but pick-up in sales in our view remains a key driver for normalizing profitability. We retain our HOLD-rating with a target price of EUR 0.55 (0.70).

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Etteplan - In line with expectations

30.10.2018 - 13.20 | Earnings Flash

Etteplan posted solid Q3 results, largely in line with our estimates. Net sales amounted to EUR 52.6m (Evli 54.5m) and EBIT from business operations was EUR 4.8m (Evli 4.7m). Development was good in Engineering services and Embedded Systems and IoT, while Technical documentation continued to see some weakness. The demand situation is expected to remain good throughout the end of year despite some market uncertainty.

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  • Net sales in Q3 were EUR 52.6m (EUR 47.1m in Q3/17), slightly below our estimates (Evli EUR 54.5m). Sales growth in Q3 was 11.6 % y/y.
  • EBIT in Q3 was EUR 4.4m (EUR 2.9m in Q3/17), slightly above our estimates (Evli EUR 4.2m), at an EBIT-margin of 8.3 %.
  • Engineering services: Net sales in Q3 were EUR 28.8m vs. EUR 29m Evli. EBIT BO in Q3 was EUR 2.9m vs. EUR 2.5m Evli. The MSI-% in Q3 was 52 % compared to 53 % in Q3/17.
  • Embedded systems and IoT: Net sales in Q3 were EUR 13.6m vs. EUR 14.4m Evli. EBIT BO in Q3 was EUR 1.3m vs. EUR 1.2m Evli. The MSI-% in Q3 was 46 % compared to 53 % in Q3/17.
  • Technical documentation: Net sales in Q3 were EUR 10.1m vs. EUR 11.1m Evli. EBIT BO in Q3 was EUR 0.8m vs. EUR 1m Evli. The MSI-% in Q3 was 74 % compared to 78 % in Q3/17.
  • The demand situation is expected to remain good in Q4 despite some market uncertainty.

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Innofactor - EBIT misses estimates

30.10.2018 - 09.20 | Earnings Flash

Innofactor’s Q3 results were below our estimates. Net sales amounted to EUR 13.8m (Evli 14.2m) while EBIT was weak, at EUR -1.2m (Evli -0.3m), partly due to the lower net sales. Innofactor concluded co-operation negotiations and reorganizations, expecting a total positive impact on group EBITDA of EUR 2.4m beginning in 2019.

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  • Net sales in Q3 amounted to EUR 13.8m, slightly below our estimates of EUR 14.2m. Sales growth in Q3 was -2.5 % y/y.
  • EBIT in Q3 was EUR -1.2m, falling below our estimates (Evli EUR -0.3m), at an EBIT-margin of -8.6 %. The weaker profitability was partly due to lower than expected sales.
  • Guidance (updated 8.10.2018) intact: Innofactor’s net sales are expected to remain at 2017 levels (EUR 65.7m) and operating margin (EBITDA) in 2018 is estimated to be weaker than in 2017 (EUR 1.3m) but positive.
  • Operating cash flow during Jan-Sep 2018 was EUR -1.9m.
  • Active personnel at the end of the period 591 (2017: 623)
  • Innofactor concluded co-operation negotiations and reorganizations, expecting a total positive impact on group EBITDA of EUR 2.4m beginning in 2019.

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Verkkokauppa.com - Back to double-digit growth

29.10.2018 - 09.00 | Company update

Verkkokauppa.com returned to double-digit growth in Q3 as we expected. The company also delivered a surprisingly strong gross margin, considering active campaigning by competitors during the quarter. However, competition is seen tightening even further, which keeps the outlook somewhat uncertain when going into the seasonally strong Q4. We continue to see the shares quite fairly valued at present and hence retain “Hold” with TP of EUR 4.7 (4.5).

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Back to double-digit growth, as expected

Verkkokauppa.com returned to double-digit 11% revenue growth in Q3, after only 3% growth in H1. Growth was in line with expectations. Wholesale volumes were broadly flat as guided and no longer provided headwind as in H1. Revenue growth is guided to continue at a stronger level in Q4 than in H1. We expect revenue growth of 15% in Q4, supported by both Raisio and underlying growth.

Surprisingly strong GM despite tightening competition

Verkkokauppa.com’s earnings beat in Q3 was fully driven by the gross margin, which improved to 14.9% from last year’s very low level of 13.2%. We expected 14.3%. Stronger than expected margin improvement came despite competition tightened from Q2 as we expected. The company responded to increased campaigning by competitors as expected, but managed its campaigns more efficiently and had better terms with suppliers. Also, a part of the actions to boost sales was marketing, which was visible in OPEX.

“Hold” with TP of EUR 4.7 (4.5)

Our estimates are slightly up for Q4 and FY19-20E after the Q3 report. On our base case estimates Verkkokauppa.com trades 14x,11x and 10x EV/EBIT in FY18-20E. We see valuation as fairly neutral at present and hence retain “Hold” rating with TP of EUR 4.7 (4.5) for the shares.

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Consti - Profitability remains a concern

29.10.2018 - 08.45 | Company update

Consti’s third quarter results were affected by lower profitability in a limited number of projects, with group EBIT at EUR -1.4m. The weaker profitability was largely related to electrical installations and project delays leading to additional costs from catching up with timetables and in our view of more temporary nature. Sales growth continued at a slower pace, as Consti has tightened tendering criteria. We retain our HOLD-rating with a target price of EUR 7.5 (8.2).

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A fraction of projects driving weak profitability

Consti’s third quarter EBIT was EUR -1.4m, affected by lower than expected profitability in project deliveries of the technical installations business included in the Technical Building Services business area and the housing repair business included in the Building Facades business area. The problems related largely to electrical installations and projects being delayed, resulting in additional catch up costs. The issues concern a limited number of projects, of which most will be completed during 2018. The profitability issues in our view are more of a temporary nature. Of some concern is the communication between worksites and management, as the problems appear to have come as a complete surprise.

Seeking to further tighten project tendering criteria

Consti’s Q3 sales growth continued at a slower pace, at 1.4 % y/y, as Consti has been tightening project tendering criteria. Consti will also continue to tighten criteria, with building purpose modification projects being one area under scrutiny, having seen a EUR 4.0m negative impact from two such projects during 2018.

HOLD with a target price of EUR 7.5 (8.2)

Our estimates post-Q3 remain unchanged. We remain conservative on Q4 profitability due to the project issues but see potential for notable improvement. We retain our HOLD-rating with a target price of EUR 7.5 (8.2).

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Finnair - Competition and fuel concerns

29.10.2018 - 08.40 | Company update

Finnair’s Q3 earnings were somewhat better than expected, but guidance for FY18E adj. EBIT was cut to reflect increased competition and fuel. Combination of increased competition and higher fuel price keeps the outlook tough. We retain “Hold” rating with TP of EUR 6.8 intact.

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Guidance cut due to increased competition and fuel

Finnair cut its guidance for adj. EBIT. Company now expects adj. EBIT to somewhat weaken vs. be flat previously. Guidance was cut to reflect increased competition, especially in the Nordics, and the fuel price increase. Increased capacity by competitors was visible in Q3 traffic and suggests yield compression is likely to continue at least in European traffic in the short-term, despite fuel price has been increasing for almost two years now.

Fuel price looks to be moving up further in Q4

Fuel price looks to be moving up further in Q4, with USD spot prices in October averaging 8% higher compared to the average spot of Q3. Current spot price is 4% higher than the Q3 average.

Challenging outlook – “Hold” intact

On our estimates Finnair trades at an EV/EBITDA discount, but at a P/E premium to its primary peers. On P/B Finnair trades 0.8x in FY18-19E, or 1.0-0.9x when the EUR 200m hybrid removed from equity, while generating ROCE of ~7-8% in FY18-19E, slightly below our WACC. We think valuation does not look too attractive, considering increasing competition and fuel. We retain “Hold” rating with TP of EUR 6.8. Our TP values the shares at a discount to Finnair’s 3yr historical average NTM EV/EBITDA, but close to par with P/E on our FY19E estimates.

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Consti - Profitability burdened by older projects

26.10.2018 - 09.15 | Earnings Flash

Consti had pre-announced Q3 revenue and EBIT of EUR 78.9m and EUR -1.4m respectively. Profitability was weakened by a limited number of projects launched in 2016 and 2017 within the Technical Building Services and Building facades business areas. Revenue growth continued at a slow pace, but the order backlog remains strong, at EUR 270m.

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  • Consti had pre-announced Q3 revenue and EBIT on October 17th
  • Net sales in Q3 were EUR 78.9m (EUR 77.8m in Q3/17). Sales growth in Q3 was 1.4 % y/y.
  • EBIT in Q3 was EUR -1.4m (EUR -0.8m in Q3/17), at an EBIT-margin of -1.8 %. The weaker profitability concerns a limited number of projects launched in 2016 and 2017 in project deliveries within the Technical Building Services and Building Facades business areas, with the majority of projects to be completed in 2018.
  • Free cash flow was negative, at EUR -3.5m (2.9m).
  • Technical Building Services: Net sales in in Q3 were EUR 25m vs. EUR 23.9m Evli.
  • Renovation Contracting: Net sales in in Q3 were EUR 23.8m vs. EUR 22.7m Evli.
  • Building Facades: Net sales in in Q3 were EUR 34.1m vs. EUR 36.4m Evli.
  • Order backlog at EUR 270m, up 35.9 % y/y.
  • Guidance intact, Consti estimates that its operating result for 2018 will grow compared to 2017.

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Verkkokauppa.com - Profits beat

26.10.2018 - 08.30 | Earnings Flash

Verkkokauppa.com delivered a profit beat on revenues that were as expected. Compared to our estimates the beat is fully driven by better than expected gross margin. OPEX were in line. Guidance for 2018E is kept intact.

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  • Q3 revenue was EUR 117m vs. EUR 117m Evli and EUR consensus. Sales grew by 11%. Wholesale volumes were broadly flat y/y. Market growth was 2% in Jul-Sep, according to GfK.
  • Q3 gross profit was EUR 17.4m (14.9% margin) vs. EUR 16.5m (14.1%) Evli.
  • Q3 adj. EBIT was EUR 3.4m (2.9% margin) vs. EUR 2.3m/2.0m (2.0%/1.7%) Evli/cons estimates.
  • 2018 guidance intact: revenue is expected to be EUR 460-500m and adj. EBITDA between EUR 11-14m. Raisio store opening costs will mainly accrue in H1’18. Wholesale revenue in H2 is expected to be more in line with the previous year. Revenue growth and profitability will be clearly higher in H2’18 vs. H1’18.
  • CEO comments: “The company expects the market to get even tougher because of flat summer sales for the whole sector.”

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SRV - Moving towards positive profitability

26.10.2018 - 08.10 | Company update

SRV’s Q3 results were slightly better than we expected. Revenue fell slightly short of our estimates due to lower revenue in business construction. Profitability was better than expected, mainly due to a smaller impact of the REDI project than we had anticipated. Further cost exceeding in the project is still possible but unlikely and with the project having been completed the potential additional costs should be significantly smaller. We retain our HOLD rating with a target price of EUR 2.4 (2.7).

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Q3 slightly better than anticipated

SRV’s Q3 revenue came in at EUR 208.4m (Evli 216.8m), while the operative operating profit amounted to EUR -3.1m (Evli EUR -6.9m). The revenue was mainly in line with expectations but fell short of our estimates in business construction in Finland. The profitability beat was mainly due to the negative impact of the REDI project being smaller than we had anticipated. SRV’s order backlog remained solid at EUR 1,678.5m, up 9.3 % y/y. SRV made agreements for releasing capital tied on the balance sheet for approx. EUR 50m, of which around EUR 20m will materialize in Q4 along with an additional goal of EUR 20-30m.

Estimates revisions minor

We have made minor changes to our estimates, with our 2018E revenue and operative operating profit figures at EUR 959.3m (prev. 960.5m) and EUR -2.3m (prev. -5.2m). SRV expects revenue in 2018 to decline compared to 2017 (EUR 1,114.4m) and the operative operating profit to be negative. We have also checked down our 2019E sales growth estimates by approx. 2 percentage points, mainly in business construction in Finland.

HOLD with a target price of EUR 2.4 (2.7)

On our estimates SRV trades at EV/EBIT and P/E 2019E of 10.8x and 7.7x respectively. SRV trades at a discount to peer P/E 2019E multiples, which we currently consider reasonable following the profitability issues. We retain our HOLD-rating at a target price of EUR 2.4 (2.7).

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Finnair - Guidance cut

25.10.2018 - 09.40 | Earnings Flash

Finnair’ Q3 adj. EBIT came in at EUR 108m, above our estimate (EUR 102m) and consensus (EUR 105m). However, Finnair cut its FY18E guidance and now expects adj. EBIT to be somewhat below last year’s level of EUR 170m, vs. flat previously. Finnair states it is experiencing increased competition in its main markets. We have expected EUR 159m adj. EBIT in 2018E, ie below last year’s EUR 170m. Consensus has been EUR 160m. However, separately released discontinuation of incentive plan for pilots will have a positive EUR 11m adj. EBIT impact in Q4, which with new guidance seems to imply underlying estimates for Q4 adj. EBIT may be too optimistic.

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  • Q3 adj. EBITDAR was EUR 184m vs. EUR 177m our view.
  • Q3 adj. EBIT was EUR 108m vs. EUR 102m/105m Evli/cons views. Compared to our estimates the beat comes from lower fuel and staff costs in the quarter.
  • Absolute costs: actual fuel cost (incl. hedging) was EUR 163m vs. EUR 166m our view. Staff costs were EUR 109m vs. 116m our view. All other OPEX combined were EUR 363m vs. 359m our view.
  • Unit costs: CASK was 6.01 eurocents vs. 6.06 our view, while CASK ex fuel was 4.60 eurocents vs. 4.62 our view. CASK in fixed FX and excl. fuel declined by 6.4% y/y. After Q1-Q3’2018 CASK in fixed FX and excl. fuel is down by 6.9%.
  • 2018E guidance cut: Finnair expects capacity growth at least 15% (intact), passenger volume growth of 12- 13% (prev: in line with capacity growth) and revenue growth of 10-11% (prev: slightly lower than capacity growth). Adj. EBIT is expected to be somewhat below last year’s level of EUR 170m (prev: to remain broadly flat). Finnair is experience increased competition in its main markets. We have expected 11% revenue growth and adj. EBIT of EUR 159m for 2018E.

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Vaisala - Leosphere and order intake reflect on W&E estimates

25.10.2018 - 09.15 | Company update

In Q3’18, Weather and Environment (W&E) order intake was y/y lower for the second consecutive quarter, partly due to the absence of large orders. Vaisala maintained its cautious view on the Chinese demand for traditional weather observation solutions during 2018. We have updated our estimates particularly for W&E. On our estimates, the positive net sales and EBIT margin impact of the recently acquired Leosphere is partly offset by more cautious growth estimates for the rest of W&E. We maintain HOLD rating with a TP EUR 19 (21).

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Timing of W&E projects caused some surprises

After the Q2’18 result, Vaisala estimated that the high share of project revenue will negatively affect W&E’s profitability during H2’18. However, Q3’18 turned out to be an exception: the timing of W&E projects resulted in weaker net sales but supported gross margin and EBIT margin, as the share of typically low margin project deliveries fell to 25% (37% in Q3’17) in W&E. According to Vaisala, project gross margins also happened to be better y/y.

Low W&E order intake continued in Q3’18

In Q3’18, W&E order intake amounted to 48.7 MEUR (-33% y/y) which was the second consecutive weak quarter, even when we adjust for the 6.3 MEUR Vietnamese contract order in Q3’17. According to Vaisala, the demand for W&E products in China has not changed significantly from Q2’18 to Q3’18. The company repeated its view that the Chinese demand for traditional weather observation equipment is expected to decline moderately y/y in 2018. Vaisala sees that the main Chinese customer for traditional weather stations may have saturated its network, which could explain the weaker demand in 2018. Meanwhile, Vaisala sees that sales to Chinese airports are a growing business.

HOLD maintained with a TP of EUR 19 (21) per share

We have updated our estimates, which now reflect the acquired Leosphere. In addition, we lower W&E sales growth estimates for other segments due to the continued weak development in order intake and continued cautiousness regarding the Chinese market. In our estimates the weak W&E order intake partly offsets the estimated growth boost from Leosphere. Our 2019E estimates and peer EV/EBIT multiples imply a value of 18.8 EUR per share when we adjust for Vaisala’s net debt. We maintain HOLD rating with a target price of EUR 19 (21) per share.

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SRV - EBIT above expectations

25.10.2018 - 09.10 | Earnings Flash

SRV’s Q3 results were slightly better than expected. Although revenue fell slightly short of our estimates, EUR 208.4m vs. Evli EUR 216.8m, EBIT came in above our estimates, at EUR -5.7m vs. Evli EUR -8.4m. The earnings impact of REDI was slightly smaller than we had anticipated in Q3. SRV expects a positive operative operating profit and cash flow in Q4/18.

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  • SRV’s revenue in Q3 amounted to EUR 208.4m, compared to EUR 216.8m/233.7m Evli/cons. Sales declined 22 % y/y.
  • EBIT in Q3 was EUR -5.7m compared to EUR -8.4m/-7.6m Evli/cons. International Operations stood for EUR -3.7m of EBIT. The EBIT-margin in Q3 was -2.7 %. The operating operative profit amounted to EUR -3.1m vs. EUR -6.9m Evli.
  • Order backlog at EUR 1,678.5m, up 9.3 % y/y.
  • Negative impact of the REDI project on earnings during Jan-Sep 2018 was EUR 29.7m, and EUR 9.4m in Q3.
  • In its preliminary outlook SRV expects the operative operating profit and cash flow to be positive in Q4.
  • Operations Finland: Business construction revenue EUR 159.1m (Evli 167.1m), housing construction revenue EUR 47.4m (Evli 48.2m). Operative operating profit EUR -1.8m (Evli -4.7m)
  • International operations: Revenue EUR 1.8m (Evli EUR 1.5m) and operative operating profit EUR -1.1m (Evli EUR -1.2m)
  • The completion of the REDI Majakka housing project I expected to be delayed from May 2019 to June-July 2019.

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Tokmanni - Delivering LFL growth

25.10.2018 - 08.00 | Company update

Despite adj. EBITDA miss Tokmanni’s Q3 report looked quite good overall, with solid LFL growth, upgraded guidance and stable gross margin. Sourcing did not improve, but work continues. More efficient sourcing remains key to our investment case in the mid-term. We think valuation looks attractive against the margin/sourcing improvement potential, and hence retain “Buy” rating with TP of EUR 9.

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Continued LFL growth prompted a revenue guidance upgrade

Tokmanni delivered 4% LFL growth in Q3 vs. our 2% expectation, and thereby continued good performance from H1. Assortment improvements and investment in prices were mentioned as positive contributors, as earlier. Continued LFL growth improves trust on own actions yielding results and prompted a revenue guidance upgrade for 2018E.

Adj. EBITDA missed due to OPEX

Despite a sales beat adj. EBITDA missed estimates in Q3, driven by OPEX. Store refurbishments and changes to the store network burdened OPEX, which increased slightly as % of revenue in Q3 vs. decreased in H1. Management was not happy with the development and seeks to turn the trend.

More efficient sourcing remains key to our investment case

Tokmanni’s gross margin improved slightly in Q3 and was broadly as we expected. Yet the share of direct imports and PL products of sales was flat in Q3. More efficient sourcing remains key to our investment case in the mid-term, as without this Tokmanni is unlikely to meet the gradual gross margin improvement we have incorporated in our estimates for 2019-2020E.

Estimates largely unchanged – “Buy” retained, TP EUR 9

Our estimates remain largely unchanged after Q3. On our estimates Tokmanni is valued at par to its Nordic peers in FY19- 20E on EV/EBITDA, but at a discount on EV/EBIT and EV/FCF. Our DCF model yields fair value of EUR 11, but this is with a 6.5% terminal EBIT margin assumption that has not been reached historically – using 5% our DCF model would yield a fair value of EUR 9 per share (company has reached ~6% each year in 2013- 2016). We retain “buy” rating with TP of EUR 9.

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Tokmanni - Adj. EBITDA miss despite revenue beat; upgrades guidance

24.10.2018 - 09.00 | Earnings Flash

Tokmanni beat estimates on revenue, but missed them on adj. EBITDA. Stronger revenue is driven by LFL growth of 4.0% vs. our 2.0% expectation, whereas the adj. EBITDA miss is driven by higher than expected OPEX. Tokmanni upgrades its guidance after the third quarter for revenue: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Adj. EBITDA margin guidance is intact. The change in guidance wording improves trust for seasonally strong Q4, in our view. Despite the adj. EBITDA miss we consider the report to be fairly good, due to stronger LFL growth and stable gross margin.

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  • Q3 revenue was EUR 211m vs. EUR 207m/208m Evli/cons, 1-2% above estimates. Revenue grew by 7.8% y/y, driven by 4.0% LFL growth (Evli exp. 2.0%) and new openings. Good LFL growth is attributed to assortment improvements and investments in prices.
  • Q3 adj. gross margin was 34.2% vs. 34.4% Evli estimate. the share of direct imports and PL products of total sales remained flat y/y.
  • Q3 adj. fixed costs in total were EUR 54.9m (26.1% of revenue) vs. EUR 52.6m (25.4% of sales) Evli view.
  • Q3 adj. EBITDA was EUR 18.2m (8.6% margin) vs. EUR 19.6m (9.5%) Evli and EUR 19.2m (9.2%) consensus.
  • 2018 guidance upgraded: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Profitability (adj. EBITDA margin) is expected to increase in 2018E (intact). CAPEX will be at the level of depreciations in 2018.

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Cibus Nordic - Initiating coverage with BUY

23.10.2018 - 09.05 | Company report

We initiate coverage on Cibus with BUY rating and target of SEK 120. We expect the grocery retail portfolio to generate stable and predictable inflation-linked cash flows while from a valuation standpoint there is room for further yield compression.

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Solid grocery retail portfolio with anchoring tenant strategy

Cibus’ property portfolio is largely occupied by three leading Finnish daily-goods retailers. A natural outcome due to the market’s oligopolistic structure, we view the portfolio’s tenant risk as negligible. We expect the average lease duration to remain at its current level of ca. 5 years and the occupancy rate to stay at 95%. The portfolio’s rental income is fully linked to inflation while the properties’ operating costs are mostly borne by the tenants owing to the contracts being largely net lease in nature.

We like the portfolio’s large exposure to supermarkets

In our view the supermarket-size store is the most attractive and resilient type of daily-goods store, offering a good balance between logistic efficiency and daily convenience. 43% of the portfolio’s rental income is attributable supermarkets spread around Finland, while another 25% is contributed by discount stores located for the large part in Southern Finland.

Groceries to manage e-commerce in cities and rural areas

In our view e-commerce currently represents a manageable tail risk for grocery retailers. The economics of grocery e-commerce remain challenging, especially in a country as sparsely populated as Finland. We think supermarkets as particularly well-positioned to weather the e-commerce threat and even benefit owing to their status as a distribution network.

Initiating coverage with a BUY rating and TP of SEK 120

We expect Cibus’ income to grow in-line with the Finnish CPI and property expenses to stay at ca. 7%, paving the way for a highly predictable financial performance. As the shares currently trade slightly below par in terms of EV/GAV, we see potential for both price gain as well as solid income from dividends.

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Talenom - Solid quarter, investments ahead

23.10.2018 - 09.00 | Company update

Talenom’s Q3 profitability beat expectations. Based on Jan-Sep profitability development potential for guidance beat is strong but investments in Q4 are expected to affect profitability. We anticipate a further impact during early 2019 and expect slower EPS growth. Continued increases in new customers support continued robust sales growth. Our 2019E estimates do not give significant support for valuation increases and we retain our HOLD-rating with a target price of EUR 18.5 (18) per share.

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Solid earnings, investments to impact from Q4

Talenom’s Q3 results beat profitability expectations, with EBIT at EUR 1.9m vs. EUR 1.0m Evli, improving some 136 % y/y. Sales were in line with expectations, at EUR 11.1m, growing 19.8 % y/y. With Jan-Sep EBIT at EUR 7.1m, the FY 2018 guidance of EUR 7.4-8.0m appears conservative, but investments into the additional services are expected to impact in Q4. We anticipate the investments to continue to show during early 2019. We expect profitability to remain at solid levels but with slower EPS growth, with our 2018E and 2019E EPS growth estimates at 55 % and 6 % respectively.

No signs of larger sales growth slow down

We expect sales growth to remain good, supported by growth in new customers and pick-up in the sales of additional services, mainly in staff leasing. We have mainly made minor estimates adjustments post-Q3 but increase our 2019E sales growth estimates by 2 percentage points. We also raise our DPS estimates, with our FY 2018E estimate at EUR 0.45. Our 2018E sales and EBIT estimates are at EUR 49m and EUR 7.9m respectively.

HOLD with a target price of EUR 18.5 (18)

We retain our HOLD rating with a target price of EUR 18.5 (18). On our estimates and target price Talenom’s 2019E target P/E and EV/EBIT are at 20.5x and 17.3x respectively and do not give support for significant valuation increases.

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Talenom - Clear earnings beat

22.10.2018 - 13.45 | Earnings Flash

Talenom earnings were clearly better than expected. Net sales in Q3 were in line with our estimates, at EUR 11.1m (EUR 10.9m/11.0m Evli/cons.). Profitability beat both our and consensus estimates, with EBITDA at EUR 3.1m compared to EUR 2.2m/2.3m Evli/cons.

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  • Talenom’s net sales in Q3 amounted to EUR 11.1m, compared to EUR 10.9m/11.0m Evli/cons. Sales growth amounted to 19.8 % y/y.
  • The revenue from additional services during Jan-Sep 18 amounted to EUR 2.4m, with growth of 66 % to the comparison period.
  • EBITDA in Q3 was EUR 3.1m compared to EUR 2.2m/2.3m Evli/cons. EBITDA improved 59 % y/y. The EBITDA-margin in Q3 was 27 %.
  • EBIT in Q3 was EUR 1.9m compared to EUR 1.0m/1.1m Evli/cons. The EBIT-margin in Q3 was 16.6 %.
  • Net investments in Q3 were EUR 1.6m compared to EUR 1.6m in Q3/17.
  • Talenom’s guidance was kept intact, expecting sales to grow clearly faster than in 2017 (12.1 %) and the EBIT to be between EUR 7.4-8.0m.

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Raute - Initiating coverage with HOLD

22.10.2018 - 09.30 | Company report

In the last 3 years, Raute’s strong performance has been largely driven by European investment activity. We estimate that the activity normalizes in 2019, which reflects negatively on Raute’s net sales and EBIT-% in 2019-2020. Meanwhile, we estimate that the share of technology services grows and drives Raute’s long-term growth and profitability. We initiate coverage of Raute with a HOLD rating and a target price of EUR 27.0 per share. The rating and target price are based on Raute’s historical valuation and our DCF model.

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Recent growth driven by project deliveries to Europe

In 2017, 67% of Raute’s net sales was project sales which are highly cyclical and drive Raute’s EBIT-% together with fixed costs. During the last 3 years, Raute’s sales and EBIT have hit new records, largely driven by European investment activity. We estimate that order intake from Europe normalizes in 2019 since growth in the European construction output is estimated to decelerate in 2018. As a result, we estimate y/y declining net sales and EBIT-% in 2019 and 2020.

We estimate that tech services drive long-term growth

In 2021-2023, we estimate that Raute’s net sales grow at a CAGR of 3.6%, driven by growth in technology services (5.0% CAGR). Raute has not disclosed the profitability of technology services but, based on peer data, we estimate that the increasing share of services supports Raute’s long term EBIT-%. In contrast, we estimate that project sales grow at a CAGR of 2.5%, limited by slow GDP growth in developed economies and challenging competitive environment in emerging economies.

HOLD with a target price of EUR 27.0 per share

In our valuation approach, we emphasize 2020 estimates since we see that they represent Raute’s performance at a neutral stage of the investment cycle. On our estimates, Raute’s 2020E EV/EBIT amounts to 9.7x. This is clearly above the 2012-2017 median trailing 12m EV/EBIT of 7.0x and limits valuation upside, even though the growing share of technology services reduces volatility and risks. Meanwhile, our DCF model implies EUR 28.0 per share, assuming a 6.5% terminal EBIT margin.

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Etteplan - Upgrade to BUY

22.10.2018 - 00.00 | Preview

Etteplan reports Q3 earnings on October 30th. Etteplan has apart from smaller problems in the Technical documentation and Embedded Systems and IoT business areas seen steady progress and we do not expect Q3 to have changed the trend. Profitability in Engineering Services has reached solid levels and we expect to see margin development slowing down in the near future. With recent share price development valuation looks more attractive. We upgrade to BUY (HOLD) with a TP of EUR 10.

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Profitability at healthy levels, still room for improvement

Etteplan’s EBIT from business operations margin improved to 9.7 (8.6 in Q2/17) per cent in Q2/18, driven by profitability developments in Engineering Services, while margins in Technical documentation and Embedded Systems and IoT saw flattish development y-on-y. The EBIT BO margin in Engineering services reached 10.7 % and has according to management reached solid levels. We expect margin improvement in Embedded Systems and IoT due to a weaker comparison period. In Technical documentation delays in a significant project delivery has impacted on margins and we expect this to still have some effect on Q3.

Seasonally slower quarter

We have not made changes to our estimates ahead of Q3. Market conditions have remained favorable and along with the acquisition of Eatech we expect continued good growth in Q3. Our net sales and EBIT BO estimates for Q3 are EUR 54.5m and EUR 4.7m respectively.

BUY (HOLD) with a target price of EUR 10

Following recent share price development valuation again looks more favourable. We upgrade to BUY (HOLD) with a target price of EUR 10.

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Verkkokauppa.com - Estimates cut ahead of Q3

12.10.2018 - 09.00 | Preview

We cut estimates ahead of Q3 on anticipation of tighter competition. Peer multiples have also dropped notably since our latest update in mid-Aug. We conclude risk/reward is still not attractive enough, and keep “Hold” rating intact.

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Revenue growth has been guided to improve in H2

Verkkokauppa.com reached only 3% revenue growth in H1 as wholesale volumes declined significantly compared to last year. Market growth was also limited in H1 at ~2%, according to GfK. We understand market growth in Q3 has offered no better tailwind than in H1. However, in H2 wholesale volumes should no longer give headwind as they have been guided flat in H2. We expect revenue growth to improve to 11% in Q3 from the 3% in H1, driven primarily by the new store in Raisio but also by slight underlying growth. Stronger growth has been guided for H2.

Competition seems to have intensified during Q3

Based on a talk with management intensity of competition seems to have increased during Q3 with more active campaigning by competitors. Verkkokauppa.com has repeatedly reminded that it stands ready to respond should pricing tighten and to use price as tool to speed up growth. We expect a modest gross margin of 14.1% in Q3, which is better than last year’s multi-year low of 13.1%, but slightly below 14.3% of Q2.

Raisio to continue burdening margins in H2

Verkkokauppa.com’s new store in Raisio had a somewhat disappointing start with higher than expected OPEX and slower than anticipated ramp-up. The company has stated it will continue to invest in prices and OPEX to boost the store in H2.

Estimates cut ahead of Q3 – “Hold” intact, TP EUR 4.5 (5.7)

We have cut estimates and expect Q3 revenue of EUR 117m with adj. EBITDA of EUR 2.6m. Our FY18E adj. EBITDA estimate is down by 6%. Corresponding FY19-20E estimates are down by 3%. Peer multiples for FY18-20E have also dropped by ~10-15% since our latest update in mid-Aug. We reflect lower estimates and peer valuation in our scenario analysis and conclude risk/reward is still not attractive enough, considering there is little room for disappointments in H2 for guidance to hold, and as the risk of Amazon remains an overhang on the stock.

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Tokmanni - LFL growth should normalize

11.10.2018 - 09.00 | Preview

Tokmanni will report its Q3 business review on October 24th. In Q3 comparables no longer provide tailwind as in H1, which should make the quarter more normal and better representative of how assortment improvements and other development actions yield results. Our estimates, rating and TP are intact ahead of the Q3 report.

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Non-grocery market growth figures indicate softer demand

PTY statistics indicate the non-grocery market grew by -4.2% in July and by -1.4% in August. Still in H1 non-grocery market grew by +1.5%. PTY statistics thus seem to indicate somewhat softer demand in the market in Q3 vs. H1.

We expect positive LFL growth to continue from H1

Tokmanni delivered 7.0% LFL growth in H1, supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning and their better management. In Q3 comparables no longer help and hence LFL growth should normalize. We have incorporated LFL growth of +2.0% for Q3.

Estimates, rating and TP intact ahead of Q3

We expect revenue of EUR 207m (6.1% growth y/y, of which LFL 2.0%) and adj. EBITDA of EUR 19.6m (EUR 16.1m y/y) in Q3. Our “Buy” case and TP EUR 9 remain intact ahead of the Q2 report, as valuation remains attractive against the sourcing improvement potential and related gross margin improvement potential, in our view.

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Finnair - Weaker traffic, more expensive fuel

10.10.2018 - 09.00 | Preview

Finnair’s traffic performance in July-September indicate Q3 revenue of EUR 801m. We expected EUR 814m while consensus was at EUR 816/817m. On the cost side fuel moved up further in Q3. We expect earnings to weaken in Q3 after 15 quarters of improvement and have cut FY18- 19E adj. EBIT estimates by ~10%.

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Q3 traffic: capacity growth in line, PLF below our estimates

Finnair’s capacity (ASK) continued double-digit growth in Q3 at +14% and was close to our +15% expectation. Sold capacity (RPK), however, grew somewhat less than we expected at +11% vs. +14% our expectation and hence passenger load factor (PLF) came in below our estimate at 84.5% vs. 86.5%. Unit revenue (RASK) declined by 4.6%, ie. at about the same rate as in H1 and what we expected in Q3. Overall, Jul-Sep traffic and revenue came in slightly below our expectations driven by weaker PLF.

Fuel moved up and reached multi-year high at end of Q3

Jet fuel moved up further in Q3. Average price increased by +1% in USD and by +4% in EUR compared to average price of Q2. Average price for Q3 was ~37% higher than last year in USD and ~39% higher in EUR. Fuel reached new multi-year high at the end of Q3. We foresee EUR 60m+ negative earnings impact from higher fuel price in 2018E (incl. FX and hedges but excl. impact of capacity growth), assuming price remains at the average level of Q3 for the remainder of the year.

Estimates cut

Finnair has improved its adj. EBIT for 15 straight quarters, but we expect this trend to turn in Q3, due to higher fuel costs. We foresee Q3 adj. EBIT at EUR 102m vs. EUR 119m last year. Following estimate cuts our FY18-19E adj. EBIT estimates are down by ~10%. With lower estimates and somewhat lower multiples among peers, we cut TP to EUR 6.8 (8.0) and keep “Hold” intact ahead of Q3. We think valuation still does not look too attractive considering the weakening earnings trend.

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SRV - Initiate coverage with BUY

05.09.2018 - 09.00 | Company report

We initiate coverage of SRV with a BUY rating and target price of EUR 3.2. We expect profitability to see recovery during H2/18 with the completion of the REDI project. We expect sales growth of 14.5 % in 2019E, driven by an increase in developer contracting housing unit completions, and an EBIT margin of 3.7 %, supported by improved business construction profitability and a smaller foreign exchange rate impact.

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Profitability expected to see recovery in H2/18

SRV’s sales have declined during H1/18 following fewer completed developer contracting units along with a lowered construction activity in international operations. EBIT was negative at EUR -14.3m due to a negative impact of EUR 20.3m from exceeding costs in the REDI project along with exchange rate impacts. Profitability is expected to see recovery during H2/18 with the completion of the REDI project and increased housing completions.

Sales growth and profitability improvement in 2019

We expect sales to see growth in 2019, with our sales growth estimate at 14.5 %. Growth is mainly expected from an increase in developer contracting housing unit completions, supported by a large number of start-ups in 2017. We expect the increased sales, along with the completion of the REDI project in 2018 and reduced exchange rate impact from redenomination of loans to support profitability improvements in 2019 and expect an EBIT of EUR 41.1m, at an EBIT-margin of 3.7 %.

BUY with a target price of EUR 3.2

We initiate coverage of SRV with a BUY-rating and a target price of EUR 3.2. Our sum-of-the-parts and DCF values are at EUR 3.8 per share. On peer 2019E EV/EBIT SRV trades at a slight premium but taking into consideration an estimate range for the earnings impact of a potential Pearl Plaza exit valuation looks more attractive.

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Taaleri - Good outlook for 2018

17.08.2018 - 09.15 | Company update

Taaleri’s H1 results exceeded our estimates following higher than expected investment income and performance fees in in Wealth Management, while Financing saw lower profits following weaker investment income. The outlook for 2018E looks promising following the H1 results. We retain our BUY-rating with a target price of EUR 11.4 (11.0)

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Wealth Management drives profits

Taaleri’s operating profit in H1 amounted to EUR 12.4m. Wealth Management’s operating profit was EUR 14.1m, driven by performance fees and investment income of EUR 5.6m and EUR 4.9m respectively. Performance fees were higher than anticipated, as the mutual funds continued to contribute significantly despite a weaker first half of the year in comparison to the previous year. Financing’s operating profit was below previous year levels, at EUR 2.4m compared to EUR 7.9m in H1/17. The operating profit was affected by investment income, with return on investment at fair value of -0.1%, as high-yield bonds saw a shaky first half of the year. Energy’s operating profit remained negative as expected, at EUR -0.9m, due to ramp up of the business. A new product launch remains likely in H2/18.

Good 2018E outlook following solid Q2 results

We have revised our full-year estimates upwards following the good H1 results. While our H2 estimates remain mostly without significant changes we have adjusted downward our estimates for Financing to reflect an expected lower investment income also in H2. AUM growth was stronger than expected, despite stagnating PE funds development due to slower commitment calls, and we expect to see AUM growth in PE funds during H2. Our 2018E sales and EBIT estimates are EUR 73.2m and EUR 23.1m respectively.

BUY with a target price of EUR 11.4 (11.0)

Following our revised estimates and a stronger than previously expected result in 2018E we adjust our target price to EUR 11.4 (11.0) and retain our BUY-rating.

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Suominen - Waiting for earnings to turn

17.08.2018 - 09.15 | Company report

Suominen has faced clear challenges in recent years and there is way to go to reach the historical earnings level. Own efforts and Bethune’s improving outlook support the outlook for earnings gradually turning to the better. Valuation on 2019E multiples looks moderate, but evidence of earnings turning remains to be delivered. We retain “Hold” rating for Suominen’s shares.

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Business has suffered in recent years

Capacity increases by competitors in certain product areas have had a clear negative impact on Suominen’s business in 2016, 2017 and H1’18. Particularly price/mix and profitability have been key issues. Suominen addresses these via its 3P program. Some early results were delivered in H1’18. Bethune’s increasing contribution should help in gradually turning price/mix to the better. We expect earnings in 2018E to remain modest, in line with guidance, but expect earnings to gradually improve in 2019-2020E, driven by both Bethune and Suominen ex-Bethune.

Bethune’s outlook seems to be finally improving

After a lengthy period of ramp-up troubles, Suominen’s new production line in Bethune finally reached positive gross profit towards the end of Q2’18. Management indicated production volumes in July 2018 were good, which improves outlook for a gradual turn finally taking place. We expect Bethune to have a more significant topline impact from H2’18 and its gross profit contribution to turn to positive in H2’18.

Waiting for earnings to turn - “Hold” reiterated

Suominen’s valuation looks unattractive with 2018E multiples, but on 2019E multiples valuation looks much more moderate: on our 2019E estimates Suominen trades 5.4x EV/EBITDA, 10.3x EV/EBIT and 13.1x P/E, which are close to Suominen’s historical multiples. While valuation does not look particularly challenging on 2019E estimates, evidence of earnings turning to better is needed to justify material upside. With 2019E multiples close to historical valuation we keep “Hold” rating intact with target price of EUR 3.4 (3.5). If Suominen was to move towards its financial targets, there would be clear upside to valuation.

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Taaleri - Clear earnings beat

16.08.2018 - 09.00 | Earnings Flash

Taaleri’s H1 results clearly beat our estimates, with income of EUR 35.2m vs. 31.9m Evli and EBIT of EUR 12.4m vs. 6.9m Evli. The earnings were attributable to the Wealth Management segment, mainly due to investment income.

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  • Net sales in H1 were EUR 35.2m (EUR 38.7m in H1/17), beating our estimates (Evli EUR 31.9m). The group’s continuing earnings grew seven per cent.
  • EBIT in H1 was EUR 12.4m (EUR 15.4m in H1/17), well above our estimates (Evli EUR 6.9m). The higher than expected earnings were attributable to the Wealth Management segment, where performance fees and investment income of EUR 5.6m and EUR 4.9m respectively were recorded, along with growth in fee income.
  • The Wealth Management segments net sales in H1 were EUR 28m vs. EUR 23.2m Evli and EBIT EUR 14.1m vs. EUR 6.1m Evli.
  • The Financing segments net sales in H1 were EUR 6.2m vs. EUR 9m Evli and EBIT EUR 2.4m vs. EUR 4.8m Evli.
  • The Energy segments net sales in H1 were EUR 1.1m vs. EUR 1.4m Evli and EBIT EUR -0.9m vs. EUR -0.5m Evli.
  • Net sales from other operations in H1 were EUR -1.5m vs. EUR -1.7m Evli and EBIT EUR -3.3m vs. EUR -3.5m Evli.
  • Assets under management at the end of H1/18 amounted to EUR 6.0m.

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Vaisala - Initiating coverage with HOLD

28.06.2018 - 09.45 | Company report

We estimate net sales to grow at a CAGR of 4.1% in 2018E-2020E, driven by Industrial Measurements and growth areas in Weather and Environment. Meanwhile, we estimate that improving sales mix and economies of scale raise Vaisala’s EBIT margin to 13.7% in 2020E. We initiate coverage with a HOLD rating and a target price of EUR 21 per share.

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Industrial Measurements - Strong growth and profitability

In 2010-2017, Industrial Measurements (IM, 33% of sales) net sales grew at a CAGR of 8.2%. In the past five years, IM’s operating margin has improved from 12 to 20 percent, driven by scale economies. The business area follows a product leadership strategy and the current focus is on the power transmission and life sciences markets.

Weather and Environment – Focusing on growth areas

In 2010-2017, Weather and Environment (W&E, 67% of sales) net sales grew at a CAGR of 2.3%. Operating margin was 8.2% in 2017E. W&E is currently focusing on meteorological projects in developing countries, digital solutions, and air quality related solutions. Meanwhile, growth is relatively slow for traditional meteorological equipment in the developed countries.

Estimating EUR 376m sales, 13.7% EBIT margin in 2020E

Vaisala targets 5% CAGR sales growth (4.0% CAGR in 2010-2017) and 15% EBIT margin (12.3% in 2017) in the long term. We estimate 4.1% CAGR sales growth for 18E-20E, driven by IM sales and growth areas in W&E. We estimate that Vaisala’s EBIT margin improves to 13.7% in 2020E, driven by economies of scale and the increasing share of IM sales.

Initiating coverage with a HOLD rating and TP of EUR 21

Our 2019E estimates and peer EV/EBIT multiples imply a value of 20.4 EUR per share. Meanwhile, our DCF model implies a value of EUR 21.3 per share. We see that Vaisala’s current share price already reflects our expectations of continued growth and gradual profitability improvements. We initiate coverage with a HOLD rating and a target price of EUR 21 per share.

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Taaleri - Initiate coverage with BUY

29.05.2018 - 00.00 | Company report

We initiate coverage of Taaleri with a BUY-rating and target price of EUR 11. We expect continued growth in continuing earnings while viewing stronger investment and performance based return potential in the mid- to long-term. Taaleri has seen considerable profitability improvements and we expect profitability to remain at good levels.

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Growth in continuing earnings

We expect to see growth in continuing earnings in all three segments. In Wealth Management we expect growth to be supported by increasing AUM, driven by private equity funds, and in Financing from growth in the insurance portfolio. Growth in Energy is supported by the newly completed SolarWind fund. We expect continuing earnings to grow at a CAGR of some 13 % during 2017-2020E. We expect performance and investment returns to decline in 2018 following strong returns in 2017 and expect the returns to increase in the mid- to long-term. Our revenue estimate for 2018 is EUR 72.2m.

Expect continued good profitability

Taaleri’s profitability has seen improvements in recent years, with 2017 being an exceptionally strong year in terms of both revenue and profitability. We expect profitability to remain at good levels but to decline slightly in 2018 due to lower revenue. In 2019-2020 we expect profitability to pick up following higher revenue and cost discipline. We expect to see the largest profitability increases in Wealth Management and Energy, with Energy expected to be profitable from 2019 onwards.

BUY with a target price of EUR 11

We initiate coverage of Taaleri with a BUY-rating and target price of EUR 11, based on our SOTP and DCF valuation. On our estimates Taaleri trades at P/E of 17.9x and 12.3x for 2018E and 2019E respectively. On our estimates relative valuation is somewhat elevated on 2018 multiples following expected weaker earnings. On 2019E multiples valuation is in line. We expect stronger mid and long-term potential.

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SSH - Initiate coverage with HOLD

26.03.2018 - 09.30 | Company report

We initiate coverage of SSH with a HOLD-recommendation and a target price of EUR 2.0. Our target price is based on our DCF value and 4.5x EV/Sales multiple on our 2019 revenue estimates. Current valuation is high, but we see compelling longer-term revenue and profitability potential which supports valuation.

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Transformation in process

Under the management of the new CEO Ms. Kaisa Olkkonen, the company has taken a new strategic direction to reposition SSH into a more inclusive strategic PAM vendor for companies of all sizes operating in all IT-environments. With the launch of PrivX and further developing its PAM offering, the company intends to drive its growth by increasing its focus towards the subscription model, faster deployments and expanding into new customer segments.

Building up momentum in 2018

We expect only slight revenue growth for 2018, but see growth accelerating during towards the end of ’19-’21 period as sales of PAM offering picks up speed. We expect EBIT-margin to improve, but to remain negative during 2018-2020 due to further investments in growth. We have not included potential patent income and possible firewall related revenue in our estimates. If these projects were to materialize, they represent an upside risk to our estimates.

HOLD with a target price of EUR 2.0

On our estimates 2019E-2020E, SSH is trading at EV/Sales 4.3x and 3.7x, which is in line with the average 4.5x and 3.6x EV/Sales multiples for our small sample peer group. Current valuation is high, given that that the company is in the beginning of its transformation phase and risks are elevated, but we see compelling longer-term revenue and profitability potential which supports valuation.

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Endomines - Initiate coverage with BUY

22.03.2018 - 09.00 | Company report

Through a recent transaction Endomines acquired American entity TVL Gold and the five gold assets it holds. Along the completed rights issue and financing arrangements the company is in a stronger position to continue production as resources at the Pampalo mine have neared depletion. We initiate coverage of Endomines with a BUY rating and target price of SEK 9.3

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Acquisition and strengthening of balance sheet

Endomines recently acquired TVL Gold and its five gold projects in the Orogrande mining district in Idaho, USA. In conjunction with the acquisition and completed rights issue, with net proceeds of some SEK 180m, Endomines completed a series of financial transactions after which the company has no remaining bank debt.

Production focus to shift to the acquired assets

With the current reserves Endomines targets production of 250-300kg gold at the Pampalo mine after which investments into an extension would need to be made. Production at the first of the acquired assets is expected within a year of the acquisition and within 2-5 years at the other assets.

Potential coupled with uncertainty

The acquisition and a planned expansion of the exploration program offer increased potential but we note a high uncertainty relating to the TVL Gold assets as resource estimates are limited and no production is currently on-going at the assets and resources at Pampalo are nearing depletion.

Initiate coverage with BUY and target price of SEK 9.3

We initiate coverage of Endomines with a BUY rating and a target price of SEK 9.3. Our target price is based on a 0.95x multiple to our NAVPS estimate, taking into consideration the stability of the operating jurisdictions and the early stages of the assets.

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Gofore - Initiate coverage with buy

23.01.2018 - 08.30 | Company report

We initiate coverage of Gofore with a BUY rating and target price of EUR 9.2. We expect growth to continue strong in 2018-19E and profitability to remain at good levels.

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Targeting above market growth rate in the IT-services sector

Gofore aims to grow faster than the company’s target IT-services market. Gofore’s long-term profitability target is to generate an EBITA-margin of 15%. We expect Gofore to have good possibilities to reach its profitability target during 2017E-2018E mainly supported by price increases and a good cost discipline due to a competitive personnel cost structure. Our EBITA-margin estimate for 2018E is 18.0 %. Historically, Gofore has grown faster than its main competitors and profitability has been above the competitor average in 2012-2016.

Recruitments in 2017 support good growth in 2018

Gofore’s personnel increased to 374 in 2017 from 196 in 2016. The increase came mostly from new recruitments and a smaller part from the acquisition of Leadin. The recruitments will support the continued growth in 2018E, with our sales growth estimates at 46.2 %. We also expect Gofore to continue expansion internationally, giving further support for continued good near-term growth. We expect sales growth to slow down going forward from 2018. The certain sector-wide difficulties in recruitments could put pressure on further slow-down of growth.

BUY with a target price of EUR 9.2

We initiate coverage of Gofore with a BUY-rating and target price of EUR 9.2. Our target price is based on our DCF-value and the peer multiples for 2018E. Gofore trades at a discount on earnings-based multiples for 2018E. Our target price values Gofore at 12.2x EV/EBIT 2018E.

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