Latest research

Finnair - Result heavily impacted by the pandemic

28.10.2020 - 9.45 | Earnings Flash

Vaisala - Uncertainties in W&E outlook

28.10.2020 - 09.35 | Company update

Vaisala delivered a two-fold Q3 result. Despite W&E’s strong profitability improvement, sales and orders declined and COVID-19 continues to pose significant near-term risks. IM business remains resilient. We keep our estimates broadly unchanged and maintain TP of 32€ with SELL.

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Sales mix boosted profitability, orders and sales decreased
Q3 net sales decreased by 11% to 94 MEUR mainly due to the decline in W&E’s project business. Gross margin improved to 57.7% (55.3%) and EBIT to 19.5 MEUR (16.3 MEUR), 20.7% (15.5%) of net sales. W&E’s EBIT improved to 11.1 MEUR (9.7 Evli) and IM’s was 8.6 MEUR (10.3 Evli) According to Vaisala, lower share of less-profitable project business, improved profitability of digital services in W&E and higher share of IM sales boosted margins. Operating expenses also decreased compared to previous year due to less travelling and some non-recurring positive impacts. Orders received decreased overall by 19% as W&E’s order intake was impacted by COVID-19 especially in airports segment and emerging markets. IM’s orders received increased 2% supported by strong order intake in APAC (+19%).

Our estimates broadly unchanged
Vaisala reiterated its 2020 outlook issued last week, as expected, estimating FY20 net sales to be 370-390 MEUR and EBIT to be 40-48 MEUR. Based on the report, we keep our estimates broadly unchanged. We expect 20e sales to decline 5.3% to 382.1 MEUR and EBIT to increase to 46.7 MEUR. W&E outlook is weighed by the weakened outlook for aviation and restrictions will cause delays in project deliveries. Thus, we expect W&E 20e sales to decrease by 7.3% to 242.1 MEUR and EBIT to decrease to 16.7 MEUR. We expect IM to remain relatively resilient with 20e sales down 1.7% to 140 MEUR and EBIT increasing to 30.1 MEUR. In 21e, we expect IM sales to continue growing (+7%), while W&E is expected to recover only slightly (+3%) due to uncertainties and decreased order intake.

Valuation still challenging
On our estimates, Vaisala is still trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. Based on the report, we retain our TP of 32€ and SELL rating. Our TP values Vaisala at 21-22e EV/EBIT multiples of 22.9x and 20.7x which are above the peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Consti - In line with our estimates

28.10.2020 - 09.15 | Earnings Flash

Consti's net sales in Q3 declined 16.7% to EUR 68.2m, in line with our estimates and slightly below consensus (EUR 69.6m/72.1m Evli/cons.). EBIT amounted to EUR 2.5m, in line with our estimates and slightly below consensus (EUR 2.5m/2.7m Evli/cons.). Free cash flow at EUR 4.6m (Q3/19: EUR -0.4m).

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  • Net sales in Q3 were EUR 68.2m (EUR 81.8m in Q3/19), in line with our estimates and slightly below consensus (EUR 69.6m/72.1m Evli/Cons.). Sales declined -16.7 % y/y.
  • Operating profit in Q3 amounted to EUR 2.5m (EUR 2.1m in Q3/19), in line with our estimates and slightly below consensus (EUR 2.5m/2.7m Evli/cons.), at a margin of 3.6%.
  • EPS in Q3 amounted to EUR 0.21 (EUR 0.17 in Q2/19), in line with our estimates and below consensus (EUR 0.21/0.23 Evli/cons.).
  • The order backlog in Q2 was EUR 189.4m (EUR 206.4m in Q3/19), down by -8.2 %. Order intake EUR 31.0m in Q3 (Q3/19: EUR 37.0m).
  • Free cash flow improved to EUR 4.6m (Q3/19: EUR -0.4m) and 1-9/2020 cash flow amounted to a stellar 14.7m (1-9/19: EUR -1.1m).
  • The coronavirus pandemic has impacted through the postponement of some projects and decreased demand in certain areas. Escalation of the coronavirus pandemic after the reporting period creates further uncertainty to the short-term outlook to the short-term demand outlook of renovations.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019. The coronavirus pandemic is negatively impacting on Consti’s sales, but performance is expected to remain solid also during Q4/2020.

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Scanfil - Well-positioned for the weather

28.10.2020 - 09.05 | Company update

Scanfil’s top line didn’t meet our estimate but profitability remained strong. We retain our EUR 6.25 TP, rating BUY.

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Some top line softness but in our view nothing dramatic

Scanfil posted EUR 141.6m in Q3 revenue, down 7% y/y. The figure didn’t meet our EUR 156.2m estimate largely due to the Communication and Industrial segments. Communication revenue fell by 28% q/q mostly as a result of low demand for network elements. The segment also supplies other types of products and we expect revenues to stabilize in Q4. Consumer Applications’ top line remained low as expected, slightly up by q/q but down by 23% y/y. There are signs the segment’s demand is bottoming out and we expect more improvement for Q4. Energy & Automation and Medtec & Life Science performed close to expectations, but Industrial managed only EUR 44.7m (vs our EUR 50.5m estimate) and was down by 9% y/y. Industrial softness wasn’t attributable to any single customer and was pronounced in July and August. Demand nevertheless improved in September. In absolute profitability terms Scanfil’s EUR 9.9m Q3 adj. EBIT didn’t quite reach our EUR 10.5m estimate, however the quarter still delivered a strong 7% operating margin.

Guidance implies meaningful q/q improvement for Q4

The low-end of the updated FY ’20 guidance implies 5% q/q Q4 revenue increase, while the high-end implies 19% growth. We make only small updates to our Q4 estimates, and now expect EUR 154m in Q4 revenue (prev. EUR 158m), down by 1% y/y and up by 8% q/q. We now expect Q4 EBIT at EUR 10.0m (prev. EUR 11.1m). Scanfil’s overall positioning within the value chain and relative to competition remains unchanged. The company has a balance sheet ready to facilitate acquisitions should a fitting opportunity arise. There’s a lot of uncertainty but we note Scanfil’s customers tend to be well-positioned OEMs who compete against each other directly only to a very limited extent.

Valuation is still very reasonable

Scanfil is valued at about 6.3x EV/EBITDA on our FY ’20 estimates. Scanfil’s organic strategic growth target for ’23 implies some 5% CAGR for the coming years. Although the target was decided on before the pandemic, we still view it quite relevant considering the customer portfolio and performance so far this year despite the uncertainty. Our TP remains EUR 6.25 and our rating BUY.

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Innofactor - Eager to see what the future holds

28.10.2020 - 08.45 | Company update

Innofactor reported good results in the quarter expected to be most hit by negative impact of the pandemic. The outlook for 2021 remains positive but we have yet to see signs of the next clear steps of growth pick-up and margin improvement. Valuation still remains attractive and we adjust our TP to EUR 1.45 (1.35) and retain our BUY-rating.

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Good results in the by COVID-19 impact weakened quarter
Innofactor reported slightly better Q3 results than we had expected in the due to the coronavirus pandemic more challenging quarter. Net sales grew 0.3% y/y to EUR 14.0m (Evli 13.8m), with the negative impacts of the pandemic lowering sales per employee by 1.6%. EBITDA amounted to EUR 1.6m (Evli EUR 1.3m), with slightly negative figures in the other Nordic countries due to lower sales. The negative impacts of the pandemic were in line with company expectations. Weaker demand has mainly been seen among commercial customers. The order backlog amounted to EUR 58.2m, up 9.4% y/y.

Awaiting signs of faster growth and earnings improvement
Innofactor expects net sales and EBITDA in 2020 to increase from 2019, with our estimates now at EUR 65.5m (2019: EUR 64.2m) and EUR 7.7m (2019: EUR 5.1m) respectively, with the latter estimate up slightly post Q3 following better than expected relative profitability. The outlook for 2021 remains positive but we still expect only a modest growth of 4.0% and minor EBITDA-% improvement (11.7% ->12.0%). Challenges continue to relate mainly to performance in the other Nordic countries and any notable signs of improvement are yet to be seen. M&A activity continues to appear likely in the coming years, with the company committed to its 20% annual growth and 20% EBITDA-% target, but it is too early to account for such.

BUY with a target price of EUR 1.45 (1.35)
On peer multiples Innofactor continues to trade at a clear discount. We also expect Innofactor to initiate dividend payments in 2020. Non-cash items (mainly PPA) affecting earnings will still keep dividend yields rather low (2020e: 2.3%). We raise our TP to EUR 1.45 (1.35) and retain our BUY-rating.

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Suominen - Earnings multiples remain cautious

28.10.2020 - 08.35 | Company update

Suominen again topped expectations. We update our estimates, our TP is now EUR 6.0 (5.5) and rating still BUY.

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Another extension to a steep upward profitability trend

Suominen recorded EUR 115.4m in Q3 revenue, up by 12% y/y and down by 6% q/q, meeting our EUR 114.0m estimate. FX had a negative EUR 5.6m impact. Europe remained very strong (up by 17% y/y), and at EUR 43.5m topped our EUR 41.0m estimate. Americas grew by 9% y/y and at EUR 71.9m was close to our EUR 73.0m estimate. Suominen delivered high volumes and margins despite maintenance breaks, which will also take place in Q4. While the results were near our estimates in terms of top line, margins were again a positive surprise. Suominen achieved a 17.1% gross margin, gaining more on the 16.0% in Q2 and clearly higher than our 15% estimate. Low raw materials prices in general continue to exert pressure on nonwovens pricing, however the pricing clauses work with a lag and Suominen was also able to defend its pricing to some extent. Suominen has been very successfully achieving production cost efficiencies and says the variable cost optimization program continued to yield results on all sites. The company managed strong with SGA, R&D and other expenses as well since the total item was only EUR 6.8m, compared to our EUR 7.3m estimate. Suominen’s EUR 12.9m Q3 EBIT thus clearly beat our EUR 9.8m estimate.

We expect Q4 earnings to decline by some EUR 4m q/q

Although the company continues to perform strong not only due to a favorable environment but also thanks to in-house measures, we expect results to decline q/q in Q4. We now expect Q4 gross margin at 15% and continue to see some further pressure down next year. Raw materials prices have remained low for quite some time and hence are unlikely to support additional boost in profitability. On the positive side wipes demand should remain high for an extended time period.

Multiples attractive despite margin pressure going forward

Suominen is now valued ca. 5.5x EV/EBITDA on our estimates for this year. Going forward, we see additional earnings gain hard next year. In our opinion somewhat low earnings multiples are warranted given the extraordinary environment, but we nevertheless continue to view the overall valuation picture attractive. Our TP is now EUR 6.0 (5.5) and rating remains BUY.

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Detection Technology - Looking past the air turbulence

28.10.2020 - 08.25 | Company update

Detection Technology’s Q3 report was below expectations as SBU continues to struggle under the pandemic. Despite low visibility and the uncertainty related to aviation, we see security market weakness as temporary and do not see DT’s competitive position, strategy or longer-term drivers compromised. Therefore, we see DT well positioned to perform again once security market normalizes. Despite our estimates cut, we maintain our target price of 22 euros and HOLD rating.

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Clear miss due to worse than expected SBU performance

DT’s Q3 result missed our and consensus expectations as SBU continued to struggle due to the ongoing pandemic, which is postponing investments in security market, especially airports. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) due to COVID-19 affecting the demand for security X-ray devices. MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation) due to continued strong demand in medical CT imaging. DT’s Q3 EBIT came in at EUR 2.6m (12,6% margin) vs. our estimates of EUR 4m (EUR 3.4m cons).

 DT cautiously optimistic that worse is behind it

The COVID-19 pandemic is negatively affecting the demand for X-ray devices in all DT’s target markets, apart from medical CT imaging. Apart from domestic air transport in China, global air transport has failed to recover, which has led to exceptionally low demand in aviation. In addition, extensive restrictions on mass gatherings has negatively affected demand in security applications. DT expects SBU sales to decrease in Q4, but to start improving in H1/21 driven by Chinese demand. DT expects MBU sales to grow in Q4 and to continue to grow in Q1 of 2021, albeit more slowly than in 2020.

 Maintain HOLD with target price 22 euros

Based on the report, we have cut our sales and EBIT estimates for the coming years. On our renewed lowered estimates, DT is now trading at premiums to our peer group, but we note that there is high uncertainty in our estimates and multiples can quickly change when security market recovery starts. It’s difficult to estimate how long the challenging situation regarding aviation will continue and at what point SBU will start recovering. We do not however see DT’s competitive position, strategy or longer-term drivers compromised, and therefore DT should be well positioned to perform again once security market normalizes. Until we see some signs of security market stabilizing, we remain cautious. We maintain our target price of 22 euros and HOLD rating.

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Vaisala - Strong profitability in both segments

27.10.2020 - 14.30 | Earnings Flash

Vaisala’s Q3 did not provide bigger surprises as the company updated its business look for 2020 and published preliminary Q3 net sales and EBIT figures last week. Vaisala’s Q3 net sales decreased by 11% to 94.0 MEUR. Q3 reported EBIT was 19.5 MEUR.

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  • Group level results: Q3 net sales decreased by 11% to 94.0 MEUR.
  • Gross margin was 57.7% vs. 55.3% last year.
  • Orders received were 85.3 MEUR vs. 105.1 MEUR last year. Orders received decreased by 19% due to weakened order intake especially in W&E’s airports markets and emerging markets. Order book was 134.6 MEUR vs. 154.4 MEUR in Q3’19.
  • Weather & Environment (W&E) net sales decreased by 14% to 59.2 MEUR vs. 59.9 MEUR our expectation. W&E EBIT was 11.1 MEUR (9.7 MEUR Evli). W&E’s orders received decreased by 29% and was impacted by decreased order intake mainly from MEA and Latin America.
  • Industrial Measurements (IM) net sales declined 3% to 34.8 MEUR vs. 34.5 MEUR our expectation. IM EBIT was 8.6 MEUR (10.3 MEUR Evli). Industrial Measurements’ order intake growth was 2% and orders received grew by 19% in APAC, while order intake in EMEA and Americas decreased partially offsetting increase in APAC.
  • Business outlook for 2020 maintained: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 370–390 million and operating result (EBIT) to be in the range of EUR 40–48 million (updated on October 21st).

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Suominen - Another exceptional quarter

27.10.2020 - 10.00 | Earnings Flash

Suominen’s Q3 figures continued to defy our expectations as marginal profitability increased further q/q despite being already exceptionally high in Q2.

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  • Suominen Q3 revenue amounted to EUR 115.4m (up 12% y/y), compared to our EUR 114.0m expectation.
  • Europe top line was EUR 43.5m while we estimated EUR 41.0m. Americas posted EUR 71.9m, compared to our EUR 73.0m estimate.
  • Gross profit amounted to EUR 19.7m vs our EUR 17.1m estimate. Gross margin was therefore 17.1% vs our 15.0% expectation. In our view the additional improvement in gross margin (which amounted to 16.0% in Q2’20) indicates Suominen was able to defend its nonwovens pricing in a favorable supply-demand environment, despite low raw materials prices. Suominen hinted at such an opportunity during its CMD, and our view proved too conservative in this respect.
  • Suominen Q3 EBIT was EUR 12.9m, compared to our EUR 9.8m estimate. The beat was mostly due to the higher gross margin and resulting gross profit, however Suominen was also somewhat more efficient in terms of SG&A.

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Innofactor - Fared well in challenging quarter

27.10.2020 - 09.30 | Earnings Flash

Innofactor’s Q3 results were slightly above our expectations and figures were fairly good given the expected COVID-19 related weakness in the quarter. The net sales amounted to EUR 14.0m (Evli EUR 13.8m), while EBITDA amounted to EUR 1.6m (Evli EUR 1.3m). Guidance remains intact. The impact of the pandemic on Q3 was in line with company expectations.

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  • Net sales in Q3 amounted to EUR 14.0m (EUR 14.0m in Q3/19), slightly above our estimates (Evli EUR 13.8m). Net sales in Q3 grew 0.3% y/y. Net sales grew in Finland but declined in the other Nordic countries.
  • EBITDA in Q3 was EUR 1.6m (EUR 1.5m in Q3/19), above our estimates (Evli EUR 1.3m), at a margin of 11.1%. EBITDA was clearly positive in Finland and somewhat negative in the other countries due to smaller than expected net sales due to the coronavirus pandemic.
  • Operating profit in Q3 amounted to EUR 0.4m (EUR 0.3m in Q2/19), above our estimates (Evli EUR 0.2m), at a margin of 2.8%.
  • Order backlog at EUR 58.2m, up 9.4% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The impact of the coronavirus pandemic on the third quarter was in line with company expectations. On a monthly level August was weaker than anticipated but September instead better than expected and the trend is expected to strengthen during the end of the year.
  • Innofactor updated its strategy during Q3, with no major changes being made. The updated dividend policy was confirmed, and financial targets remain the same.

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Detection Technology - Result miss, but some light in end of tunnel

27.10.2020 - 09.25 | Earnings Flash

DT’s Q3 result clearly missed our and consensus expectations due to worse than expected performance in SBU. DT’s Q3 net sales were EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. SBU sales declined -43% to EUR 10.6m (EUR 13.5m our expectation) and MBU sales increased +20% to EUR 10.1m (EUR 10.5m our expectation). DT’s Q3 EBIT came in at EUR 2.6m vs. our estimates of EUR 4m (EUR 3.4m cons). On the positive, DT says it is cautiously optimistic that the worst may already be behind it.

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  • Group level results: Q3 net sales amounted to EUR 20.6m (-23.4% y/y) vs. EUR 24m/23.5m Evli/consensus estimates. Q3 EBIT was EUR 2.6m (12.6% margin) vs. EUR 4m/3.4m Evli/cons. R&D costs amounted to EUR 2.3m or 11% of net sales (Q3’19: 2.6m, 9.7%).
  • Security and Industrial Business Unit (SBU) had net sales of EUR 10.6m vs. EUR 13.5m Evli estimate. SBU sales declined -43% y/y, mainly due the COVID-19 pandemic. SBU net sales are expected to decrease in Q4 y/y, but the company expects improvement in H1 of 2021.
  • Medical Business Unit (MBU) delivered net sales of EUR 10.1m which was broadly in line with our estimate of EUR 10.5m. Net sales of MBU increased by +20% y/y due continued strong demand in medical CT imaging. DT expects MBU sales to grow in Q4 and to continue to grow in Q1 of 2021, albeit more slowly than in 2020.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

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Scanfil - Sound figures

27.10.2020 - 08.40 | Earnings Flash

Scanfil reported Q3 revenue slightly on the soft side, however the overall picture seems to remain pretty much unchanged with demand and profitability as previously expected.

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  • Scanfil Q3 revenue was EUR 141.6m vs the EUR 156.2m/147.6m Evli/consensus estimates. In our view the slight softness was due to Communication and Industrial segments.
  • Communication posted EUR 20.7m in revenue, compared to our EUR 27.8m estimate. The softness was due to lower demand for network elements.
  • Consumer Applications’ revenue was EUR 21.3m vs our EUR 20.9m estimate. Scanfil reports encouraging signs of demand picking up for the segment.
  • Energy & Automation revenue was EUR 28.9m while we expected EUR 30.4m. There was a lot of customer-specific sales variation.
  • Industrial recorded EUR 44.7m vs our EUR 50.5m expectation. July and August were slow, but demand improved in September.
  • Medtec & Life Science revenue amounted to EUR 26.1m, compared to our EUR 26.6m estimate.
  • Scanfil Q3 EBIT stood at EUR 9.9m, compared to the EUR 10.5m/10.3m Evli/consensus estimates. Operating margin was thus 7.0% vs our 6.8% expectation.
  • Scanfil guides FY ’20 revenue to land in the EUR 590 – 610m range and EBIT EUR 38 – 40m. The estimate ranges were previously EUR 580 – 620m and EUR 38 – 42m.

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Etteplan - Weaker Q3 figures expected

27.10.2020 - 08.30 | Preview

Etteplan reports Q3 results on October 29th. We expect weakish figures in the seasonally slower quarter, as the impact on demand of the COVID-19 induced uncertainty should also show clearly. We estimate a sales decline of 9.6% in the quarter and an EBIT-margin of 5.3%. We adjust our target price to EUR 9.3 (8.7) and retain our HOLD-rating.

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Seasonal slowness and COVID-19 impact
Etteplan’s Q2 results were a clear positive in the challenging environment and timely measures taken helped in keeping up profitability. The organic decline in revenue was 11.3%. During Q3 the market environment overall saw improvement compared with the restrictions during Q2 but with the third quarter being seasonally slower and a trickle-down effect of the demand weakness in Q2 we expect weakish figures. With the capacity reduction due to temporary layoffs to our understanding somewhat similar to that of Q2 we expect a similar organic revenue decline, expecting revenue of EUR 55.6m (Q3/19: EUR 61.5m). Despite good cost control, we still expect the lower revenue to have an impact on profitability and estimate an adj. EBIT of EUR 2.9m (Q3/19: EUR 4.9m), at a margin of 5.3%.

2020E: sales decline 1.7% and EBIT of EUR 18.4m
Etteplan reissued a guidance in Q2, expecting 2020 revenue to decrease slightly or be at 2019 levels and EBIT to decrease compared with 2019. We currently estimate a sales decline of 1.7% in 2020 and EBIT of EUR 18.4m (2019: EUR 22.8m). The situation with the coronavirus pandemic has turned to the worse again with the second wave and we will be keeping our eyes on comments on the potential effect on demand development.

HOLD with a target price of EUR 9.3 (8.7)
We have made only minor tweaks to our estimates ahead of the Q3 results. With the slightly improved sentiment after Q2 and peer multiple appreciation we adjust our target price to EUR 9.3 (EUR 8.7), valuing Etteplan at 7.5x 2020 EV/EBITDA, and retain our HOLD-rating.

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Talenom - Preparing new avenues for growth

27.10.2020 - 08.00 | Company update

Talenom reported solid Q3 figures despite slight sales weakness. Attention was drawn to the new small customer concept, with the for us surprising addition of banking services. Although still in its infancy, the concept in our view appears promising.

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Solid profitability, slight COVID-19 sales weakness
Talenom reported solid Q3 results. Revenue was slightly weaker than expected, at EUR 14.8m (Evli/cons. EUR 15.3m/15.2m), as the pandemic has a slight impact on transaction volumes. Cost control however aided profitability and the EBIT of EUR 3.1m beat expectations (Evli/cons. EUR 2.6m/2.8m). The financial figures were clearly of lesser interest in the earnings report as focus lied on the new small customer concept.

Seeking to cater previously underserved customer segment
Talenom launched a new small customer concept, the TiliJaska service, a free accounting system, as well as Talenom Light Entrepreneur, designed for the smallest, previously by Talenom underserved customers. Costs for the system arise with usage after a certain threshold. The product is intended to broaden the service offering and attracting growing enterprises to Talenom’s bookkeeping services but also to be a profitable product in itself. The product will be in beta until the end of the year and is also planned to be launched next year in Sweden. A potentially very interesting and unexpected new angle was the addition of banking services. In our view the service, or essentially the idea of in the long-run potentially creating a much broader service platform, view has clear potential. Talenom also mentioned that it is looking into other markets in Europe, but we see it as too early to make any assumptions regarding such expansion.

HOLD with a TP of EUR 10.2 (8.5)
Talenom’s valuation continues to be stretched but with the interesting new sales growth potential and more light to be shed on the new services in the upcoming Capital Markets Day (November 11th), we can justify to stay along for the ride. We adjust our TP to EUR 10.2 (8.5), valuing Talenom at a 2020 P/E of 45x, and retain our HOLD-rating.

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Talenom - Solid profitability figures once again

26.10.2020 - 14.00 | Earnings Flash

Talenom's net sales grew 10.0% in Q3 to EUR 14.8m, slightly below our and consensus estimates (EUR 15.3/15.2m Evli/cons.). EBIT amounted to EUR 3.1m, above our and consensus estimates (EUR 2.6m/2.8m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q3 amounted to EUR 14.8m (EUR 13.5m in Q3/19), slightly below our and consensus estimates (EUR 15.3m/15.2m Evli/Cons.). Growth in Q3 amounted to 10.0% y/y.
  • Operating profit in Q3 amounted to EUR 3.1m (EUR 2.4m in Q3/19), above our and consensus estimates (EUR 2.6m/2.8m Evli/cons.), at a margin of 21.2%.
  • EPS in Q3 amounted to EUR 0.05 (EUR 0.04 in Q3/19), in line with our and consensus estimates (EUR 0.04/0.05 Evli/cons.).
  • Net sales growth was slightly weakened by the impact of the pandemic on transactional volumes, but cost adjustments aided profitability.
  • Talenom launched its new small customer concept, TiliJaska, aimed to be launched also next year in Sweden. Talenom also launched the Talenom Light Entrepreneur service, a service platform catering the needs for customers ranging from part-time light entrepreneurs to listed companies.
  • Talenom clarified its long-term vision, seeking to broaden its offering to an increasing extent also towards banking services, supported by digital transformation and legislative changes.
  • Guidance intact: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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Verkkokauppa.com - Towards the important campaign season

26.10.2020 - 09.40 | Company update

Once again, Verkkokauppa.com delivered a strong result as revenue increased by ~7% y/y (EUR 129m) while adj. EBIT totaled EUR 5.6m. We have slightly increased our estimates and keep our rating “BUY” with TP of EUR 6.5 (6.3).

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Revenue increased by 7% y/y

Verkkokauppa.com’s good momentum continued throughout Q3, driven by strong consumer web sales. Growth was particularly good in mid-sized and evolving categories (MDA, BBQ, sports as well as office & supplies). Revenue increased by ~7% y/y amounting to EUR 129m (vs. our EUR 126m). Gross margin developed favorably as well due to the sales mix, strong consumer sales as well as lower level of wholesale sales but also due to operational improvements. The company’s adj. EBIT was EUR 5.6m (vs. our 5.3m) in Q3.

The current environment supports further growth

Online migration has continued strong throughout the year partly due to the COVID-19 and as the virus situation seems to be prolonging, we expect the same trend to continue. Even though the company is known for its strong presence in the consumer electronics market in Finland, the growth has been strong in other product categories as well boosting the company’s sales and profitability development. This also benefits the company’s growth in the future since the consumer electronics market is extremely competed and price driven. The final quarter is normally the most important for Verkkokauppa.com and it is driven by campaigns (e.g. Cyber Monday and Black Friday) and the Christmas season. We expect the good momentum to continue also in Q4E. Due to the travel restrictions, wholesale sales should remain in a lower level also in Q4E, having a positive impact on margins.

“BUY” with TP of EUR 6.5 (6.3)

We have slightly increased our estimates and expect 20E revenue of EUR 546m and adj. EBIT of EUR 20.4m. Hence, our estimates are at the higher end of the given guidance (revenue between EUR 525-550m and adj. EBIT between EUR 17-21m). On our estimates the company trades at 20E-21E EV/EBIT multiple of 10.7x and 11.0x, which translates into ~50% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.5 (6.3).

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Fellow Finance - Obstacles to overcome

23.10.2020 - 09.15 | Company report

Fellow Finance is a highly scalable international marketplace lending platform. Recent challenges due to increased competition, adverse regulatory decisions and the Coronavirus pandemic caused a setback to the company’s solid growth and profitability track and is now on a slightly challenging turnaround undertaking.

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Good track record, challenging year behind...
Fellow Finance is an international marketplace lending platform connecting investors and lenders and facilitates both consumer and business lending. Operations have in the past years been expanded abroad, with operations now in six countries. The company has been able to achieve a good track record on growth and profitability but has since the latter half of 2019 been met with challenges due to regulation, increased competition and volume declines due to the Coronavirus pandemic. As a result of a decline in facilitated loan volumes sales have decreased and profitability has suffered.

... but long-term potential remains
The business environment still remains challenging in the near-term, especially with the temporary cap on interest rates on certain consumer credit. Potential for disruptive growth in the addressable market and the scalability of the platform still continues to offer ample opportunities in the long-term but with the challenges being faced there is still work to be done. With the improving investor demand after a dip in volumes due to the pandemic we expect the negative sales trend to be reversed and profitability to improve as a result in 2021.

HOLD with a target price of EUR 2.8 (2.5)
We base our valuation on peer multiples and derive a fair value of EUR 2.78 using a 2021 P/sales multiple of 1.3x, at a discount to the consumer finance companies given differences and faced challenges and above the somewhat chronically underperforming lending platform peers. We adjust our target price to EUR 2.8 (2.5) and retain our HOLD-rating.

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Detection Technology - Looking for signs of recovery

23.10.2020 - 08.42 | Preview

Detection Technology will report Q3 earnings next Tuesday, October 27th, at 9:00 EET. As usual, we look forward to hearing the latest developments and outlook regarding the security and medical imaging markets. We maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).

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Expecting declining sales, but a better quarter than last

We expect Q3 net sales of 24 MEUR (23,5 MEUR cons) and EBIT of 4 MEUR (3,4 MEUR cons), meaning a decline of around -11% and -20% respectively compared to last year. Despite decline, we expect Q3 to be clearly better than Q2. The reason behind net sales decline is the lower demand in SBU due to the COVID-19 pandemic affecting the demand for security X-ray devices, especially in aviation segment. We expect SBU net sales to decline -27% to 13,5 MEUR. MBU is compensating for the decline in SBU, as demand for medical CT imaging is currently strong due to the pandemic. We expect MBU net sales to grow 26% on slightly weak comparison figures to 10,5 MEUR. We expect DT’s Q3 EBIT to be 4 MEUR (17% EBIT margin), which is -20% lower y/y (high comparison figure), but clearly better than in Q2 (2,6 MEUR).

 Looking for signs of recovery in SBU amidst low visibility

DT has stated that it expects lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimated in its Q2 report that airport CT standard equipment upgrades in Europe and U.S. will be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. MBU sales growth is expected to continue in H2 driven by the demand in CT applications.

 Situation regarding aviation main uncertainty

The situation regarding aviation remains the biggest near-term uncertainty for DT as SBU represents roughly 2/3 of net sales and we’ve estimated aviation to contribute roughly half of SBU net sales. We have not made any changes to our estimates, thus we maintain our target price of 22 euros ahead of the report, our recommendation is HOLD (prev. BUY).

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Verkkokauppa.com - Q3 result in line with expectations

23.10.2020 - 08.35 | Earnings Flash

Verkkokauppa.com’s Q3’20 revenue grew by 7.3% y/y and was EUR 129m vs. Evli EUR 126m and consensus of EUR 127m. Adj. EBIT was EUR 5.6m vs. EUR 5.3m/5.3m Evli/cons. 2020 guidance: the company expects revenue to be 525-550 million euros and comparable operating profit to be 17-21 million euros.

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  • Q3 revenue was EUR 129m (7.3% y/y) vs. EUR 126m Evli view and EUR 127m consensus. Growth was good especially in mid-sized and evolving categories.
  • Q3 gross profit was EUR 20.9m (16.2% margin) vs. EUR 20.7m (16.4% margin) Evli view.
  • Q3 adj. EBIT was EUR 5.6m (4.3% margin) vs. EUR 5.3m (4.2% margin) Evli view and EUR 5.3m (4.2% margin) consensus.
  • Q3 eps was EUR 0.09 vs. EUR 0.09/0.09 Evli/cons.
  • 2020 guidance: the company expects revenue of EUR 525-550m and comparable operating profit of EUR 17-21m.
  • The company also decided on a quarterly dividend of EUR 0.055 per share.

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Vaisala - Q3 EBIT clearly better than expected

22.10.2020 - 09.30 | Company update

Vaisala updated yesterday its business outlook for 2020 and published preliminary net sales and operating result for Q3. With the better than expected profitability development, we raise our TP to 32€ (29), but due to continued share price rally our rating is now SELL (HOLD).

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Sales expected to be 370-390 MEUR and EBIT 40-48 MEUR
Vaisala narrowed net sales estimate and increased EBIT estimate, and now expects 2020 sales to be between 370–390 MEUR and EBIT to be between 40–48 MEUR (prev. sales 370-405 MEUR and EBIT 34-46 MEUR). Vaisala also provided preliminary figures for January–September 2020. Preliminary net sales were 273 MEUR (277.2 MEUR Evli) and EBIT was 33 MEUR (25.6 MEUR Evli).

EBIT clearly better than expected despite the decline in sales
Pandemic has affected negatively especially airports customer segment and emerging markets, and W&E has been missing larger project orders. Some project deliveries have also been delayed due to restrictions related to COVID-19. IM’s industrial instruments and liquid measurements products has not met growth targets due to volatile market situation during Q2 and Q3. On the other hand, Vaisala’s profitability has developed clearly better than expected in Q3 (EBIT 19.9 MEUR vs. 12.6 MEUR Evli). According to Vaisala, W&E’s digital services and IM’s product and service businesses improved their gross margins. In addition, the decline in operating expenses caused by the prolonged pandemic, has improved EBIT more than expected.

Valuation remains stretched
Based on the update, we have cut our sales estimates and increased EBIT estimates for 2020e. We expect 2020e net sales to decline 5.2% to 382.5 MEUR and EBIT to increase to 46.6 MEUR. We have also revised EBIT estimates slightly upwards for 2021e. Despite the margin improvement, COVID-19 continues to pose significant near-term uncertainties. Vaisala’s share price rally has continued and, on our estimates, Vaisala is trading at clear premiums compared to our peer group and we see valuation stretched given the weaker financial performance compared to peer group. We look forward to hearing more about the drivers of margin development in connection with Q3 report next Tuesday. With the better than expected profitability development we raise our TP to 32€ (29), but downgrade to SELL (HOLD).

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Suominen - Multiples are still conservative

22.10.2020 - 09.30 | Preview

Suominen reports Q3 results on Tue, Oct 27. Our estimates, EUR 5.5 target price and BUY rating all remain intact.

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No clear reason to expect softening wipes demand for now

In our opinion outlook is solid even after an exceptionally strong Q2, when revenues in Americas and Europe grew y/y by 19% and 16%. Fatigue and possibly growing indifference towards hygienic considerations could limit wipes growth at a certain near future point, however many reports suggest this unlikely to happen at least during the next few quarters. According to a New York Times article some consumers in the US prize canisters of Clorox disinfecting wipes as kinds of trophies since the item remains such a rare sight on store shelves. Many companies have formed partnerships with Clorox to reassure employees and customers that surfaces can be kept disinfected. Clorox saw wipes demand grow by 500% in a few months and inventory usually enough for 1-2 months gone in 1-2 weeks. Clorox was able to up production and plans to add more early next year. This is just one brand-specific example from the downstream part of the supply chain, but we believe it’s still relevant for upstream nonwovens suppliers. The US is also a key market for Suominen since the Americas BA contributes ca. 65% of revenue. Although European consumers may not be as keen wipers as their American counterparts, we believe the recent pandemic acceleration continues to lift volumes on both sides of the Atlantic.

There are no changes to inform estimate revisions

We view Suominen well-positioned to post double digit y/y growth rates during the next couple of quarters. With regards to H2’20 top line figures we see the uncertainty associated mostly with the scheduled maintenance breaks at several Suominen plants and to what extent exactly these will negatively affect production and delivery volumes. Raw materials prices have continued to develop flat and hence we still expect gross margin to decline from 16% in Q2 to 15% in Q3. There has also been basically no change to FX rates lately and so our EUR 114m revenue and EUR 9.8m EBIT estimates for Q3 remain intact.

We consider the conservative multiples attractive

Suominen continues to trade well below 6x EV/EBITDA on our estimates, compared to a historical average of 6.5x. We find this an attractive level and so retain our EUR 5.5 TP and BUY rating.

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Raute - Earnings not yet out of the woods

20.10.2020 - 09.10 | Preview

Raute reports Q3 results on Thu, Oct 29. Many issues point how order levels and profitability might have bottomed out, yet we continue to view valuation neutral. We retain our EUR 20 per share target price and HOLD rating.

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A very large Russian order raises confidence on next year

While Q3 order intake likely remained at a subdued level Raute disclosed on Oct 16 the signing of a complete plywood mill project delivery. The EUR 55m Russian greenfield is worth close to the record EUR 58m Segezha order now on delivery. Raute begins delivering the new order next year and the mill is set to start production in ‘22. Even though the order is very large such a project delivery announcement is not that surprising given Raute’s Russian plywood mill track record. As usual with such big projects, Raute’s margin potential is likely quite limited. The order raises our confidence on next year’s workload. We now expect FY ’21 revenue at EUR 139m (prev. EUR 127m). With regards to FY ’21 EBIT we now estimate EUR 6.6m (prev. EUR 7.4m).

Long-term potential remains strong, short-term still hazy

While the pandemic has negatively affected Raute’s business it’s worth bearing in mind the investment cycle was cooling already well before this year. Although the pandemic and related uncertainty now only seem to prolong themselves by the day, we nevertheless view the prospect of wider plywood and LVL sector investment upturn entirely plausible. We see a reasonable chance Raute’s order intake will bottom out during H2’20. Another positive is the high likelihood of Raute emerging from the pandemic even stronger relative to competition. On the negative side is the extended short-term pressure on profitability. While it is clear this year’s valuation multiples should be overlooked, next year could still fall meaningfully short of long-term potential. In our opinion Raute does not face long-term profitability challenges, but on the other hand the sector’s cyclical nature means long-term outlook should be valued cautiously.

We expect improvement, but multiples aren’t yet attractive

Now that a big project has been secured, we focus on smaller scale equipment orders and services in the Q3 report. Raute is currently trading some 7x EV/EBITDA and 11x EV/EBIT on our estimates for next year. We view these multiples quite neutral in the current context. We retain our EUR 20 TP and HOLD rating.

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Finnair - Dark winter ahead

19.10.2020 - 09.40 | Preview

Finnair will report its Q3 result on next week’s Wednesday, 28th of October. We have cut our 20E-21E estimates. We keep our rating “HOLD” with TP of EUR 0.38 (EUR 0.50) ahead of Q3 result.

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Q3’20 ASK decreased by 87% y/y

In Jul-Sep, Finnair carried 454k passengers which is 89% decline compared to Q3’19. Finnair’s Q3 Available Seat Kilometers (ASK) decreased by 87% y/y but compared to Q2’20, ASK increased by ~380%. Revenue Passenger Kilometers (RPK) decreased by 94% y/y. Passenger load factor in Q3, was 38.7% (-47.5pp compared to Q3’19). Due to the strict travel restrictions and new infection waves, the company was not able to operate as many flights as it first anticipated. We expect Q3E revenue of EUR 157m and adj. EBIT of EUR -191m.

Aiming to fly ~75 daily flights during the winter season

The coronavirus has not shown signs of abating during the autumn and the travel restrictions have remained relatively tight, impacting negatively on demand. The company has been forced to adjust its traffic plans for several times and due to the current situation, the company now expects to operate approx. 75 flights per day from Nov’20 to Mar’21 (in 2019, ~350 daily flights) and will increase its destinations for summer 2021. During Q3, the company finalized a sale and leaseback arrangement for its A350 aircraft delivered in February this year. This had an immediate EUR ~100m positive cash effect. The company also issued a new EUR 200m hybrid bond (fixed interest rate of 10.250% p.a.).

“HOLD” with TP of EUR 0.38 (0.50)

We have further cut our 20E-21E estimates. We expect 20E revenue of EUR 1062m and comparable operating loss of EUR 609m. We expect the better recovery to start during ’21 spring but we highlight that the outlook is still very blurry. We keep our rating “HOLD” with TP of EUR 0.38 (0.50).

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Pihlajalinna - Headwind from many directions

01.10.2020 - 09.20 | Company update

The FCCA has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. We now see the likelihood of the transaction being completed significantly lower. The political landscape is also changing. We keep our rating “HOLD” with new TP of EUR 11.0 (16.0).

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FCCA proposes to prohibit the merger

The Finnish Competition and Consumer Authority (FCCA) has proposed the market court to prohibit the merger between Mehiläinen and Pihlajalinna. According to the FCCA, the merger would significantly impede effective competition in the Finnish health services market as there would be only two nationwide healthcare companies (Mehiläinen and Terveystalo) in the market post-merger. Hence, the Finnish healthcare market would become even more concentrated post-merger and the merger would create competition concerns and the proposed remedies are not sufficient to address the identified competition concerns (Mehiläinen submitted two remedies proposals). According to the FCCA, the merger is also likely to lead to price increases. The combined market share of the companies would have been ~7% of the total healthcare and social services market. The market court has to issue its decision within three months (latest on 29th of December).

The probability of the acquisition being completed has dropped

The result of the investigation came as a surprise to the parties involved and to us as well. It is possible that the FCCA’s methodology to assess the market size has varied from the methodology used by the companies (e.g. public vs. private sector). Anyhow, we see that the likelihood of the acquisition being completed has decreased significantly thus we return to see Pihlajalinna as an independent service provider also in the future. During the process, Pihlajalinna has continued to develop its business as usual. The company has for instance developed its digital services and other medical services. Additionally, the company has a strong background of cooperating with municipalities. Due to the economic difficulties, the public sector has seeked more efficient ways to produce effective services (e.g. by outsourcings) which has benefited the private sector. The political interests have however shifted more towards the public side meaning that the landscape has become more negative towards private social and healthcare service providers.

“HOLD” with TP of EUR 11.0

We have not made changes to our estimates but we see that the probability of transaction being completed is significantly lower. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 19.5x and 12.9x which translates into 15-30% discount compared to the peers. We keep our rating “HOLD” with a new TP of EUR 11.0 (16.0).

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Verkkokauppa.com - Strong momentum continues

28.09.2020 - 09.10 | Company update

Verkkokauppa.com issued a positive profit warning and expects 20E revenue of EUR 525-550m and adj. EBIT of EUR 17-21m. We have slightly increased our estimates and keep our rating “BUY” and TP of EUR 6.3 intact.

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Guidance upgrade due to better than expected development

Verkkokauppa.com issued a positive profit warning and upgraded its 2020 guidance. The upgrade is due to a better than expected development during Q3 and improved outlook for the remainder of the year. The company now estimates that the revenue in 2020 is in a scale of EUR 525-550m while adj. EBIT is EUR 17-21m (prev. revenue of EUR 520-545m and adj. EBIT of EUR 13-18m). This is the company’s second positive profit warning within a short period of time as the previous one was given in July.

Consumers still on the move

According to the company, sales and the consumer demand have continued stronger than expected throughout Q3. Against the expectations, the strong demand in many of the key product categories (e.g. consumer electronics) in Q2 has not resulted in a weakened demand in these categories in Q3. It is however likely that the growth in the consumer electronics market hasn’t continued as strong but rather that Verkkokauppa.com has been able win market shares. The management indicated that the demand has continued strong also in other smaller product categories. We expect the lower margin wholesale sales to remain relatively low throughout the year, boosting gross margin development. If the same momentum continues, Verkkokauppa.com’s campaign season in Q4 is likely to be very strong. However, there are still significant uncertainties due to the COVID-19 situation.

“BUY” with TP of EUR 6.3

We have only slightly increased our 20E revenue expectation (EUR 543m) while increasing our adj. EBIT expectation by ~11% (EUR 19.8m). On our estimates, the company trades at 20E-21E EV/EBIT multiple of 10.1x and 10.4x, which translates into a 60-70% discount compared to the peers. We keep our rating “BUY” with TP of EUR 6.3 intact.

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Suominen - One sweeping turn

24.09.2020 - 09.15 | Company report

Our estimates and EUR 5.5 TP are intact; retain BUY rating.

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Fundamentals now materially firmer in short and long term

Suominen’s turnaround materialized in a very swift fashion this past spring. Figures were considerably soft as late as Q4’19 when top line slipped in both business areas, especially so in Europe. Americas grew again in Q1’20 but Europe still declined some 11% y/y. While overall Q1 was already a positive surprise in terms of profitability, revenue nevertheless continued to develop flat y/y. Then Suominen proceeded to issue two positive profit warnings during a span of two months in spring and early summer. However strong indication of improving performance this was, our estimates could not exactly keep up with the pace and hence Q2 figures trounced our expectations. Although the groundwork for solid improvement had been laying back there for some time (thanks to e.g. sustainable product introductions), it seems basically all the factors happened to align favorably during the spring. Both Americas and Europe posted revenue increases in the high teens, which also helped production efficiency. Investments in US production assets were ready to pay off. Product mix improved some more while nonwovens prices did not decline quite as much as those of raw materials.

Success in sustainable products helps to reach targets

The notable pre-pandemic challenges have vanished. Strong wipes demand means nonwovens supply-demand balance now tilts much more favorably from a manufacturer’s point of view, at least in the short-term. Despite this we expect some softening in Suominen’s H2 figures as nonwovens prices tend to follow raw materials prices closely, in addition to which several Suominen plants will go through scheduled maintenance breaks. The Q2 records place the bar high for next year, but in our view Suominen’s long-term financial targets look credible. Success in sustainable products (in Suominen’s case increasing share of wood-based fibers) could well defend margins also in the long-term, although the innovations’ profitability remains to be tested in a scenario where significant new capacity enters the market.

We see upside relative to historical earnings multiples

We continue to view Suominen’s below 6x EV/EBITDA multiples attractive. Our TP is EUR 5.5 and we retain our BUY rating.

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Marimekko - Outlook brightens

21.09.2020 - 09.00 | Company update

Marimekko announced a guidance for 2020E and expects net sales to be lower compared to last year and adj. EBIT to be approx. at the same level or lower than last year. Due to the improved outlook we have increased our estimates. We upgrade to “BUY” (“HOLD”) with new TP of EUR 42.0 (32.0).

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Guidance for 20E announced

Marimekko withdrew its earlier 20E guidance in March, solely due to the estimated impacts of the COVID-19. The company stated during its Q2 result that the coronavirus will have a significant negative impact on sales and profitability in 20E. Now the company has announced a guidance for 20E and expects net sales to be lower than in the previous year (EUR 125.4m) and adj. EBIT to be approx. at the same level or lower than in the previous year (EUR 17.1m).

Better than expected trend in sales

According to Marimekko, the improved outlook is mainly due to better than expected trend of Finnish retail sales during the summer and improved outlook of wholesale sales but also due to better fixed cost savings during the rest of 20E. The company however highlights that there are still significant uncertainties caused by the COVID-19. The travel restrictions remained tight throughout the summer thus it is likely that the money normally spent on traveling has now been put into other things. Additionally, during the pandemic, the trend of domesticity has increased among Finnish consumers which should also have a positive impact on domestic sales. According to the company, major portion of its net sales and earnings for H2E will be generated during Q3E.

Upgraded to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0)

We have increased our 20E sales expectation by ~2% and our 20E adj. EBIT estimate by ~21%. In our view, Marimekko’s mid-term outlook is good despite of the challenging times. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.6x and 16.4x which translates into a clear discount (~50%) compared to the luxury peers and at 20E-21E P/E multiple of 25.0x and 21.6x – also a clear discount compared to the luxury peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0).

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Aspo - Improvement ahead in Q4

15.09.2020 - 09.25 | Company update

Aspo reissued guidance for this year. In our view the main takeaway is that improvement will be visible in Q4 figures, albeit there’s still long way to reach the targets set for ’23. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).

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Q4 will mark the beginning of profitability rebound

Aspo now guides FY ’20 EBIT to be in the EUR 12-16m range, compared to EUR 21.1m last year. Aspo says Telko’s (including Kauko) development has proved a positive surprise while Leipurin has been able to defend its profitability despite exceptional circumstances. Aspo expects the combined EBIT for Telko and Leipurin segments will be higher this year than in ‘19 (the combined figure amounted to EUR 11.0m last year). Meanwhile Aspo estimates ESL will post a negative result for Q3 but expects Q4 to be clearly profitable as e.g. steel industry production shutdowns end and cargo volumes will begin to grow.

Q4 results will still be significantly below target levels

The new range’s EUR 14.0m midpoint is lower than our previous EUR 15.3m estimate, the difference being mostly due to ESL’s expected negative Q3 result (which we previously estimated at EUR 0.4m). We now expect ESL to post EUR -0.2m in Q3 EBIT. We leave our FY ’20 estimates intact for other segments, and so we now expect Aspo to post EUR 14.6m EBIT this year. In our view the guidance reissue is positive news for Aspo shareholders in terms of informational content as it hints at relatively brisk profitability rebound in Q4. On the other hand, Q4 EBIT, which we now estimate at EUR 4.8m, will still be far from Aspo’s full potential. According to the long-term targets published at last fall’s CMD, Aspo aims for 6% EBIT margin in ‘23 (vs our 3.9% estimate for Q4). ESL’s targets imply EUR 24m in annual EBIT, or some EUR 6m on a quarterly level (vs our EUR 2.8m estimate for Q4). Telko and Leipurin will likewise still be generating EBIT margins clearly below their respective 6% and 5% targets.

Uncertainty remains, but we see surprises tilting to upside

The guidance pushes away some uncertainty, yet it was previously known this year will fall significantly below long-term potential. Next year’s profit gradient is the key question; the main upside driver is found in positive surprises for ‘21. Although it’s early to wait such news, we see valuation attractive already in terms of SOTP. Our TP is EUR 7.25 (6.00), rating BUY (HOLD).

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Verkkokauppa.com - Riding the wave

11.09.2020 - 09.20 | Company report

Verkkokauppa.com’s growth story has continued over the years and the company’s revenue CAGR in 2010-2019 was 12.6 percent. Now the company has started to put more emphasize on profitability. We keep our rating “BUY” with TP of EUR 6.3.

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Focusing on profitable growth
Verkkokauppa.com’s revenue CAGR in 2010-2019 was 12.6 percent. The growth has been mainly supported by competitive pricing, strong online positioning and new product categories. The competition in the consumer electronics market has continued fierce and price driven. The company’s efficient and scalable cost base driven by small physical footprint enables competitive pricing and strong reliance against competition. The company has a strong net cash position which enables investments in growth. The company has started to put more emphasis on profitability of which the first evidences have already been seen.

Better profitability improvement via gross margin increase
Verkkokauppa.com’s future growth is depended on the online migration. According to the company, online sales represent some 12-13 percent of the total Finnish retail market. The company’s extremely good performance in H1’20 has been partly driven by the COVID-19, as sales grew by 11 percent and adj. EBIT grew by over 240 percent. It is challenging to estimate how permanent the market changes will be. However, increased online demand benefits e-commerce players such as Verkkokauppa.com. At the same time, risks related to the overall economic outlook and declining purchasing power have increased. Due to the low and scalable cost base we expect the company’s profitability to improve together with revenue growth. However, we see that better profitability improvement stems from higher gross margin levels.

“BUY” with TP of EUR 6.3 intact
We have slightly increased our estimates and expect sales in 20E-21E to grow by ~7 percent and ~4 percent, respectively. We also expect profitability to improve and adj. EBIT margin of 3.2-3.3 percent in 20E-21E. We value Verkkokauppa.com by using our scenario analysis which indicates a fair value of EUR 6.3. On our estimates, Verkkokauppa.com trades at 20E-21E EV/EBIT multiple of 10.9x and 10.7x, which translates into ~60 percent discount compared to the peers. 20E-21E EV/Sales multiple is ~30 percent below peers. We keep our rating “BUY” with TP of EUR 6.3.

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Suominen - CMD notes; wiping trends are strong

03.09.2020 - 09.25 | Company update

Suominen hosted a virtual CMD yesterday. Although there were no major updates the event nevertheless added some color on recent trends. Our TP remains EUR 5.5, rating BUY.

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Volumes are up globally due to cleaning and disinfection

The pandemic has lifted volumes in all markets and Suominen expects elevated demand to persist at least for the next few months. Permanently higher demand is likely within cleaning and disinfection products. Suominen estimates it has an above 15% wiping market share in Europe and is thus the leading player. All segments have enjoyed strong demand, household wiping especially so. Americas’ development has been similar and stores in the US still often have trouble shelving enough household cleaning products. Nielsen Homescan estimates 79% of US households now consider disinfecting wipes a staple item (vs 50% prior to the outbreak). Certain interesting consumer behavior anecdotes were discussed e.g. how Uber riders can now check before boarding whether the ride will feature Clorox disinfecting wipes. Luckily the new assets in Bethune and Green Bay were ready to meet surging demand. Indeed, the plant in Bethune was able to finally reach performance targets. In general, Suominen aims to grow with its current major customers and we see the company well-positioned to capture above market growth (thanks to competitive product portfolio), according to the long-term financial targets updated previously this year. Margins should stay relatively high in the short-term and Suominen might even be able to defend its nonwovens pricing, despite lower raw materials prices, as high wiping demand continues to persist together with the pandemic.

Our estimates remain unchanged for now

The CMD did not lead us to revise our estimates at this point. We expect some softening in gross margin and thus in EBITDA following the exceptionally strong Q2 (Suominen posted a 14.7% EBITDA margin, compared to the above 12% long-term target).

Further improvement not very easy but multiples are low

2020 will be a new record year for Suominen in terms of financial performance and in our view further gain in EBITDA next year can prove tricky. However, we continue to view current valuation attractive (EV/EBITDA is ca. 5.5x on our estimates for this year and next). We retain our EUR 5.5 TP and BUY rating.

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Next Games - Showing some more positive signs

31.08.2020 - 09.00 | Company update

Next Games reported better results than we had expected and clearly better profitability, which effectively halted cash burn. The Stranger Things and Blade Runner Rogue games are set for scaled launch in the year-end or later and growth prospects in 2021 remain largely unchanged.

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Profitability clearly above expectations
Next Games reported better H1 results than we had expected. Revenue amounted to EUR 14.4m (Evli 13.8m) and the adj. operating profit to EUR 0.1m (Evli -2.4m). NML performed above our expectations due to ARPDAU improvements while Our World gross bookings continued to decline as DAU figures fell clearly, although the ARPDAU continued to improve. Our World was affected by COVID-19 restrictions on movement. With the improved profitability operating cash flow turned positive and the cash position excluding debt repayment remained effectively unchanged from the end of 2019.

Scaled new game launches set for the year-end
Next Games has clearly reevaluated its publishing strategy since the launch of Our World and new games will be brought to market and scaled over a longer time period. With Stranger Things expected to be launched in Q4/20 and Blade Runner Rogue still seeing major updates the impact of new games on 2020 revenue will likely be very limited and Next Games quite expectedly dropped its revenue guidance. Publishing operations EBITDA is expected to grow clearly in 2020 following lower marketing costs. 2021 figures are highly dependent on the new games to be launched and visibility as such is extremely low. With a larger share of employees working on live games profitability should improve but marketing costs should still limit near-term profitability potential.

SELL with a target price of EUR 1.2 (0.9)
The improved profitability and resulting halt to cash burn provide needed support for the company’s financial position. With the uncertainty from the dependency on new games, valuation in our view is still not justifiable. We adjust our target price to EUR 1.2 (0.9) and retain our SELL-rating.

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Fellow Finance - Uncertainty in volume recovery

31.08.2020 - 08.15 | Company update

Fellow Finance’s H1 figures were somewhat below our expectations and EBIT barely fell in the red. Volume recovery prospects in 2020 appear rather meager and growth ambitions should pick up during H2 to put things back on track in 2021. We retain our HOLD-rating and TP of EUR 2.5.

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EBIT barely in the red
Fellow Finance reported H1 figures somewhat below our expectations. Revenue amounted to EUR 5.8m (Evli 6.3m), declining 20% y/y, and EBIT to EUR -0.1m (Evli 0.3m). Facilitated loan volumes and commissions income declined around 37% y/y respectively, while increases in interest yield income mitigated some of the revenue impact. The uncertainty caused by the coronavirus was clearly visible in loan volumes after March, dropping average volume levels to approx. EUR 9m per month during 4-6/2020 compared with approx. EUR 14.5m during 1-3/2020.

2020 to be a challenging year
Investor’s demand has according to Fellow Finance seen recovery in recent months. The temporary regulation on maximum interest rates on consumer loans in Finland, valid during 1.7-31.12.2020, should have a negligible impact on volumes as Fellow Finance is compensating investors with the difference to the actual interest rate but will result in some additional costs during H2. We currently expect loan volumes to rebound to an EUR 11m per month average level in Q4. Although possible, with the current more challenging environment we do not see Fellow Finance achieving the pre-corona volume levels during 2020. We still expect notable improvements in 2021, assuming an ease in temporary regulations and renewed focus on growth drivers.

HOLD with a target price of EUR 2.5
Our estimates have been slightly lowered post-H1 given the below expectations figures and continued dim outlook for volume recovery. Near-term multiples on our estimates remain unattractive but longer-term growth potential still remains. We retain our HOLD-rating and target price of EUR 2.5.

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Endomines - Funding still a key issue

31.08.2020 - 07.30 | Company update

Endomines commenced gold concentrate sales at its Friday mine but COVID-19 related challenges have pushed back ramp up to design capacity further. The attractive gold price level unfortunately remains overshadowed by cash burn and lack of more permanent financing solutions. We retain our SELL-rating with a target price of SEK 5.5.

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Sales commenced but head grades still low
Endomines Q2 results were slightly below our estimates, with revenue of SEK 7.5m (Evli 9.0m), EBITDA of SEK -17.5m (Evli -20.6m) and EBIT of SEK -27.7m (Evli -24.5m). The first concentrate sales at the Friday mine were made, but with pre-production development material being milled head grades were low and with the still low capacity revenue was not yet significant. COVID-19 related challenges to supply chains and recruitment have further pushed back the ramp up timetable of the processing facility and design capacity will unlikely be reached in 2020.

Friday ramp-up delayed due to COVID-19
We have clearly lowered our 2020 estimates post-Q2 following the ramp-up delays and update on the stockpiled pre-production development material. We expect 80% of design capacity to have been reached in Q4 and atypical head grades throughout the year due to stockpiled development material. We now expect revenue of SEK 41.0m (prev. 77.1m) and EBITDA of SEK -68.9m (prev. -38.3m). Endomines reported that plans are being made for a possible re-opening of Pampalo given the current gold price, which in our view could provide a production boost somewhere towards H1/21 if initiated.

SELL with a target price of SEK 5.5
Despite production and sales having recommenced, the unfortunate side of the Q2 report was the cash burn rate, with liquid assets again largely depleted and some exploration activities having been put on hold. Gold price levels are clearly attractive but with the expected cash burn rate during H2/20 and so far lack of more permanent financing solutions risks are still substantial. We retain our TP of SEK 5.5 and SELL-rating.

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Next Games - Profitability surpassed expectations

28.08.2020 - 09.30 | Earnings Flash

Next Games' net sales in H1 amounted to EUR 14.4m, slightly above our estimate (EUR 13.8m Evli). Gross bookings amounted to EUR 14.2m (Evli EUR 13.8m). The adj. EBIT was clearly better than expected at EUR 0.1m (EUR -2.4m Evli).

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  • Net sales in H1 were EUR 14.4m (EUR 19.2m in H1/19), slightly above our estimate (EUR 13.8m Evli). Net sales in H1 declined 25% y/y. Compared to our estimates, revenue was better than expected due to better than anticipated performance of No Man’s Land.
  • The adj. operating profit in H1 amounted to EUR -0.1m (EUR -1.8m in H1/19), clearly better than we had expected (EUR -2.4m Evli). The EBITDA of publishing operations in H1 amounted to EUR 3.4m. Research and development expenditure amounted to EUR 3.3m.
  • EBIT amounted to EUR -1.6m (H1/19: -3.5m), clearly above our estimate of EUR -4.0m.
  • TWD: NML (Q1/Q2) - DAU 162k/158k (225k/190k), MAU 483k/463k (669k/540k), ARPDAU EUR 0.27/0.28 (0.22/0.22).
  • TWD: OW (Q1/Q2)- DAU 83k/70k (211k/155k), MAU 309k/246k (982k/602k), ARPDAU EUR 0.50/0.51 (0.29/0.37).
  • Games in development: Blade Runner Rogue continues in development, with the rest of the major updates planned for this year. The Stranger Things game is planned to be brought to the market in stages during Q4/20.
  • Outlook updated: Revenue from already published titles expected to continue on flat or declining trend. Publishing operations EBITDA expected to improve clearly in 2020 compared with 2019. Next Games expects to start scaling 1-2 games during 2020.

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Fellow Finance - Somewhat weaker than expected

28.08.2020 - 09.00 | Earnings Flash

Fellow Finance’s H1/2020 results were somewhat weaker than expected, with revenue of EUR 5.8m (Evli EUR 6.3m) and an adj. EBIT of EUR -0.1m (Evli EUR 0.3m). The adj. EPS was below our estimates at EUR -0.10 (Evli EUR -0.05). Coronavirus uncertainty and temporary regulations affected facilitated loan volumes, down 36.8% in H1/20 compared with H1/19.

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  • Revenue in H1 amounted to EUR 5.8m (EUR 7.2m in H1/19), below our estimates (Evli EUR 6.3m). Revenue declined 19.8% in H1. Compared with H1/19 commission fees declined by 38% and interest yields increased by 31%.
  • Fellow Finance facilitated loans during H1 for a total of EUR 69m (EUR 109.3m in H1/19), a decrease of 36.8%. Loan volumes were affected by uncertainty caused by the coronavirus pandemic, which interrupted new investments, along with temporary regulations in Finland and Poland, which limited loan intermediation possibilities.
  • The adj. EBIT in H1 amounted to EUR -0.1m (EUR 1.4m in H1/19), below our estimates (Evli EUR 0.3m) driven by the lower than expected revenue.
  • The adj. EPS in H1 amounted to EUR -0.10 per share (EUR 0.07 in H1/19), below our estimate of EUR -0.05.
  • Guidance: Fellow Finance withdrew its guidance in March and did not reinstate a guidance in conjunction with the H1 report.
  • Repayment levels of business and consumer loans did not face any significant deterioration despite the challenging environment.
  • Business financing volumes grew 15% compared to H1/19 despite the environment and tightened credit approval criteria.

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Endomines - First production figures in

27.08.2020 - 10.00 | Earnings Flash

Endomines’ gold production amounted to 326.1oz. Head grades were at a low level of 2.9g/t due to the milling of pre-production development material. Near design capacity at Friday is now sought to be reached in Q4, with the COVID-19 pandemic having caused delays. Q2 revenue amounted to SEK 7.5m (Evli 9.0m) and EBITDA to SEK -17.5m (Evli -20.6m).

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  • Endomines made its first shipments of gold concentrate from the Friday mine during Q2.
  • Revenue* in Q2 amounted to SEK 7.5m, with our estimates at SEK 9.0m. Gold production amounted to 326.1oz, with a head grade of 2.9g/t. Gold concentrate was produced from pre-production development material, thus resulting in low head grades.
  • EBITDA* in Q2 was at SEK -17.5m, slightly above our estimate of SEK -20.6m.
    *Figures not reported, derived from Q1-H1 figures
  • At the processing facility at Friday Endomines was able to operate at an average rate of 41.1 tonnes per day. Ramp up to design capacity (3,445 tonnes per month) continued. The COVID-19 pandemic has continued to severely impact production ramp-up due to supply chain disruptions and slowdowns in hiring. Endomines now expects that near design capacity could be reached towards Q4 (previously expected in Q2).
  • Endomines did not give any numeric production guidance for 2020.
  • Endomines sees interest in investing in the decline at Pampalo at current all-time high gold prices.
  • Liquid assets amounted to SEK 3.4m at the end of the quarter.

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Next Games - Two-fold implications of the pandemic

24.08.2020 - 09.15 | Preview

Next Games reports H1 results on August 28th. We expect the COVID-19 restrictions to have supported gaming in general but had an adverse impact on the location based Our World game. The limited news on games in development raises some concerns for the 2020 outlook.

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Expect to see two-fold impact of the pandemic
Next Games will report H1 results on August 28th. We expect the outbreak of the coronavirus pandemic to have had a two-fold effect on current live games. The imposed restrictions on movement and self-isolation should have had an adverse effect on the location based Our World game and Next Games did launch the Free Roam feature to mitigate some of the impact. No Man’s Land should have continued to perform seemingly well, with the restrictions to certain activities having freed up more time for other activities such as gaming. We expect revenue of EUR 13.8m, a decline of 28% from the stronger comparison period, and an adj. EBIT of EUR -2.4m, with positive publishing operations profitability.

Limited news flow on games in development
News flow on games in development has been essentially non-existent post H2/2019. Blade Runner Rogue is running on app stores, but retention issues previously saw the game being moved back to production phase. The Stranger Things -game was in early access earlier on but no further news has been given. The pandemic should not have significantly affected development progress, with employees having rapidly shifted to remote working. Next Games expects modest revenue growth in 2020 assuming one or two games are published in 2020. We see some risks in achieving the outlook given the news flow and expect the H1 report to shed some much-needed light on the progress.

SELL (HOLD) with a target price of EUR 0.9 (0.84)
Valuation continues to be clearly below peers as is profitability. The restrictions due to the pandemic will have aided the gaming sector and peer multiples have in the past months been on the rise. We adjust our TP to EUR 0.9 (0.84) but lower our rating to SELL (HOLD).

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Cibus Nordic - Something more to chew over

21.08.2020 - 09.15 | Company update

Cibus’ portfolio remains unaffected by the pandemic and additional acquisitions are imminent despite already busy H1’20. Our TP is now SEK 160 (150) per share, rating BUY.

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Certain exceptional transactions burdened Q2 bottom line

Cibus was largely immune to the pandemic (shared certain small Finnish tenants’ troubles to the tune of EUR 0.2m). Property figures were as expected with rental income at EUR 16.4m vs our EUR 16.2m estimate. Property expenses remained in check and so net rental income amounted to EUR 15.1m i.e. same as our estimate. Administration costs were elevated by some EUR 0.5m due to bond transactions as well as the restructuring of Finnish books. The EUR 13.6m in operating income thus fell short of our EUR 14.2m estimate. Net financial costs were driven high, to EUR 5.8m, by a one-off EUR 2.9m item attributable to bond redemption premiums and arrangement fees. Net operating income was thus EUR 7.8m vs our EUR 9.9m estimate.

Both existing portfolio and prospects basically unchanged

The daily-goods property market remains stable and the pandemic hasn’t discernibly altered deal flow. This means Cibus is in a strong position to add to its property mass through smaller portfolio acquisitions and thus scale the current organization. Yields are still attractive as Cibus can buy assets at some 100-150bps pick-up relative to its own book valuation. In addition to the EUR 180m Swedish entry, Cibus is well ahead of its annual EUR 50m acquisition target since Finnish purchases total over EUR 70m YTD. With EUR 85m in cash and long-term financing in place further additions might well happen in H2’20. Cibus is also instituting additional shareholder-friendly effects in the near term, namely the transitioning to monthly dividend payments as well as switching to the Nasdaq Stockholm main list.

We see scope for further valuation rerating

In our opinion some tightening in valuation relative to the wider Nordic property sector is warranted since the pandemic has very limited direct bearing on Cibus. The situation is different for the bulk of commercial real estate e.g. offices. Cibus’ yield spread relative to other listed Nordic entities has indeed tightened a bit recently, however in our view there’s still room to go with Cibus yielding ca. 5% vs some 4% for a typical Nordic portfolio. Our TP is now SEK 160 (150) per share. We retain our BUY rating.

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Cibus Nordic - Temporarily elevated expenses

20.08.2020 - 09.30 | Earnings Flash

Cibus’ portfolio continued to perform according to expectations while transactions and financing activities drove central administration expenses and especially net financial costs exceptionally high.

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  • Cibus’ Q2 rental income was EUR 16.4m while we estimated EUR 16.2m.
  • Net rental income (i.e. after property expenses) amounted to EUR 15.1m, compared to our EUR 15.1m estimate.
  • Operating income (after central administration expenses) was EUR 13.6m vs our EUR 14.2m estimate.
  • Net operating income (after net financial costs) stood at EUR 7.8m vs our EUR 9.9m estimate.
  • Annual net rental income capacity is now EUR 65.1m (previously EUR 60.6m).
  • The portfolio was valued at EUR 1,124m and thus EPRA NAV amounted to EUR 11.8 (11.6) per share.
  • Net LTV ratio was 60.5% (58.1%).
  • Occupancy rate was measured at 95.2% (94.8%).
  • WAULT remained at 5.5 years at the end of Q2.

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Pihlajalinna - Focus on the tender offer

17.08.2020 - 09.20 | Company update

Pihlajalinna’s Q2 result was close to expectations. Revenue decreased by 11.6% y/y and was EUR 114.7m while adj. EBIT totaled EUR 0.6m. The tender offer by Mehiläinen is being under review of the FCCA and if approved, the process is expected to be completed during Q3. We keep our rating “HOLD” with TP of EUR 16.0.

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The pandemic hampered especially non-urgent healthcare

Pihlajalinna’s April-June revenue of EUR 114.7m (-11.6% y/y) was slightly above our expectation of EUR 112.1m. Adj. EBITDA was EUR 9.0m vs. our EUR 9.1m and adj. EBIT was EUR 0.6m vs. our EUR 0.2m. Complete outsourcings and other fixed priced invoicing supported the company throughout Q2 (profitability of these remains relatively stable despite of the demand situation). The situation didn’t also have significant impacts on the demand of housing services for elderly, recruitment services, public surgical operations or fertility treatments. Customer flows and demand decreased especially in private clinics and dental clinics. Revenue of Forever-fitness centers declined by over 80 percent y/y, resulting from the temporarily closure of the centers.

Releasing pent-up demand

According to the company, the biggest drop in demand is now behind and as the pent-up demand has started to release, the customer flows in private clinics, occupational healthcare services and dental care services have recovered relatively well and the demand is closer to a normal situation. As the restrictions impacted the most on the demand of non-urgent healthcare services, there are bottlenecks in the treatment queues especially on the public side. This could potentially further increase the customer flows of the private sector. However, the increasing number of new coronavirus infections is indicating a new wave, which increases uncertainties and makes the visibility of H2 blurry.

“HOLD” with TP of EUR 16.0

The tender offer by Mehiläinen is currently being under review of the FCCA (phase two investigation). The deadline for the investigation is 27th of August (plus possible extension period). Based on the current information, if the tender offer is approved, the process is expected to be completed during Q3. We have only made minor adjustment to our estimates after the Q2 result. We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m. We keep our TP at the tender offer price of EUR 16.0 and retain our rating “HOLD”.

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Gofore - Steady as she goes

17.08.2020 - 08.45 | Company update

Gofore’s H1 report did not provide any larger surprises. With net sales pre-announced at EUR 37.4m adj. EBITA of EUR 5.8m was quite in line with our estimates (Evli EUR 5.5m). The large share of public sector clients (73.5% of H1 net sales) is proving beneficial under these circumstances and the direct impact of COVID-19 has been rather limited. We retain our HOLD-rating with a TP of EUR 8.6 (8.4).

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No surprises in the H1 results

Gofore’s H1 results brought no larger surprises, as net sales had been pre-announced at 37.4m the adj. EBITA was quite in line with our estimates at EUR 5.8m (Evli 5.5m). Relative profitability was as expected weaker in the second quarter compared to the first quarter but saw no major direct negative impact of the coronavirus pandemic. Demand in the public sector clientele, representing 73.5% of net sales in H1, saw demand remaining steady while the private sector clientele saw some delays in development work and cancellations of projects.

Acquisition seals growth prospects

Our estimates remain largely intact as our marginally lowered expectations for H2 are offset by the slight profitability beat in H1. We expect 2020 net sales of EUR 75.1m (co’s guidance EUR 70-76m) and an adj. EBITA of EUR 10.0m. Our profitability estimates are more on the cautionary side given H1 profitability but in our view reflects the company guidance and P&L changes from the Qentinel Finland acquisition. In our estimates for net sales in the second half of the year we currently expect similar organic growth as in H1 along with the expected EUR 4m M&A impact. In 2021 we see Gofore set for solid earnings growth with help of the large inorganic growth.

HOLD with a target price of EUR 8.6 (8.4)

With only minor estimates revisions post-H1 we fine-tune our target price to EUR 8.6 (8.4), valuing Gofore at ~17.0x 2020e adj. P/E. Demand uncertainty is at elevated levels due to the pandemic but resilience has so far been provided by the large share of public sector clients. Our HOLD-rating remains intact.

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Marimekko - First wave survived

14.08.2020 - 09.40 | Company update

Considering the circumstances, Marimekko delivered relatively good Q2 result. Net sales decreased by 20% y/y and amounted EUR 23.3m vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT clearly beat expectations and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. We keep our rating “HOLD” with TP of EUR 32 (24)

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Relatively good result, considering the circumstances
Marimekko’s Q2 net sales were down by 20% y/y and totaled EUR 23.3m (EUR 18.3m/19.8m Evli/cons). Especially retail sales in Finland, Scandinavia and North America faced headwind amid the pandemic but also wholesale sales in the APAC region declined. At the same time, licensing income in the APAC region boosted sales. Adj. EBIT clearly beat estimates and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Profitability was weighed down by lower net sales and declined relative sales margin (sales margin was negatively impacted by increased logistics costs and bigger discounts). In the early stage of the pandemic situation, the company implemented cost saving measures resulting in decreased fixed costs in Q2. Guidance for 20E was not given.

Sales and earnings depending on the pandemic situation
Even though the Q2 result beat the expectations, the uncertainties hover over the H2’20. Despite of the strong online sales growth (more precise information not disclosed), it is vital especially for the retail stores to remain open. In the case of new infection waves, we expect the customers to become even more price sensitive and cautious with their purchases, impacting negatively on sales. This could also have an impact on the partners’ behavior. However, we expect the mentality of “support your local” among the Finnish consumers to continue, supporting domestic sales together with nonrecurring promotional deliveries of which majority will take place in H2’20E. Marimekko is also planning to reorganize its operations and initiates cooperation negotiations. The aim is to seek annual cost savings of approx. EUR 1.5m.

“HOLD” with TP of EUR 32.0 (24.0)
After the Q2 result we have increased our 20E revenue estimate by ~6% (EUR 116m) and our adj. EBIT estimate by ~27% (EUR 13.7m). We have also slightly increased our 21E-22E estimates. However, we note that there are significant uncertainties not only with our 20E estimates but also with our 21E estimates. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 18.1x and 13.5x, which translates into a clear discount compared to the luxury peers. We keep our rating “HOLD” with TP of EUR 32.0 (24.0).

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Gofore - Profitability slightly above estimates

14.08.2020 - 09.30 | Earnings Flash

Gofore’s adj. EBITA in H1 was slightly better than we had expected, at EUR 5.8m (Evli 5.5m). Revenue amounted to EUR 37.4m (pre-announced). Little direct impact of the coronavirus pandemic on the public sector client segment so far, private sector more affected.

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  • Gofore’s H1/20 net sales amounted to EUR 37.4m (pre-announced), with sales growth of 11.7% compared to H1/19 figures. Growth was driven by organic growth and the acquisitions of Silver Planet and Mangodesign.
  • Adj. EBITA in H1 amounted to EUR 5.8m, slightly above our estimates (Evli EUR 5.5m), at a margin of 15.5%. EBIT amounted to EUR 4.0m (Evli EUR 3.7m), at a 10.8% EBIT-margin.
  • The coronavirus pandemic has had little direct impact on the public sector client segment so far, in the private sector some cancellations of projects and delays in development work have been seen.
  • Guidance (upd. Aug 10th): Gofore's net sales in 2020 are expected to be EUR 70-76m and the adjusted EBITA will grow compared to 2019.
  • The number of personnel at the end of the period was 610 (H1/19: 559).

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Solteq - Actions taken yielding results

14.08.2020 - 09.00 | Company update

Solteq reported clearly better than expected profitability figures following cost reductions, with comp. EBIT at EUR 1.5m (Evli 0.5m). Possible demand thinness remains a concern but with the lower cost base we raise our 2021-22 comp. EBIT estimates by some 30% on average. We adjust our TP to EUR 1.65 (1.15) and our rating to BUY (HOLD).

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Profitability clearly beat our estimates
Solteq reported solid Q2 results and profitability was clearly better than we had expected. Revenue grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m) with both segments contributing nearly equally. The comp. EBIT amounted to EUR 1.5m, clearly above our estimates (Evli EUR 0.5m). The earnings improvement was attributable to previously taken streamlining actions and to some extent reduced travel expenses due to COVID-19. Solteq also reinstated a guidance for 2020, expecting comp. EBIT to grow significantly. The operating cash flow was also strong, at EUR 5.3m in H1 (2019: EUR 4.1m).

Coming year profitability estimates up by quite a bit
We have made larger estimates revisions post Q2, now expecting 2020 revenue of EUR 60.2m (prev 58.9m) and comp. EBIT of EUR 4.8m (prev. 2.4m). We have also raised our 2021-2022 comp. EBIT estimates by some 30% on average. The impact of the coronavirus has so far been limited and sales growth has been good during H1 following good earlier order intake. Our main concerns going forward relate to possible thinness in demand and as such expect lower relative growth figures. Solteq has seen good demand in for instance the energy sector, while areas more affected by the pandemic, such as the travel, restaurant and maritime sectors, saw lower sales in Q2.

BUY (HOLD) with a TP of EUR 1.65 (1.15)
Solteq has been burdened by high leverage and as such low earnings, which to a large extent will be reversed by the improved profitability and improved cash flows will reduce financial risk. With our revised estimates we adjust our TP to EUR 1.65 (1.15), implying a 2020e P/E of 16.5x. We adjust our rating to BUY (HOLD).

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Pihlajalinna - No bigger surprises with Q2 result

14.08.2020 - 08.45 | Earnings Flash

Pihlajalinna’s Q2 result was somewhat in line with our expectations. Q2 revenue amounted to EUR 114.7m vs. EUR 112.1m/119.1m Evli/cons, while adj. EBIT landed at EUR 0.6m vs. EUR 0.2m/1.8m Evli/cons estimates. EPS was EUR -0.03 vs. our EUR -0.03.

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  • Q2 revenue was EUR 114.7m vs. EUR 112.1m/119.1m Evli/cons estimates. Revenue declined by 11.6% y/y.
  • Q2 adj. EBITDA was EUR 9.0m (7.9% margin) vs. EUR 9.1m/10.3m Evli/cons estimates.
  • Q2 adj. EBIT was EUR 0.6m (0.5% margin) vs. EUR 0.2m/1.8m Evli/cons estimates.
  • Q2 EPS was EUR -0.03 vs. EUR -0.03/0.02 Evli/cons.
  • According the company, the pandemic and restrictions reduced customer flows the most in fitness centers, private clinics and dental clinics but over half of the business remained stable during Q2, despite of the situation.
  • The company didn’t provide a guidance for 20E at this point, due to the weak visibility caused by the virus.

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Aspo - Navigation is still challenging

13.08.2020 - 09.25 | Company update

Aspo Q2 was stronger than expected thanks to Telko, but the report and comments painted a cautious short-term picture. Our TP remains EUR 6.0, retain HOLD rating.

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Some beacons of light but still surrounded by thick fog

ESL’s top line declined by 23% y/y and at EUR 32.9m was clearly below our EUR 40.1m estimate. Q2 EBIT, at EUR 0.6m, thus didn’t meet our EUR 1.6m estimate. Steel industry cargo volumes fell steep and energy industry activity wasn’t much better. Smaller vessels continued to perform quite well but many larger ones operated in weak spot markets. ESL managed to shave fixed costs by EUR 0.9m and Aspo says cost measures will be fully realized in Q3, however Q3 outlook is not bright as steel industry volumes will be low with rebound now expected for Q4. Meanwhile Telko posted EUR 4.2m EBIT (vs our EUR 1.1m estimate), a strong show given that revenue declined by 26% y/y to EUR 59.5m (vs our EUR 63.1m estimate). Telko’s performance is clearly on an improving trend thanks to efforts addressing e.g. working capital efficiency. It however seems Q2 EBIT margin was exceptionally high and current outlook is challenging especially in Ukraine and Russia. Leipurin Q2 revenue fell by 17% y/y and the EUR 0.3m EBIT didn’t meet our EUR 0.6m estimate as certain machinery deliveries bound for Russia were postponed to H2.

We cut estimates due to cautious market comments

Aspo’s H1 figures already reflected the pandemic shock yet Q3 remains challenging especially for ESL. We now expect ESL EBIT at EUR 0.4m and EUR 2.9m respectively for Q3 and Q4. In our view Aspo’s unofficial soft guidance for Telko FY ’20 (flat y/y absolute profitability i.e. some EUR 8m) seems a bit conservative given the EUR 6.6m accumulated already in H1. We expect Telko Q3 EBIT at EUR 2.3m. We cut our H2 EBIT estimate all in all by EUR 4.0m to EUR 7.2m, reflecting Aspo’s cautious comments.

Strong rebound remains a possibility yet not imminent

It’s clear this year will be quite soft figurewise with ESL only beginning to rebound in Q4. There’s thus clear upside relative to long-term estimates, yet in our view given the prolonged pandemic uncertainty it takes a lot of conviction to rely on that outlook. In terms of SOTP there’s potential with respect to the ’19 and ’20 average, however that approach relies on Telko’s FY ’20 improvement. Our TP remains EUR 6, rating HOLD.

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Marimekko - Q2 result better than anticipated

13.08.2020 - 09.00 | Earnings Flash

Marimekko’s Q2 result beat the consensus expectations. Net sales were EUR 23.3m (-20% y/y) vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT was clearly above estimates at EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20E was not given at this point.

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  • Finland: revenue was EUR 11.4m vs. EUR 10.4m Evli view. Revenue decreased by 32% (retail sales -41% y/y).
  • International: revenue declined by 3% y/y and was EUR 11.9m vs. EUR 7.9m Evli view. Retail sales declined especially in North America and Scandinavia. Wholesale sales decreased especially in the APAC region. On the other hand, increased licensing income in the Asia-Pacific region boosted sales.
  • Q2 adj. EBIT was EUR 2.7m (11.4% margin) vs. EUR 0.6m/0.5m (3.2%/2.7% margin) Evli/cons. Decreased net sales and weaker relative sales margin had a negative impact on profitability. On the other hand, fixed costs decreased significantly, resulting from the saving program.
  • Q2 EPS was EUR 0.27 vs. EUR 0.04/0.03 Evli/cons.
  • Marimekko is also planning to reorganize its operations and initiates cooperation procedure as the company seeks to achieve annual costs savings of approx. EUR 1.5m.
  • The company expects the coronavirus to have a significant negative impact on net sales and profitability in 2020 but guidance for ’20 was not given.

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Suominen - Exceptional performance

13.08.2020 - 09.00 | Company update

Suominen’s Q2 was way above our estimates. The major question now is where gross margin settles as the dance between nonwovens and raw materials prices plays out. We have upgraded our estimates, our new TP is EUR 5.50 (4.75) and we retain our BUY rating as multiples remain low.

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Q2 performance was in our view exceptionally strong

Suominen posted EUR 122.2m in Q2 revenue (up 18% y/y and compared to our EUR 115.0m estimate), a record high despite lower nonwovens prices (reflecting soft raw materials) as volumes grew considerably due to high wiping demand. Both Americas and Europe did brisk volumes and posted revenues respectively at EUR 77.2m (up 19% y/y) and EUR 45.0m (up 16% y/y). Gross margin also increased almost another 400bps q/q to 16.0%. We note this is a record figure (vs e.g. 14.7% GM back in Q3’14) and likely not sustainable long-term. Record revenue and gross margin led to EUR 19.5m gross profit vs our EUR 14.4m estimate. SG&A and R&D remained flat at EUR 7.8m and thus the EUR 12.4m EBIT trounced our EUR 6.8m estimate.

We expect some softening in gross margin going forward

Suominen’s H1 was unexpectedly strong as improving product mix, production efficiency and low raw materials prices led to big margin gains. The pandemic also helped business as demand for wipes increased and Suominen was able to meet the challenge. However, production volumes will be lower in H2 due to scheduled maintenance stoppages at several plants. We nevertheless continue to see the demand and volume outlook strong since the pandemic is unlikely to fade away soon. With respect to profitability we expect the gross margin to have topped out. We don’t expect significant downward correction in the short-term as nonwovens and raw materials prices are in practice highly correlated. Given the current price data we expect Q3 gross margin at 15% and Q3 EBIT thus at EUR 9.8m.

Multiples still quite reasonable on our updated estimates

Suominen also announced an EUR 8m investment in Cressa, Italy. The production line upgrade will enhance capacity and seems a straightforward measure to address growing demand. All in all, we see further upside potential despite sharp rerating this year. On our updated estimates Suominen now trades slightly below 6x EV/EBITDA FY ’20. Our new TP is EUR 5.50 (4.75), rating BUY.

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Solteq - Our estimates clearly beat

13.08.2020 - 08.30 | Earnings Flash

Solteq’s revenue in Q2 grew 7.8% in comparable terms to EUR 15.1m (Evli EUR 14.6m). The comparable operating profit clearly beat our expectations at EUR 1.5m (Evli EUR 0.5m) aided by cost savings from actions taken to improve operational efficiency. Guidance reinstated: Solteq Group’s comparable operating profit in 2020 is expected to grow significantly.

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  • Net sales in Q2 were EUR 15.1m (EUR 14.7m in Q2/19), slightly above our estimates (Evli EUR 14.6m). Growth in Q2 amounted to 2.9% y/y. Comparable growth, adjusted for the divestment of the SAP ERP business, amounted to 7.8%. Growth was attributable to both segments. Approximately a fifth of sales came from outside Finland.
  • The operating profit and adjusted operating profit in Q2 amounted to EUR 1.5m (EUR 0.6m in Q2/19), clearly above our estimates (Evli EUR 0.5m). Profitability was aided by cost savings resulting from streamlining measures taken earlier this year.
  • Capitalized product development investments during H1/20 amounted to EUR 1.8m. Solteq expects product development investments in 2020 to amount to less than EUR 3.0m (2019: EUR 3.9m).
  • Solteq Digital: Comparable revenue in Q2 amounted to EUR 10.5m (Q2/19: EUR 10.4m) vs. Evli 10.3m. The comparable EBIT amounted to EUR 1.1m (Q2/19: EUR 0.5m) vs. Evli EUR 0.4m.
  • Solteq Software: Comparable revenue in Q2 amounted to EUR 4.6m (Q2/19: EUR 4.3m) vs. Evli EUR 4.3m. The comparable EBIT amounted to EUR 0.4m (Q2/19: EUR 0.0m) vs. Evli EUR 0.1m.
  • Solteq reinstated a guidance for 2020, expecting the comparable operating profit to grow significantly.

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Aspo - Major earnings beat due to Telko

12.08.2020 - 10.40 | Earnings Flash

Aspo clearly beat estimates in terms of profitability, managing to post flat EBIT despite a significant drop in revenue as Telko’s profitability proved a huge positive surprise.

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  • Aspo Q2 revenue amounted to EUR 115.6m vs EUR 130.5m/127.1m Evli/consensus estimates.
  • Q2 EBIT was EUR 4.1m, compared to the EUR 2.1m/2.0m Evli/consensus estimates. ESL and Leipurin underperformed relative to our estimates while Telko beat our EBIT estimate significantly.
  • ESL’s top line was EUR 32.9m while we expected EUR 40.1m. EBIT amounted to EUR 0.6m vs our EUR 1.6m expectation. Cargo volumes decreased to 3.0m tonnes (4.1m tonnes a year ago). Two-thirds of the volume decrease was due to steel industry and roughly one-third due to energy industry. Q3 result is expected to be weak.
  • Telko posted EUR 59.5m in Q2 revenue in comparison to our EUR 63.1m estimate. EBIT was EUR 4.2m while we had expected EUR 1.1m. Exceptional circumstances enabled highly active pricing, which temporarily increased margins. Gross margin is expected to decrease in H2 relative to Q2, but overall should improve slightly for FY ’20. Temporary cost measures will have a relatively significant impact in Q3 and FY ’20 profitability should be at the level of previous year.
  • Leipurin Q2 revenue amounted to EUR 23.2m vs our EUR 27.3m estimate. Meanwhile EBIT stood at EUR 0.3m in comparison to our EUR 0.6m expectation.
  • Other operations cost EUR 1.0m vs our EUR 1.2m estimate.
  • Aspo withdrew guidance in April and does not reinstate it for now.

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Suominen - Crushed our estimates

12.08.2020 - 09.55 | Earnings Flash

Suominen’s Q2 results wiped the table clean with our estimates.

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  • Suominen Q2 revenue was EUR 122.2m while we had estimated EUR 115.0m. Revenue thus grew 18% y/y and reached a record on a quarterly basis. Nonwovens delivery volumes increased considerably while prices decreased following lower raw material prices.
  • Gross profit stood at EUR 19.5m vs our EUR 14.4m estimate. Gross margin was therefore 16.0% compared to our 12.5% expectation. While nonwovens prices decreased lower raw material and other direct product costs more than compensated.
  • Q2 EBIT amounted to EUR 12.4m compared to our EUR 6.8m expectation. EBIT thus more than quadrupled compared to year ago.
  • In terms of guidance Suominen expects 2020 comparable operating profit to improve significantly from 2019 (no change).

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Etteplan - Still a bumpy road ahead

12.08.2020 - 09.30 | Company update

Ettplan’s timely actions to reduce costs saw EBIT remaining strong, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m) despite the organic revenue decrease of 11.3%. Challenges will continue in coming quarters but the hit from the pandemic so far appears smaller than we had feared.

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Timely cost reduction actions kept profitability strong
Etteplan reported Q2 results that were above expectations given the challenging circumstances. Revenue was in line with expectations at EUR 62.9m (EUR 63.3m/63.3m Evli/cons.), decreasing 2.2% y/y and organically 11.3% y/y. EBIT was clearly better than expected, at EUR 5.4m (Evli/cons. EUR 3.2m/3.8m). Profitability was aided by timely actions made to reduce operating costs. With operating costs declining faster than cash flow from sales, Etteplan posted an exceptionally strong operating cash flow of EUR 18.0m (Q2/19: 8.8m). The uncertainty in customer demand remains but we interpret comments by the company pointing to expectations of some recovery in the second half of the year. Etteplan reinstituted a guidance for 2020, expecting sales to light decrease slightly or remain at 2019 levels and EBIT to decrease compared to 2019.

The hit to 2020 figures not as bad as feared based on H1
With the higher than anticipated reduction in operating expenses we adjust our 2020 EBIT estimate to EUR 18.1m (prev. 14.3m), while keeping our revenue estimates largely intact. We expect 2020 revenue of EUR 258.3m for an estimated organic decline of some 7%. Our estimates assume similar capacity decreases due to temporary layoffs in Q3 as Q2 and roughly half the decrease in Q4. Visibility into the coming years is weak but we expect to see Etteplan returning to growth in 2021, as although a second wave of the pandemic may cause challenges, lessons learned during the first wave should result in a lesser strain on both Etteplan and customers.

HOLD with a target price of EUR 8.7 (8.3)
Based on our revised estimates we adjust our target price to EUR 8.7 (8.3), for a 2020e P/E of ~16x, which we currently consider fair given the elevated uncertainty. We retain our HOLD-rating.

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Etteplan - Surprisingly good profitability

11.08.2020 - 13.30 | Earnings Flash

Etteplan's net sales in Q2 amounted to EUR 62.9m, in line with our estimates and consensus (EUR 63.3m/63.3m Evli/cons.). EBIT amounted to EUR 5.4m, above our consensus estimates (EUR 3.2m/3.8m Evli/cons.). Etteplan expects 2020 revenue to decrease slightly or be at the same level as in 2019 and EBIT to decrease compared to 2019.

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  • Net sales in Q2 were EUR 62.9m (EUR 64.2m in Q2/19), in line with our and consensus estimates (EUR 63.3m/63.3m Evli/Cons.). Growth in Q2 amounted to -2.2% y/y, of which -11.3% organic growth.
  • EBIT in Q2 amounted to EUR 5.4m (EUR 5.8m in Q2/19), above our and consensus estimates (EUR 3.2m/3.8m Evli/cons.), at a margin of 8.6%.
  • EPS in Q2 amounted to EUR 0.16 (EUR 0.18 in Q2/19), above our and consensus estimates (EUR 0.09/0.09 Evli/cons.).
  • Engineering Solutions net sales in Q2 were EUR 35.9m vs. EUR 35.8m Evli. EBITA in Q2 amounted to EUR 3.7m vs. EUR 1.9m Evli. The MSI-% in Q2 was 57% compared to 57% in Q2/19.
  • Software and Embedded Solutions net sales in Q2 were EUR 15.2m vs. EUR 16.5m Evli. EBITA in Q2 amounted to EUR 1.7m vs. EUR 1.3m Evli. The MSI-% in Q2 was 52% compared to 55% in Q2/19.
  • Technical Documentation Solutions net sales in Q2 were EUR 11.6m vs. EUR 11.0m Evli. EBITA in Q2 amounted to EUR 1.0m vs. EUR 0.9m Evli. The MSI-% in Q2 was 79% compared to 75% in Q2/19.
  • Guidance given: Revenue for the full year 2020 will decrease slightly or be at the same level as in the previous year, operating profit (EBIT) will decrease compared to 2019 (prev. guidance withdrawn).

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Gofore - Sizeable acquisition boosting growth

11.08.2020 - 09.15 | Company update

Gofore acquired software testing automation specialist Qentinel Finland Oy, with some 100 employees, and specified its 2020 guidance. We now expect 2020 sales growth of 17.2% and the adj. EBITA to improve to EUR 9.8m (2019: 8.0m). We adjust our TP to EUR 8.4 (7.8), HOLD-rating intact.

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Acquisition and guidance revision
Gofore announced the acquisition of Qentinel Finland Oy, a specialist in software testing automation with roughly 100 employees and 2019 sales and EBIT of EUR 12.0m and EUR 1.7m respectively. The debt-free purchase price is EUR 8.9m and an additional purchase price has been agreed upon, expected to be EUR 1-2m, with the deal estimated to be closed September 1st. EV/EBIT multiples of ~7.0x on 2019 figures and upper range of the purchase price appear rather attractive given the high profitability, with our peer group on 2020 estimates at a median on 14.6x. Gofore specified its 2020 guidance in conjunction with the acquisition announcement, with sales expected to be in the range of EUR 70-76m (prev. grow from 2019) and adj. EBITA to grow compared with 2019. The sales impact of the acquisition on 2020 figures is estimated at EUR 4m.

Expecting good H1 figures, acquisition boosting growth
Gofore reports H1 results on August 14th. H1 sales have been pre-announced at EUR 37.4m, with the monthly figures in our view having shown little impact of the pandemic. We see slightly weaker adj. EBITA-margins in H1 compared with the solid 17.3% Q1 margins but still expect a commendable 14.7% adj. EBITA-%. We expect full-year sales and adj. EBITA of EUR 75.1m and 9.8m respectively. The acquisition should keep growth in the double-digits in 2021 assuming a continued limited COVID-19 impact.

HOLD with a target price of EUR 8.4 (7.8)
Following revisions to our estimates based on the acquisition and guidance revision we adjust our target price to EUR 8.4 (7.8), valuing Gofore at 16.5x 2020E adj. P/E, with our HOLD-rating intact.

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Pihlajalinna - Pandemic hampers non-urgent healthcare

10.08.2020 - 09.35 | Preview

Pihlajalinna reports its Q2’20E result on this week’s Friday, 14th of August. We expect the COVID-19 and the movement restrictions have continued to hamper Pihlajalinna’s business especially in April but the situation should have started to normalize. The tender offer by Mehiläinen is still being under review of the FCCA. We keep our rating “HOLD” and TP of EUR 16.0 intact.

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Expecting weak demand in non-urgent healthcare

Pihlajalinna’s operations were heavily impacted by the emergency laws that came into force in mid-March. We expect to see the most negative impacts in April as especially the demand of non-urgent healthcare and oral healthcare started rapidly to decrease in late March. The management indicated earlier in H1 that the complete outsourcings and other fixed-priced invoicing have supported the company during the unexceptional times as the profitability of these kinds of contracts normally remains stable, even during times of lower demand. The demand of housing services for the elderly and recruitment services should also remain relatively stable.

Still waiting for the FCCA’s decision

We expect the customer flows have started slowly to recover. However, we expect to see better improvement later in H2’E as the pent-up demand of social services and non-urgent healthcare should normalize after the restrictions were lifted. The visibility of H2E remains blurry and the demand is depended on the pandemic situation. The tender offer by Mehiläinen is still being under review of the FCCA and the second phase investigation should be ready by the end of August. If approved, the process is expected to be completed during Q3’20E.

"HOLD” with TP of EUR 16.0

We have only made minor adjustments to our estimates. We expect Q2’20E revenue of EUR 112.1m (-13.6% y/y) and adj. EBIT of EUR 0.2m (EUR 2.1m in Q2’19). We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 22.3m (6.7% y/y). We keep our rating “HOLD” and TP of EUR 16.0 intact.

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Scanfil - Proven resilient results

10.08.2020 - 09.15 | Company update

Scanfil’s Q2 clearly beat our estimates. The company’s active plant network management should help secure good profitability in the coming years even if the pandemic will eventually begin to hurt business more. Our TP is now EUR 6.25 (5.25); we reiterate our BUY rating.

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Communication and Energy & Automation up organically

Scanfil Q2 revenue was EUR 156m (up 9% y/y and of which two-thirds due to HASEC i.e. mostly Industrial). Communication posted a 49% revenue surge. Business jumped due to 5G networks but also e.g. camera surveillance systems. Energy & Automation grew by 15% as many accounts drove growth. Industrial top line grew by 17% mainly due to HASEC, yet also organically with e.g. KONE elevators. Medtec & Life Science was flat. Consumer Applications demand fell as the pandemic altered consumer behavior. The segment supplies e.g. TOMRA reverse vending machines and Scanfil says many accounts cut business sharply in Q2, leading to 26% y/y drop in revenue. Scanfil is however seeing signs of stabilizing demand for the segment. The EUR 10.2m in Q2 EBIT (vs our EUR 8.7m estimate) was more than satisfactory as Scanfil estimates the pandemic’s effects’ net cost was EUR 0.8m in H1. The pandemic notably elevated freight and safety costs. On the other hand, Scanfil also received state subsidies in compensation for shortened working hours.

Fundamentally strong thanks to active plant management

We make minor estimate changes, mostly reflecting latest segment updates. We see FY ’20 EBIT at EUR 40.4m. While FY guidance is likely to hold it’s early to say much about next year. However, Scanfil’s Hamburg plant closure will further help profitability going forward. Scanfil expects the decision to yield EUR 2.5m in annual cost savings since two other nearby plants are in a better position to serve the current Hamburg accounts. Scanfil also prunes its Chinese operations, having sold the Hangzhou plant (sheet metal mechanics) and thus focusing on Suzhou (electronics manufacturing and demanding integration).

In our opinion higher multiples are justified

The pandemic could begin to hurt volumes even if so far Scanfil’s overall levels have not been impacted. Scanfil however remains valued at attractive levels, ca. 6.5x EV/EBITDA and 9.0x EV/EBIT on our FY ’20 estimates. Our new TP is EUR 6.25 (5.25), rating BUY.

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Etteplan - Weaker result to be expected

07.08.2020 - 09.00 | Preview

Etteplan reports Q2 results on August 11th. The coronavirus pandemic will have had a detrimental impact on results, but we see a rapid adaption to have limited some of the earnings impact. We expect an organic revenue decline of ~9% and EBITA of EUR 4.1m. We retain our HOLD-rating with a TP of EUR 8.3 (8.0).

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Weaker Q2 but rapid adaption should limit some downside
Etteplan will report Q2 results on August 11th. Earnings uncertainty is clearly elevated due to the coronavirus pandemic, with Q1 challenges having been mainly limited to operations in China. Etteplan adapted rapidly to the situation through temporary layoffs and reducing its cost base which together with the order backlog should according to our estimates still yield a fairly decent profitability given the circumstances. We expect revenue of EUR 63.3m, representing a perceived organic growth decline of approx. 9%, and group EBITA to decline to EUR 4.1m (Q2/19: EUR 6.5m). With the loan agreements made earlier we do not see any significant risk to Etteplan’s financial position.

Uncertainty remains elevated in 2020
The development in 2020 remains shrouded by uncertainty due to the pandemic but we currently expect the biggest dent to be seen in Q3 and Q4 to also remain weaker. The Engineering Solutions service area will have some challenging times ahead while Software and Embedded Solutions should be rather resilient due to digitalization demand. Reported new order values in Q2 for some key customers indicate a double-digit decline y/y, with expectations of demand picking up towards the end of the year. Etteplan’s customer base is relatively diverse and thankfully for instance automotive and aviation, which have been hit hard by the pandemic, account for only a small share of revenue.

HOLD with a target price of EUR 8.3 (8.0)
We have made minor upwards adjustments to our 2020 estimates following an in our view somewhat improved sentiment post-Q1 and revisions based on updates on temporary layoffs. We adjust our target price to EUR 8.3 (8.0) and retain our HOLD-rating.

Open report

Scanfil - Clearly topped expectations

07.08.2020 - 08.40 | Earnings Flash

Scanfil’s Q2 clearly exceeded expectations. Revenue grew by 9% y/y and slightly more than a third of the increase was organic, the rest being attributable to the HASEC acquisition (mainly recognized in the Industrial segment).

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  • Scanfil Q2 revenue was EUR 155.6m compared to the EUR 145.4m/147.0m Evli/consensus estimates. Scanfil says organic demand growth was especially strong in Communication and Energy & Automation.
  • Communication revenue amounted to EUR 28.9m vs our EUR 20.4m estimate.
  • Consumer Applications top line was EUR 20.3m compared to our EUR 26.2m expectation. Scanfil comments the pandemic has had an adverse effect on the segment’s demand.
  • Energy & Automation revenue was EUR 32.6m while we expected EUR 29.1m.
  • Industrial posted EUR 48.5m vs our EUR 43.2m estimate.
  • Medtec & Life Science revenue was EUR 25.3m compared to EUR 26.5m estimate.
  • Scanfil Q2 EBIT amounted to EUR 10.2m vs the EUR 8.7m/9.3m Evli/consensus estimates. Operating margin was therefore 6.5% while we had expected 6.0%.
  • Scanfil guides FY ’20 revenue in the EUR 580 – 620m range and sees adjusted EBIT at EUR 38 – 42m.

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CapMan - Earnings improvement story still strong

07.08.2020 - 08.30 | Company update

CapMan’s Q2 results were better than expected on bottom-line figures. AUM growth is seen to pick up with the establishment of the NRE III (target EUR 500m) and Growth II funds (target EUR 85m). We have revised our 2020 EBIT estimate to EUR 9.4m (prev. 1.2m), with the solid 2021 earnings prospects intact.

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EBIT beat from higher investment returns
CapMan’s delivered an upbeat Q2 earnings report. Q2 EBIT of EUR 4.1m beat our expectations (Evli EUR 2.6m) following a clear recovery in investment returns. Revenue amounted to EUR 8.7m, short of our expectations (Evli EUR 10.4m) due to continued weaker Services business sales and somewhat soft management fees given no new fund closings. AUM (EUR 3.2bn) continued to stall at near previous quarter levels. AUM is seen to grow during H2 following the establishment of the NRE III and Growth II funds, which combined could bring in near EUR 600m in equity commitments. Investor demand for the new funds has according to CapMan been strong.

Solid 2021 earnings prospects despite weak 2020
We continue to expect 2020 to be somewhat of a gap-year due to the weak start but have raised our EBIT estimate to EUR 9.4m (prev. EUR 1.2m) mainly due to higher expectations for investment returns. We expect a clear increase in fee-based profitability in 2021 due to an increase in management fees from fundraising during H2/20. Investment returns are also set to pick up clearly after the challenging 2020. CapMan will re-organize its Service business (no changes to CaPS) and Scala’s private placement business will be discontinued, but the earnings impact is not seen to be notable. All in all, we see a clear improvement in 2021 and expect an EBIT of EUR 33.7m.

BUY with a target price of EUR 2.20 (1.95)
The Q2 report in our view served to prove that CapMan remains on a healthy track despite the elevated uncertainty of Q1 and with the solid earnings outlook 2021E P/E of ~11x is not particularly challenging. We retain our BUY-rating with a TP of EUR 2.20 (1.95).

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Suominen - Profitability outlook is now strong

06.08.2020 - 09.40 | Preview

Suominen reports Q2 results on Wed, Aug 12. We have slightly lowered our revenue estimates due to a currency headwind, while on the other hand we now expect gross margin to have improved modestly q/q also in Q2. Our new TP is EUR 4.75 (4.25), and thus we reiterate our BUY rating.

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Raw materials prices imply gross margin should hold high

Suominen posted a big gross margin jump in Q1 as the figure gained almost 400bps q/q to 12.1%. Improved product mix and production efficiency as well as low raw materials prices fueled the rise. Moreover, Suominen upgraded FY ’20 outlook in June by changing the wording from clear to significant improvement in comparable EBIT. The update had only a minor impact on our estimates since we changed our FY ’20 EBIT estimate from EUR 23.1m to EUR 24.0m. Perhaps more important was the fact that Suominen removed the previous disclaimer according to which estimating the result for H2 was hard due to the pandemic. It seems Suominen’s strategy is proceeding according to plan and financial performance is on a solid upward trend thanks to strong outlook for value-add end-uses such as household and workplace wipes. With respect to raw materials prices Suominen is unlikely to suffer cost inflation pressure for a while. We see the outlook for pulp prices muted, while the same is only true at best for oil-based inputs polyester and polypropylene. In fact, raw materials prices have developed so soft Suominen faces some negative pressure on nonwovens pricing. We expect gross margin further improved modestly to 12.5% in Q2, and see the figure settling on this level in the short-term.

Recent dollar weakness a (small) negative for top line

The dollar has lately declined by some 5% against the euro, the implication being a negative translation impact on US revenue. We update our estimates to reflect the headwind, which we estimate at some EUR 10m on an annual level. The overall result of our update is that we now estimate Q2 EBIT at EUR 6.8m (previously EUR 6.2m). We now see FY ’20 EBIT at EUR 24.4m.

Multiples are low while figures are on a solid trend up

Suominen trades some 6x EV/EBITDA on our estimates for this year while the multiple for next year is about 5.5x. We view these multiples attractive now that profitability is on a steep improvement path. Our TP is now EUR 4.75 (4.25), remain BUY.

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CapMan - Back to healthy profitability

06.08.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q2 amounted to EUR 8.7m, below our and consensus estimates (EUR 10.4m/10.6m Evli/cons.). Profitability was better than expected due to larger fair value changes and EBIT amounted to EUR 4.1m, above our estimates and above consensus estimates (EUR 2.6m/2.5m Evli/cons.).

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  • Revenue in Q2 was EUR 8.7m (EUR 13.4m in Q2/19), below our estimates and consensus estimates (EUR 10.4m/10.6m Evli/Cons.). Growth in Q2 amounted to -35 % y/y.
  • Operating profit in Q2 amounted to EUR 4.1m (EUR 5.8m in Q2/19), above our estimates and consensus estimates (EUR 2.6m/2.5m Evli/cons.), driven by higher than expected fair value changes.
  • EPS in Q2 amounted to EUR 0.02 (EUR 0.02 in Q2/19), above our estimates and consensus estimates (EUR 0.01/0.01 Evli/cons.).
  • Management Company business revenue in Q2 was EUR 6.5m vs. EUR 7.2m Evli. Operating profit in Q2 amounted to EUR 1.6m vs. EUR 2.0m Evli.
  • Investment business revenue in Q2 was EUR 0.0m vs. EUR 0.0m Evli. Operating profit in Q2 amounted to EUR 2.8m vs. EUR 0.1m Evli. Fair value changes amounted to EUR 3.2m (Evli EUR 0.8m)
  • Services business revenue in Q2 was EUR 2.2m vs. EUR 3.2m Evli. Operating profit in Q2 amounted to EUR 0.5m vs. EUR 1.5m Evli.
  • Capital under management by the end of Q2 was EUR 3.2bn (Q2/19: EUR 3.3bn). Real estate funds: EUR 1.9bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.03bn.
  • CapMan Growth established a new growth fund with a target size of EUR 85m, having so far raised EUR 74m.

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Detection Technology - Continued air turbulence ahead

05.08.2020 - 09.30 | Company update

Detection Technology delivered a decent Q2 operating result despite the significant drop in net sales due to the ongoing corona pandemic. Medical business is going strong, but challenging situation in aviation segment weighs on SBU and visibility into how long situation will continue is poor. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. We maintain our target price of 22 euros and BUY recommendation.

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Decent quarter considering circumstances

Given the ongoing pandemic affecting especially DT’s security business, DT delivered a decent and broadly in-line Q2 operating result despite a quite significant drop in net sales. Q2 net sales amounted to EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. Q2 EBIT was EUR 2.6m (12.3% margin) vs. EUR 1.9m/3.0m Evli/cons. R&D costs amounted to EUR 2.7m or 12.7% of net sales (Q2’19: 2.9m, 10.7%). SBU had net sales of EUR 11.2m vs. EUR 15.2m Evli estimate. SBU sales declined -42.1% y/y, mainly due the COVID-19 pandemic affecting the demand for security X-ray devices. MBU delivered net sales of EUR 9.9m which was in line with our estimate of EUR 9.8m. Net sales of MBU increased by +22.5% y/y due to continued strong demand in medical CT imaging.

Short term visibility poor with aviation segment weighing on SBU

DT continues to expect lower demand in the security segment to continue in Q3 and SBU sales to decrease in 2020. DT however sees SBU sales starting to improve towards end of the year. DT estimates airport CT standard equipment upgrades in Europe and U.S. to be postponed at least 12 months. Regarding China, it remains unclear when similar Chinese airport standardization will start and if any security infrastructure related government recovery measures will take place. The situation regarding aviation remains the biggest near-term uncertainty for DT. We estimate aviation to contribute roughly half of SBU net sales. That said, -42% drop in SBU Q2 net sales is a relatively good performance given that aviation grinded almost completely to a halt in Q2. MBU sales growth is expected to continue in H2, although product mix is likely to shift from basic CT devices to more high-end devices, which should support MBU margins further.

Maintain BUY recommendation with TP of 22 euros

Based on the report, we have trimmed our 2020E sales and EBIT estimates by 7% and 4% respectively. We expect SBU sales to decline -23,5% from last year’s highs and MBU to grow +18%, resulting in 2020E net sales to decline -10% and EBIT of 12.5 MEUR. We have increased our sales growth estimates for 2021-22E to account for postponement of CT standardization related upgrades. On our revised estimates, DT is trading at 19.8x and 13.6x EV/EBIT multiples for 20-21E, some 10-20% below our peer group now that peer multiples have rerated since DT’s Q1 report. Although 2020E will be challenging, we see that DT is well positioned to weather out the storm and its competitive position with its new products remains good. Therefore, we continue to see DT as an attractive investment story given the strong longer-term drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. We maintain our target price of 22 euros and BUY recommendation. Our target price implies EV/EBIT multiple of 16.4x on our 21E estimates, which is still ~7% below peer group.

 

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Detection Technology - Decent result despite COVID hammering net sales lower than expected

04.08.2020 - 09.30 | Earnings Flash

DT’s Q2 net sales were EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. SBU sales declined -42.1% to EUR 11.2m (EUR 15.2m our expectation) and MBU sales increased +22.5% to EUR 9.9m (EUR 9.8m our expectation). DT’s Q2 EBIT came in at EUR 2.6m vs. our estimates of EUR 1.9m (EUR 3.0m cons). DT continues to expect SBU sales to decrease and MBU sales to increase in 2020.

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  • Group level results: Q2 net sales amounted to EUR 21.1m (-23.2% y/y) vs. EUR 25m/25.3m Evli/consensus estimates. Q2 EBIT was EUR 2.6m (12.3% margin) vs. EUR 1.9m/3.0m Evli/cons. R&D costs amounted to EUR 2.7m or 12.7% of net sales (Q2’19: 2.9m, 10.7%).
  • Security and Industrial Business Unit (SBU) had net sales of EUR 11.2m vs. EUR 15.2m Evli estimate. SBU sales declined -42.1% y/y, mainly due the COVID-19 pandemic. DT continues to expect that security market will not return to growth path this year (same guidance in Q1’20).
  • Medical Business Unit (MBU) delivered net sales of EUR 9.9m which was in line with our estimate of EUR 9.8m. Net sales of MBU increased by +22.5% y/y due continued strong demand in medical CT imaging. DT expects MBU sales growth to continue in the second half driven by the demand in CT applications.
  • No change in medium-term targets; at least 10% net sales growth, EBIT margin at or above 15%.

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Talenom - Steadily through the pandemic

04.08.2020 - 09.00 | Company update

Talenom’s Q2 results fell slightly shy of expectations, with the coronavirus pandemic having had some impact on transaction-based invoicing volumes, but relative profitability remained solid. Talenom’s potential remains unchanged, which has been reflected in its share price and valuation is becoming rather stretched. We retain our HOLD-rating with a target price of EUR 8.5 (7.0).

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Minor impact from COVID-19 but profitability still strong
Talenom’s Q2 results fell slightly shy of expectations, with revenue of EUR 16.5m (EUR 17.2m Evli/cons.), affected by a decrease in transaction-based invoicing in for instance payroll services due to customer layoffs. EBIT amounted to EUR 3.6m (EUR 3.7m Evli/cons.) and relative profitability remained on par with expectations, with an EBIT-margin of 21.8%. The new small customer concept is expected to be released later on in the year and long-term potential expectations appear to be high. The impacts of the coronavirus overall have been quite in line with company expectations.

Continued growth and profitability improvement in 2020
Talenom’s guidance for 2020 (net sales EUR 64-68m, EBIT 12-EUR 14m) remains intact and should in our view not be in jeopardy unless a clearly unfavourable development in transaction-based invoicing volumes is seen during H2. We expect net sales of EUR 66.3m and EBIT of EUR 12.4m. Growth potential remains intact, with emphasis seen to be shifting towards M&A and Sweden as well as smaller customers as regional coverage in Finland limits growth. We assume a relative lower profitability of potential acquisitions to limit some margin upside in the coming years.

HOLD with a target price of EUR 8.5 (7.0)
Talenom’s share price has risen to record-high levels, with the stability of the business providing benefits under current market uncertainty and valuation levels are becoming harder to justify. We raise our target price to EUR 8.5 (7.0), valuing Talenom at ~40x 2020E P/E, which we still consider reasonable given growth potential and the defensive nature. Our rating remains HOLD.

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Talenom - Quite in line with expectations

03.08.2020 - 14.00 | Earnings Flash

Talenom's net sales in Q2 amounted to EUR 16.5m, slightly below our and consensus estimates (EUR 17.2m Evli/cons.). EBIT amounted to EUR 3.6m, in line with our and consensus estimates (EUR 3.7m Evli/cons.). Guidance remains intact, net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q2 were EUR 16.5m (EUR 14.8m in Q2/19), slightly below our and consensus estimates (EUR 17.2m Evli/Cons.). Growth in Q2 amounted to 11.8% y/y.
  • Operating profit in Q2 amounted to EUR 3.6m (EUR 3.2m in Q2/19), in line with our and consensus estimates (EUR 3.7m Evli/cons.), at a margin of 21.8%.
  • EPS in Q2 amounted to EUR 0.06 (EUR 0.05 in Q2/19), in line with our and consensus estimates (EUR 0.06/0.07 Evli/cons.).
  • Sales and relative profitability in Q2 were affected by lower transaction-based invoicing and lower relative profitability of acquired businesses.
  • New sales have continued in the upper range of company expectations but below targets set before the coronavirus pandemic. Customer business defaults during Q2 developed as expected while transaction-based invoicing has been in the lower range of company estimates.
  • Guidance intact: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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Tokmanni - Discount retail reflects the uncertain times

30.07.2020 - 09.35 | Company update

Tokmanni had a successful Q2 as sales grew by 19.2% y/y to EUR 286m. Adj. EBIT amounted to EUR 30.6m (~64% y/y). The good momentum is expected to continue throughout 20E. We keep our rating “BUY” with TP of EUR 18.4 (16.4).

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Benefiting from the lockdown

Tokmanni continued its solid growth in Q2 with sales totaling EUR 286m, growth of 19.2% y/y (LFL growth of 17.5% y/y). This also beat the revenue growth of department store and hypermarket chains (10.7%, FGTA). Revenue was driven by attractive pricing and growth was strong especially in leisure, gardening, home improvement products and food products, reflecting the situation where people are spending more time at home. At the same time, the demand in clothing was weaker. Tokmanni’s adj. gross margin was 34.5% (35.2% in Q2’19) vs. our 34.1%. The drop was due to cheaper prices and unusual structure of sales. Adj. EBIT totaled EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons.

The success story expected to continue in H2E

Supported by the broad product assortment, attractive pricing and a wide store network, Tokmanni benefited from the situation where people are spending more time at home. On the other hand, the sales structure has been different compared to the normal conditions and the weaker share of Tokmanni’s private labels weighed down adj. gross margin. As the situation is now recovering and people are likely to return back to the offices we expect somewhat normalizing growth in H2E. We expect the sales structure to move closer to normal which supports margin development. The cost control has been successful and this is expected to continue. Tokmanni has also taken precautions to secure its most important season, Christmas (import from China has a key role) and some products are already being shipped to Finland, which is earlier than normally. The company reduced its investments during Q2 but these will continue relatively normally in H2E. Capex in 20E is expected to be EUR ~15m.

“BUY” with TP of EUR 18.4 (16.4)

Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to increase from 2019. We have further increased our estimates and we expect 20E sales growth of 9.5% y/y (EUR 1034m) and adj. EBIT margin of 8.8% (EUR 90.6m). On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.7x and 14.0x, which translates into 22-25% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4 (16.4).

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Detection Technology - Challenging quarter ahead

30.07.2020 - 09.15 | Preview

Detection Technology will report Q2 earnings next Tuesday, August 4th at 9:00 EEST. DT’s share price has been lagging the market due to its exposure to aviation segment, but we see the overall investment case intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.

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Expecting declining sales and operating profit due to weakened demand in SBU

We expect Q2 net sales to decrease -9% to 25 MEUR (25,3 MEUR cons.) due to lower SBU sales affected by the pandemic. For Q2, we estimate SBU declining -21,6% as demand in security applications is lower due to COVID-19. We expect MBU growing 21% with the help of increased demand in medical CT solutions. Due to lower net sales, our Q2 EBIT estimate is 1,9 MEUR (3,0 MEUR cons), which is down -60% compared to 4,8 MEUR last year.

Focus on market outlook and situation in China

Our focus in the Q2 result will be on management’s comments on the outlook for both security and medical imaging markets, as well as hearing the latest developments in China. DT has indicated that it expects healthy demand in MBU for Q2 and H2, whereas SBU sales are expected to decrease in Q2 and FY20. Looking at other industries, we note that Chinese market has been first to recover after the pandemic resided. That said, there is still a lot of uncertainty related to aviation, which is a crucial part of DT’s security business, accounting for roughly 2/3 of DT’s net sales. DT saw positive signs in demand for medical CT solutions at the end of Q1 (after a slowdown around end of 2019), stemming from CT imaging being used to detect pulmonary changes caused by the COVID-19 virus, as well as diagnosis and treatment of patients.

DT’s share price has been lagging the market, we see investment case intact

DT’s share price is YTD -23% vs. -5% HEX25, and since mid-March +26% vs. +41% HEX25. We see this relating to SBU’s exposure to aviation segment. Although 2020e will be challenging, we see DT well positioned to weather out the storm and its competitive position with its new products remaining good, thus investment case is intact. We maintain our target price of 22 euros and BUY recommendation ahead of the Q2 result.

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Innofactor - On track despite the pandemic

29.07.2020 - 09.30 | Company update

Innofactor posted solid Q2 profitability figures, with EBITDA at EUR 2.1m (Evli 1.1m) for a 12.3% EBITDA-margin. We assume a slightly weaker H2 due to the coronavirus pandemic, but progress made supports the long-term case. Our 2020-2022 EBITDA estimates are up some 20% post-Q2. We raise our TP to EUR 1.35 (0.95) with our BUY-rating intact.

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Delivered a positive earnings surprise
Innofactor delivered a pleasant surprise in second quarter profitability figures, with EBITDA of EUR 2.1m clearly topping our estimates (Evli EUR 1.1m). Net sales grew 0.6% y/y to EUR 16.8m (Evli 16.6m). Net sales in the other Nordic countries developed somewhat unfavourably due to the coronavirus pandemic, resulting in negative EBITDA figures for their part, while Finland continued strong. The impact of the pandemic was still not as large as the company had anticipated. The order backlog continued y/y and q/q growth, up to EUR 56.9m (Q2/19: 44.2m).

Profitability development on a solid track
We have raised our 2020E EBITDA estimate to EUR 7.2m (prev. EUR 5.9m) and our 2021-2022E estimates by ~20%. We expect some margin decline in H2 compared to H1 due to the pandemic given slower sales development, although cost base reductions due to travel restrictions should ease some of the pressure. Our sales growth assumptions in 2021-2022 remain modest (avg. 3.5% p.a.) given the company target (~20% p.a.), with limited signs of more rapid pick-up in growth. Innofactor acquired the remaining ~55% of shares in Arc Technology and with the improved cash flows we expect likely further M&A activity to boost growth.

BUY with a target price of EUR 1.35 (0.95)
Innofactor’s share price has rallied some 40% since our previous update in May but on our revised estimates and peer multiples we still see upside in valuation. On our revised estimates we adjust our target price to EUR 1.35 (0.95), for an implied 2020 EV/EBITDA of 8.7x and retain our BUY-rating.

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Tokmanni - Actions taken in Q2 were successful

29.07.2020 - 09.05 | Earnings Flash

Tokmanni’s Q2 revenue increased by 19.2% (LFL growth of 17.5%) and was EUR 286m. Tokmanni’s adj. EBIT was EUR 30.6m vs. EUR 30.9m/28.5m Evli/cons. Adj. gross margin was 34.5%. The company expects strong growth in revenue and LFL revenue in 20E. Comparable EBIT margin is expected to improve on the previous year.

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  • Q2 revenue grew by 19.2% and was EUR 286m. The preliminary figures were already given earlier thus there were no surprises with the sales development. The increase in sales of leisure, gardening and home improvement products and food products was particularly strong in Q2.
  • Q2 adj. gross profit was EUR 98.6m (34.5% margin) vs. EUR 97.5m (34.1%) Evli expectation. Adj. gross margin fell from last year due to strong sales program and unusual sales structure.
  • Q2 adj. EBITDA was EUR 46.7m vs EUR 46.9m our view.
  • Q2 adj. EBIT was EUR 30.6m (10.7% margin) vs. EUR 30.9m (10.8%) our expectation and EUR 28.5m (10.0%) consensus.
  • Q2 eps was EUR 0.38 vs EUR 0.38/0.35 Evli/consensus
  • Guidance for 20E: strong growth in revenue and like-for-like revenue. Profitability (comparable EBIT margin) is expected to improve on the previous year.

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Innofactor - Continued good profitability

28.07.2020 - 09.30 | Earnings Flash

Innofactor’s Q2 results were above our expectations and profitability remained at a good level. The net sales in Q2 amounted to EUR 16.8m (Evli EUR 16.6m), while EBITDA amounted to EUR 2.1m (Evli EUR 1.1m). Guidance remains intact. The impact of the coronavirus pandemic was limited but EBITDA in Sweden, Norway and Denmark fell in the red due to lowered sales.

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  • Net sales in Q2 amounted to EUR 16.8m (EUR 16.7m in Q2/19), in line with our estimates (Evli EUR 16.6m). Net sales in Q2 grew 0.6% y/y.
  • EBITDA in Q2 was EUR 2.1m (EUR 1.1m in Q2/19), clearly above our estimates (Evli EUR 1.1m), at a margin of 12.3%. EBITDA was clearly positive in Finland but somewhat negative in the other countries due to smaller than expected net sales due to the coronavirus pandemic.
  • Operating profit in Q2 amounted to EUR 0.9m (EUR 0.2m in Q2/19), clearly above our estimates (Evli EUR 0.0m), at a margin of 5.3%.
  • Order backlog at EUR 56.9m, up 28.8% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The impact of the coronavirus pandemic on the second quarter was smaller than the company had previously expected. The pandemic lowered sales in Sweden, Norway and Denmark in the second quarter. Impact of the pandemic on Group net sales and profitability expected to be small during the rest of 2020. The company estimates a possibility that it will not achieve comparable net sales growth in Q3 as in Q1 and Q2.

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Finnair - Slow recovery ahead

27.07.2020 - 09.35 | Company update

Finnair’s April-June revenue decreased by 91% y/y (EUR 69m) while adj. EBIT totaled EUR -174m. Flights are slowly recovering in Europe and Asia but the costs related to the ramp-up will increase H2E comparable operating loss. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).

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Heavy losses during Q2
Finnair’s Q2 result was weak as expected. April-June passenger numbers were down by ~98% y/y. Revenue declined by ~91% y/y and was EUR 69m vs. EUR 54m/49m Evli/consensus. Adj. EBIT was EUR -174m vs. EUR -177m/-179m Evli/consensus. ASK decreased by ~97% y/y and PLF was 33.1% (-49.4pp). Finnair’s revenue in the second quarter was greatly supported by the cargo business, which generated more than 70% of the revenue. The company reiterated its previous guidance (20E revenue will decline significantly compared to the previous year and the comparable operating loss will be significant). Revenue guidance for Q3E was not given. However, the comparable operating loss in Q3E will be of a similar magnitude than in Q2, due to clearly reduced capacity and costs related to the ramp-up.


Slowly recovering
The historically gloomy quarter is now behind and Finnair is slowly recovering its flights as travel restrictions in many European and Asian countries are gradually being lifted. In July, the company operates approx. 25% of its normal amount of flights. The estimated level in September is approx. 50%. The current traffic plan might change based on the pandemic situation and changes in the country specific restrictions. Finnair’s cargo business has increased its importance during this time and especially on Asian long-haul routes, the profitability is supported by the cargo business thus the good development of freight supports the launch of passenger flights. The company has been able to improve its cash position due to the rights offering proceeds of approx. EUR 500m (wasn’t fully booked by the end of June) and EUR 200m instalment of the EUR 600m statutory pension premium loan which was drawn in June.


“HOLD” with TP of EUR 0.50 (0.60)
Based on the new information we have further cut our estimates. We expect 20E revenue of EUR 1497m and adj. EBIT of EUR -503m. We highlight that the visibility remains very weak and there are significant uncertainties also with our 21E-22E estimates. We keep our rating “HOLD” with TP of EUR 0.50 (0.60).

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Consti - Upgrade to BUY

27.07.2020 - 09.00 | Company update

Consti’s Q2 operating profit of EUR 2.4m was better than expected (Evli/cons. 1.8m/1.4m) and free cash flow and financial position improved clearly. The coronavirus pandemic has and will have some impact on demand in 2020 but the long-term demand situation remains favourable and the company now appears to be in good shape after recent year challenges. We upgrade our rating to BUY (HOLD) with a target price of EUR 10.0 (7.4).

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Q2 profitability better than expected
Consti’s Q2 results were better than expected, as although the revenue of EUR 69.3m came in around expectations (Evli/cons. 68.5m/70.3m), the operating profit of EUR 2.4m clearly exceeded expectations (Evli/cons. EUR 1.8m/1.4m). The order intake in the quarter was also favourable, with new orders of EUR 66.8m, and the order backlog continued on a slight upwards trend since the end of 2019. Free cash flow in the quarter (EUR 8.1m) was exceptionally strong, boosting the rolling 12-month cash conversion ratio to 133.5%. As a result, net debt excl. IFRS 16 improved to EUR 8.3m (2019: 15.3m).

Company in good shape after previous year challenges
Consti’s Q2 report was clearly positive and following measures taken during the past years and management comments the company now appears to be in good shape. We expect sales to continue to decline y/y in H2 due to stricter bidding discipline but for profitability to continue to improve as a result of the healthier order backlog. The coronavirus pandemic has and will in our view have a slight impact on the demand situation during the year, but long-term demand drivers remain intact.

BUY (HOLD) with a target price of EUR 10.0 (7.4)
We have raised our 2020 EBIT estimate by 10% and slightly raised our 2021-2022 profitability estimates. With the higher profitability as well as cash flow and net debt improvements, possible near-term risks from the coronavirus pandemic and St. George arbitration proceedings are reduced. We raise our target price to EUR 10.0 (7.4) and upgrade our rating to BUY (HOLD).

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Verkkokauppa.com - Expecting normalizing growth in H2

27.07.2020 - 08.40 | Company update

Verkkokauppa.com benefited from the lockdown and was able to increase its Q2 sales by ~14% y/y. At the same time profitability development was strong as adj. EBIT totaled EUR 4.8m (EUR 0.2m in Q2’19). We keep our rating “BUY” with TP of EUR 6.3 (6.2).

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Strong growth in both, revenue and profitability
E-commerce took a big leap during H1 as consumers moved online quickly once the movement restrictions came into force. This boosted Verkkokauppa.com’s Q2 result. Sales were up by ~14% y/y (EUR 123m), outpacing the consumer electronics market growth of ~9% (GfK). Adj. EBIT totaled EUR 4.8m (Q2’19: EUR 0.2m) and was driven by improved gross margin (17.4% vs. our 16.4%). The improvement in gross margin was due to the sales mix, improvements in category management and declining wholesale sales. The preliminary Q2 figures were already given in connection with the positive profit warning issued last week thus there were no surprises with the result. The company expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m.


Expecting normalizing demand in H2
It is clear that Verkkokauppa.com has benefited from the epidemic situation. The company has a low cost base which is supported by small physical footprint and that has been a major advantage during this time. Category management has been successful and as the demand of consumer electronics has increased, the competition hasn’t probably been as price-driven as normally. On the other hand, we expect that the strong growth in demand of consumer electronics during H1 will be shown as weaker sales growth and profitability development in H2E. Thus, we see this only as a momentary market change. In addition, consumers are likely to become more price aware, especially ahead of the campaign season in Q4 which will add pressure on margins.


“BUY” with TP of EUR 6.3 (6.2)
We have kept our estimates largely intact and expect 20E revenue of EUR 535m and adj. EBIT of EUR 17.1m. Thus, our estimates are at the higher end of the given guidance. On our estimates, Verkkokauppa.com trades at 20E-21E EV/sales multiple of 0.4x, ~17% below its online-focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.3 (6.2).

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Finnair - Ugly Q2, as expected

24.07.2020 - 09.50 | Earnings Flash

Finnair’s Q2’20 adj. EBIT was EUR -174m vs. our expectation of EUR -177m and consensus of EUR -179m. Revenue decreased by 91% and was EUR 69m vs. our expectation of EUR 54m and consensus of EUR 49m.

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  • Q2 revenue was EUR 69m vs. EUR 54m/49m Evli/cons.
  • ASK decreased by 97.2% y/y in Q2. PLF was 33.1% (-49.4 points).
  • Q2 adj. EBIT was EUR -174m vs. EUR -177m/-179m Evli/cons. Q2 comparable EBITDA was EUR -89m vs. EUR -91m our view.
  • Absolute costs in Q2: Fuel costs were EUR 33m vs. EUR 14m our view. Staff costs were EUR 48m vs. EUR 37m our view. All other OPEX+D&A combined were EUR 173m vs. EUR 180m our view.
  • Unit costs: CASK was 70.5 eurocents vs. 67.1 eurocents our view.
  • Q2 EPS was EUR -0.25 vs. EUR -0.12/-0.12 Evli/cons.
  • In Q3, Finnair gradually increases its capacity and will operate ~25% of flights in July compared to the same period in 2019. Based on the current assumption, the share of flights operated increases to ~50% in September. There are uncertainties relating to COVID-19 development and lifting of travel restrictions. As a result, the outlook remains unclear and the company does not provide revenue guidance for Q3.
  • Finnair reiterates its previous guidance and states that the revenue will decrease significantly in 2020 compared to 2019 and that the comparable operating loss will be significant in the financial year 2020. In addition, Finnair's capacity will decrease significantly this year compared to 2019.

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Verkkokauppa.com - Restrictions boosted Q2 result

24.07.2020 - 09.15 | Earnings Flash

Verkkokauppa.com’s Q2’20 result was extremely strong. The report did not offer surprises as the company issued a positive profit warning and released preliminary information on April-June figures earlier this week. Revenue grew by 14.1% and was EUR 123m. Gross profit was EUR 21.4m (17.4% margin) vs. our EUR 20.2m (16.4% margin). Adj. EBIT was EUR 4.8m (3.9% margin). 2020E guidance: The company expects revenue to be EUR 520-545m and comparable operating profit to be EUR 13-18m.

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  • Q2 revenue grew by 14% to EUR 123m. Revenue growth in Q2 was driven by strong online sales, positive performance in mid-sized and evolving categories, and successful marketing that resulted in increased online traffic.
  • Q2 gross profit was EUR 21.4m (17.4% margin) vs. EUR 20.2m (16.4% margin) Evli view. Gross margin improved due to good sales improvement in higher margin categories, improvements in category management and declining sales in lower margin wholesale.
  • Q2 adj. EBIT was EUR 4.8m (3.9% margin) and improved as a result of strong sales and improved gross margin.
  • Verkkokauppa.com updated its guidance on 21 July 2020, and estimates 2020E revenue to be between 520-545 million euros and comparable operating profit to be between 13-18 million euros.

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Raute - Uncertainty continues to run high

24.07.2020 - 09.15 | Company update

Raute reported Q2 results below our expectations. We turn slightly more cautious as uncertainty remains quite elevated. Our TP is now EUR 20 (21), rating HOLD (BUY).

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Uncertainty is high as many regions grapple with the crisis

Raute posted EUR 24m in Q2 revenue vs our EUR 29m estimate. Services revenue was as expected (EUR 10m) while project deliveries were EUR 5m below our EUR 19m expectation. Russian revenue, at EUR 12m, was EUR 7m lower than we estimated, and the low figure is explained by order book timing with regards to the large EUR 58m Russian order to be delivered mostly this year. Order book timing as well as the pandemic (which complicated installations and services) meant profitability was weak also in Q2 as the company recorded EBIT at EUR -1.0m vs our EUR 1.3m estimate. Order intake, at EUR 13m, was also lower than we expected (EUR 19m) and was due to softness in both machinery and services orders. Order intake declined by half y/y as the pandemic postponed project decisions. Russian orders were lower in Q2 than we expected (EUR 3m vs our EUR 9m estimate). Although no major projects were initiated during the quarter Raute says cancellations are unlikely and many investment decisions could receive green light when the situation stabilizes.

We make minor estimate changes

According to Raute activity levels are still good in Russia and China, and customers are planning some big strategic investment projects but for now there’s no way to reliably estimate a time frame during which the leads might translate to actual orders for Raute. We expect Q2 to prove the slowest quarter for Raute in terms of order intake, but there’s significant uncertainty as to how rapidly order intake might improve in H2.

Long-term strategy intact yet short-term outlook hazy

We continue to view Raute’s prospects beyond this year’s weak results. A significant pick up in order activity would likely follow the operating environment’s inevitable normalization, but this might take some time to be reflected in the order book. We view Raute well positioned to capture large plywood and LVL machinery orders in the coming years once the sector is ready to commit itself to new capacity investments. However, in the current uncertain environment we see the overall valuation picture neutral. Our new TP is EUR 20 (21), rating HOLD (BUY).

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Consti - Profitability beats expectations

24.07.2020 - 09.00 | Earnings Flash

Consti's net sales in Q2 amounted to EUR 69.3m, in line with our estimates and consensus (EUR 68.5m/70.3m Evli/cons.). EBIT amounted to EUR 2.4m, above our and consensus estimates (EUR 1.8m/1.4m Evli/cons.). Free cash flow improved to a solid EUR 8.1m (Q2/19: EUR 2.7m).

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  • Net sales in Q2 were EUR 69.3m (EUR 81.2m in Q2/19), in line with our estimates and consensus estimates (EUR 68.5m/70.3m Evli/Cons.). Sales declined -14.7 % y/y.
  • Operating profit in Q2 amounted to EUR 2.4m (EUR 0.1m in Q2/19), above our estimates and consensus estimates (EUR 1.8m/1.4m Evli/cons.), at a margin of 3.4 %.
  • EPS in Q2 amounted to EUR 0.21 (EUR -0.04 in Q2/19), above our estimates and consensus estimates (EUR 0.14/0.11 Evli/cons.).
  • The order backlog in Q2 was EUR 211.8m (EUR 226.8m in Q2/19), down by -6.6 %. Order intake EUR 66.8m in Q2 (Q2/19: EUR 57.4m).
  • Free cash flow improved to EUR 8.1m (Q2/19: EUR 2.7m) driven by profitability improvement and release of working capital.
  • The corona pandemic had a limited impact, with worksites remaining open in all business areas. Short-term uncertainty in renovation demand outlook due to the possible moving forward of some projects in the negotiation stage.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019.

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Raute - Results below our expectations

23.07.2020 - 09.50 | Earnings Flash

Raute’s Q2 results were clearly below our expectations with respect to revenue and profitability as well as order intake.

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  • Q2 revenue amounted to EUR 24.4m vs our EUR 29.0m estimate. The shortfall was attributable to project deliveries.
  • EBIT was EUR -1.0m, compared to our EUR 1.3m expectation. Order book timing affected the results negatively.
  • Q2 order intake stood at EUR 13m (EUR 26m a year ago) while we expected EUR 19m. Order intake for both project deliveries and technology services declined by about half y/y. The pandemic postpones investment decisions but Raute says project cancellations are unlikely and the situation could normalize quickly.
  • Order book amounted to EUR 80m at the end of the quarter (EUR 72m a year ago), which we view a rather good figure.

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Verkkokauppa.com - Extremely strong performance in Q2

23.07.2020 - 09.05 | Company update

Verkkokauppa.com issued a positive profit warning and gave preliminary information on April-June figures. The company now expects 20E revenue of EUR 520-545m and adj. EBIT of EUR 13-18m. The company’s Q2 result is due on Friday. We keep our rating “BUY” with TP of EUR 6.2.

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Strong performance during spring & summer

Verkkokauppa.com issued a positive profit warning as its spring/summer sales and profitability have developed better than first anticipated but also due to the brighter H2’20E outlook. The company now expects 20E revenue of EUR 520-545m (Evli prev. 525m) and comparable operating profit of EUR 13-18m (Evli prev. 14.3m). The company previously expected 20E revenue of EUR 510-530m and comparable operating profit of EUR 12-15m. Verkkokauppa.com also provided preliminary Q2 figures. April-June revenue is approx. EUR 123m, growth of ~14% y/y (Evli 113m/cons. 113m) while adj. EBIT is approx. EUR 4.8m (EUR 0.2m in Q2’19) vs. EUR 1.3m/1.4m Evli/consensus. According to the company, comparable operating profit improved as a result of strong sales and improved gross margin.

Consumers have been active during Q2

Based on the preliminary second quarter figures, it seems that the demand of consumer electronics has continued strong. Due to the increased demand, we expect less price driven competition in the consumer electronics market which impacts positively on gross margin. However, we see this only as a temporary change. Also, good demand in other smaller categories (offering higher margins) supports gross margin development. We now expect Q2E gross margin of 16.4% (14.2% in Q2’19). According to the management, the pandemic might not have as big impact on consumer demand as first anticipated which is also likely to impact on H2’20E.

“BUY” with TP of EUR 6.2

We have increased our estimates as a result of the positive profit warning. We expect sales to grow also in H2’20E, although the growth is expected to normalize from H1’20. We now expect 20E revenue of EUR 535m (6% y/y) and adj. EBIT of EUR 17.1m (51% y/y). On our estimates, the company trades at 20E-21E EV/sales multiple of 0.4x, ~20% below the online focused Nordic & European peers. We keep our rating “BUY” with TP of EUR 6.2.

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Vaisala - Eyes on the horizon

22.07.2020 - 09.30 | Company update

Vaisala delivered a decent Q2 result, with improved EBIT despite decrease in net sales and orders received. Vaisala maintained its 2020 guidance although market outlook is still weighed down by COVID. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. Our estimates remain unchanged, and we continue to see Vaisala executing well but valuation is challenging. We maintain HOLD recommendation with target price of 29 euros (prev. 26).

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W&E stronger than expected, while IM soft

On a whole, Vaisala’s Q2 result was broadly in line. Q2 net sales decreased -5% to 91,4 MEUR vs. 93,5 MEUR Evli and 94 MEUR consensus. Q2 EBIT improved 9,7% y/y to 7,9 MEUR (8,7% margin) vs. 8,1 MEUR our expectation (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus). Gross margins held up nicely (54,5% vs. 54,2% last year) despite lower volumes. Orders received decreased -2% to 95,9 MEUR due to weakened order intake in IM and especially in APAC region. Overall, W&E fared slightly better than we expected with Q2 EBIT at 0,7 MEUR (0,2 MEUR Evli) and decent orders received +1% due to strong EMEA. On the other hand, IM was softer than we had expected. IM net sales declined -5% to 33,8 MEUR (37,1 MEUR Evli) and EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. IM order intake declined -8% in all regions, especially APAC. According to Vaisala, IM’s high-end humidity and high-end carbon dioxide markets were affected by COVID as customers suspended operations and delayed decision making.

2020 outlook maintained

Vaisala estimates that lost order intake during H1 was roughly 15–25 MEUR and lost net sales was in range of 5–15 MEUR. Looking forward, it’s clear that uncertainties will continue. W&E outlook is weighed by the weakened outlook for aviation and lack of larger infra projects, especially in developed countries. IM is also expected to suffer short term from COVID repercussions. Vaisala maintained its 2020 outlook it issued in April, expecting FY20 net sales of 370–405 MEUR and EBIT of 34–46 MEUR. Our estimates remain broadly unchanged after the report. We believe pulling out of COVID will help IM fare better in H2, and our 20E estimates are at midpoint of guidance. We expect 2020e net sales to decline roughly 4% to 388 MEUR and reported EBIT to decline to 39,5 MEUR. Our 2021-22E estimates remain unchanged and we continue to see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins resuming after pandemic resides.

Valuation remains challenging

On our estimates, Vaisala is still trading at premiums compared to our peer group, and as noted before, we see valuation stretched given Vaisala’s weaker financial performance compared to peer group. Peer group valuation multiples have however risen, and premiums are now more acceptable. Although there are still short-term risks related to the pandemic, we see Vaisala coming out rather unscathed from the pandemic, and therefore we are ready to emphasize more the coming years and Vaisala’s post-COVID performance. We raise our target price to 29€ (prev. 26€) and maintain our HOLD recommendation. Our target price values Vaisala at 21-22e EV/EBIT multiples of 22x and 19x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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SRV - Upgrade to BUY

22.07.2020 - 09.30 | Company update

SRV’s Q2 profitability fell short of our estimates due to one-offs, with revenue and construction profitability slightly better than expected. We have raised our 20-22E EBIT estimates by some 5-10% on a fairly good H1 order intake and higher construction margin expectations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).

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One-offs affected profitability, good construction margins
SRV’s revenue in Q2 grew 28% y/y to EUR 265.0m for a slight expectations beat (EUR 243.4m/243.0m Evli/cons.). The operative operating profit was at EUR 0.5m (Evli 3.8m), affected by an EUR 3.1m provision for expenses recognized due to a ruling by a Russian court as well as recovery programme costs and costs stemming from impacts of the coronavirus. Construction profitability was good and slightly better than expected, with an operative operating profit margin of 2.8% (Evli 2.6%). The effects of the coronavirus were limited, although some additional costs were incurred, and housing sales were slower during April-May. Shopping centres were also affected and in Russia a large share of stores were and remain closed due to restrictions.

20-22E EBIT estimates raised by some 5-10%
We have post-Q2 raised our 20-22E EBIT estimates by some 5-10%, prompted by a fairly good H1/20 order intake and slightly raised construction margin expectations. The coronavirus pandemic continues to pose a risk, but current recovery prospects in Finland and a higher share of housing units sold to investors in the construction portfolio remain supportive factors.

BUY (HOLD) with a target price of EUR 0.66 (0.64)
Uncertainty of shopping centre exits has increased due to the pandemic and will most likely be delayed, with Pearl Plaza discussions already having been in late stages. On our 21-22E estimates and peer multiples, current valuation levels in our view essentially appear to only assign a value to SRV’s construction operations. We upgrade our rating to BUY (HOLD) with a target price of EUR 0.66 (0.64).

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Exel Composites - Profitability outshines uncertainties

22.07.2020 - 09.25 | Company update

Exel’s Q2 volumes developed as expected while profitability was a big positive surprise. We weigh the strong performance against valuation prudence; caution is warranted since volumes are sensitive even in benign business climates. However, we view the current valuation simply too low. Our TP is EUR 6.25 (5.50), rating BUY.

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Top line as expected, profitability a major positive surprise

Exel’s Q2 was as expected in terms of group-level revenue. The figure was EUR 27.2m i.e. in line with the EUR 27.9m/27.2m Evli/cons. estimates and up 3% y/y. Wind power grew by 52% y/y, and the EUR 7.9m figure was clearly above our EUR 6.6m estimate. The increase was driven by Asia-Pacific. All in all, it seems the pandemic has had only a limited impact on Exel’s business so far. Revenues have rolled in as expected and Q2 order intake only fell by 4% y/y, which in our view is a remarkable result considering the business and the current macro context. In this sense the Q2 update was a bit unsurprising relative to the Q1 release. The surge in profitability, however, was unforeseen. Exel achieved EUR 2.9m in adj. EBIT, compared to the EUR 2.0m/2.0m Evli/cons. estimates. The US unit fueled the positive surprise.

Profitability outperformance has been extended

Guidance wasn’t reinstated (Exel guided increased revenue and adj. EBIT earlier this year). In our view the reluctance to issue guidance for now reflects order uncertainties. Deliveries could be hit should the environment rapidly worsen, which is a relevant possibility. Yet in our view Exel is on a clear track to achieve higher earnings, considering the EUR 5.0m in H1’20 adj. EBIT vs the EUR 4.2m in H1’19. The company has topped the expectations we had prior to the pandemic. The earnings report changes our top line estimates very little, but we upgrade our profitability estimates. We previously expected EUR 3.7m in H2’20 adj. EBIT, and now see the figure at EUR 5.1m. For FY ’21 we now estimate the figure at EUR 11.1m (previously EUR 9.5m).

Valuation is undemanding especially compared to peers

Exel has continued to outperform our expectations while the macroeconomic situation does justify some valuation caution. We nevertheless see clear upside to current multiples. Our new TP of EUR 6.25 (5.50) implies ca. 6.5x EV/EBITDA and 10.5x EV/EBIT on our estimates for this year. Our rating remains BUY.

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Vaisala - Q2 broadly in line, IM softer than expected

21.07.2020 - 12.25 | Earnings Flash

Vaisala’s Q2 EBIT was broadly in line, but pandemic had its toll on both business areas and orders received. Vaisala’s Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 reported EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (7,9 MEUR consensus).

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  • Group level results: Q2 net sales decreased 5% to 91,4 MEUR vs. 93,5 MEUR our expectation and 94 MEUR consensus. Q2 EBIT was 7,9 MEUR (8,7% margin) vs. our expectation of 8,1 MEUR (cons. 7,9 MEUR). EPS was 0.16 (0.19 Evli, 0.20 consensus).
  • Gross margin was 54,5% vs. 54,2% last year
  • Orders received was 95,9 MEUR vs. 98 MEUR last year. Orders received decreased by -2% due to weakened order intake in Industrial Measurements and especially in APAC region. Order book was 145,3 MEUR vs. 141,6 MEUR Q1’20.
  • Weather & Environment (W&E) net sales decreased -5% (-5% excl. FX) to 57,6 MEUR vs. 56,4 MEUR our expectation. W&E EBIT was 0,7 MEUR (0,2 MEUR Evli). Order intake growth was 1% with strong orders received in EMEA offset by weaker APAC and Latin America.
  • Industrial Measurements (IM) net sales declined -5% (-5% excl. FX) to 33,8 MEUR vs. 37,1 MEUR our expectation. IM EBIT was 7,1 MEUR (7,9 MEUR Evli), due to lower net sales. Industrial Measurements order intake declined -8% in all regions, especially APAC.
  • Business outlook for 2020 maintained: Vaisala estimates that its full-year 2020 net sales will be in the range of 370–405 MEUR and EBIT will be in the range of 34–46 MEUR (updated previously on April 21st)

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Exel Composites - Excellent results

21.07.2020 - 10.45 | Earnings Flash

Exel Composites reported Q2 revenue in line with expectations while profitability was clearly higher than expected. Higher profitability was mainly due to the US unit’s improved performance. Overall Exel’s performance seems very solid despite the pandemic, however the company does not yet reissue guidance.

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  • Q2 revenue amounted to EUR 27.2m, compared to the EUR 27.9m/27.2m Evli/consensus estimates.
  • With respect to customer industries, Wind power revenue stood at EUR 7.9m in Q2 i.e. some EUR 1.3m higher than we expected.
  • Adjusted operating profit was EUR 2.9m vs EUR 2.0m/2.0m Evli/consensus estimates. Adjusted operating margin was thus an excellent 10.6%. The profitability improvement was primarily driven by the US unit.
  • Q2 order intake declined by 3.8% y/y to EUR 22.9m, which in our view is more than a decent figure considering the extraordinary circumstances that prevailed during the quarter. One large order, attributable to Buildings and infrastructure (worth some EUR 3.5m), helped but overall the order book situation looks rather good for now.
  • Exel withdrew guidance for FY ’20 in connection with the Q1 earnings release. The company says it will reinstate guidance later this year.

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Consti - Eyes on the demand situation

21.07.2020 - 09.30 | Preview

Consti will report Q2 results on July 24th. As the direct impacts of the Coronavirus pandemic have been limited, we expect profitability to have remained at a good level and clearly above the weak comparison period. The order backlog will remain of support for the quarter while a thinness in demand may start to show during the latter half of the year. We retain our HOLD-rating and adjust our target price to EUR 7.4 (7.0).

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Limited direct pandemic impact to support profitability
Consti continued on a track of improved profitability in Q1 and we do not expect any major deviations from that trend. The direct impacts of the Coronavirus pandemic on the second quarter results are expected to be limited, as on-going worksites have to our understanding been able to operate without significant interruptions. We expect EBIT to improve clearly from the weak comparison period (Q2/2019: EUR 0.1m), which was affected by certain weak-margin projects, to EUR 1.8m in Q2/2020. We expect a revenue of EUR 68.5m, a decline of 15.7% y/y, as a result of the weakened order backlog from more disciplined bidding procedures.

Short-term demand thinness to be expected
Going forward, we expect our main attention to be pointing toward the overall demand situation. Given the timing of the housing company General Meeting season, decision-making for certain renovation projects will have been delayed to the fall or possibly next year. Decisions of corporations will possibly also have been affected while the public sector should have been less affected. The renovation sector fundamentals, however, remain unaffected and the impact should as such be of more temporary nature.

HOLD with a target price of EUR 7.4 (7.0)
Our estimates remain unchanged ahead of the Q2 results. Following lower COVID-19 uncertainty and increases in peer multiples we adjust our target price to EUR 7.4 (7.0) and retain our HOLD-rating.

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SRV - Fared rather well

21.07.2020 - 09.00 | Earnings Flash

SRV's net sales in Q2 amounted to EUR 265.0m, above our and consensus estimates (EUR 243.4m/243.0m Evli/cons.). EBIT amounted to EUR 3.3m, below our estimates and above consensus estimates (EUR 3.8m/2.4m Evli/cons.).

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  • Revenue in Q2 was EUR 265.0m (EUR 207.4m in Q2/19), above our estimates and consensus estimates (EUR 243.4m/243.0m Evli/Cons.). Growth in Q2 amounted to 27.8 % y/y.
  • Operating profit in Q2 amounted to EUR 3.3m (EUR -3.1m in Q2/19), below our estimates and above consensus estimates (EUR 3.8m/2.4m Evli/cons.), at a margin of 1.2 %. The operative operating profit amounted to EUR 0.5m (Evli EUR 3.8m). The operating profit was affected by an EUR 3.1m provision for expenses that were recognized due to a ruling by a Russian court, as well as costs relating to the recovery programme among other things.
  • EPS in Q2 amounted to EUR 0.02, above our estimates and consensus estimates (EUR -0.02/-0.01 Evli/cons.).
  • Construction: Revenue in Q2 was EUR 264.1m vs. EUR 242.7m Evli. Operating profit in Q2 amounted to EUR 7.4m vs. EUR 6.3m Evli.
  • Investments: Revenue in Q2 was EUR 1.2m vs. EUR 1.2m Evli. Operating profit in Q2 amounted to EUR -1.7m vs. EUR -1.5m Evli.
  • Other operations and elim.: Revenue in Q2 was EUR -0.2m vs. EUR -0.5m Evli. Operating profit in Q2 amounted to EUR -2.4m vs. EUR -1.0m Evli.

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Raute - Longer perspective is warranted

20.07.2020 - 09.20 | Preview

Raute reports Q2 results on Thu, Jul 23. Order book stands at a decent level but Q2 must have been slow with respect to new orders. Raute issued two releases in Q2 which speak of the company’s strategy proceeding according to plan; however, these news items will not immediately impact our estimates. In our view valuation is turning attractive on our unchanged estimates. Our TP is EUR 21, rating BUY (HOLD).

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Order intake was likely low, but strategy appears on track

Raute didn’t disclose any large orders in Q2, which in our view is unsurprising. However, the company did book an order for the delivery of modern veneer drying and automated lay-up lines to South China. Although the order is moderate in size, amounting to perhaps a few million euros, it may prove to hold significant reference value for Raute as the machinery represents the inaugural Chinese purchase of such advanced plywood production technology. The order will be delivered by the end of this year. In our view the order is an initial encouraging sign that the Chinese plywood market, by far the biggest, is gradually maturing towards higher quality standards. Raute has so far been unable to make meaningful inroads into the market and it remains to be seen in what time frame significant results might materialize. Raute also recently announced the acquisition of a Finnish software company specializing in demanding industrial solutions, including machine vision. From a financial perspective the deal has no impact on our current estimates but is consistent with Raute’s strategy, according to which the company continues to invest in further developing its technological edge.

We see soft Q2 order intake, expect improvement in H2

We expect Raute to have booked EUR 19m in Q2 new orders i.e. about half the average quarterly level last year. As with so many other industries, the focus will be on comments regarding the changes and improvement in activity following the most acute weeks of the pandemic lockdown.

We view valuation low especially relative to peer multiples

This year will not be great in terms of profitability. On our estimates for next year Raute currently trades ca. 5.5x EV/EBITDA and 8.5x EV/EBIT; despite uncertainty regarding the sharpness of next year’s profitability improvement we view these multiples attractive. Our TP remains EUR 21, rating now BUY (HOLD).

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Verkkokauppa.com - Strong tailwind amid the pandemic

17.07.2020 - 09.30 | Preview

Verkkokauppa.com reports its April-June result on next week’s Friday, 24th of July. We expect Q2E sales of EUR 113m (5% y/y) and adj. EBIT of EUR 1.3m. We keep our rating “BUY” with TP of EUR 6.2 (4.5).

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Expecting a strong Q2
Verkkokauppa.com had a strong start for the year as Q1’20 sales increased by over 8% y/y, boosted by exploded online sales caused by the COVID-19. Remote working has become the new normal during this time thus we expect good growth in the consumer electronics market. The management indicated that the demand of several other categories has developed favorably as well (e.g. sports, home). We also expect the good weather in the early summer to have a positive impact on sales. We have increased our Q2’20E sales expectation by 3% to EUR 113.2m. We expect Q2’20E adj. EBIT of EUR 1.3m (Q2’19: EUR 0.2m).


Targeting improved brand awareness
Verkkokauppa.com transferred to the main list of Nasdaq Helsinki in early June as the company is targeting to increase its brand awareness and to improve its liquidity. The total expenses related to the listing are EUR ~0.8m. According to the listing prospectus, some 16% of total sales in Q1’20 came from outside of Finland (2019: 12%). Due to the global movement restrictions, we expect significantly lower international sales during Q2E. We expect gross margin to improve in Q2E (14.9% vs. 14.2% in Q2’19) as the consumer electronics market should ease temporarily but also due to the good development of other smaller categories (offering higher margins). We expect good control over costs, supporting earnings development.


“BUY” with TP of EUR 6.2 (4.5)
We have increased our 20E adj. EBIT expectation by ~5% (EUR 14.3m) while slightly increasing our 20E sales expectation (EUR 525.4m). The company expects 20E sales of EUR 510m-530m and adj. EBIT of EUR 12-15m thus our estimates are at the higher end of the given guidance. We have also increased our 21E-22E sales expectation by 1-1.5% and adj. EBIT expectation by 6-7%. On our estimates, the company trades at 20E-21E EV/sales multiple of 0.4x, which translates into ~25% discount compared to the online focused Nordic and European peers. We keep our rating “BUY” with TP of EUR 6.2 (4.5).

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Finnair - Gloomy Q2 figures ahead

16.07.2020 - 09.30 | Preview

Finnair reports its Q2 result on next week’s Friday, 24th of July. As well known, April-June figures will not be pretty. We expect Q2E revenue of EUR 54m and adj. EBIT of EUR -177m. We upgrade to “HOLD” (“SELL”) with TP of EUR 0.60.

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Historically gloomy traffic
Finnair’s April-June traffic figures were extremely weak, as expected. Passenger numbers decreased by 97% y/y as Finnair carried only ~100k passengers during this time. ASK decreased by 97% y/y and RPK decreased by 99% y/y. The were no flights to North Atlantic nor to Asia during most of the quarter and the remaining operations have been mainly related to cargo. Finnair has estimated that its daily comparable operating loss will be approx. EUR 2m throughout Q2. We expect Q2’20E revenue of EUR 54m and adj. EBIT of EUR -177m.

Jet fuel prices dropped during Q2
Jet fuel prices have dropped significantly during Q2. The average price in both, USD and in EUR dropped by 49% on a q/q basis compared to Q1’20. On a y/y basis, the average price in USD fell by 62% and in EUR by 61%.

Flights starting gradually to recover
Finnair has gradually started to add frequencies and routes to its network as many travel restrictions have now been removed and the pandemic situation has improved, at least in Europe and Asia. The company estimated earlier that it aims to fly some 30% of its normal amount of flights in July. Some 70% of the normal capacity is expected to be operated by the end of the year. The company should be able to expand its offering relatively quickly depending on the country specific restrictions and demand.

“HOLD” (“SELL”) with TP of EUR 0.60
As a result of Finnair’s rights offering issued during the summer, Finnair receives net proceeds of approx. EUR 501m. The total number of Finnair’s shares increased to 1.4b. There are no major changes in our 20E-22E estimates. We expect 20E revenue of EUR 1595m and adj. EBIT of EUR -304m. We expect the traffic slowly to recover during 21E-22E but we don’t expect to see levels reached prior the pandemic any time soon. We keep our TP of EUR 0.60 and upgrade to “HOLD” (“SELL”).

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Tokmanni - Positive surprise with Q2 sales

10.07.2020 - 09.30 | Company update

Tokmanni’s Q2’20 sales increased by 19.1% y/y to EUR 286m which is a positive surprise after the company withdrew its guidance in March due to the COVID-19. Tokmanni will report its Q2 result on 29th of July. We keep our rating “BUY” with TP of EUR 16.4 (13.5).

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Q2 sales increased by 19.1% y/y

Tokmanni published its Q2 sales beforehand (Q2 result will be published on 29th of July) as its April-June sales increased by 19.1% y/y (EUR 286m). The exceptional jump in sales came as a surprise as the company withdrew its guidance in March, due to the coronavirus situation and the consensus expectation indicated decrease in sales. According to the company, the customer numbers decreased towards the end of March but have since recovered. LFL growth was 17.4% y/y and online sales accounted for 1.4% of sales. Our previous Q2E sales expectation was EUR 191m. Tokmanni expects comparable gross margin in Q2E to decrease by ~1ppt y/y, resulting from the active measures to increase sales and the structure of sales.

Restrictions impacting positively on consumer behavior

Due to the movement restrictions caused by the COVID-19, Finns have spent more time at home and at their summer cottages and domestic tourism has become more popular. Therefore, the demand of leisure, gardening and home improvement products has strongly increased. Also, the demand of food products has been strong during Q2. On the other hand, clothing sales decreased y/y. We don’t expect a significant increase in customer numbers during the quarter but rather in the average basket size. We expect that Tokmanni’s cost base has remained stable despite of the increase in sales, resulting in improved profitability. We expect Q2’20E adj. gross margin of 34.1% and adj. EBIT of EUR 30.9m.

“BUY” with TP or EUR 16.4 (13.5)

As result of the latest information, we return back to our view prior the COVID-19 and expect Tokmanni to reach sales of over EUR 1bn in 20E. We expect 20E sales of EUR 1026m and adj. EBIT of EUR 90m. As the significant increase in Q2’20 revenue was exceptional, we expect normalized sales during H2’20E and sales to remain in the same level also in 21E. Our view of Tokmanni’s 21E-22E hasn’t changed. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 13.0x and 13.1x, which translates into 25-31% discount compared to the international discount peers. We keep our rating “BUY” with TP of EUR 16.4 (13.5).

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Suominen - Clean and shining

25.06.2020 - 09.25 | Company update

Suominen revised its outlook upwards for the second time this year. We update our estimates; the announcement has only minor impact in quantitative terms but turns us more confident towards Suominen’s sustainable profitability improvement. Our TP is now EUR 4.25 (3.25) and thus we rate the shares BUY (HOLD).

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The update reflects conviction in value-add wiping demand
Suominen previously expected comparable FY ‘20 EBIT to improve clearly from ‘19. The updated outlook guides significant improvement. The figure amounted to EUR 8.1m last year, and we now expect Suominen to post EUR 24.0m this year (our previous estimate was EUR 23.1m). In our view the outlook update therefore has somewhat limited information value as such, although it’s worth mentioning that Suominen also removed the previous disclaimer according to which the result estimate for the second half of the year was uncertain due to the pandemic. In other words, the announcement does not change our estimates quantitatively as much as it does qualitatively. Suominen did not comment on market developments, but in our view the update reflects certain value-add wiping product categories’, namely those meant for household and workplace uses, improved prospects due to the pandemic.

Our higher gross margin estimate offsets weaker USD
During the last two months USD has declined by about 5% relative to EUR. We thus update our revenue estimate for this year downwards to EUR 443m from the previous EUR 454m. There have been no meaningful interim changes in raw materials prices, and as we expect value-add wiping product demand to remain brisk we revise our FY ’20 gross margin estimate up by some 50bps to 12.1%. These changes’ net effect on our FY ’20 EBIT estimate is an increase to the tune of EUR 0.9m.

Valuation is attractive as profit recovery gains traction
Suominen currently trades at about 5.7x and 4.8x EV/EBITDA on our estimates for this year and next. In our view higher multiples are now warranted as profitability improvement looks increasingly robust. Our new EUR 4.25 (3.25) TP implies the respective multiples at levels of 6.2x and 5.3x. Suominen is also valued clearly below peer group multiples. We now rate the shares BUY (HOLD).

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Finnair - Strengthening its balance sheet

12.06.2020 - 09.25 | Company update

Finnair will strengthen its balance sheet with a rights offering of approx. EUR 500m, which have been fully underwritten. We have also cut our 20E estimates to be in line with the latest traffic plan. We keep our rating “SELL” with TP of EUR 0.6 (3.3).

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Aiming to raise gross proceeds of approx. EUR 500m

Finnair has announced the terms and conditions of its rights offering of approx. EUR 500m, which have been fully underwritten. The proceeds from the offering are intended for strengthening the company’s balance sheet and to support the company’s long-term strategy. The company offers up to ~1279m new shares for subscription for the existing shareholders. The existing shareholders receive one subscription right for each share held on the record date and each subscription right carries the right to subscribe for ten offer shares. The subscription price is EUR 0.40 per offer share. The state of Finland, which is the largest shareholder of Finnair, has committed to subscribe in full for offer shares on the basis of subscription rights allocated to it (a total of 55.9% of the offer shares). The subscription period commences on 17 June 2020 and ends on 1 July 2020.

Further estimates cut for 20E

We have also adjusted our H2’20E estimates downward based on the traffic plan introduced earlier in May. Finnair will start gradually to add frequencies and routes back starting from July. For instance, the company will fly to several European destinations, concentrating first on the key cities. Also, long-haul flights to Asia will start in phases. The company aims to operate approx. 30% of its normal amount of flights in July. Finnair estimated that it will fly approx. 70% of its normal capacity at the end of this year.

“SELL” with TP of EUR 0.6 (3.3)

We now expect 20E revenue to decline by ~48% y/y, amounting to EUR 1605m (prev. EUR 1752m). We expect 20E adj. EBIT of EUR -305m (prev. EUR -265m). We keep our rating “SELL” with TP of EUR 0.6 (3.3).

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SRV - Next step of recovery measures

03.06.2020 - 09.45 | Company update

SRV is approaching the final leg of its recovery programme and initiated a rights issue, seeking to raise EUR 50m gross proceeds. The good progress so far remains somewhat overshadowed by the development of the Russian economy. We adjust our TP to EUR 0.64 (1.10), HOLD-rating intact.

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Seeking to raise EUR 50m gross proceeds
SRV initiated a rights issue with the aim of raising gross proceeds of EUR 50m and resolved upon offering up to ~131m new shares, corresponding to 49.8% of all shares if fully completed, with existing shareholders receiving one subscription right for each owned share and the subscription price for new shares set at EUR 0.38. The share issue proceeds are primarily intended for strengthening of the company’s balance sheet. SRV also completed a directed share issue in May, resulting in gross proceeds of approx. EUR 75m but no cash proceeds, as outstanding hybrid bonds were converted into equity. The company expects that the issues along with measures taken as part of the company’s recovery programme will improve the company’s equity ratio excl. lease liabilities from 26.4% (31.12.2019) to 30-33% by the end of Q2.

Profitability improving, financial expenses hamper earnings
We assume full completion of the rights issue in our estimates given the EUR 40m commitments made and the discount of the subscription price. Apart from adjustments due to the expected expenses related to the share issues our estimates remain intact. We expect the operative operating profit to improve to EUR 15.3m following improved construction profitability, while expecting net earnings to remain negative due to the high financial expenses.

HOLD with a target price of EUR 0.64 (1.10)
Our SOTP implies an equity value of EUR 0.69 per share while peer multiples remain challenging. The ruble has seen recovery from its Q1 dip but together with the state of the Russian economy pose a risk to easing balance sheet strains through exits. We adjust our target price to EUR 0.64 (1.10) with our HOLD-rating intact.

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Cibus Nordic - Staple and stable

18.05.2020 - 09.20 | Company update

Cibus performed strong. The fundamentals are solid as before, yet wider property valuations are subject to higher uncertainty. We retain our SEK 150 TP and BUY rating.

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There’s little reason to expect performance to be impaired

Cibus’ portfolio performed as expected with Q1 rental income at EUR 14.0m vs our EUR 13.9m estimate, while net rental income amounted to EUR 13.0m (vs our EUR 13.0m expectation). We did expect temporarily elevated administration costs due to the Coop acquisition, as the company suggested, and estimated the Q1 figure at EUR 1.1m. The figure came in at EUR 1.5m and thus the EUR 11.5m Q1 operating income missed our EUR 11.9m estimate. Meanwhile we overestimated financial costs (excluding currency losses) since net operating income excluding currency losses was EUR 7.7m, compared to our EUR 7.6m estimate. In terms of earnings capacity, the updated property expenses line is higher than we expected while the administration cost line is slightly lower. We make only small revisions to our estimates.

Cash flow is solid, yet valuation is not immune to macro

In our view Cibus’ figures and comments prove the pandemic will have little impact operationally. While in the big picture retail rents are likely to be under pressure (mainly due to shopping centers) in our opinion there’s no valid reason to expect this will apply to daily-goods stores. Cibus hasn’t noticed changes to deal flow and bank financing prospects. We see the daily-goods property market remaining stable and would not expect distressed sellers to surface in any meaningful numbers. Even though the pandemic will provide strong tailwind for online grocery sales the fact remains that such operations still struggle profit-wise in the Nordics. We expect Cibus will continue to generate robust cash flow as before. We view wider property valuation trends as the main risk for Cibus’ shareholders: uncertainty runs high and it remains to be seen how exactly e.g. telecommuting practices will affect office vacancy rates.

We reiterate our SEK 150 TP and BUY rating

Cibus continues to scan e.g. the Norwegian market, but for now the focus is on Finland and Sweden. The purchased Swedish properties are being converted into Coop stores (Coop purchased them from Netto last year); Cibus says the conversion is progressing well. We retain our SEK 150 TP and BUY rating.

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Cibus Nordic - No meaningful surprises

15.05.2020 - 09.30 | Earnings Flash

Cibus Nordic reported Q1 property portfolio performance in line with our estimates, while operating income was slightly below our estimate due to the Coop portfolio acquisition which temporarily elevated central administration expenses.

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  • Q1 rental income amounted to EUR 14.0m vs our EUR 13.9m estimate.
  • Accounting for property expenses, net rental income was EUR 13.0m while we expected EUR 13.0m.
  • Subtracting central administration expenses, operating income stood at EUR 11.5m in comparison to our EUR 11.9m estimate. The expenses were higher than we expected due to the Coop portfolio acquisition.
  • After considering net financial costs (including currency losses), net operating income was EUR 6.8m vs our EUR 7.6m expectation. The figure was EUR 7.7m excluding currency losses.
  • Annual net rental income capacity now stands at EUR 60.6m (previously EUR 50.9m).
  • The portfolio was valued at EUR 1,053m, meaning EPRA NAV amounted to EUR 11.6 (11.4) per share.
  • Net LTV ratio was 58.1% (58.7%).
  • Occupancy rate stood at 94.8% (94.7%) at the end of Q1.
  • WAULT was 5.5 years (4.9 years), increasing due to the Coop portfolio acquisition.

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Marimekko - Consumer behavior likely to change

15.05.2020 - 09.25 | Company update

Marimekko’s Q1 result was below expectations as net sales declined by 8% y/y, amounting to EUR 24.9m (27.9m/25.4m Evli/cons). Adj. EBIT was EUR 1.2m (1.7m/1.4m Evli/cons). The coronavirus hampered sales in all Marimekko’s market areas. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).

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All market areas were impacted by the coronavirus

COVID-19 hampered all Marimekko’s market areas which led to a decline in net sales (-8%). Net sales totaled EUR 24.9m (27.9m/25.4m Evli/cons). Finland was the only market area with a positive sales development (+6%) in Q1. Net sales in the second largest market area APAC, declined by 28% y/y. Wholesale sales in APAC fell by -30% y/y not only due to the coronavirus but also as the corresponding figures in the comparison period were high due to an exceptional delivery pattern. Relative sales margin was affected by increased logistics costs and nonrecurring expenses resulting from the relocation of the company’s main warehouse. Decline in sales and weakened relative sales margin weighed down adj. EBIT which was EUR 1.2m vs.  EUR 1.7m/1.4m Evli/cons.

Consumers likely to become more cautious

Our expectations for the upcoming months are not high as the movement restrictions and the temporary closure of stores will no doubt have a significant negative impact on Marimekko’s sales and profit. The company’s online store supports the business in some level as the online sales have increased significantly, though the management did not provide information regarding the magnitude of this. The outlook for ’20 wholesale sales in Asia is affected by the temporary closure of partner-owned stores and changing customer sentiment. At the same time, domestic wholesale sales in ’20 are boosted by nonrecurring promotional deliveries, which will be mainly taking place during H2. Going forward, the globally weakening economic outlook and declining purchasing power will have a negative impact on consumer behavior. We expect retail sales and wholesale sales to decline by 12% and 11%, respectively in 20E.

“HOLD” (“BUY”) with TP of EUR 24 (28)

We have cut our 20E sales expectation by ~4% and adj. EBIT expectation by ~8%. The company expects COVID-19 to have a significant negative impact on sales and profit in ‘20 but did not provide more detailed guidance at this point. Due to the weakening economic outlook we have also cut our 21E-22E sales expectation by 7-9% and adj. EBIT expectation by 10-12%. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.3x and 10.3x, which translates into 50-60% discount compared to the luxury peers. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).

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Endomines - Production finally picking up

15.05.2020 - 09.15 | Company update

Endomines Q1 report was largely uneventful, with no gold concentrate production at Friday during the quarter. Financial transactions in Q2 will aid the strained cash position. Q2 is set for first Friday gold concentrate sales, while the COVID-19 pandemic is creating uncertainty around production ramp-up to design capacity. We retain our SELL-rating with a target price of SEK 5.5 (5.0).

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No gold concentrate sales in Q1
Endomines Q1 report contained limited new information of value. No gold concentrate sales from Friday occurred and revenue amounted to SEK 3.1m due to Pampalo clean up gold. Lesser cost activation saw costs higher than our estimates and as a result a weaker EBITDA, at SEK -27.8m (Evli -13.6m). 3,700 tonnes of lower grade (5.7 g/t) ore was mined during the first quarter. Design capacity (3,445 tonnes/month) at Friday is sought to be reached in Q2, however, COVID-19 impacts on staff and component availability may cause delays. The first gold concentrate shipment from Friday was made during Q2.

Financing arrangements to aid cash position
Post-Q1 financial transactions will bring much needed relief to Endomines’ strained cash position (Q1/20: SEK 1.3m), raising some SEK 81m through two loans and a rights issue. We expect further financing to be needed during 2020, as evident by the signing of an engagement letter with a financial advisor for long-term financing. Closing of the transaction with Transatlantic Mining provides additional production potential, although little is yet known of the assets. 2020 will in our view revolve around ramping-up production at Friday and planning for production at other assets from 2021 onwards.

SELL with a target price of SEK 5.5 (5.0)
Following adjustments to our valuation approach following the favourable gold price development and taking into account the transactions in Q2 we raise our target price to SEK 5.5 (5.0). Our SELL-rating remains intact.

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Endomines - Focus on ramp-up

14.05.2020 - 10.00 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q1. Design capacity at Friday is sought to be reached in Q2, although impacts of the COVID-19 pandemic may cause delays. No numeric production guidance was given. 3,700 tonnes of ore at 5.7g/t grade mined during Q1. EBITDA lower than our expectations at SEK -27.8m (Evli -13.6m).

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  • Endomines did not sell any gold concentrate from Friday in Q1. An agreement for the sale of gold concentrate was signed and the first shipment of gold concentrate from the Friday mine was done in May.
  • Revenue in Q1 amounted to SEK 3.0m, with our estimates at SEK 3.1m.
  • EBITDA in Q1 was at SEK -27.8m, below our estimate of SEK -13.6m following higher than expected costs.
  • At the processing facility at Friday Endomines was able to operate at a rate of 36 tonnes per day. Ramp up to design capacity (3,445 tonnes per month) continued. The goal is to reach design capacity during Q2, however, the COVID-19 pandemic poses some challenges with staff and part availability and continued effects of the pandemic may postpone the reaching of design capacity. Endomines has mined approximately 3,700 tonnes of ore at a grade of 5.7 g/t at Friday in Q1.
  • Endomines did not yet give any numeric production guidance for 2020.
  • Liquid assets amounted to SEK 1.3m at the end of the quarter. After the quarter Endomines raised SEK 81m net proceedings through the issuance of two loans and a directed share issue.
  • An agreement with Transatlantic Mining was signed after Q1 to buy US Grant Mine and mill and the Kearsarge Gold Project.

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Marimekko - Decline in sales in Q1

14.05.2020 - 08.45 | Earnings Flash

Marimekko’s Q1 result was below expectations as net sales decreased by 8%, amounting EUR 24.9m vs. EUR 27.9m/25.4m Evli/cons. Adj. EBIT was EUR 1.2m vs. EUR 1.7m/1.4m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20 was not given at this point.

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  • Finland: revenue was EUR 13.6m vs. EUR 13.3m Evli view. Revenue increased by 6%.
  • International: revenue was EUR 11.3m vs. EUR 14.6m Evli view. Revenue declined by 21%. The decline in wholesale sales in APAC was due to an exceptional delivery pattern in the comparison period but the coronavirus had also a negative impact as some expected reorders were not placed.
  • Retail sales were at the same level as in the comparison period but wholesale sales declined by 13% and licensing income by 71%.
  • Q1 adj. EBIT was EUR 1.2m (4.6% margin) vs. EUR 1.7m/1.4m (5.9%/1.4% margin) Evli/cons. Lower sales and a decline in relative sales margin had a weakening impact on result whereas lower fixed costs had a positive impact.
  • Q1 EPS was 0.02 EUR vs. EUR 0.07/0.10 Evli/cons.
  • The company expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20 was not given at this point.

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Cibus Nordic - Graduating the property ladder

12.05.2020 - 09.30 | Company report

Our updated TP is SEK 150 (155), rating now BUY (HOLD).

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Cibus has performed according to expectations

Cibus’ portfolio performance has delivered the promises since the IPO in March 2018. Moreover, the portfolio’s exposure to supermarkets, in our view the preferred daily-goods store type, has increased following a string of acquisitions large and small. The company has also advanced on the organizational side. Cibus is now more independent entity, and Sirius’ partial exit made entry for other institutional investors easier and helped facilitate the Swedish property market expansion earlier this spring.

The Swedish market entry fits the strategy well

Cibus was able to acquire the EUR 180m Coop supermarket portfolio at a yield of close to 6%, which to us was a surprisingly high level, especially considering the portfolio’s quality, 10-year triple-net lease structure as well as Coop’s agreement to invest SEK 3m into each of the 110 stores for rebranding purposes (Coop acquired the stores from Netto last year). We view the portfolio a good base for further expansion in Sweden.

We base our TP on the portfolio’s current CF capacity

Cibus continues to trade at attractive levels relative to other listed Nordic property portfolios since Cibus’ assets are small in the institutional investor context and thus there’s a paucity of buyers as this specific asset class isn’t the most convenient way to deploy large amounts of capital. Single grocery stores can often be purchased at high yields. We’d describe Cibus a vehicle for capitalizing on the yield differential. Since Cibus’ portfolio is well diversified we see there’s scope for fair value gains every time Cibus buys a property. Having said that Cibus isn’t the only Nordic daily-goods property portfolio (although it’s the only publicly traded one) and so we view it prudent to focus on the current portfolio cash flow capacity. We value Cibus’ current cash flow prospects with a yield we see sufficiently below that of the underlying daily-goods property market (to account for diversification benefits) on the one hand, and adequately above that of the wider property market (the vehicular benefits shouldn’t be exaggerated) on the other. Our TP is now SEK 150 (155), rating BUY (HOLD).

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Pihlajalinna - Getting ready for the FCCA’s decision

11.05.2020 - 09.25 | Company update

Pihlajalinna’s Q1 revenue amounted to EUR 133m (+0.4% y/y) vs. our EUR 135m. Adj. EBIT was EUR 4.2m vs. our EUR 5.2m. The tender offer by Mehiläinen is currently being under review of the FCCA and the final decision should be ready at the end of Q2 or latest in Q3. We keep our TP of EUR 16.0 and downgrade our rating to “HOLD” (“BUY”).

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Non-urgent and oral healthcare took hit from COVID-19

Pihlajalinna’s Jan-March result was rather good even though it slightly missed our expectations. Q1 revenue increased by 0.4% y/y to EUR 133m (EUR 135m/133m Evli/cons). Adj. EBIT landed at EUR 4.2m (EUR 5.2m/4.4m Evli/cons). According to the management, revenue and profitability developed as expected during the first months of the year but the coronavirus and the emergency laws that came into force in mid-March had a negative impact on the company’s business. Negative impacts were especially seen on the demand of non-urgent healthcare and oral healthcare. Fitness centers were also closed at the end of March. The decreased customer flows reduced the invoicing by approx. EUR 3.3m.

Demand should start slowly to recover

We expect the coronavirus had the most negative impacts on Pihlajalinna’s business in April due to the movement restrictions but the demand should start slowly to recover as the government is starting to ease the restrictions. Also, the management of Pihlajalinna indicated that some signs of recovering demand have already been seen. During these unexceptional times, complete outsourcings and other fixed-price invoicing have supported the company as the profitability of these kinds of contracts normally remains stable, even during times of lower demand. Also, the coronavirus should not have significant impacts on the demand of housing services for the elderly or recruitment services. Thus, more than half of the business operations are expected to remain stable during this time. The outlook for H2 still remains blurry as the visibility around the situation is very weak. Therefore, guidance for 20E was not given at this point.

“HOLD” (“BUY”) with TP of EUR 16

We have cut our 20E adj. EBIT estimate by ~20% while making only minor adjustments to our revenue expectation. We expect 20E revenue of EUR 517m (-0.3% y/y) and adj. EBIT of EUR 21.6m (3% y/y). The tender offer by Mehiläinen is currently being under review of the FCCA (in the phase two investigation). The investigation process should be completed at the end of Q2 or latest during Q3. We keep our TP at the tender offer price of EUR 16 and downgrade our rating to “HOLD” (prev. “BUY”).

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Pihlajalinna - Q1 result slightly below expectations

08.05.2020 - 08.40 | Earnings Flash

Pihlajalinna’s Q1 result was slightly below our expectations but in line with consensus. Q1 revenue amounted to EUR 133m vs. EUR 135m/133m Evli/cons, while adj. EBIT landed at EUR 4.2m vs. EUR 5.2m/4.4m Evli/cons estimates. Guidance for 20E was not given at this point.

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  • Q1 revenue was EUR 133m vs. EUR 135m/133m Evli/cons estimates. Revenue grew by 0.4% y/y.
  • Q1 adj. EBITDA was EUR 12.7m (9.5% margin) vs. EUR 14.2m/13.2m Evli/cons estimates.
  • Q1 adj. EBIT was EUR 4.2m (3.2% margin) vs. EUR 5.2m/4.4m (3.9%/3.3%) Evli/cons estimates
  • Q1 EPS was EUR 0.06 vs. EUR 0.12/0.10 Evli/cons.
  •  According the company, sales and profitability developed as planned during the first months of the year, prior the coronavirus epidemic.
  •  Pihlajalinna did not provide a guidance for 20E at this point due to the coronavirus.

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Exel Composites - The story is not derailed

07.05.2020 - 09.30 | Company update

Exel’s Q1 met expectations. The pandemic has so far had a limited impact on operations. Short-term demand outlook is uncertain, but we don’t see long-term fundamentals impaired. Our TP is now EUR 5.50 (6.75), rating still BUY.

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Strong development continued during Q1

Exel’s EUR 27.8m Q1 revenue grew by 3% y/y and matched EUR 27.9m/27.2m Evli/cons estimates. The company updated its reporting structure, now disclosing revenue for seven customer industries instead of the previous three broad segments. Buildings & infrastructure and Wind power, which previously made up the Construction & Infrastructure segment, reported a combined EUR 12.0m in revenue, which was in line with our estimate (Wind power only grew by 1% y/y due to timing issues). Machinery & electrical, Transportation and Telecommunications, i.e. the former parts of Industrial Applications, reported a combined EUR 8.4m. This was less than we expected but Equipment & other industries and Defense made up with a total of EUR 7.4m. Adjusted EBIT, at EUR 2.1m, also met EUR 2.2m/2.0m Evli/cons estimates. ROCE increased to 12% from 3% a year ago and the US unit reached profitability. Order intake growth accelerated to 23% y/y pace and the EUR 34.5m in new orders meant order backlog stood at EUR 37.1m, up 50% y/y. A big US order is scheduled to be delivered through FY ’20.

We now expect adjusted EBIT to increase to EUR 7.8m

Although strong development continued Exel is not immune to macro uncertainty and thus the company withdrew guidance. We revise our estimates down. We previously expected 6% top line growth for this year, and we have revised the figure down to 3%. We cut our FY ’20 EBIT estimate down by EUR 0.9m to reflect potential operational challenges. In our opinion the long-term case remains intact. Exel also has a good liquidity situation. The EUR 10m overdraft facility was extended by two years.

We cut our TP due to significantly higher uncertainty

In our view higher multiples are justified by the fact that Exel has continued to perform according to expectations. Meanwhile the pandemic raises uncertainty even if development has remained good. We update our TP to EUR 5.50 (6.75) due to lowered estimates and higher uncertainty; yet in our view Exel still trades at relatively low multiples and we thus retain our BUY rating.

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Etteplan - Better than feared

06.05.2020 - 10.00 | Company update

Etteplan’s Q1 results were better than feared and market turbulence had a rather minor impact, with a slight decline in organic growth. We expect an average organic growth of around -7% in 2020 and EBITA to decline to EUR 16.9m (2019: 25.9m). We retain our HOLD-rating with a target price of EUR 8.0 (6.9).

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Q1 results better than expected
Etteplan’s Q1 results beat our and consensus estimates. Revenue amounted to EUR 71.3m (EUR 67.0m/70.0m Evli/Cons.) and EBIT to EUR 5.7m (EUR 4.4m/5.0m Evli/cons.). The assumed effect of the COVID-19 pandemic and labor market turbulence in Finland on Q1 was fortunately smaller than expected. The organic growth did however turn negative and was -1.9% on comparable FX. The number of hours sold in China decreased 25% y/y but business was nearly back to normal by the end of March.

We expect 2020 organic growth of around -7%
Uncertainty in the coming quarters is elevated by the COVID-19 pandemic and visibility is low, due to which Etteplan is also not giving a guidance for 2020. We use the number of temporary layoffs as a benchmark for our 2020 estimates, for which we assume an upper bound for the Q2 average FTE capacity decrease of around 8%. Pricing pressure is further likely to increase along with a risk for credit losses, for which Etteplan made minor reservations in Q1. We currently assume that the situation will improve in the latter quarters but still expect an average organic growth of around -7% in 2020, with our 2020 revenue estimate at EUR 259.8m (2019: 262.7m). We expect 2020 EBITA to decline to EUR 16.9m (2019 25.9m).

HOLD with a target price of EUR 8.0 (6.9)
Etteplan is currently trading at 8.2x 2020 EV/EBITDA on our estimates, with peers trading at ~8.8x. With the COVID-impact now more accurately reflected in peer multiples we assign a higher weight on peer multiples, keeping the pre-COVID average NTM EV/EBITDA of 9.0x as a benchmark, and along with some added confidence from the Q1 report raise our target price to EUR 8.0 (6.9) and retain our HOLD-rating.

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Exel Composites - Q1 as expected but guidance is off

06.05.2020 - 09.35 | Earnings Flash

Exel Composites’ Q1 results met expectations. The company nevertheless had to withdraw FY ’20 guidance. The pandemic has so far had only a limited impact on business.

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  • Q1 revenue was EUR 27.8m vs EUR 27.9m/27.2m Evli/consensus estimates, thus increasing by 3% y/y. The pandemic impacted business only in China during Q1, where production has resumed to full capacity. The UK unit has been running at reduced capacity since April.
  • Exel Composites updated its reporting structure. The company previously reported revenue for three broad segments and now discloses figures for seven customer industries. In Q1 most of the customer industry revenues grew y/y, excluding Transportation and Telecommunications. 
  • Exel Q1 adjusted operating profit stood at EUR 2.1m compared to EUR 2.2m/2.0m Evli/consensus estimates.
  • Order intake increased by 23% y/y to EUR 34.5m. Order backlog was thus 50% higher than a year ago.
  • Exel Composites issued an outlook on Feb 18 according to which revenue and adjusted operating profit are expected to increase in 2020 compared to 2019. The company now withdraws the guidance due to poor short-term visibility.

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Aspo - Improvement outlook unclear

06.05.2020 - 08.55 | Company update

Aspo’s operations ran rather normal in Q1, but profitability is under more pressure in Q2 and it’s quite uncertain how strong EBIT might rebound in H2’20. We have cut our estimates, our TP is now EUR 6.00 (6.25), rating HOLD.

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The segments will perform far short of their potential

The nascent pandemic began to impair ESL’s EBIT early on in Q1 as the escalating situation in China had a substantial negative effect on shipping rates. ESL’s Q1 EBIT thus fell to EUR 2.3m from EUR 3.2m a year ago. ESL was able to run its operations without interruptions and cargo volumes declined only slightly to 3.5m tonnes (3.6m tonnes a year ago), helped by stable levels for smaller vessels. Demand for larger vessels, however, remains rather weak and this also negatively affects demand for loading services. Q2 is thus set to be worse. Telko’s EUR 2.4m EBIT in the face of falling volumes and prices was in our view strong show (revenue down 12% y/y), yet the operational improvements are probably not going to help figures that much in the near-term considering the kind of macroeconomic outlook e.g. vaporizing oil prices are indicating. Leipurin’s EBIT improved to EUR 0.6m, but many customers such as restaurants, cafes and small bakeries are suffering. Large industrial bakeries saw demand briefly spike but the situation has since normalized.

We now expect FY ’20 EBIT to decline almost 20%

We have cut our estimates especially for Telko. We now expect Telko’s FY ’20 revenue to decline by 14% and see EBIT down to EUR 6.4m compared to EUR 8.0m last year. For Q2 we see Telko revenue down 22% y/y. We estimate Aspo’s FY ’20 EBIT at EUR 17.4m (previously estimated EUR 20.7m) as macroeconomic recovery prospects have continued to deteriorate. H2’20 remains particularly uncertain in terms of ESL’s cargo volume outlook (on which EBIT improvement mainly relies). In our view Aspo’s creditworthiness is not in question (the company also has a EUR 67m liquidity position), but from a shareholder point of view the pace of improvement remains crucial, and right now it’s unclear just how quickly profitability could reach more attractive levels.

We see current valuation fair in the present environment

Our view is unchanged in the sense that higher profitability potential remains, but for now it’s difficult to rely on long-term estimates. Our TP is EUR 6.00 (6.25), rating still HOLD.

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Innofactor - Right on track

06.05.2020 - 08.45 | Company update

Innofactor posted solid profitability figures in Q1 along with continued revenue growth. A minor COVID-19 impact is expected for the rest of the year. We continue to expect minor sales growth along with EBITDA improvement in 2020. We retain our BUY-rating with a target price of EUR 0.95 (0.90).

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Solid Q1 profitability and sales growth
Innofactor’s Q1 results beat our expectations and profitability reached solid levels. Revenue amounted to EUR 17.2m (Evli 16.8m) and grew 6.2% y/y. EBITDA amounted to EUR 2.0m (Evli 1.2m). All countries were profitable and showed sales growth in Q1. Non-cash internal debt exchange rate fluctuations kept PTP in the red but operating cash flow was a solid EUR 3.1m. The order backlog was at a good level of EUR 54.1m and the pipeline remains healthy according to the company. Guidance remains intact, with net sales and EBITDA expected to increase compared to 2020.

COVID-19 impact expected to be minor
Innofactor expects the impacts of the Coronavirus pandemic on the rest of the year to be minor. Our 2020 estimates remain largely intact as the solid Q1 offset adjustments due to the pandemic for the later quarters. We expect minor growth in 2020, with revenue of EUR 65.1m (2019: 64.2m), and an EBITDA of EUR 5.9m (2019: 5.1m). The high share of recurring revenue, some 55% in Q1, will prove to be beneficial under current circumstances. Additional funding of EUR 3.0m was secured for financial flexibility and possibly pursuing inorganic growth opportunities. The ownership in Arc Technology was increased and will be reported as a subsidiary from Q2, 2020 net sales impact is approximately EUR 1.0m.

BUY with a target price of EUR 0.95 (0.90)
Innofactor has been on a good track on EPS growth and improved operational efficiency and the impact of COVID-19 is estimated to be limited. Valuation has become fairer on peer multiples, but we see long-term potential intact. We retain our BUY-rating with a target price of EUR 0.95 (0.90).

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Aspo - Q2 will be weaker

05.05.2020 - 10.50 | Earnings Flash

Aspo disclosed its preliminary Q1 figures already on Apr 9, in addition to withdrawing guidance for FY ’20, so there was little surprise with regards to the results released today. The pandemic did hurt Q1 figures to some extent, but the impact will be felt harder during Q2.

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  • Aspo Q1 revenue stood at EUR 133.2m, down 6% y/y.
  • Q1 EBIT was EUR 4.0m. Lower shipping rates in early Q1, due to the situation in China back then, affected ESL’s profitability, while in our view Telko and Leipurin managed relatively strong operating profits. Q2, however, is bound to be worse for all three.
  • ESL Shipping’s top line was EUR 42.7m (EUR 43.7m a year ago) while EBIT amounted to EUR 2.3m (EUR 3.2m a year ago). Q1 cargo volumes declined slightly y/y from 3.6m to 3.5m tonnes. Volumes for smaller vessels remained at a normal level. ESL can operate normally, but both demand and shipping rates are set to fall further during Q2.
  • Telko’s Q1 revenue was EUR 63.6m i.e. down 12% y/y, and EBIT came in at EUR 2.4m (EUR 2.4m a year ago). Aspo expects volumes to decline rapidly during Q2.
  • Leipurin posted EUR 26.9m revenue, up 4% y/y, and EUR 0.6m EBIT (EUR 0.5m a year ago). Aspo says the pandemic will have a significant negative impact on Q2 figures.

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Innofactor - Solid profitability figures

05.05.2020 - 09.30 | Earnings Flash

Innofactor’s Q1 results were above our expectations and profitability was at solid levels. The net sales in Q1 amounted to EUR 17.2m (Evli EUR 16.8m), while EBITDA amounted to EUR 2.0m (Evli EUR 1.2m). Guidance remains intact. COVID-19 impact so far limited, minor impact on net sales and profitability expected for the end of the year.

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  • Net sales in Q1 were EUR 17.2m (EUR 16.1m in Q1/19), slightly above our estimates (Evli EUR 16.8m). Net sales in Q1 grew 6.2 % y/y. Net sales grew in all countries.
  • EBITDA in Q1 was EUR 2.0m (EUR 0.9m in Q1/19), clearly above our estimates (Evli EUR 1.2m), at a margin of 11.4 %.
  • Operating profit in Q1 amounted to EUR 0.8m (EUR -0.1m in Q1/19), clearly above our estimates (Evli EUR 0.1m), at a margin of 4.8 %.
  • Order backlog at EUR 54.1m, up 32% y/y. Innofactor received several significant orders during the quarter and the order backlog improved q/q.
  • Guidance intact: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • The Coronavirus pandemic has so far not had a significant effect on the ability to provide services. Innofactor estimates that the pandemic will have a minor effect on the net sales and profitability of the rest of the year. Third and fourth quarter growth and profitability will depend on the schedule of removal of restrictions in the Nordics.
  • EUR 3.0m additional funding received, organic growth opportunities possible

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Solteq - Good start given prevailing uncertainty

04.05.2020 - 09.45 | Company update

Solteq’s Q1 growth was clearly better than expected, 11.6% in comparable terms, with sales at EUR 15.7m (Evli 14.4m). The adj. EBIT was in line with our expectation at EUR 0.9m (Evli 0.8m). We expect reasonable growth in comparable terms in 2020 despite some COVID-19 headwind. We retain our HOLD-rating with a TP of EUR 1.15 (0.95).

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Growth in Q1 a positive surprise
Solteq’s revenue growth in Q1 was a clear positive, with revenue growing 5.0% (comparable growth 11.6%) to EUR 15.7m (Evli EUR 14.4m). Growth was driven by the Solteq Digital as a result of good order intake. The adj. EBIT was in line with our estimates at EUR 0.9m (Evli EUR 0.8m), with a lower relative profitability y/y (Q1/19: comp. EBIT 1.2m) due to higher product development depreciation, long-term project revenue recognition and COVID-19 provisions.

Expect growth in comparable revenue despite COVID-19
Based on the positive Q1 revenue figures we have revised our 2020E estimates, expecting revenue to amount to EUR 58.9m and increase some 6.5% from 2019 comparable revenue figures. We assume a dip in sales growth during mid-2020 due to the COVID-10 pandemic but for growth to pick up in 2021. We expect the adj. EBIT in 2020E (Evli EUR 2.4m) to be slightly below 2019 comparable figures largely due to an increase in depreciation related to capitalized product investments. Solteq does not provide a guidance for 2020 due to the pandemic. During 2021-2022 we expect stronger relative growth pick up in Solteq Software with the ramp-up of new projects and a perceived lesser impact of the pandemic along with a notable improvement in relative profitability.

HOLD with a target price of EUR 1.15 (0.95)
On our revised estimates we retain our HOLD-rating with a target price of EUR 1.15 (0.95). Should growth continue at a similar pace as in Q1 valuation upside potential would be clearer, but visibility is currently limited due to the COVID-19 pandemic and earnings multiples on our estimates rather unattractive.

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SRV - Good start to the year

30.04.2020 - 09.45 | Company update

SRV’s Q1 results were better than expected, most importantly profitability improved to healthy levels (EBIT Act./Evli EUR 4.5m/-5.1m), and order intake is showing positive development. Steps to improve the financial position continue to be of focus, COVID-induced uncertainty poses a threat to shopping centre exit plans. We retain our HOLD rating with a TP of EUR 1.1 (1.0).

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Back to healthier profitability in Q1
SRV’s Q1 results were better than expected. Revenue amounted to EUR 208.1m (EUR 187.0m/198.0m Evli/cons.) and EBIT to EUR 4.5m (EUR -5.1m/-0.4m Evli/cons.). Compared to our estimates, profitability was higher mainly due to a misjudgment of FX hedging and the higher revenue. Q1 included EUR 2.1m profit margin eliminations from the sale of holdings in REDI and Tampere Deck and Arena. Overall, Q1 profitability was in our view a clear but still early positive sign of a turnaround. New orders have developed positively so far during 2020, with EUR 198m new orders in Q1.

2020 EBIT estimate raised to 14.8m (4.3m)
Apart from adjustments based on Q1 figures, our 2020 estimates are largely intact. SRV’s estimate for developer-contracted housing unit completions in 2020 was revised to 520 (586), but we had for housing construction already as a precaution to possible near-term housing market uncertainty due to the coronavirus pandemic assumed a clearly lower number of units recognized as income compared to completion guidance. Our revised 2020E estimates for revenue and EBIT are EUR 957.2m (prev. 956.2m) and EUR 14.8m (prev. EUR 4.3m).

HOLD with a target price of EUR 1.1 (1.0)
Following estimates revisions, we adjust our target price to EUR 1.1 (1.0) and retain our HOLD-rating. Q1 showed good progress on the profitability front, next steps will be the measures to improve the financial position. Received commitments support the upcoming rights issues, shopping centre exits will likely see delays due to the COVID-induced uncertainty.

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Finnair - Figuring out the new normal of air travel

30.04.2020 - 09.25 | Company update

Finnair’s Q1 result was weak as expected due to the coronavirus pandemic. Revenue declined by 16% y/y to EUR 561m while adj. EBIT was EUR -91m. We have decreased our 20E-22E estimates and downgrade our rating to “SELL” (“HOLD”) with TP of EUR 3.3 (4.0).

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Weak Q1 result due to COVID-19
Finnair’s Q1 result was heavily impacted by COVID-19. Revenue declined by 16% y/y to EUR 561m vs. EUR 585m/555m Evli/cons. Adj. EBIT was below estimates at EUR -91m vs. EUR -73m/-59m Evli/cons. ASK decreased by 9.4% y/y while RASK decreased by 7.3% y/y. The company expects a significant comparable operating loss in 20E. Earlier Finnair cut its capacity by over 90% due to the coronavirus and the company will operate the current minimum network throughout Q2. Finnair estimates that its comparable operating result will be a daily loss of approx. EUR 2m throughout Q2.

Ugly Q2 ahead – H2 remains blurry
Due to the coronavirus pandemic, Q2E result will be even uglier than in Q1. We expect Finnair’s Q2E ASK to decrease by 95% y/y, resulting in a significant decline in revenue. We expect comparable operating loss of EUR ~170m in Q2E. The situation should start slowly to recover after Q2 but we still expect significant capacity cuts during the late summer and autumn. H2’20E remains blurry as it still is unknown how the coronavirus situation will evolve in different markets. Finnair also gave insights of how the mid-term outlook of air travel might look like and indicated that the passenger numbers are not expected to recover to the levels prior the crisis at least not during the next couple of years. It is likely that the air travel will face permanent structural changes and will never return as it was before the crisis.

“SELL” (“HOLD”) with TP of EUR 3.3 (4.0)
We have decreased our 20E revenue estimate by ~20% and adj EBIT estimate by ~80%. We have also cut our 21E-22E revenue estimates by ~14% and adj EBIT estimates by ~30-50%. We now expect Finnair’s 20E revenue to decline by 43% y/y to EUR 1752m and comparable operating loss of EUR 265m. We note that there are significant uncertainties with our estimates. Prior the crisis, Finnair had a strong cash position and a healthy balance sheet. The company is also implementing a substantial funding plan, including sale and leasebacks of unencumbered aircraft, a revolving credit facility of EUR 175m, which has already been raised and a statutory pension premium loan totaling to EUR 600m. Therefore, we see that Finnair is well placed to continue its operations after the crisis, even if the situation is prolonged. Finnair is also planning for an approx. EUR 500m share issue to strengthen its equity. We downgrade our rating to “SELL” (“HOLD”) with TP of EUR 3.3 (4.0).

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Raute - Long-term story not much changed

30.04.2020 - 09.10 | Company update

Raute’s Q1 results missed our estimates due to order timing and certain delays, while order intake was a positive surprise. The pandemic has so far had a limited impact. In the big picture our view is not meaningfully changed since Raute’s results tend to be volatile also in more normal times. Our TP remains EUR 21 and rating HOLD.

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Outlook seems to have turned more positive in early Q1
Q1 revenue fell by 42% y/y to EUR 24m vs our EUR 36m estimate. Services’ EUR 10m top line fell short of our EUR 13m expectation, but most of the gap was due to project deliveries’ order timing as the EUR 58m Russian order was recognized at a lower rate than we expected. Certain unseen delivery delays also had an impact. Project revenue thus amounted to EUR 14m while we had estimated EUR 23m. The EUR -3.0m EBIT (vs our EUR 1.5m estimate) was also due to higher investments in R&D, which Raute booked EUR 1.4m in Q1, or slightly higher than our expectation (Raute says there were certain exceptional items to the line and says ca. EUR 1.2m would be a more normal figure). The report’s positive note was found in order intake, which at EUR 25m was above our EUR 15m estimate. Technology services’ order intake, at EUR 11m, was as we expected and so the EUR 14m in project deliveries orders clearly exceeded our estimate.

Raute’s competitive position is unlikely to be hit
Maintenance and spare parts demand continued good, but safety policies began to restrict business with the onset of the pandemic. Raute saw positive signs in terms of potential uptick in demand prior to the pandemic. Since then customers’ comments have been mixed and there’s no consensus on how long-term fundamentals might have been altered. Our view is that end-demand, i.e. wood-based construction, is not meaningfully impaired. Government actions could possibly help construction but right now there are few facts. The EUR 92m order book is highly current i.e. cancellations are unlikely. The EUR 40m cash position means liquidity is no problem.

We see reasons why more long-term valuation is justified
Multiples for FY ‘20 begin to look high but should normalize next year. We see Raute well-positioned for an uncertain macro environment and thus in our opinion a more long-term view is justified. Our TP is still EUR 21, rating HOLD.

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Solteq - Solid revenue growth

30.04.2020 - 08.30 | Earnings Flash

Solteq’s revenue in Q1 was better than expected at EUR 15.7m (Evli EUR 14.4m). Comparable growth was 11.6%. The adj. operating profit was in line with expectations at EUR 0.9m (Evli EUR 0.8m). Product development investments in 2020E EUR 3.0m (2019 3.9m).

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  • Net sales in Q1 were EUR 15.7m (EUR 14.9m in Q1/19), above our estimates (Evli EUR 14.4m). Growth in Q4 amounted to 5.0 % y/y. Comparable growth, adjusted for the divestment of the SAP ERP business amounted to 11.6%. Growth was mainly driven by the Solteq Digital segment. Approximately a quarter of sales came from outside Finland.
  • The operating profit in Q1 amounted to EUR 0.7m (EUR 1.5m in Q1/19), in line with our estimates (Evli EUR 0.8m). The adj. operating profit amounted to EUR 0.9m (EUR 1.2m in Q1/19), in line with our estimate of EUR 0.8m.
  • Capitalized product development investments during Q1/20 amounted to EUR 1.0m. Solteq expects product development investments in 2020 to amount to EUR 3.0m (2019: EUR 3.9m).
  • Solteq Digital: Revenue in Q1 amounted to EUR 11.3m (Q1/19: EUR 10.7m). Comparable growth 15.5%. The adj. EBIT amounted to EUR 0.7m (Q1/19: EUR 0.6m).
  • Solteq Software: Revenue in Q1 amounted to EUR 4.3m (Q1/19: EUR 4.2m). Growth was 2.5%. The adj. EBIT amounted to EUR 0.2m (Q1/19: EUR 0.7m).
  • Solteq announced a change to its dividend proposal due to uncertainty caused by the coronavirus pandemic and the BoD is to propose that no dividend be distributed.

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Tokmanni - Expecting a quick recovery after the crisis

30.04.2020 - 07.45 | Company update

Tokmanni’s Q1 revenue increased by 5.8% y/y to EUR 199m (EUR 197m our view), while adj. EBIT was EUR 0.3m (EUR -2.2m our view). We expect sales and margins to decline in Q2 due to the movement restrictions but the situation should normalize relatively fast during the summer. We keep our rating “BUY” with TP or EUR 13.5 (12.5).

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Good sales and profitability development in Q1
Tokmanni’s Q1 result was slightly above estimates as revenue increased by 5.8% y/y to EUR 199m vs. EUR 197m/194m Evli/cons. LFL growth was 4.4%. Revenue was supported by good growth in online sales while the mild winter in Southern Finland had a negative impact on sales. The movement restrictions that came into force in mid-March had also a negative impact. For the first time in the company’s history, adj. EBIT was positive in Q1 as it amounted to EUR 0.3m vs. EUR -2.2m/-1.4m Evli/cons. The positive development in EBIT was mainly due to improved adj. gross margin which was 32.1% (Q1’19: 31.2%). Due to the situation around the coronavirus, the company did not provide a guidance for 20E.

Attracting new customer groups as the economic outlook weakens
The customer numbers in stores saw a significant drop when the movement restrictions came into force in mid-March. The stores have been open during this exceptional time. We expect the customer numbers to remain in a lower level during Q2 compared to the normal levels but expect the numbers to increase relatively fast after the restrictions are removed. We expect good growth in grocery sales and as people are staying at home, the demand in categories such as leisure and gardening is likely to remain strong. As an only nationwide general discount retailer with a broad product assortment, we expect Tokmanni to attract new customer groups as it is likely that consumers become more price conscious when the economic outlook weakens and the purchasing power declines. We expect a decline in sales and margins in Q2 compared to the previous year but the situation should normalize relatively quickly after that. Due to the temporary changes in the sales mix, we expect only a slight improvement in gross margin in 20E.

“BUY” with TP of EUR 13.5 (12.5)
After the Q1 result we have increased our 20E revenue expectation by ~1% and adj. EBIT expectation by 17%. We now expect 20E revenue of EUR 931m (-1.4% y/y) and adj. EBIT of EUR 64.5m (-8% y/y). On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 16.0x and 11.9x, which translates into ~15-30% discount compared to the international peers. With the estimates upgrade, we increase our TP to EUR 13.5 (12.5) and retain our rating “BUY”.

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Consti - Order backlog declines showing

30.04.2020 - 07.30 | Company update

Consti’s Q1 revenue declined more than expected (Act./Evli EUR 59.0m/64.7m), while EBIT was below our overly optimistic estimates (Act./Evli EUR 0.5m/1.9m). The impact of COVID-19 has been limited, some headwind is seen in new projects. We adjust our TP to EUR 7.0 (7.2), HOLD-rating remains intact.

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Below our optimistic estimates, good cash conversion
Consti’s Q1 results were below estimates but quite in line with company expectations. Revenue declined more than expected, 19.7% y/y, to EUR 59.0m (EUR 64.7m/67.9m Evli/cons.). EBIT was below our estimates as a result of the lower revenue and admittedly also our overly optimistic estimates, at EUR 0.5m (EUR 1.9m/0.4m Evli/cons.). Conti’s cash conversion remained solid (LTM cash conversion ratio 105.7%) and free cash flow amounted to EUR 2.0m. The order intake development was positive and amounted to EUR 62.1m, with the order backlog at EUR 202.2m (-14.9% y/y).

Some headwind seen in new projects
We have lowered our estimates based on the perceived new revenue level after the high volumes in 2019 and Q1 figures. We now expect revenue of EUR 271.9m (prev. 282.3m) and EBIT of EUR 7.6m (prev. 10.1m) in 2020E. The coronavirus pandemic has so far had a limited impact on Consti, as worksites have been able to be kept open. Negotiations for new renovation projects have been successful, for instance a EUR 11.3m school renovation project. Some projects in the negotiation stage have however been cancelled and the start of some projects have been postponed. Our estimates currently only include a limited impact of the pandemic.

HOLD with a target price of EUR 7.0 (7.2)
On our revised estimates we adjust our target price to EUR 7.0 (7.2), valuing Consti at ~10x 2020E EV/EBIT, and retain our HOLD-rating. Uncertainty is elevated by the pandemic and the St. George arbitration proceedings, which saw the time limit for delivering the final arbitration award extended to June 2021.

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Finnair - Significant losses due to COVID-19

29.04.2020 - 09.35 | Earnings Flash

Finnair’s Q1’20 adj. EBIT was EUR -91m vs. our expectation of EUR -73m and consensus of EUR -59m. Revenue decreased by 16% and was EUR 561m vs. our expectation of EUR 585m and consensus of EUR 555m.

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  • Q1 revenue was EUR 561m vs. EUR 585m/555m Evli/cons.
  • ASK decreased by 9.4% y/y in Q1. RASK decreased by 7.3% y/y.
  • Q1 adj. EBIT was EUR -91m vs. EUR -73m/-59m Evli/cons. Q1 comparable EBITDA was EUR -8.6m vs. EUR 4.5m our view.
  • Absolute costs in Q1: Fuel costs were EUR 144m vs. EUR 132m our view. Staff costs were EUR 136m vs. EUR 117m our view. All other OPEX+D&A combined were EUR 386m vs. EUR 425m our view.
  • Unit costs: CASK was 6.75 eurocents vs. 6.81 eurocents our view.
  • Q1 EPS was EUR -1.14 vs. -0.61/-0.70 Evli/cons.
  • Finnair expects that comparable operating loss will be significant in 20E. The company estimates that with the current minimum network, its comparable operating result will be a daily loss of approximately 2 million euros throughout the second quarter, despite cost adjustments.

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Raute - Miss driven by order book timing

29.04.2020 - 09.35 | Earnings Flash

Raute’s Q1 revenue and EBIT came in clearly below our expectations. According to Raute the pandemic had some negative impact, but the miss relative to our estimates seems to have been mostly attributable to order book scheduling. Order intake was clearly above our estimate, meaning order book increased slightly during the quarter.

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  • Raute posted EUR 23.8m Q1 revenue, compared to our 36.0m estimate. Project deliveries generated EUR 14.0m revenue (which we had expected at EUR 23.0m), while technology services sales amounted to EUR 9.8m (vs our EUR 13.0m estimate). The rather low top line figure was due to the timing of order book and a few projects’ postponing but the pandemic also had a negative impact, which Raute says was limited but not insignificant.
  • Q1 EBIT amounted to EUR -3.0m vs our EUR 1.5m estimate.
  • Order intake was EUR 25m in Q1 while we expected EUR 15m. The intake consisted of small and mid-sized individual production line deliveries and modernizations. Most of the orders received were attributable to projects that were negotiated long before the pandemic. Raute’s customers have continued to start up their investment projects in the face of the pandemic.
  • Order book stood at EUR 92m, compared to our EUR 67m expectation. In our view this is a rather strong figure.

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SRV - Q1 figures beat expectations

29.04.2020 - 09.15 | Earnings Flash

SRV's net sales in Q1 amounted to EUR 208.1m, above our and consensus estimates (EUR 187.0m/198.0m Evli/cons.). EBIT amounted to EUR 4.5m, above our and consensus estimates (EUR -5.1m/-0.4m Evli/cons.). SRV estimates that 520 developer-contracted housing units will be completed in 2020 (previously 586).

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  • Revenue in Q1 was EUR 208.1m (EUR 222.6m in Q1/19), above our estimates and consensus estimates (EUR 187.0m/198.0m Evli/Cons.). Growth in Q1 amounted to -6.5 % y/y.
  • Operating profit in Q1 amounted to EUR 4.5m (EUR 3.3m in Q1/19), above our estimates and consensus estimates (EUR -5.1m/-0.4m Evli/cons.), at a margin of 2.2 %. Operative operating profit was EUR 5.0m (Evli EUR 0.9m).
  • EPS in Q1 amounted to EUR -0.13 (EUR -0.02 in Q1/19), below our estimates and consensus estimates (EUR 0.07/-0.08 Evli/cons.).
  • The order backlog in Q1 was EUR 1,361.5m (EUR 1,782.5m in Q1/19), down by -23.6 %.
  • Construction: Revenue in Q1 was EUR 204.9m vs. EUR 186.3m Evli. Operating profit in Q1 amounted to EUR 6.2m vs. EUR 3.4m Evli.
  • Investments: Revenue in Q1 was EUR 1.6m vs. EUR 1.2m Evli. Operating profit in Q1 amounted to EUR 1.4m vs. EUR -7.5m Evli.
  • Other operations and elim.: Revenue in Q1 was EUR 1.6m vs. EUR -0.5m Evli. Operating profit in Q1 amounted to EUR -0.2m vs. EUR -1.0m Evli.
  • SRV estimates that 520 developer-contracted housing units will be completed in 2020 (previously 586).
  • The coronavirus pandemic did not substantially affect SRV’s revenue and result for January–March.

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Tokmanni - Q1 result slightly above estimates

29.04.2020 - 09.05 | Earnings Flash

Tokmanni’s Q1 revenue increased by 5.8% (LFL growth of 4.4%) and was EUR 199.0m vs. EUR 196.6m/193.5m Evli/consensus. Tokmanni’s adj. EBIT was EUR 0.3m vs. EUR -2.2m/-1.4m Evli/cons. Adj. gross margin was 32.1% vs. 31.4% Evli. The company did not provide a guidance for 20E, due to the coronavirus situation.

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  • Q1 revenue grew by 5.8% and was EUR 199.0m vs. EUR 196.6m/193.5m Evli/consensus. The leap day had a positive impact on sales. The restrictions caused by the coronavirus reduced customer flows towards the end of the quarter.
  • Q1 adj. gross profit was EUR 63.8m (32.1% margin) vs. EUR 61.7m (31.4%) Evli expectation.
  • Q1 adj. EBITDA was EUR 16.3m vs EUR 13.6m/14.5m Evli/consensus.
  • Q1 adj. EBIT was EUR 0.3m (0.1% margin) vs. EUR -2.2m (-1.1%) our expectation and EUR -1.4m (-0.7%) consensus.
  • Q1 eps was EUR -0.04 vs EUR -0.07/-0.06 Evli/consensus
  • Guidance for 20E was not given at this point due to the coronavirus crisis.

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Consti - Lower revenue drives estimates miss

29.04.2020 - 09.00 | Earnings Flash

Consti's net sales in Q1 amounted to EUR 59.0m, below our estimates and below consensus (EUR 64.7m/67.9m Evli/cons.). EBIT amounted to EUR 0.5m, below our estimates but in line with consensus (EUR 1.9m/0.4m Evli/cons.). Uncertainty has increased as a result of the coronavirus pandemic, but impact so far limited.

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  • Net sales in Q1 were EUR 59.0m (EUR 73.5m in Q1/19), below our estimates and consensus estimates (EUR 64.7m/67.9m Evli/Cons.). Growth in Q1 amounted to 19.7 % y/y.
  • Operating profit in Q1 amounted to EUR 0.5m (EUR 0.4m in Q1/19), below our estimates and in line with consensus estimates (EUR 1.9m/0.4m Evli/cons.), at a margin of 0.8 %.
  • EPS in Q1 amounted to EUR 0.01 (EUR -0.08 in Q1/19), below our estimates and in line with consensus estimates (EUR 0.15/0.00 Evli/cons.).
  • Free cash flow EUR 2.0 (Q1/19: EUR -3.5m)
  • The order backlog in Q1 was EUR 202.2m (EUR 237.8m in Q1/19), down by -15 %. Order intake in the quarter amounted to EUR 62.1m (Q1/19: EUR 73.5m)
  • Uncertainty has increased as a result of the coronavirus pandemic, but impact so far limited. Worksites have remained open in all operational areas. Some projects in the negotiation stage have been cancelled, and the start of some projects that were at the contractual stage has been moved forward.
  • Guidance reiterated: The Company estimates that its operating result for 2020 will improve compared to 2019.

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Vaisala - Clouds over W&E while IM keeps on rocking

29.04.2020 - 08.45 | Company update

Vaisala delivered a better than expected Q1 result. Overall, Vaisala is well positioned to weather the corona storm, but clouds are gathering above W&E as project business is exposed to the pandemic. Given the uncertainty to W&E’s performance in H2, we do not see short term risk/reward profile particularly attractive now. Based on our slightly raised estimates, we raise our target price to 26€ (prev. 25€), our recommendation is now HOLD (prev. SELL).

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No major impact of corona in Q1
Vaisala delivered a better than expected Q1 result as corona did not have major impact on business in the quarter and delivery capabilities remained good. Q1 net sales grew 4% to 87.2 MEUR vs. 84.5 MEUR our expectation and 84.3 MEUR consensus. Q1 reported EBIT was 5.2 MEUR (6% margin) vs. our expectation of 2.1 MEUR (3.2 MEUR consensus). EBIT improvement was due to strong 3pp improvement in gross margins (56.4% vs. 53.2% Q1’19), which was attributed to projects and digital services in W&E and exceptionally high GM of 65.8% in IM. Q1 order intake decreased -21% due to lower order intake in W&E. It’s worth noting however that order intake comparison period was exceptionally good (including two large projects) and variations between quarters can be large depending on timing of projects. Order book grew +2% q/q and -6% y/y. The Ethiopian project order (13 MEUR) is not yet included in order book.

W&E business exposed while IM continues on track
Vaisala reiterated its 2020 guidance (updated on April 21st); expecting net sales of 370–405 MEUR and EBIT of 34–46 MEUR. With W&E’s current strong order book, descent order intake, and delivery capabilities remaining at current acceptable levels, we expect W&E business to perform well in H1. The effects of the corona pandemic impact more on W&E business in H2, where delays or postponements of projects become more likely if current situation is prolonged. Vaisala sees developed countries market remaining more stable while developing countries being more hit by the pandemic. IM is expected to continue growing, albeit slower than last year’s organic growth of roughly 9.5%.

Valuation stretched given weakened financial outlook in W&E
We’ve only made small adjustments to our estimates based on the report. We expect IM to continue performing well, while W&E to decline in H2 partly due the pandemic and high comparison period. We expect 2020e net sales to decline 3% to 392 MEUR and reported EBIT to decline to 39 MEUR, mainly due to the lower performance in W&E in H2. On our estimates, Vaisala is still trading at clear premiums compared to our peer group. Also, our 2020-21e PPA-adjusted EV/EBIT multiples of 22x and 19x, are ~25% above our peer group. Given the uncertainty to W&E’s performance this year, we do not see short term risk/reward profile particularly attractive now. Based on our slightly raised estimates, we raise our target price to 26€ (prev. 25€), our recommendation is now HOLD (prev. SELL). Our target price values Vaisala at 20-21e EV/EBIT multiples of 23.5x and 20x which is above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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Detection Technology - Corona related bump in the road

28.04.2020 - 09.00 | Company update

DT’s Q1 result clearly missed expectations due to weaker than expected demand and profitability development caused by COVID-19. DT expects weakness in SBU sales to continue throughout the year, while MBU is enjoying good momentum. DT is well positioned to weather out the corona storm and its competitive position with new products remains good. We have lowered our estimates for 2020e and based on the estimates cut, we lower our target price to 22€ (prev. 24€) but maintain BUY recommendation.

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Corona pandemic affecting SBU demand and profitability
DT’s Q1 net sales amounted to 19.9 MEUR (-13.6% y/y) vs. 22.2/22.0 MEUR Evli/consensus estimates. Q1 EBIT was 1.2 MEUR (5.9% margin) vs. 2.8/2.6 MEUR Evli/cons. R&D costs amounted to 2.6 MEUR or 13% of net sales (11% Q1’19). SBU had net sales of 11.5 MEUR vs. 14.2 MEUR Evli estimate. SBU sales declined -20% y/y, mainly due the COVID-19 pandemic. Both air and land transport decreased from 30 to 90% in different segments. MBU delivered net sales of 8.4 MEUR which was in line with our estimate of 8.0 MEUR. Net sales of MBU decreased by -2% y/y due to the expected softness in the CT market outside China at the beginning of the year, and the ramp-down in production of a product family started by one of DT’s key customers last year. The COVID-19 pandemic increased demand in CT applications towards the end of Q1, but relatively high comparison figures led to the overall development in net sales remaining negative.

Mid-term fundamentals remain good for both BU’s
DT expects lower demand in the security segment to continue in Q2 and SBU sales to decrease in 2020. DT sees that despite the short-term challenges in the aviation segment, ECAC C3 standard equipment upgrades will continue at European airports, but the deadline for CT machine installations will be probably extended by 6-12 months. The CT upgrades in the US have continued, however a slight delay is expected for future purchases. China is also preparing similar standardization and has informed earlier that they will publish details by the end of 2020. On the other hand, MBU sales is enjoying better momentum as CT imaging is used to detect pulmonary changes caused by the COVID-19 virus, as well as in the diagnosis and treatment of patients. DT sees demand in medical CT applications remaining at a good level also in H2 and MBU sales to increase in 2020.

Investment story remains attractive despite bump in the road
Based on the report, we have cut our 2020e sales and EBIT estimates by 8% and 23% respectively, while keeping our 2021-22e estimates broadly unchanged. We expect SBU sales to decline -13% from last year’s highs and MBU to grow 17%, resulting in 2020e net sales to decline -3% and EBIT of 13 MEUR. On our revised estimates, DT is trading at 19x and 13x EV/EBIT multiples for 20E-21E. Valuation picture is now more mixed as 2020e metrics will be clearly lower due to the pandemic, and growth and profitability should resume in 2021e. DT is now trading on slight EV/EBIT premium on our 2020e estimates, but on a 12% discount on our 2021e estimates. Although 2020e will be challenging, DT is well positioned to weather out the storm and its competitive position with its new products remains good. Therefore, we continue to see DT as an attractive investment story given the strong longer-term drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Based on the estimates cut, we lower our target price to 22€ (prev. 24€) but maintain BUY recommendation. Our target price implies EV/EBIT multiple of 15.5x on our 2020e estimates, broadly in line with our peer group.

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Talenom - Defensive characteristics showing

28.04.2020 - 09.00 | Company update

Talenom’s Q1 results slightly beat our expectations, with net sales of EUR 17.4m (Evli 16.9m) and EBIT of EUR 3.7m (Evli 3.5m). Net sales and EBIT guidance for 2020 was set at EUR 64-68m and 12-14m respectively. Growth outlook remains favourable and any plausible impact from the coronavirus pandemic for now appears limited. We adjust our target price to EUR 7.0 (6.7), HOLD-rating intact.

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Q1 slightly better than expected
Talenom’s Q1 results were slightly better than expected. Net sales grew 17.4% to EUR 17.4m (Evli 16.9m) and EBIT amounted to EUR 3.7m (Evli 3.5m). Talenom gave a numeric guidance for 2020, expecting net sales of EUR 64-68m and EBIT of EUR 12-14m. Sales plans have progressed almost in line with plans despite the coronavirus pandemic. Investments are being made to customer interfaces and plans for a new concept for small customers were floated, which sounds promising but will likely have little sales impact before 2021. Additional financing of EUR 10m was secured for acquisitions and growth projects in Finland and Sweden.

Near-term risks limited
Our post-Q1 estimates revisions are minuscule and we expect 2020E net sales and EBIT of EUR 67.3m and EUR 12.5m respectively. Near-term risks due to the pandemic are limited, with transactional volumes possibly affected. A prolonged situation and an increase in defaults would have a heavier impact on 2021 due to customer bookkeeping obligations. The resilience of the bookkeeping market is noteworthy, and the near-term uncertainty may open more opportunities for inorganic growth.

HOLD with a target price of EUR 7.0 (6.7)
Talenom remains an attractive investment case through its track-record and defensive nature, valuation slightly less so, with the share price essentially at pre-COVID levels. We adjust our target price to EUR 7.0 (6.7), valuing Talenom at ~32x 2020E P/E, and retain our HOLD-rating.

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Talenom - Earnings flash - Upbeat Q1 report

27.04.2020 - 14.00 | Earnings Flash

Talenom's net sales in Q1 amounted to EUR 17.4m, slightly above our and consensus estimates (EUR 16.9m/17.0m Evli/cons.). EBIT amounted to EUR 3.7m, slightly above our and consensus estimates (EUR 3.5m/3.5m Evli/cons.). Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m.

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  • Net sales in Q1 were EUR 17.4m (EUR 14.8m in Q1/19), slightly above our estimates and consensus estimates (EUR 16.9m/17.0m Evli/Cons.). Growth in Q1 amounted to 17.4 % y/y.
  • Operating profit in Q1 amounted to EUR 3.7m (EUR 3.4m in Q1/19), above our estimates and consensus estimates (EUR 3.5m/3.5m Evli/cons.), at a margin of 21.4 %.
  • EPS in Q1 amounted to EUR 0.07 (EUR 0.06 in Q1/19), above our and consensus estimates (EUR 0.06/0.06 Evli/cons.).
  • Sales team has changed over to a distance sales model and sales still almost in line with plans despite the coronavirus pandemic.
  • An additional loan of EUR 10m has been negotiated, that can be used for acquisitions and for other projects in support of growth in Finland and Sweden.
  • Guidance 2020: Net sales for 2020 are expected to amount to EUR 64-68m and operating profit to EUR 12-14m (Evli 2020E: 68.8m and 12.6m respectively). Previous guidance: 2020 is expected to be in line with 2019 in terms of relative growth in net sales and relative profitability.

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Detection Technology - Clear miss due to weakened demand and profitability caused by COVID-19

27.04.2020 - 09.20 | Earnings Flash

DT’s Q1 net sales were EUR 19.9m (-13.6% y/y) vs. EUR 22.2m/22.0m Evli/consensus estimates. SBU sales declined -20% to EUR 11.5m (EUR 14.2m our expectation) and MBU sales declined -2% to EUR 8.4m (EUR 8.0m our expectation). DT’s Q1 EBIT came in at EUR 1.2 m vs. our estimates of EUR 2.8m (EUR 2.6m cons). DT expects SBU sales to decrease and MBU sales to increase in 2020.

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Group level results: Q1 net sales amounted to EUR 19.9m (-13.6% y/y) vs. EUR 22.2m/22.0m Evli/consensus estimates. Q1 EBIT was EUR 1.2m (5.9% margin) vs. EUR 2.8m/2.6m Evli/cons. R&D costs amounted to EUR 2.6m or 13% of net sales (11% Q1’19).
Security and Industrial Business Unit (SBU) had net sales of EUR 11.5m vs. EUR 14.2m Evli estimate. SBU sales declined -20% y/y, mainly due the COVID-19 pandemic. Both air and land transport decreased from 30 to 90% in different segments.
Medical Business Unit (MBU) delivered net sales of EUR 8.4m which was in line with our estimate of EUR 8.0m. Net sales of MBU decreased by -2% y/y due to the expected softness in the CT market outside China at the beginning of the year, and the ramp-down in production of a product family started by one of DT’s key customers last year. The COVID-19 pandemic increased demand in CT applications towards the end of Q1, but high comparison figures led to the overall development in net sales remaining negative.
Outlook update: DT expects lower demand in the security segment to continue and SBU sales to decrease in Q2. Demand in medical CT applications, however, will remain at a good level, and MBU sales will grow. DT expects the demand in medical CT applications to remain at a good level also in H2, and MBU sales to increase in 2020. DT estimates that drop in demand in the security segment will continue at least to the end of the year, and thus DT expects SBU sales to decrease in 2020.

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Verkkokauppa.com - Focus on sustainable growth

27.04.2020 - 09.20 | Company update

Verkkokauppa.com delivered a strong Q1 result as revenue increased by 8% y/y to EUR 125m (121m/118m Evli/cons). Adj. EBIT increased by 63% y/y to EUR 3.8m (2.7m/2.5m Evli/cons). The management had a good control over the business despite of the challenging times. We have slightly increased our estimates and upgrade our rating to “BUY” (“HOLD”) with TP of EUR 4.5 (3.5).

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Strong sales growth without forgetting profitability

Verkkokauppa.com delivered a strong Q1 result. Revenue increased by 8.2% y/y to EUR 125m (121m/118m Evli/cons). Good sales growth was driven by strong online sales and effective marketing. Development was good in all the major product categories but strong performance was also seen in evolving categories such as sports and home. Gross profit improved by 12% y/y to EUR 19.4m (15.5%) vs. our EUR 18.3m (15.1%), resulting from good control over sales mix. This impacted positively on adj. EBIT which was up by 63% y/y, totaling EUR 3.8m (2.7m/2.5m Evli/cons).

A strong online presence offering competitive advantages

Verkkokauppa.com’s small physical footprint and strong online presence offer the company competitive advantages amid the coronavirus and the movement restrictions. The company’s agile business model and a strong cash position support the company during these challenging times and it enables the company to develop its business as planned. We don’t expect the coronavirus to have significant negative impacts on Verkkokauppa.com’s operative business, although some availability issues might occur in some product categories later in H2. The increasing uncertainties are more related to the economic outlook and declining purchasing power. The company has introduced new delivery methods and sub-categories to enhance customer experience. Going forward, we expect the sales mix and broad product assortment to be the key drivers behind sustainable growth as the competition in the consumer electronics market is likely to remain tight, meaning that seeking growth in this category might become too expensive.

“BUY” (“HOLD”) with TP of EUR 4.5 (3.5)

We have slightly increased our estimates after the Q1 result. We expect 20E revenue of EUR 523m and EBIT of EUR 13.6m. Thus, our estimates are slightly above the midpoint of the given guidance (revenue of EUR 510-530m and adj. EBIT of EUR 12-15m). The outlook in the market remains blurry due to the weak visibility of the coronavirus and its full impacts but it is likely that the current situation speeds up the more permanent shift into online which benefits players like Verkkokauppa.com. On our estimates, the company trades at 20E-21E EV/sales multiple of 0.3x which translates into ~40 discount compared to the peers. We upgrade to BUY (HOLD) with TP of EUR 4.5 (3.5).

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Scanfil - Outlook basically unchanged

27.04.2020 - 09.15 | Company update

Scanfil operations continue to develop on a positive note as industrial OEM customer demand seems remarkably strong in the face of the pandemic. We have made rather small downward revisions to our estimates due to increasing uncertainty. Our TP is EUR 5.25 (5.75), rating BUY.

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No dramatic effects to segment performances so far
Q1 revenue grew by 11% y/y (two-thirds due to the HASEC acquisition) to EUR 144m and thus beat estimates by ca. EUR 10m. ROI, at 17.8% in Q1, continued to develop strong. February saw the Chinese plants stall due to the coronavirus situation that hadn’t back then escalated into a pandemic. There has been only one production plant closure so far since (in Poland). In fact, March was the strongest month in terms of (organic) growth and helped to compensate for slow February. According to Scanfil supply chains have continued to work well and only a few customer accounts have seen demand forecasts drop for Q2 and Q3. Naturally uncertainty is growing but for now Scanfil can reiterate its previous strong outlook for this year.

Scanfil continues to perform and is ready for acquisitions
We have slightly revised our estimates down due to increased uncertainty. The adjustments are remarkably small, amounting to an average of EUR 6m in quarterly revenue, or 4%. We have also done a small downward adjustment to operating margin, now expecting 6.5% instead of the previous 6.75%. We thus see EBIT at the low bound of the guidance range i.e. at EUR 39.0m; we previously expected EUR 41.4m. Scanfil says it has a liquidity position of some EUR 60m ready to be deployed for e.g. M&A.

A valuation above peer multiples is well justified
The pandemic seems to pose no cracks to Scanfil’s fundamentals. According to one narrative the pandemic will reverse globalization and thus supply chains and actors such as contract manufacturers are hit particularly hard. In our opinion such stories fly a bit too high and are based on unsound reasoning. Scanfil’s comments readily confirm industrial OEMs still want to outsource significant amounts of production. We update our TP to EUR 5.25 (5.75) due to increased macroeconomic uncertainty but note how few facts seem to impair Scanfil’s long-term story. We see good upside to Scanfil’s 5.5x EV/EBITDA and 7.5x EV/EBIT ‘20e valuation multiples.

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Raute - Outlook weakens

27.04.2020 - 09.00 | Company update

Raute downgraded its outlook for FY ‘20 ahead of the Q1 report, which the company releases on Wed, 29 Apr. We cut our estimates; TP now EUR 21 (25), rating still HOLD.

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We expect FY ’20 revenue down almost 20% y/y
Raute issued a profit warning. The company had previously guided flat revenue and decreasing operating profit for 2020 compared to 2019. The updated outlook guides declining top line as well as clearly weakening operating profit. The downgrade is not particularly surprising since Raute noted increasing uncertainty in the operating environment already last year due to cooling demand in the wake of major new capacity investments. There was a dearth of demand for mid-sized projects like modernizations. Raute saw demand for large and small orders at a good level, however it’s always hard to anticipate when big investment decisions will receive green light and the current extraordinary macroeconomic environment will not help. Safety policies will also limit assembly, commissioning and maintenance works at plywood and LVL mills.

We estimate FY ’20 EBIT falling close to 40% y/y
We cut our estimates for this year and next. We expect Raute’s top line at EUR 123m in ’20 (previously estimated EUR 142m) while we see EBIT down to EUR 5.2m (prev. EUR 7.6m). This year finds support from the record EUR 58m Segezha order, but extended weakness in order intake will mean next year revenue prospects will be under pressure as well. Should order intake begin to improve during the latter half of ‘20 we expect Raute to achieve rather stable development in ’21. We now estimate ’21 revenue at EUR 127m (prev. EUR 140m) and have revised ’21 EBIT estimate down to EUR 7.4m (prev. EUR 9.3m). We don’t see the pandemic hurting Raute’s long-term competitive positioning as the market leader within its niche. If anything, in our view it’s more likely that the opposite would be true.

We still view valuation neutral given competitive position
Raute trades some 7x EV/EBITDA and 12x EV/EBIT on our new estimates for ‘20. On our next year estimates the multiples stand at 5.5x and 8.5x, respectively. In our view current valuation falls within an acceptable range considering earnings have plenty of potential to rebound from the low level to be seen this year. Our new TP is EUR 21 (25), rating remains HOLD.

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Suominen - Long-term story gains more ground

24.04.2020 - 09.10 | Company update

Suominen’s Q1 revenue only slightly exceeded our estimate but as gross margin improved close to 400bps EBIT came in almost double our estimate. Suominen upgraded FY ’20 EBIT guidance. We have updated our estimates, and our new TP is EUR 3.25 (2.50), rating now HOLD (SELL).

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Profitability would have jumped even without the pandemic

Suominen reported flat y/y Q1 revenue at EUR 110.2m, while our estimate was EUR 108.0m. Suominen says its sustainable products sales are developing well (new products contributed more than 25% of sales vs 20% previously). The investment in Green Bay, WI plant helped volumes and contributed to a more favorable i.e. higher quality product mix. The pandemic also began to have a positive effect on volumes towards the end of Q1. Especially cleaning and disinfection applications demand has increased. Nonwovens demand in general has received a boost due to applications like surgical drapes and face masks, however such products represent relatively small business for Suominen. New products, improved production and raw material efficiency as well as low raw material prices together lifted gross margin almost 400bps (we had expected only slight improvement), and thus EBIT amounted to EUR 5.7m vs our EUR 2.9m estimate.

We now expect FY ’20 EBIT at EUR 23m (prev. EUR 12m)

Suominen sees Q2 another strong quarter, and thus updated FY ’20 guidance, now guiding clear EBIT improvement (previously improving) even if there’s much uncertainty with regards to H2’20 as the demand surge induced by the pandemic may cool down. Nonwovens prices will adjust with a few months’ time lag to accommodate changes in raw materials prices. We see some downward pressure on Q2 gross margin due to lower nonwovens prices, expecting a 60bps decline to 11.5%. So far Suominen’s operations have run basically normal. There could be raw material shortages and Suominen or its customers might have to close plants due to the pandemic.

Long-term story receives a boost, yet uncertainty still high

Suominen trades 5x EV/EBITDA and 10x EV/EBIT on our estimates for ‘20. In our view these are attractive levels, yet much depends on the gross margin going forward. Although new products sell well, the size of the pandemic’s positive impact is still hard to gauge. Our TP is now EUR 3.25 (2.50), rating HOLD (SELL).

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SSH - New CEO takes the realm in exceptional times

24.04.2020 - 09.00 | Company update

SSH’s Q1 report was in line with our expectations and we have not made any material changes to our estimates based on the report. We continue to see growth as main value driver and, as noted previously, we see SSH’s limited growth investment capacity as main strategic obstacle. We maintain our TP of 0.70€, our recommendation is SELL (prev. HOLD).

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Q1 in line, more transparency to come in reporting

SSH’s Q1 net sales were 3.1 MEUR (3.1 MEUR Evli), an increase of 16% y/y on relatively low comparison figures, mainly driven by strong license sales and supported by growth in subscription revenue. Software fees were 0.9 MEUR (0.8 MEUR Evli), professional services were 0.0 MEUR (0.1 MEUR Evli), and recurring revenue was 2.1 MEUR (2.2 MEUR Evli). Q1 operating loss was –0.6 MEUR (vs. -0.5 MEUR Evli). The report did not provide materially new information that would affect our estimates at present, but SSH did provide a more transparent and candid overview into its result and operations than previously. SSH plans on introducing monthly recurring revenue (MRR) figures in coming quarters. According to SSH, MRR was approximately 1 MEUR in December (reported FY’19 recurring revenue 8.6 MEUR).

Newly appointed CEO to update strategy in June

SSH’s new CEO, Mr. Teemu Tunkelo started in end of March. Mr. Tunkelo has held various global management and technology leadership roles in companies such as Voith, Siemens, ABB, Invensys, and Compaq. According to the CEO, preliminary guidelines for SSH’s new strategy can be expected in June. He acknowledged the need for further investments into go-to-market and talked about the potential in being first mover in cloud PAM (PrivX) and IoT applications. The COVID-19 outbreak has not had a significant impact during the first quarter, but SSH has seen some project delays and it is still too early to assess the full business impact of the pandemic. As such, SSH’s cash position is good (11.7 MEUR Q1’20) and share of recurring revenue around 60%, which should help SSH weather the storm. SSH is reviewing options for further funding for product development, as well as options for its 12 MEUR hybrid debt. Negotiations regarding the hybrid have however stalled due to the pandemic. The hybrid debt’s interest rate increased from 7.5% to 11.5 % as of March 30th. Under the current circumstances the hybrid is valuable despite the increase in financial expenses.

Estimates unchanged, target price of 0.70€ maintained

We have not made any changes to our estimates based on the report and we note that SSH is in a good position to ride out the corona pandemic. After the share price rally yesterday, current valuation looks challenging given sales growth uncertainty. On our estimates, SSH is trading at 2020-21e EV/Sales multiples of 2.8x and 2.4x, which is, as previously noted, clearly below the cyber security 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 the results of SSH’s strategy materializing somewhat in the growth figures in order to justify higher valuation multiples.We maintain our TP of 0.70€, with SELL recommendation (prev. HOLD). 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 growth and profitability metrics and the uncertainty to our estimates.

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Verkkokauppa.com - A strong start to the year

24.04.2020 - 08.40 | Earnings Flash

Verkkokauppa.com’s Q1’20 result beat our and consensus estimates. Revenue grew by 8.2% and was EUR 125m vs. Evli EUR 121m and consensus of EUR 118m. Gross profit was EUR 19.4m (15.5% margin) vs. EUR 18.3m (15.1% margin) Evli view. Adj. EBIT was EUR 3.8m vs. EUR 2.7m/2.5m Evli/cons. 2020E guidance reiterated: The company expects revenue to be EUR 510-530m and comparable operating profit to be EUR 12-15m.

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  • Q1 revenue was EUR 125m vs. EUR 121m Evli view and EUR 118m consensus. Sales grew as much as by 8.2% y/y. Revenue growth in Q1 was boosted by strong online sales and marketing. All product categories performed well.
  • Q1 gross profit was EUR 19.4m (15.5% margin) vs. EUR 18.3m (15.1% margin) Evli view.
  • Q1 adj. EBIT was EUR 3.8m (3.0% margin) vs. EUR 2.7m (2.2% margin) Evli view and EUR 2.5m (2.1% margin) consensus. EBIT improved mainly due to gross margin improvement.
  • Q1 eps was EUR 0.05 vs. EUR 0.04/0.04 Evli/cons.
  • 2020 guidance reiterated: The company expects revenue to be EUR 510-530m and comparable operating profit to be EUR 12-15m.
  • The company also decided on a quarterly dividend of EUR 0.053 per share.

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CapMan - Good progress negated by FV changes

24.04.2020 - 08.30 | Company update

CapMan’s Q1 results were slightly better than expected and underlying performance remained good, although EBIT as a result of negative fair value changes as expected fell clearly, to EUR -6.0m (Evli/cons. -7.5m/-3.9m). Fundraising projects continue but delays of 0-6 months are seen. Cost savings of up 10% of the cost base are sought without affecting growth ambitions. We retain our BUY-rating and TP of EUR 1.95.

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Negative FV changes spoiled otherwise good profitability
CapMan’s Q1 results came in slightly better than we had expected, with revenue of EUR 11.9m (Evli/cons. 10.7m) and EBIT of EUR -6.0m (Evli/cons -7.5m/-3.9m). Termination of the 2018 share plan caused a one-off cost of approx. EUR 1.4m. Unrealized FV changes amounted to EUR -10.5m. Profitability of the Management company and Service businesses improved clearly y/y, the latter aided by success fees from Scala but also seeing good development overall.

2020 an unfortunate dent to solid progress
With the significant negative FV changes in Q1 and assuming a cautionary view on carry and success fees in the current market environment we expect adj. EBIT to decline in 2020 to EUR 1.2m (25.0m). We expect the fee-based profitability to continue to improve through growth in AUM. Fundraising projects are seen to be delayed by 0-6 months but are continuing nonetheless, and CapMan also flashed a second Growth fund. CapMan is seeking to achieve cost savings of up to 10% of its cost base, which are sought to be achieved without affecting growth ambitions.

BUY with a target price of EUR 1.95
The expected weak earnings in 2020, mainly due to the negative unrealized FV changes, makes valuation on near-term figures more challenging. Upside potential can be seen on 2021E peer multiples and dividend yields but with the weakened visibility due to the Coronavirus we assume a near-term uncertainty discount and retain our target price of EUR 1.95 and BUY-rating.

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Scanfil - Good results amid the pandemic

24.04.2020 - 08.30 | Earnings Flash

Scanfil’s Q1 revenue clearly exceeded our and consensus estimates. Communication, Energy & Automation as well as Industrial segments were stronger than we expected. Scanfil says profitability developed as expected and reaffirms FY ’20 outlook.

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  • Q1 top line stood at EUR 144.1m, compared to EUR 133.7m/135.2m Evli/consensus estimates.
  • Communication revenue was EUR 22.4m while we expected EUR 16.1m. Scanfil says 5G network elements were the most important demand driver.
  • Consumer Applications revenue amounted to EUR 18.7m vs our EUR 24.7m estimate. Scanfil says the softness was due to a certain account whose demand begins in Q2 this year. The coronavirus also had an impact on a couple of accounts.
  • Energy & Automation recorded EUR 30.7m compared to our EUR 25.4m estimate. Demand was broad and strengthened during the quarter.
  • Industrial top line was EUR 45.6m vs our EUR 38.6m expectation.
  • Medtec & Life Science revenue amounted to EUR 26.7m, in comparison to our EUR 28.9m estimate.
  • Scanfil’s Q1 EBIT was EUR 8.6m vs EUR 8.7m/8.3m Evli/consensus estimates. The 6.0% operating margin was thus slightly lower than our 6.5% estimate.
  • Scanfil issued annual guidance on Feb 19, 2020 according to which the company saw FY ’20 revenue in the EUR 590-640m range and EBIT at EUR 39-43m. Scanfil said the guidance was subject to exceptional uncertainty due to the coronavirus situation that was evolving in China back then. The company made a certain allowance accordingly. Scanfil now reaffirms the outlook but updates the definition of uncertainties with a reference to potential negative effects of the pandemic.

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Suominen - Strong EBIT and updated guidance

23.04.2020 - 10.00 | Earnings Flash

Suominen reported Q1 revenue slightly above our estimate, while EBIT came in double our estimate. The beat was driven by higher gross margin. Suominen updates its guidance for FY ’20, expecting EBIT to improve clearly (previously improve).

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  • Q1 revenue amounted to EUR 110.2m vs our EUR 108.0m estimate. EUR 37m was attributable to Europe and EUR 73m to Americas. Nonwovens volumes increased while prices decreased along with raw materials. Suominen says the pandemic helped volumes towards the end of Q1 (for all markets) and expects extended strong demand in the short-term. In the long-term the pandemic may lead to continued increased demand for nonwovens in cleaning and disinfection applications. For now the company’s operations have been running basically normal, and nonwovens production has been classified essential.
  • Gross profit stood at EUR 13.3m while our expectation was EUR 9.2m. This means gross margin was 12.1% vs our 8.5% estimate.
  • Q1 EBIT was EUR 5.7m, compared to our EUR 2.9m estimate. The strong figure was due to higher volumes, improved production and raw materials efficiency as well as favorable raw materials prices.
  • Suominen updates its guidance, and now expects FY ’20 EBIT to improve clearly (previously improve) but notes the result estimate for H2’20 is uncertain due to the pandemic.

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SSH - Q1 result in line with expectations

23.04.2020 - 09.30 | Earnings Flash

SSH reported a Q1 result that was in line with our expectations. New CEO says financial performance was not significantly affected by the COVID-19 outbreak during the first quarter, but they’ve seen some project delays and it is still too early to assess the full business impact of the pandemic.

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• Q1 net sales were EUR 3.1 million (vs. 3.1m our expectation). Net sales increased by 16% compared to the previous driven mainly by strong license sales and supported by growth in subscription revenue.
• Software fees were EUR 0.9 million (0.8m Evli), Professional services were EUR 0.0 million (0.1m Evli), and Recurring revenue was EUR 2.1 million (2.2m Evli)
• Q1 operating loss was EUR – 0.6 million (vs. -0.5m our expectation)
• EPS was -0.02 (vs. -0.02 our estimate)
• Liquid assets were EUR 11.7m (12m Q4/19)
• PrivX update: development of the SaaS version of PrivX is proceeding well, and SSH anticipates the pilot launch during Q2. SSH has started the active conversion of existing CryptoAuditor customers to use PrivX.

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CapMan - FV changes burdened results

23.04.2020 - 09.00 | Earnings Flash

CapMan's net sales in Q1 amounted to EUR 11.9m, above our and consensus estimates (EUR 10.7m/10.7m Evli/cons.). EBIT amounted to EUR -6.0m, above our estimates and below consensus (EUR -7.5m/-3.9m Evli/cons.). Profitability burdened by fair value changes amounting to EUR -8.4m (Evli -9.7m).

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  • Revenue in Q1 was EUR 11.9m (EUR 9.3m in Q1/19), above our estimates and consensus estimates (EUR 10.7m/10.7m Evli/Cons.). Growth in Q1 amounted to 28 % y/y.
  • Operating profit in Q1 amounted to EUR -6.0m (EUR 4.7m in Q1/19), below our estimates and above consensus estimates (EUR -7.5m/-3.9m Evli/cons.). Profitability burdened by fair value changes amounting to EUR -8.4m (Evli -9.7m). Portfolio companies average FV decline 20%, Infra/RE 4%.
  • EPS in Q1 amounted to EUR -0.05 (EUR 0.02 in Q1/19), in line with our estimates and below consensus estimates (EUR -0.05/-0.03 Evli/cons.).
  • Management Company business: Revenue in Q1 was EUR 7.2m vs. EUR 7.1m Evli. Operating profit in Q1 amounted to EUR 1.9m vs. EUR 1.4m Evli.
  • Investment business: Operating profit in Q1 amounted to EUR -8.4m vs. EUR -10.0m Evli.
  • Services business: Revenue in Q1 was EUR 4.8m vs. EUR 3.5m Evli, aided by Scala success fees during Q1. Operating profit in Q1 amounted to EUR 3.0m vs. EUR 2.0m Evli.
  • Capital under management by the end of Q1 was EUR 3.2bn (Q1/19: EUR 3.2bn). Real estate funds: EUR 2.0bn, private equity & credit funds: EUR 1.0bn, infra funds: EUR 0.3bn, and other funds: EUR 0.03bn.

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Consti - COVID-induced uncertainty

23.04.2020 - 08.00 | Preview

Consti will report Q1 results on April 29th. We expect a third consecutive quarter of healthier profitability, while the points of interest will be less on Q1 financials and more on comments on any impact of the Coronavirus pandemic and order backlog development. Our estimates overall remain intact for now. With the added uncertainty we adjust our target price to EUR 7.2 (8.0) and retain our HOLD-rating.

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Profitability expected to have remained at healthier levels
With the on-going Coronavirus pandemic, the Q1 financials will be of lesser interest, as we expect that Consti should have been able to post a third consecutive quarter of healthier profitability. Our Q1 revenue and EBIT estimates are at EUR 64.7m and EUR 1.9m respectively. Of key interest in the Q1 report will be any comments regarding the possible impacts of the Coronavirus pandemic and order backlog development. The renovation sector in general is less prone to near-term shocks due to lengthier orders but the coinciding housing company General Meeting season could affect order backlog development and revenue later on in the year.

Sales decline 2020E, additional risk from COVID-19
Our estimates on annual basis remain largely intact for now. We expect a 10.3% decline in 2020 revenue based on completion of larger projects in 2019 and the order backlog development. We expect EBIT to improve to EUR 10.7m (2019: 4.6m) as profitability burdening projects have been completed. The Coronavirus pandemic poses a risk to our estimates through plausible project delays and potential supply chain problems, dependent also on the general economic impact, but we still see fundamental drivers in place and a slow-down in new construction volumes due to the pandemic could benefit renovation construction.

HOLD with a target price of EUR 7.2 (8.0)
Our estimates remain largely intact for now in awaiting the Q1 results, but with the elevated risk level we adjust our target price to EUR 7.2 (8.0), with our HOLD-rating intact.

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Finnair - Coronavirus hampers Q1 result

22.04.2020 - 09.15 | Preview

Finnair will report its Q1 result on next week’s Wednesday, 29th of April. The company’s Q1’20 traffic data was below our expectations thus we have cut our estimates. We expect Q1’20E revenue of EUR 585m and adj. EBIT of EUR -73m. We keep our rating “HOLD” with TP of EUR 4.0 (3.5) ahead of Q1.

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Q1 traffic hampered by the coronavirus

Finnair’s traffic figures were substantially below our expectations in Q1, due to March traffic figures, which slumped more than we expected. In Jan-Mar, capacity (ASK) decreased by 9% vs. our +2% expectation, while sold capacity (RPK) declined as much as by 16% vs. our -1% expectation. Thus, passenger load factor (PLF) declined by 5.7 percentage points to 72.6%. Traffic figures and cargo were heavily impacted by the coronavirus in all Finnair’s market areas. Total passenger number declined by 16% y/y. We expect Q1’20E revenue of EUR 585m (Q1’19: EUR 668m) and adj. EBIT of EUR -73m (Q1’19: EUR -16m).

Drop in fuel prices

Oil prices have dropped significantly since the beginning of the year amid the coronavirus pandemic and the price war between Saudi Arabia and Russia. The average fuel price in both USD and EUR dropped by 20% on a q/q basis compared to Q4’19. The average price in Q1’20 was 19% lower y/y in USD and 17% lower y/y in EUR.

“HOLD” with TP of EUR 4.0 (3.5)

We have cut our 20E estimates as the ongoing movement restrictions are likely to continue for several weeks or even months and the air travel is not expected to return to normal, not at least during this summer. Finnair has cut some 90% of its capacity due to COVID-19. We now expect 20E revenue of EUR 2213m (-29% y/y) and adj. EBIT of EUR -144m (-190% y/y). We note that there are significant uncertainties with our short-term estimates due to the situation. We have also decreased our 21E-22E revenue estimates by ~6% and adj. EBIT estimates by ~9%. Despite of the weak short-term outlook we still see Finnair’s mid-term outlook rather positive. Prior the crisis Finnair had a strong cash position and a healthy balance sheet. The company is also implementing a substantial funding plan, including sale and leasebacks of unencumbered aircraft, a revolving credit facility of EUR 175m, which has already been raised and a statutory pension premium loan totaling to EUR 600m. It has been proposed that the State of Finland would guarantee the loan. Therefore, we see that Finnair is well placed to continue its operations relatively normally after the crisis. We keep our rating “HOLD” with TP of EUR 4.0 (3.5) ahead of Q1.

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Vaisala - W&E business hurting from corona

22.04.2020 - 09.10 | Company update

Vaisala issued yesterday a profit warning due to estimated impacts related to the coronavirus pandemic. Consequently, we’ve revised down our estimates for 2020. Despite Vaisala being a great company, we see current valuation unattractive given the weakened financial outlook. We maintain our SELL with new target price of 25 euros (prev. 29.5).

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W&E’s project and services business suffering from corona
Vaisala expects delays or interruptions particularly in project and services deliveries due to the extensive restrictions imposed by governments and authorities. Demand in W&E has to some extent already weakened and Vaisala estimates that the situation will become more challenging as governments have tighter budgets, especially in emerging markets. The profit warning did not come as a complete surprise given that Vaisala’s largest segment, W&E, consists roughly 40-45% of projects and services, and the growth is very dependent on investments from emerging market governments. Vaisala does not expect demand for IM to change materially, but growth will slow down from last year (+22.2%).

New guidance broader as predicting is currently difficult
Vaisala’s now expects 2020 sales will be between 370–405 MEUR and EBIT between 34–46 MEUR (prev. sales 400–425 MEUR and EBIT 38–48 MEUR). The outlook’s range for both net sales and EBIT is wide due to high uncertainty related to the duration and impact of coronavirus pandemic as well as unknown speed of recovery. Vaisala will provide an update to its market outlook in connection with its Q1 report due next week on Tuesday 28th.

Valuation still stretched given weakened financial outlook
Based on the new outlook, we have cut our estimates for 2020e and the coming years. For 2020e, we’ve cut our sales and EBIT estimates with 8% and 20% respectively. We expect 2020e net sales to decline 3% to 390 MEUR and reported EBIT to decline to 34.9 MEUR, mainly due to lower performance in W&E. On our renewed estimates, Vaisala is still trading at clear premiums compared to our peer group, which we do not see justified given the financial performance outlook currently weighed down by W&E. We maintain our SELL with new target price of 25 euros (prev. 29.5). Our target price values Vaisala at 20e EV/EBIT multiple of 25x which is still above peer group, reflecting Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions.

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CapMan - Upgrade to BUY

21.04.2020 - 09.15 | Preview

CapMan will report Q1 results on April 23rd. We expect weak earnings on paper due to negative fair value changes (non-cash) as a result of implications of the Coronavirus pandemic. CapMan was heading into a year of major AUM growth potential, which is now put at some risk due to plausible fundraising challenges. We adjust our target price to EUR 1.95 (2.50) following revised estimates and upgrade to BUY (HOLD).

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Negative fair value changes to burden Q1 results
We expect CapMan to report weak Q1 results due to negative fair value changes, although these are non-cash items. The largest relative hit will come from portfolio companies due to peer valuation declines. We currently estimate fair value changes of EUR -14.2m in 2020. We estimate a Q1 adj. EBIT of EUR -7.5m. Apart from the fair value changes, the Coronavirus pandemic will not yet have had a significant impact on other business areas and we expect decent results from the Management Company and Service businesses, not expecting significant carry or success fees in the quarter.

2020 growth outlook more challenging
CapMan was heading into a year of major AUM growth potential with on-going projects as well as significant new fundraising projects announced in late 2019. COVID-19 will in our view have a detrimental effect on fundraising and we will be looking for any comments implying the magnitude of the impact from the Q1 results. Although growth expectations are pointing downwards, the Management Company business enjoys a healthy base of recurring fees that for now remain unaffected. We expect the Services business revenue and profits to decline in 2020, as Scala in particular would be affected by any possible dry-up of new fundraising projects.

(BUY) HOLD with a target price of EUR 1.95 (2.50)
Following estimates revisions and the increased uncertainty we adjust our TP to EUR 1.95 (2.50) based on our SOTP and peer multiples and upgrade to BUY (HOLD) due to share price declines.

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Detection Technology - COVID-19 - a near term threat with a silver lining

21.04.2020 - 09.02 | Preview

Detection Technology will report Q1 earnings next Monday, April 27th. We’ve slightly lowered our near term estimates due to the pandemic. Despite the current headwinds related to coronavirus, we see longer term investment case intact. We maintain our target price of 24 euros, rating is now BUY (prev. HOLD).

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COVID-19 – both a threat and part opportunity

DT usually doesn’t give full year guidance due to short visibility into customer demand. With the ongoing corona pandemic, it’s even harder to make predictions now. As airline travel is constrained, the pandemic can be expected to weigh negatively in H1 on SBU, which represents roughly 2/3 of DT’s sales. On the other hand, CT scanning is used to detect virus-related pulmonary changes, which in turn increases demand for CT scanners especially in China. DT’s recently launched new production facility in Wuxi provides additional capacity to support the possible increase in demand for CT equipment. As CT equipment plays an important role in diagnosing and treatment of COVID-19, DT has been permitted to keep its Beijing site operational and start manufacturing in Wuxi despite restrictions set by the local and national authorities in China.

Estimates cut, but investment story remains compelling despite near term uncertainties

Given the change in the landscape due to COVID-19, we’ve slightly lowered our Q1 estimates, especially for SBU. For Q1’20, we estimate SBU declining -2% and MBU declining -7% y/y, with total Q1 net sales declining -4% y/y to 22.2 MEUR (22.3 MEUR cons). Our Q1 EBIT estimate is 2.8 MEUR (2.9 MEUR cons), which is down 30% compared to 3.9 MEUR last year. We’ve revised down our FY’20E sales growth estimate from 10% to 6%. We still expect most of the growth to materialize in H2 as growth returns, especially in China, and volumes of new Aurora and X-Panel CMOS products ramp-up. Consequently, we’ve also lowered our FY’20E EBIT estimate by 11% due to lower sales and increased spending. Our estimates beyond 2020E are broadly unchanged, and we expect EBIT to improve in medium term due to volume growth and better GM’s due to mix and new products. We note however that coronavirus poses a clear near-term threat to our estimates, especially if the current situation is prolonged.

We maintain TP of 24 euros, with rating BUY (prev. HOLD)

On our revised estimates, DT is trading at 15x and 12x EV/EBIT multiples for 20E-21E. This is roughly 15-20% below our peer group, which we see inexpensive and unwarranted given strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. We maintain our target price of 24 euros, rating is now BUY (prev. HOLD).

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Suominen - The pandemic tailwind is not clear

20.04.2020 - 09.30 | Preview

Suominen reports Q1 results on Thu, Apr 23. We have left our estimates unchanged. We expect Suominen to perform relatively well in the current environment, however we don’t see the pandemic producing absolute gains based on current info. Our TP is EUR 2.50 (2.25), rating SELL (HOLD).

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Last year was weak for European sales

Suominen’s revenue declined by 5% last year to EUR 411m as the European business lost volumes and sales fell by 13% to EUR 150m. Americas was flat. Product split held steady as baby wipes were the largest group (40%) followed by personal care and home care wipes with about a fifth each. Suominen gives no short-term sales guidance but expects EBIT to improve this year. We estimate Q1 top line to have declined by 2% y/y to EUR 108m assuming volumes have improved a bit while nonwovens prices have declined slightly along with raw materials prices. We still expect Q1 gross margin at 8.5% i.e. marginally up from the 8.3% Q4 figure. We see SGA stable, and thus expect Q1 EBIT at EUR 2.9m (EUR 3.0m a year ago). Assuming stabilizing raw materials prices and gross margins for the rest of the year, we expect FY ’20 revenue up by 3% due to improving volumes. We thus see FY ’20 EBIT at EUR 12.0m vs EUR 8.1m last year.

In our view the pandemic might not inevitably help sales

Relatively speaking Suominen should perform well amid the pandemic, but in terms of absolute gains we don’t see the picture that clear. Suominen’s recent challenges were not due to lack of nonwovens demand, but rather caused by abundance of supply. Also, customer specific considerations matter as the ten largest accounts generate 65% of sales. We see a possibility that the pandemic and its aftermath will help accelerate volume growth, which is what the company needs in order to reach its long-term financial targets. Suominen is reportedly planning to enter face mask production in Finland in co-operation with Ahlstrom-Munksjö, however in our view it’s still early to estimate and value the possible impact on bottom line.

Valuation seems to have gone ahead of itself

In our view the current share price reflects rather hasty assumptions about the pandemic’s impact on the nonwovens market. We see caution warranted as a boost to total volumes is not inevitable. Our TP is now EUR 2.50 (2.25), rating SELL (HOLD).

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Verkkokauppa.com - COVID-19 boosting online sales

20.04.2020 - 09.00 | Preview

Verkkokauppa.com will report its Q1’20E result on Friday. We expect the coronavirus to boost online sales but expect decreasing sales in the physical stores. We have made small adjustments to our 20E estimates and retain our rating “HOLD” with TP of EUR 3.5 ahead of Q1.

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Online sales boosted by COVID-19

The exceptional situation due to COVID-19 has pushed retailers online as the demand in physical stores slumped quickly when the movement restrictions came into force. This is likely to have a positive impact on Verkkokauppa.com’s sales development in Q1’20E as the company has a strong online presence and only four physical stores in Finland. According to the management, the demand for instance in home office supplies has increased as people have switched their working spaces to their homes.

Expecting good market growth in Q1’20E

We expect the market growth in consumer electronics to be relatively good in Q1’20E but in the near future, consumers might become more cautious due to the weakening economy, especially if the situation is prolonged. Despite of the good online sales outlook we expect to see decreasing sales in Verkkokauppa.com’s physical stores during this situation. We have slightly increased our Q1’20E estimates. We expect Q1’20E revenue to increase by 4.5% y/y to EUR 121m (cons. EUR 118m) and EBIT of EUR 2.7m (cons. EUR 2.4m).

“HOLD” with TP of EUR 3.5 intact

We have made small adjustments to our 20E estimates and expect revenue of EUR 518m (2.7% y/y) and EBIT of EUR 13.0m (~15% y/y). According to the guidance given for 20E, the company expects revenue to be between EUR 510-530m and EBIT of EUR 12-15m, thus our estimates are at the lower end of the guidance. COVID-19 might speed up the more permanent leap into online in long-term which should benefit players such as Verkkokauppa.com. At the same time, the rumors of Amazon entering the Nordic market have once again increased. On our estimates, Verkkokauppa.com trades at 20E-21E EV/sales multiple of 0.3x which translates into ~50% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 3.5 intact ahead of Q1 result.

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Gofore - Back on track in Q1

15.04.2020 - 09.00 | Company update

Gofore released its business review for March 2020 and first quarter figures, with net sales up 12.8% in Q1 and profitability at high levels, with the adj. EBITA-% at 17.3%. We have slightly lowered our estimates due to the Coronavirus pandemic but currently expect only a limited impact in particular due to the comparatively large exposure to the public sector. With our lowered estimates we adjust our TP to EUR 7.8 (8.2), HOLD-rating intact.

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Profitability in Q1 back at solid levels

Gofore released its business review for March 2020 and first quarter figures. Net sales in Q1 grew 12.8% to EUR 18.8m. The adjusted EBITA amounted to a solid EUR 3.3m, at a margin of 17.3% (Q1/19: 17.2%). EBITA amounted to EUR 2.5m, affected by non-recurring costs and provisions relating to the divestment of the UK business. Gofore’s profitability figures were clearly positive given the challenges faced during the latter half of 2019.

Currently expect a rather limited impact of the pandemic

We have lowered our 2020 sales growth and EBITA estimates by 3pp and 12.5% respectively. The adjustments relate mainly to the estimated impact of the Coronavirus pandemic. We currently do not expect a major impact due to the comparatively large public sector exposure. We assume some challenges in sales of new projects due to customer investment caution, which we expect to show during H2/2020 as a slightly lower billing rate and thus lower sales and profitability. So far, the effects of the pandemic have been limited to employees shifting to working remotely and March sales figures were at a solid level.

HOLD with a target price of EUR 7.8 (8.2)

Current circumstances relating to the pandemic do not suggest a significant negative impact on Gofore’s operations, but a further prolongation would without a doubt have an adverse effect. On our revised estimates we lower our target price to EUR 7.8 (8.2) and retain our HOLD-rating.

 

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Aspo - The pandemic stirs the picture more

14.04.2020 - 09.20 | Company update

Aspo withdrew FY ’20 guidance as the pandemic is yet another setback for operations. We have cut estimates according to our assumption that business will begin to normalize during Q2 as many governments are reportedly about to ease restrictions. Yet we remain cautious given the uncertainty; our TP is now EUR 6.25 (8.25), rating HOLD.

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Q1 was very weak for ESL, Telko performed relatively strong

Aspo disclosed preliminary Q1 figures. ESL operated in challenging conditions as the Chinese situation in the beginning of the year already affected shipping rates. ESL’s steel and energy transport volumes decreased in Q1 and the uncertainty means there’s no solid view on cargo volume potential for the rest of the year. Aspo says smaller vessels’ cargo volumes remained at a normal level. ESL’s Q1 top line decreased by 2% y/y to EUR 42.7m (our estimate was EUR 46.7m) and EBIT decreased to EUR 2.3m compared to EUR 3.2m a year ago and our EUR 4.9m expectation. Meanwhile Telko performed relatively good as Q1 revenue amounted to EUR 63.6m i.e. down by 12% y/y but close to our EUR 63.9m estimate. Telko’s Q1 EBIT, unchanged y/y at EUR 2.4m, was slightly above our EUR 2.2m estimate. This indicates Telko’s profitability measures are having some effect. Leipurin’s Q1 revenue amounted to EUR 26.9m, up 4% y/y and in line with our EUR 26.8m estimate. Leipurin’s EBIT increased slightly to EUR 0.6m while our estimate was EUR 0.7m.

The H2’20 EBIT improvement slope is very hard to assess

Aspo previously guided FY ’20 EBIT to be higher than in ’19 (EUR 21.1m). In our view Aspo’s profitability for this year is especially difficult to estimate with current information as last year’s result doesn’t represent a high hurdle as such given the long-term potential. In a scenario closer to normal we would have expected Aspo to reach the guidance easy. Yet the potential is now even more subject to uncertainty as the macro picture is very murky. We expect better results in Q3 but see Q2 EBIT down to EUR 2.6m (we previously estimated Q2 EBIT at EUR 7.0m).

The environment justifies low valuation relative to potential

In our view the potential for higher EBIT remains, however in the current situation it’s challenging to rely on long-term estimates. Our TP is now EUR 6.25 (8.25), rating remains HOLD.

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Solteq - Software house journey setback

07.04.2020 - 09.15 | Company update

Solteq withdrew its guidance for 2020 due to the prevailing uncertainty caused by the Coronavirus pandemic. Customer deliveries within core business areas have so far remained unaffected but we expect to see some weakness within smaller project deliveries. Ramping up sales of newly developed own products will likely also prove to be more challenging. We expect a 6.5% decline in revenue in 2020. We retain our HOLD-rating with a TP of EUR 0.95 (1.40).

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Guidance withdrawn due to Coronavirus uncertainty
Solteq withdrew its guidance for 2020 for the time being due to the prevailing uncertainty caused by the Coronavirus pandemic. Customer deliveries with core business areas, with typically larger contracts and longer customer relationships, have so far continued without interruption. We expect the implications of the Coronavirus pandemic going forward to act as a driver for digitalization, partly due to movement restrictions and increasing online demand. In the near term we nonetheless expect revenue to be affected, mainly from smaller project deliveries. We also expect a more challenging ramp up of some of newer software products, some of which had already shown a promising start.

Expect a 6.5% sales decline in 2020
We have lowered our 2020 sales growth estimate to -6.5% (-1.4%) and EBIT to EUR 2.1m (3.5m). We currently expect to see clear margin and sales growth picking up in 2021 but note the high estimates uncertainty due to the Coronavirus outbreak. An additional uncertainty element is caused by the high leverage and interest expenses. Solteq informed of intentions to consider initiating a written procedure to extend its outstanding EUR 24.5m notes by 12 months, that were to mature July 1st, 2020.

HOLD with a TP of EUR 0.95 (1.40)
Solteq’s cash flows were set to improve in the near-term due to lower investments and improved operational profitability. Although Solteq should be able to show relative resilience, the increased uncertainty amid the company’s ambitions to change track towards a software focus is clearly suboptimal and we adjust our TP to EUR 0.95 (1.40), retaining our HOLD-rating.

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Fellow Finance - Loan volumes at risk

06.04.2020 - 09.15 | Company update

The Ministry of Justice of Finland has informed that it will start preparing a bill proposal to limit maximum consumer loan interest to 10%. According to Fellow Finance the proposal in its current form would – ceteris paribus – reduce current intermediated loan volumes by approx. 50% compared to March 2020 volumes. We keep our estimates largely intact for now but derive valuation scenarios based on which we adjust our TP to EUR 2.5 (3.0), HOLD-rating intact.

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Proposal to cap consumer loan interest at 10% (20%)
The Ministry of Justice of Finland has informed that it will in the upcoming weeks start preparing a bill proposal to limit maximum consumer loan interest to 10% from the current 20% due to the Coronavirus pandemic. The changes are planned to be in effect until the end of 2020. According to Fellow Finance the proposal in its current form would cut current intermediated loan volumes by 50% compared with March 2020 volumes. Furthermore, if investors in a 12% interest risk class would lower interest requirements to the proposed 10% cap, around 80% of current loan volumes could be intermediated.


Proposal would affect near-term profitability
We keep our estimates largely intact for now as the outcome and content of the bill proposal is not yet certain. Given the economic impact of the Coronavirus pandemic and an ease of making drastic decisions we see a high likelihood of the proposed bill passing. We derive scenarios for the possible effects of the proposal and expect a 10% cap to put EBIT in the coming years at near zero or negative.


HOLD with a target price of EUR 2.5 (3.0)
We derive three scenarios based on the planned bill proposal, described more in detail on page two. Based on a weighted approach, assuming an 80% likelihood of the bill passing, we derive a target price of EUR 2.5 (3.0) and keep our HOLD-rating intact.

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Etteplan - Challenging times ahead

01.04.2020 - 09.00 | Company update

Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak. The increased uncertainty in the global economy has adversely affected customer demand and will have a negative impact on financial development. We have lowered our 2020 estimates, expecting revenue to remain at 2019 levels and EBITA to decline clearly. We lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.

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Guidance withdrawn due to coronavirus uncertainty
Etteplan withdrew its guidance for the time being due to uncertainty caused by the coronavirus outbreak, having previously estimate revenue in 2020 to increase clearly and EBIT to be at the same level or improve compared with 2019. The coronavirus outbreak has adversely affected customer demand essentially across all customer segments. Europe is expected to show weak figures in Q2, while the in Q1 weak Chinese economy has now been picking up and demand development there is showing favourable signs.

2020 EBITA estimate down some 35%
We expect the outbreak to have a clear negative effect on financial development in 2020E. We expect the brunt of the impact on Q2/Q3 while Q1 is expected to have been somewhat weaker due to the situation in China. We note the challenges in near-term estimation due to the lacking visibility and unforeseeable nature of the consequences of the outbreak. We currently expect 2020 revenue to remain at 2019 levels, despite the current situation due to inorganic growth, and profitability to decline clearly, with our EBITA estimate at EUR 18.1m (27.5m).

HOLD with a target price of EUR 6.9 (10.2)
Etteplan has on a three-year average NTM EV/EBITDA traded at around 9.0x. Assuming a swift return to a normalized demand situation current valuation is in no way challenging. The significant near-term uncertainty, however, warrants a discount and we value Etteplan at 2020E EV/EBITDA of 7.0x, and with our 2020E EBITDA estimate down some 25% we lower our target price to EUR 6.9 (10.2) and retain our HOLD-rating.

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SRV - Turning the ship in stormy waters

31.03.2020 - 09.15 | Company report

SRV’s road has been bumpy in the past two years and measures are being taken to turn the tide. The slowing down of the Finnish construction market has created prerequisites for improved profitability by alleviating some supply chain pressure. The unfortunate Coronavirus outbreak casts a shadow over the planned turnaround and the uncertainty is reflected in valuation multiples. We adjust our target price to EUR 1.00 (1.30) and retain our HOLD-rating.

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Seeking turnaround from recent weak profitability years
SRV’s profitability has been in the red the past two years and the company is under new management seeking to turn the tide. Measures are being taken to enhance operational profitability and improve the financial situation. Market development has shown beneficial signs, as a slowing down of new construction volumes should ease supply chain pricing pressure. The Coronavirus outbreak, however, creates significant near-term uncertainty and any possible impact is yet hard to quantify.

Volumes expected to decline, profitability improve
We expect sales to settle at a level of around 10% below the solid 2019 levels (EUR 1,060.9m) following an expected overall decline in construction volumes. 2020 remains supported by the lengthy order backlog while the completion of fewer developer-contracted housing units will lower sales. We expect profitability to improve in 2020 from the recent weak comparison years due to a diminishing burden of non-recurring items but margins to still remain relatively low. We estimate a 2020 operative operating profit margin of 1.1%.

HOLD with a target price of EUR 1.00 (1.30)
Our DCF and SOTP implied equity fair values are EUR 1.10 and 0.64 respectively. We derive a target price or EUR 1.00 (1.30) per share, assigning more weight to our DCF fair value due to an unjust near-term weight on profitability of our SOTP-model and retain our HOLD-rating.

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Pihlajalinna - 20E guidance withdrawn

30.03.2020 - 09.20 | Company update

Pihlajalinna withdrew its 20E guidance as it is challenging to assess and predict the total impacts of the coronavirus. Half of the operations are expected to remain stable but the demand for non-urgent health care and oral health services has declined. We expect 20E revenue to remain at the same level as in ’19 (EUR 519m) and adj. EBIT of EUR 27m (28% y/y). However, there are significant uncertainties with our short-term estimates. Our rating is now “BUY” (“HOLD”) with TP of EUR 16.

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20E guidance temporarily withdrawn
Pihlajalinna withdrew its guidance for 20E as it is challenging to predict the total financial and operational impacts caused by COVID-19 and the given emergency laws. A new guidance will be given at a later point, when the total impacts can be more reliably assessed. According to the company, during the first months of the year, turnover and profitability have developed as expected. Based on the previous guidance given in February, Pihlajalinna expected turnover and adj. EBIT to improve from the previous year.

Non-urgent and oral health services hampered by COVID-19
According to the company, comprehensive outsourcing in the context of the social welfare and healthcare reform and other fixed-price invoicing is related to a steady recognition of income over time. Profitability of these kinds of contracts normally remains stable, even during periods of low demand. Demand for housing services for the elderly and recruitment services is not expected be affected by the situation. Therefore, more than half of the business operations are expected to remain stable. Also, demand for remote services has increased. Pihlajalinna’s fitness centers have been temporarily closed since late March and the demand for non-urgent healthcare and oral health services has decreased due to the coronavirus. We expect the demand for these services to increase after the situation, which should partly compensate this period of low demand.

“BUY” (“HOLD”) with TP of EUR 16
We have decreased our 20E turnover expectation by ~3% and adj. EBIT expectation by ~24%. We now expect 20E turnover to remain at the same level as in ‘19 (EUR 519m) and adj. EBIT of EUR 27m (28% y/y). Adj. EBIT is expected to improve due to the cost savings resulting from the efficiency improvement program that was launched last summer. However, we note that there are significant uncertainties especially with our short-term estimates. The tender offer by Mehiläinen is currently being under review of the FCCA. As expected, the FCCA initiated the phase two investigation, meaning that the process will be completed at the end of Q2’20E or latest during Q3’20E. We keep our TP at the tender offer price of EUR 16 and upgrade our rating to “BUY” (“HOLD”).

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Tokmanni - Customer flows hampered by COVID-19

27.03.2020 - 09.35 | Company update

Tokmanni withdrew its 20E guidance as there is a clear decline in customer flows due to the coronavirus. New guidance will be given at a later point when the visibility is more clear. We expect 20E sales of EUR 919m (-2.7% y/y) and adj. EBIT of EUR 55.3m (-21% y/y). We note that there are significant uncertainties with our short-term estimates. We keep our rating “BUY” with TP of EUR 12.5 (16).

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Coronavirus hampering customer flows
Tokmanni withdrew its guidance for 20E due to the situation around coronavirus. According to the company, after the emergency restrictions that came into force in March, the customer flows have clearly declined in stores. At the current stage, the company doesn’t give a guidance for the year 20E but expects that the coronavirus and the restrictions on movement will affect at least Q2’20E sales. As stated by the company, it is very challenging to estimate the development in H2’20E. Based on the guidance given in February, Tokmanni expected good revenue growth and slight growth in LFL-sales for 20E and profitability (adj. EBIT margin) to increase from the previous year.

Expecting declining sales in Q2’20E
We expect a clear decline in Q2’20E sales (-27% y/y) as the movement restrictions are likely to last for several weeks. Tokmanni aims to keep all the stores open during this unexpected time. We expect the consumer demand for grocery to remain stable but at the same time demand for non-grocery products is expected to decline. We expect online sales to increase but the contribution to the total sales is still expected to remain marginal. As the visibility is very weak it is difficult to estimate the total impacts on H2’20E sales. We expect the lockdowns in China, occurred in Q1’20, to have a negative impact on Tokmanni’s direct import, which will hamper gross margin development. As most of Tokmanni’s employees work in stores (85%), the company should be able to adjust its workforce in some level. We expect only limited adjustment possibilities in other operations, hampering profitability in Q2’20E.

“BUY” with TP of EUR 12.5 (16)
We have decreased our 20E sales expectation by ~8% and adj. EBIT estimate by ~30%. We now expect 20E sales to decline by 2.7% y/y (EUR 919m) and adj. EBIT of EUR 55.3m (-21% y/y), resulting in adj. EBIT margin of 6.0%. We note that there are significant uncertainties with our short-term estimates. We expect the customer flows and demand to normalize relatively fast after the situation and expect Tokmanni is able to return back to its growth path. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 16.7x and 10.4x, which translates into 4% premium in 20E and 29% discount in 21E compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 12.5 (16).

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Fellow Finance - Guidance withdrawn amid uncertainty

27.03.2020 - 08.45 | Company update

Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. We expect the uncertainty to affect investor sentiment and have lowered our estimates for facilitated loan volumes and as a result our revenue and profitability estimates. Fellow Finance will also have to put the brakes on some expansion plans, which will further impede growth. We retain our HOLD-rating with a TP of EUR 3.0 (4.0).

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Guidance withdrawn due to coronavirus uncertainty
Fellow Finance withdrew its 2020 guidance due to the weakened visibility caused by the coronavirus outbreak. The company previously expected turnover to grow in 2020 and the growth efforts to decrease operating profit compared to 2019, with growth expected to accelerate during 2021-2022. The uncertainty affects investor sentiment, which we expect to have a negative near-term effect on facilitated loan volumes. Furthermore, Fellow Finance will in the elevated uncertainty situation have to put the brakes on some of its growth plans internationally, which will affect growth in the coming years.

Estimates lowered on weakened investor demand prospects
We have lowered our estimates for facilitated loan volumes, driven by the change in investor sentiment, and as a result our estimates for revenue and profitability. Fortunately, fees from managing the current portfolio along with fees from Lainaamo’s loan commitments will support revenue while the variable cost components, mainly the commissions to loan brokers, should slightly soften the profitability impact. We now expect a 6% revenue decline in 2020 (prev. 4% increase) and an operating profit of EUR 0.6m (prev. EUR 1.3m).

HOLD-rating with a target price of EUR 3.0 (4.0)
On our revised estimates and increased uncertainty, we adjust our target price to EUR 3.0 (4.0). We assume only a fairly moderate deterioration of the economy due to the coronavirus, while a larger deterioration could result in a clear increase in loan defaults and have a clear negative impact on the company.

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Marimekko - COVID-19 impacting sales and profit

26.03.2020 - 09.10 | Company update

Marimekko withdrew its guidance for 20E as the consumer demand in all the market areas has dropped due to COVID-19. We now expect 20E sales to decline by 10% y/y and adj. EBIT of EUR 11.7 (-32% y/y) but we note that there are significant uncertainties especially with our short-term estimates. We upgrade to “BUY” (“HOLD”) with TP of EUR 28 (44).

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Weakened consumer demand outlook due to COVID-19
Marimekko withdrew its 20E guidance as the situation around COVID-19 has clearly weakened the consumer demand outlook in all Marimekko’s market areas (prev. 20E sales are expected to increase from the previous year and adj. EBIT is expected to be at the same level or higher than on the previous year). At the current stage, the company doesn’t give a guidance for 20E. However, if the situation is prolonged, it will have significant impacts on the company’s sales and profitability. As a result of the current situation, Marimekko is planning to adjust its operations and initiates cooperation negotiations. Marimekko has also changed its proposal for the ’19 dividend payment (prev. dividend proposition of EUR 0.90) and proposes that the AGM would authorize the Board of Directors to decide on a dividend payment of a max. of EUR 0.90 per share to be distributed in one or several instalments at a later stage when the company is able to make a more reliable estimate on the impacts of COVID-19 to the company’s business.

Expecting a significant drop especially in retail sales
As most of the market areas have some level lockdowns and thus many stores are being closed, we expect negative impacts especially on Q2’20E sales. We have lowered our Q2’20E sales estimate by ~44% and our EBIT estimate by ~82%. We expect retail sales to face the hardest hit due to the rapid drop in consumer numbers. We don’t expect as dramatical decline in wholesale sales as the buyers (of distribution channels) should have already ordered the spring/summer lines. However, it is difficult to estimate how the situation will impact on H2’20E sales. We also expect negative impacts on production and supply chain in H1’20E.

“BUY” (“HOLD”) with TP of EUR 28 (44)
We’ve lowered our 20E sales expectation by 17% and adj. EBIT estimate by 42%. We expect 20E sales of EUR 113 (-10% y/y) and adj. EBIT of EUR 11.7 (-32% y/y). We note that there are significant uncertainties with our short-term estimates but we see Marimekko’s mid-term investment case unchanged and positive as we see Marimekko is able to achieve higher sales and margins after this shock. In normal circumstances, Marimekko also offers an attractive dividend yield. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.6x and 10.2x which translates into 22-40% discount compared to the luxury peers. We upgrade our rating to “BUY” (“HOLD”) with TP of EUR 28 (44).

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SSH - Withdraws 2020 guidance due to COVID-19

24.03.2020 - 20.49 | Company update

SSH announced yesterday that it estimates the COVID-19 pandemic to negatively impact its outlook and thus it withdraws its guidance for the year 2020. We’ve clearly cut our estimates for 2020 and 2021. We note that estimating future performance now is exceptionally difficult, as the depth and length of the current crisis is unknown. Based on our lowered estimates and postponed turnaround, we lower our target price to 0.70€ (prev. 1.00€) but maintain HOLD recommendation.

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Guidance for 2020 withdrawn due to COVID-19

SSH announced yesterday that as a result of the COVID-19 pandemic, operating conditions in their markets have deteriorated significantly. Large enterprises globally, including some of SSH’s customers, have already announced profit warnings or cost savings programs. SSH expects this to affect customer’s investment decisions and the timing of IT project deployments. Due to the continued uncertainty of the situation, SSH’s visibility into the scope and duration of these effects is limited. SSH notes, that they are pre-emptively preparing for the effects of this situation by systematically reducing operating expenses, although details regarding this were not given.

 Estimates cut; turnaround postponed further

After a challenging 2019, SSH was guiding for clear improvement. For the year 2020, SSH was expecting revenue growth of 10-15 percent and an improving EBIT (FY’19: -1.2 MEUR), but this guidance is now withdrawn. We’ve cut our sales estimates for 2020E and 2021E roughly -16%. We estimate 2020E sales to decline -5%, resulting in -1.0 MEUR operating loss, despite measures to lower opex. Due to lower sales estimates, we estimate profit turnaround to be pushed forward to 2021E.

 HOLD maintained with TP 0.70€ (prev. 1.00€)

We note that estimating future performance is now exceptionally difficult, as the depth and length of the current crisis is unknown. Based on our lowered estimates and postponed turnaround, we lower our target price to 0.70€ (prev. 1.00€) but maintain HOLD recommendation.

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Finnair - Significant losses due to COVID-19

17.03.2020 - 09.25 | Company update

The continuing crisis around COVID-19 forces Finnair to cut its capacity by some 90% in April. We have cut our 20E estimates substantially and expect EUR -52m comparable operating loss in 20E. We keep our rating “HOLD” with TP of EUR 3.5 (5.0).

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Second profit warning due to COVID-19

Finnair issued its second profit warning within a month as the COVID-19 continues to hammer the global airline industry. Earlier the company withdrew its capacity estimate for 20E and expected 20E comparable operating profit to be significantly lower than on the previous year. Due to the flight restrictions and low demand, Finnair now cuts its capacity by ~90% starting from April and indicates that the comparable operating loss will be significant in 20E. Also, the company decided to withdraw the ’19 dividend proposal of EUR 0.2 per share.

Strong financial position securing Finnair’s operations

In order to secure its financing, Finnair has started to implement a substantial financing plan. This includes funding instruments such as available credit lines (Finnair has an available non-used credit line of EUR 175m), sale and leasebacks of unencumbered aircraft (Finnair currently has 42 unencumbered aircraft, which represents about half of the balance sheet value of the total fleet) and a substantial, market-based pension premium loan. Also, the Finnish government will actively support the company. Prior the COVID-19 situation, the company had a healthy balance sheet and a strong cash position, which should support Finnair’s finance and operations even if the situation around COVID-19 is prolonged. The company will also make further cost adjustments (prev. aiming cost savings of some EUR 40-50m). We expect relatively quick savings from personnel expenses but many of the other cost savings are expected to be realized later in H1’20E.

“HOLD” with TP of EUR 3.5 (5.0)

We have significantly cut our 20E estimates. We now expect 20E revenue to decline by ~13% y/y (EUR 2707m) while we expect comparable operating profit to decline by ~132% y/y (EUR -52m). This is mainly due estimates cut in Q2’20E. With our updated estimates, Finnair’s 20E gearing would be some 137% (64% in 2019), while the company’s target is to keep the ratio below 175%. Our net debt/EBITDA estimate is 3.9 (1.3 in 2019). On our estimates, Finnair trades at 20E EV/EBITDA multiple of 5.4x, which translates into 105% premium compared to the peers. Despite of the severe situation, we expect Finnair has good possibilities to quickly continue its operations after the situation. As Finnair’s financial position is strong we continue to see Finnair’s mid-term outlook rather positive. Due to the exceptional situation, there are significant uncertainties with our short-term estimates. We keep our rating “HOLD” with TP of EUR 3.5 (5.0).

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Cibus Nordic - A strong base for Swedish expansion

06.03.2020 - 09.25 | Company update

Cibus Nordic enters the Swedish property market with the EUR 180m portfolio acquisition of 111 Coop supermarkets. We view the deal as a fine way to gain more property mass and extend geographical reach in a controlled manner. Our new TP is SEK 155 (150), rating HOLD.

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We believe Cibus is an ideal owner for the supermarkets

Cibus acquires a portfolio of 111 properties located in Southern Sweden for EUR 180m. The portfolio of grocery properties belonged to Coop, the second largest grocery retailer in Sweden (19% market share), which had acquired the portfolio last year from Netto. Coop will provide some SEK 3m into each store for rebranding purposes and sign 10-year triple-net lease contracts. In this sense the new Swedish portfolio is even more cost-efficient from Cibus’ point of view. The longer lease contracts will lift Cibus’ WAULT to 5.5 years from 4.9 years. Coop has in total about 800 stores in Sweden; thus the 111 properties mean Cibus’ relationship with Coop can be compared to that with Kesko, considering Cibus’ properties amount to more than 10% of Kesko’s facility sourcing. The properties now acquired are relatively modern (83% were either constructed or renovated during the last 15 years), and are mostly located in residential areas, traffic routes and city centers. The typical property is only some 1,000 sqm in area (compared to old Cibus’ 3,500 sqm), so they can be best described as rather small supermarkets. As Coop is now in the process of rebranding the stores the inventory selection is set to expand from 1,800 items per store to 6,000.

The deal is valued at a yield above that where Cibus trades

The price implies a yield of almost 6%, which is undemanding as Cibus trades only slightly above 5%. Cibus’ net debt LTV ratio stays close to the old almost 60% level. Cibus fully used the mandate to issue 6.22m shares and thus raised EUR 84m new equity via a directed share issue. The EUR 123m new senior bank debt carries a 2% interest; Cibus consequently has some EUR 25m more cash in its balance sheet to make add-on acquisitions in Sweden. Cibus expects the deal to close next week, on Mar 10.

Cibus’ valuation and yield development

Cibus trades at a 100bps wider yield compared to the median NTM EBITDA/EV of a listed Nordic Real Estate company. Cibus managed to issue new equity at a 1.18x P/NAV (or 2.7% below the day’s closing price) to fund the Swedish expansion, which we see as a strong signal that investors view Cibus’ book value as quite conservative. We have updated our estimates; we expect Cibus’ rental income to continue to increase at the rate of inflation, and we estimate annual operating income at more than EUR 10m higher going forward.

The deal adds some EUR 10m in operating income capacity

The deal is good news for Cibus as portfolio diversification further improves. Our TP is SEK 155 (150), remain HOLD.

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Tokmanni - Bright future of discount retailing

06.03.2020 - 09.15 | Company report

Tokmanni continued its strong performance in 2019 as sales grew by 8.5% y/y while adj. EBIT margin improved to 7.5%. Profitability improvement through gross margin improvement and OPEX scalability is high on the company’s agenda and we see the set targets to be reachable. We keep our rating “BUY” with TP of EUR 16.

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Targeting EUR 1bn of sales

Tokmanni targets EUR 1bn in sales with further store network expansion and LFL growth. With 191 stores at the end of 2019 and at the targeted store network expansion pace (12,000m2 or ~5 stores annually) Tokmanni is set to reach its target of over 200 stores within the next few years. The company’s LFL growth has notably improved from 2017 levels as it was 5.6% y/y in 2018 and 4.3% y/y in 2019. We expect Tokmanni to reach its sales target of EUR 1bn during 2020E.

Further adj. EBIT margin improvement potential

Tokmanni targets to increase its adj. EBIT margin to ~9%. The adj. EBIT margin target implies ~1.5 percentage point (pp) margin improvement compared to the level reached in 2019 (7.5%). Some 0.5-1.5pp of this is to come from 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, which has been key to our investment case. OPEX scalability should contribute the remaining 0.5-1.0pp. Positive LFL growth and more efficient operations are expected to be a key driver behind OPEX scalability.

We retain our rating “BUY” and TP of EUR 16

We approach Tokmanni’s valuation through our scenario analysis and valuation multiples. Our scenario analysis, with emphasis on base case and optimistic estimates, yields a fair value of EUR 16.0. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 12.9x and 11.7x which translates into 7-10% discount compared to the Nordic non-grocery peers and 12-17% discount compared to the international discount peers. We keep our rating “BUY” and TP of EUR 16 intact.

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Raute - Adapting to a shift in demand

04.03.2020 - 09.20 | Company report

Raute’s 2017-18 was busy as familiar customers executed major capacity investments; thus ’18 marked a record year for the company. European order intake fell substantially in ’19, and was soft in other markets as well, barring Russia. This year may prove a relatively stable one owing to the record-large Russian order, yet should the cool environment be prolonged revenue is bound to fall further from the EUR 150m level. Our TP is EUR 25, rating HOLD.

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Demand for large and small orders remains at a good level

Raute left the record-year ’18 behind with a strong EUR 95m order book. Order intake remained at a decent level in early ’19, but activity began to cool steadily during the year due to increasing market uncertainty. This was manifest in mid-sized projects (such as repair and improvement investments) accounting for an exceptionally low share of order activity. Uncertainty has stayed high, but it should also be noted demand for spare parts and maintenance services remains stable, implying good capacity utilization rates at plywood and LVL mills. The record-large EUR 58m Segezha order means Raute can guide flat sales development for this year. Nevertheless, Raute guides decreasing EBIT for the year as the company has recognized a need to accelerate its investments in R&D and marketing. Raute looks to segment its machinery in order to better address lower price points and so achieve meaningful growth in emerging markets, but also aims to further improve its digital solutions offering.

Focus now on the missing middle-sized order demand

Raute’s customer demand is now focused on both large and small orders i.e. major new capacity projects, minor improvements and services. By contrast, demand for mid-sized projects, like modernizations, is at an exceptionally low level. It’s always hard to predict when big orders will materialize; we’ll focus on monitoring how mid-sized order activity develops going forward.

We view the multiples neutral in current market situation

Raute is now valued at 7x EV/EBITDA and 11x EV/EBIT ‘20e. We view the valuation neutral given the long-term fundamentals but high current uncertainty. Our TP is EUR 25, rating HOLD.

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Talenom - Share issue update, TP EUR 6.7

02.03.2020 - 09.30 | Company update

Talenom made a share issue without payment on the 28.2. to improve share liquidity, with five new shares for each existing share, after which the nr. of shares amounts to 41.836m. We adjust our target price to EUR 6.7 (prev. split adj. EUR 6.83) accounting for dividend distribution (split. adj. EUR 0.125 per share) and retain our HOLD-rating.

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Share issue without payment to improve share liquidity

Talenom made a share issue without payment on the 28.2. to improve the liquidity of its share, with five new shares given for each existing share, upon which the number of shares increased to 41.836m (6x pre-issue). We have since our previous update adjusted our quarterly estimates due to the impact of the Income Register, which based on discussion with management should be just below double the Q4/19 impact and we have as such lowered our Q1/20 revenue and EBIT estimates by EUR 0.6m, while upward adjustments to the latter quarters in the year keep our full year estimates intact. Talenom announced the acquisition of Addvalue Advisors on the 28.2., a bookkeeping company with around EUR 0.5m in revenue. The acquisition has no material impact on our estimates.

Growth and profitability improvement in 2020

Talenom expects relative growth in net sales and relative profitability in 2020 to be in line with 2019. We expect revenue in 2020 to grow 18.7% to EUR 68.8m mainly due to organic growth in Finland, with revenue growth in Sweden in our view expected to start to show in 2021. We expect EBIT to amount to EUR 12.6m, with growth of ~21% y/y.

HOLD with a target price of EUR 6.7

We adjust our target price to EUR 6.7 (prev. split adj. EUR 6.83), taking into account the distribution of dividend (record date 27.2., split adj. EUR 0.125 per share). Our target price values Talenom at ~30x 2020E P/E. With valuation in line with our estimates we retain our HOLD-rating.

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Finnair - 20E profit hampered by coronavirus

02.03.2020 - 09.20 | Company update

Finnair came out with revised 20E outlook and issued a profit warning as the impacts of the coronavirus are more severe and far reaching than first estimated. We have cut our 20E revenue estimate by ~1% and comparable EBIT estimate by ~23%. We keep our rating “HOLD” with TP of EUR 5.0 (EUR 6.3).

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Revised outlook for 2020E

Finnair revised its 20E outlook due to the larger than first estimated impacts of the coronavirus. During Q4’19 result, the company indicated that the impacts on Q1’20E result will be limited and expected 20E capacity growth of ~4% y/y. According to the new guidance, Finnair expects Q1’20E comparable EBIT to be lower than in the previous year. The company foresees decreasing demand also in Q2’20E, resulting in a negative impact on revenue. Q2’20E comparable EBIT is expected to be significantly lower compared to Q2’19. Therefore, comparable EBIT for 20E is also expected to be significantly lower than in FY19. In addition, the company withdrew its capacity (ASK) growth estimate (~4%) for 20E and aims to adjust its capacity to the current situation. Finnair has also commenced to seek how to adjust its costs by EUR 40-50m to mitigate the negative financial impact resulting from the virus.

20E estimates cut

We have made small adjustments to our Q1’20E revenue expectation and cut our already rather conservative Q1’20E comparable EBIT estimate by ~15%. We also cut our Q2’20E revenue estimate by ~4% and our comparable EBIT estimate by ~48%. Thereby, our FY20E revenue estimate is reduced by ~1% and comparable EBIT estimate by ~23%. We now expect 20E revenue growth of 1.8% y/y (EUR 3154m) while we expect comparable EBIT to decline by ~19% y/y (EUR 133m). We foresee 20E capacity (ASK) growth of 2.4% y/y (prev. estimate of 3.5% y/y). We expect negative impacts especially on Asian routes (Finnair suspended all the flights to mainland China, which might continue until the end of March) but also on European routes and on global cargo during H1’20E. We also expect weaker demand in travel services.

“HOLD” with TP of EUR 5.0 (prev. EUR 6.3)

We have kept our 21E-22E estimates intact as we don’t expect long-term financial impacts resulting from the coronavirus. However, as the visibility around the coronavirus and its development remain weak, there are uncertainties especially with our short-term estimates. We keep our rating “HOLD” with TP of EUR 5.0 (6.3).

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Next Games - Viewing game launches in H2/2020

02.03.2020 - 08.00 | Company update

Next Games Q4 revenue (Act./Evli EUR 7.7m/8.2m) fell short of our expectations despite total gross bookings in line with our estimates while EBIT (Act./Evli EUR -1.8m/-1.7m) was in line with our estimates despite the revenue miss and a low gross profit. With Blade Runner Nexus moved backed to production phase we expect new game launches in mid to late H2/2020, with priority in our view set on launching the Stranger Things -game.

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Slight revenue miss, EBIT held up fairly well

Next Games revenue in Q4 amounted to EUR 7.7m (Evli 8.2m), with gross bookings of EUR 8.2m (Evli 8.2m). EBIT was in line with our estimates at EUR -1.8m (Evli -1.7m) despite the lower revenue and a low gross profit margin (Act./Evli 53%/67%). The adj. EBIT amounted to EUR -1.0m (Evli -0.7m). Our World continued to be affected by retention issues and gross bookings continued to decline. Next Games added Publishing Operations to its reporting (live games revenue – costs), at an EBITDA of EUR 3.8m in 2019.

Next major steps should be seen during H2/2020

Next Games expects moderate revenue growth in 2020 and for its publishing operations EBITDA to be profitable. Revenue from live games is expected to continue on a flat or declining trend. Blade Runner Nexus was moved back to production phase and we now expect new game launches in mid to late H2/2020. Priority in our view will likely be on bringing the commercially more attractive Stranger Things -game to the market. Successful new launches along with seeking to solve Our World’s retention and reverse the declining will be key for 2020. We expect a revenue growth of 5% in 2020 and EBIT to remain clearly in the red due to development costs of new projects.

HOLD with a target price of EUR 0.84 (0.90)

We have overall slightly lowered our estimates post-Q4 and with the slight increase in uncertainty brought by the postponement of a BRN launch we adjust our target price to EUR 0.84 (0.90) and retain our HOLD rating.

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Cibus Nordic - EUR 200m Swedish entry this year?

28.02.2020 - 09.20 | Company update

Cibus reported an unsurprising portfolio performance for Q4, however administration costs were temporarily elevated due to development efforts. Nordic expansion could well be on the cards this year. We see Cibus’ yield still relatively attractive. Our TP is now SEK 150 (135), rating still HOLD.

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The existing portfolio continues to perform well

Cibus’ Q4 rental income, at EUR 13.2m, was close to our EUR 13.3m estimate. There were no surprises in terms of property expenses, as these summed up to EUR 0.6m and thus net rental income was EUR 12.6m, compared to our EUR 12.5m estimate. Cibus’ budgeted admin costs run close to EUR 1.0m per quarter. The admin costs amounted to EUR 2.0m in Q4 due to many one-off considerations. First, the outsourcing contract with Pareto, now terminated, still had an effect. Second, Cibus booked EUR 0.5m in restructuring costs in order to achieve a more efficient legal structure. Cibus also incurred EUR 0.2m due to mapping of Nordic markets beyond Finland. Therefore Cibus’ Q4 operating income missed our estimate by ca. EUR 1.0m. There were no notable changes to key metrics as EPRA NAV (EUR 11.4), LTV ratio (59%), occupancy rate (95%) and WAULT (4.9 years) remained basically unchanged. Cibus also highlighted its active property management successes in certain less-than-metropolitan areas like Nastola and Kajaani by filling local vacancies with tenants such as Lidl and Rusta (a discount store chain).

Authorization could enable a EUR 200m GAV acquisition

The acquisition of three Tokmanni-anchored properties helped lift the portfolio’s annual net rental income capacity by about EUR 1.0m to EUR 50.9m. Last year Cibus managed to achieve its annual EUR 50m acquisition target, however this year a larger transaction might take place as Cibus is authorized to issue up to 6.22m new shares. Cibus is eyeing other Nordic markets beyond Finland. Sweden seems to be the most potential option; the market is, on average, slightly higher priced than Finland, but Cibus believes it can apply its own concept there successfully.

Cibus’ 1.23x P/NAV still offers a 100bps yield pick-up

Cibus’ shares have rerated along with the rest of the Nordic RE market. While Cibus trades at a clear premium relative to GAV/NAV (1.08x/1.23x), the portfolio remains priced at a competitive yield. Our TP is now SEK 150 (135), rating still HOLD.

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Solteq - Slowly but steadily

28.02.2020 - 09.00 | Company update

Solteq’s Q4 results fell shy of our expectations. Revenue amounted to EUR 15.7m (Evli EUR 15.7m) while the adj. EBIT amounted to EUR 1.1m (Evli EUR 1.5m), affected by some project challenges. We expect revenue to decline slightly in 2020 due to the SAP ERP business divestment, while expecting the adj. EBIT to remain at 2019 levels. Following estimates revisions, we adjust our target price to EUR 1.40 (1.50) and retain our HOLD-rating.

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Project challenges affected H2 profitability

Solteq’s revenue in Q4 amounted to EUR 15.7m (Evli 15.7m), growing 5.2% y/y. The adj. EBIT amounted to EUR 1.1m (Evli 1.5m) and EBIT to 3.3m (Evli 3.8m) due to the profit from the sale of Solteq’s SAP ERP business. Solteq seeks to distribute a dividend of EUR 0.05 per share, to be decided upon later. Project challenges in Finland during H2 affected revenue and as a result profitability. Comments on the positive development of own software products (i.e. Utilities, POS) and international growth were welcome, although near-term visibility is still limited. Product development expenses amounted to EUR 3.9m in 2019 and are expected to decrease clearly in 2020.

Slight sales decline expected in 2020

We expect revenue to decrease by 1.4% in 2020 following the impact of the sale of the SAP ERP business. The adj. EBIT is expected to remain at 2020 levels and with a pick-up in depreciation of capitalized development costs we expect operational performance to improve in 2020. Our EBITDA and adj. EBIT estimates for 2020-2021E are down by some 6-10% and ~20% respectively post-Q4 following an updated view on profitability improvement progress.

HOLD with a target price of EUR 1.40 (1.50)

Solteq saw good earnings growth in 2019 but with the capitalization of development costs cash flows remained weak. We expect improvements in 2020 but at a slower pace than previously anticipated. On our lowered estimates we adjust our target price to EUR 1.40 (1.50) and retain our HOLD-rating.

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Next Games - Revenue miss, total gross bookings in line

28.02.2020 - 08.30 | Earnings Flash

Next Games' net sales in Q4 amounted to EUR 7.7m, below our and consensus estimates (EUR 8.2m/8.1m Evli/cons.). Gross bookings amounted to EUR 8.2m (Evli EUR 8.2m). EBIT amounted to EUR -1.8m, in line with our and consensus estimates (EUR -1.7m/-1.8m Evli/cons.). Next Games expects moderate growth in 2020 and profitable publishing operations EBITDA.

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  • Net sales in Q4 were EUR 7.7m (EUR 11.3m in Q4/18), below our and consensus estimates (EUR 8.2m/8.1m Evli/Cons.). Net sales in Q4 declined -48% y/y. Compared to our estimates, revenue was lower than expected due to lower revenue despite gross bookings being in line with our estimates (Act./Evli EUR 8.2m/8.2m).
  • Operating profit in Q4 amounted to EUR -1.8m (EUR --1.6m in Q4/18), in line with our and consensus estimates (EUR -1.7m/-1.8m Evli/cons.), at a margin of -24%. The EBITDA of publishing operations in H2 amounted to EUR 1.5m
  • Adj. EBIT amounted to EUR -1.0m (Q4/18: -0.5m), below our estimate of EUR -0.7m.
  • TWD: NML - DAU 183k (Q4/18: 253k), MAU 651k (Q4/18: 728k), ARPDAU EUR 0.25 (Q4/18: 0.25).
  • TWD: OW - DAU 114k (Q4/18: 223k), MAU 591k (Q4/18: 759k), ARPDAU EUR 0.38 (Q4/18: 0.28).
  • Guidance: Next Games expects moderate growth in 2020, weighted towards the end of the year. Publishing operations EBITDA is expected to be profitable. Revenue from already published games expected to continue on a flat or declining trend.
  • Changes to reporting: R&D now includes costs relating to unpublished products, costs relating to developing live games included in sales and marketing expenses

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Cibus Nordic - Portfolio performed as expected

27.02.2020 - 09.45 | Earnings Flash

Cibus Nordic reported property portfolio results in line with our expectations. However, administration costs were higher than we had estimated due to certain group restructuring and development-related costs.

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  • Cibus’ Q4 rental income amounted to EUR 13.2m vs our EUR 13.3m estimate.
  • After subtracting property expenses, Q4 net rental income was EUR 12.6m, while we expected EUR 12.5m.
  • When taking central administration expenses into account, operating income was EUR 10.6m, compared to our EUR 11.5m estimate. Administration costs were higher than we anticipated due to non-recurring group restructuring costs totaling ca. EUR 0.5m (to simplify group structure and help facilitate internal funds transfers) as well as EUR 0.2m cost attributable to mapping of Nordic markets.
  • Including net financial costs, net operating income was EUR 7.0m vs our EUR 8.1m expectation.
  • Annual net rental income capacity now stands at EUR 50.9m (previously EUR 49.9m).
  • The portfolio was valued at EUR 875m, translating to an EPRA NAV of EUR 11.4 (11.4) per share.
  • Net debt LTV ratio stood at 58.7% (58.9%).
  • Occupancy rate was 94.7% (94.5%) at the end of Q4.
  • WAULT remained basically unchanged at 4.9 years (5.0 years).

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Solteq - EBIT misses our estimates

27.02.2020 - 09.15 | Earnings Flash

Solteq's Q4 results were slightly below our estimates. Net sales in Q4 amounted to EUR 15.7m (Evli EUR 15.7m), while the adj. EBIT amounted to EUR 1.1m (Evli EUR 1.5m). Solteq expects that its adjusted EBIT will remain at the same level as in 2019.

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  • Net sales in Q4 were EUR 15.7m (EUR 14.9m in Q4/18), in line with our estimates (Evli EUR 15.7m). Growth in Q4 amounted to 5.2 % y/y. Revenue in Finland did not grow in 2019 compared to 2018, foreign subsidiary organic growth 26%.
  • The operating profit in Q4 amounted to EUR 3.3m (EUR 0.6m in Q4/18), below our estimates (Evli EUR 3.8m). The divestment of the SAP ERP business had a positive impact of EUR 2.5m. The adj. operating profit amounted to EUR 1.1m (EUR 0.6m in Q4/18), below our estimate of EUR 1.5m.
  • Product development investments during Q4/19 amounted to EUR 0.9m (2019: EUR 3.9m).
  • Guidance for 2020: Solteq expects that its adjusted operating profit will remain at the same level as in 2019. In our estimates we have expected growth in the adj. operating profit in 2020.
  • Dividend proposal: a dividend of a maximum amount of EUR 0.05 per share may be distributed, conditional upon whether the requirements for distribution of dividends are fulfilled in term of the company’s solvency and / or financial position. A separate announcement will be made if a resolution to distribute dividend is made. (Evli est. 0.03 per share)

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Innofactor - Sustaining successful turnaround

26.02.2020 - 09.15 | Company update

Innofactor’s Q4 results were slightly below our expectations, with net sales of EUR 17.4m (Evli 17.0m) and EBITDA of EUR 1.6m (Evli 2.0m). The business development remains favourable through a continued healthy order backlog and revenue mix. With significant improvements in cash generation and a reasonable financial situation M&A activity could again be on the table to supplement the service offering in the Nordics and speed up growth.

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Continued healthier profitability

Innofactor’s Q4 results were slightly shy of our expectations. Net sales grew 9.7% from the relatively weak comparison period to EUR 17.4m (Evli 17.0m) while EBITDA amounted to EUR 1.6m (Evli EUR 2.0m). Innofactor expects net sales and EBITDA in 2020 to increase from 2019. The order backlog remained at a good level of EUR 49.8m. Q4 saw no new significant orders but several orders have already been received during early 2020. The net sales mix remains favourable through a continued higher level of recurring revenue.

M&A activity could pick up

We continue to expect limited near-term growth (2020E: 4%) with the longer duration of the order backlog while expecting some further pick-up in margins (2020E: +1.2%p EBITDA-%). Wage inflation through changes to the Competitiveness Pact may pose a risk while the margin improvement potential remains supported by the to our understanding current suboptimal billing rates. With the improved cash generation and not particularly challenging financial position M&A activity could likely pick up again to supplement the offering of Innofactor’s pan-Nordic platform and accelerate growth.

BUY with a target price of EUR 0.90 (0.85)

Innofactor is in our view continuing to show good progress in building up a healthier business. With valuation not overly stretched we retain our BUY-rating and raise our target price to EUR 0.90 (0.85).

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Next Games - New game launches crucial in 2020

26.02.2020 - 09.00 | Preview

Next Games will report H2 results on February 28th. During Q4 Next Games announced that the Blade Runner Nexus game will not be launched during 2019 and updated its outlook. We expect Q4 revenue of EUR 8.2m, seeing some support from season 10 of TWD and the typically stronger Q4, as gross bookings have been on a declining trend for both live games, and an EBIT of EUR -1.7m.

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Expect Q4 revenue of EUR 8.2m, EBIT EUR -1.7m

With Next Games having previously announced that the Blade Runner Nexus game will not be launched during 2019, of key interest in the H2 report will be any comments on the upcoming new products. We expect Q4 revenue of EUR 8.2m (Q4/18: EUR 11.3m), seeing some support for gross bookings from season 10 of TWD and the typically stronger Q4 due to holiday seasons, with gross bookings having been on a declining trend so far during 2019. We expect an EBIT of EUR -1.7m. Profitability has been burdened by the relatively high R&D costs in relation to revenue from live games.

Launch of new games in 2020 remain crucial

With the delay in the BRN launch from the company’s previous expectations, no new games were launched in 2019. Successful new game launches in 2020 remain crucial for ensuring cash flow stability. Both live games have previously been reported to be operated profitably as independent projects, but development costs relating to new products have kept earnings figures in the red. Our assumption is for BRN to be launched mid Q2/20 and the Stranger Things -game in early Q4/20. The successful rights issue during Q4 together with cost savings during 2019 provided some much-needed breathing room for the otherwise rather strained financial position.

HOLD with a target price of EUR 0.90

Following some estimates revisions due to BRN launch timetable assumptions we continue to expect weaker profitability in 2020 before revenue from new products kick in. We retain our HOLD-rating and target price of EUR 0.90 ahead of the H2 results.

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Innofactor - Margins slightly below expectations

25.02.2020 - 09.15 | Earnings Flash

Innofactor’s Q4 results were slightly below our expectations. The net sales in Q4 amounted to EUR 17.4m (Evli EUR 17.0m), while EBITDA amounted to EUR 1.6m (Evli EUR 2.0m). Innofactor expects that its net sales and EBITDA in 2020 will increase from 2019. The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.00).

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  • Net sales in Q4 were EUR 17.4m (EUR 15.9m in Q4/18), in line with our estimates (Evli EUR 17.0m). Net sales in Q4 grew 9.7 % y/y. Net sales per employee has improved by 15.6% since the previous year.
  • EBITDA in Q4 was EUR 1.6m (EUR -0.9m in Q4/18), below our estimates (Evli EUR 2.0m), at a margin of 8.9 %.
  • Operating profit in Q4 amounted to EUR 0.5m (EUR - 1.7m in Q4/18), below our estimates (Evli EUR 1.0m), at a margin of 2.8 %. Profitability has been supported by the measures taken during the end of 2018 to improve profitability.
  • Order backlog at EUR 49.8m, up 62.4% y/y. No significant individual orders were signed during the quarter as several decisions were delayed until the turn of the year.
  • Guidance for 2020: Innofactor’s net sales and EBITDA in 2020 are estimated to increase compared to 2019.
  • Dividend proposal: The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.00).

Open report

Solteq - Finishing off a year of good progress

25.02.2020 - 09.00 | Preview

Solteq will report Q4 results on February 27th. Solteq will report exceptionally good results, aided by gains from the sale of its SAP ERP business to Enfo. We expect the operating profitability to have improved slightly from previous year levels. The divestment should further improve debt ratios sufficiently for Solteq to reinitiate dividend distribution and we expect a dividend proposal of EUR 0.03 per share. We retain our HOLD-rating and target price of EUR 1.50 intact ahead of the Q4 results.

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Expect healthy profitability in Q4

We expect Solteq’s Q4 revenue to amount to EUR 15.7m and the adj. EBIT to EUR 1.5m. Solteq sold its SAP ERP business to Enfo Oyj during the quarter and is expected to book an approx. EUR 2.3m profit in Q4, which will clearly boost earnings. The sales of the SAP ERP business in 2019 is expected to be EUR 4m. With the sale of the business Solteq will focus more on the development of its own software products and services. We expect the sale to sufficiently improve debt ratios for Solteq to reinitiate dividend distribution, which have been on hold for two years due to bond covenants and expect a dividend proposal of EUR 0.03 per share.

SAP ERP business sale to affect growth

With the divestment of the SAP ERP business we have lowered our coming year estimates to account for the decrease in sales. With Solteq on a transformation journey towards becoming more focused on its own software products and related services we have not anticipated major growth in the near-term and with the divestment now expect a minor sales decline in 2020. We continue to expect for Solteq to remain on a margin improvement trajectory. 2020 guidance should in our view likely reflect growth in adj. operating profit compared to 2019.

HOLD with a target price of EUR 1.5

Apart from adjustments made based on the divestment of the ERP SAP business, our estimates remain unchanged. We retain our HOLD-rating and TP of EUR 1.5.

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Scanfil - Higher multiples are warranted

20.02.2020 - 09.20 | Company update

Scanfil’s Q4 results fell slightly short of our expectations, yet overall there were no significant changes in the wider picture. The HASEC acquisition helped Industrial as well as Medtec & Life Science top line, however both segments extended strong organic growth. Scanfil aims to grow at a 5% organic CAGR according to its updated long-term target; in our view there’s still good upside to current multiples. Our TP is now EUR 5.75 (5.25), remain BUY.

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All segments continued to grow except Communication

Scanfil’s EUR 155m Q4 revenue didn’t quite meet our EUR 159m estimate yet grew by 10% y/y. The Industrial segment (key accounts include Kone) jumped by a third in Q4 (Q3 y/y growth was 52%), and so the EUR 47m revenue almost met our EUR 51m estimate. Scanfil says the performance has been due to organic growth but the HASEC acquisition also helped. Medtec & Life Science (potential customers include Thermo Fisher Scientific and Vaisala) top line grew by 17% y/y and so was in line with our EUR 29m estimate. Scanfil says the segment grew mostly in an organic fashion, receiving only slight lift from the German acquisition. Energy & Automation (e.g. Valmet) continued to grow at a stable organic 6% annual rate. Consumer Applications has stabilized for two quarters now, but the business is rather seasonal. Communication (e.g. Nokia) fell by 24%, yet Scanfil says the segment could well stabilize this year. Scanfil’s Q4 operating margin, at 6.5%, was 60bps below our estimate; we still think the company will easily reach its 7% long-run target.

Scanfil targets 5% organic CAGR during the next four years

We estimate Scanfil has grown at a 6% organic rate during the last two quarters. Considering Scanfil’s strong cost, quality and delivery record we view the company’s 5% CAGR target as highly feasible, especially given a good positioning in Industrial and Medtec & Life Science, which we estimate to contribute some two-thirds of all the organic growth going forward.

In our view Scanfil can be valued above peer multiples

Although lowish valuation multiples are in general well-advised for contract electronics manufacturers, in our view Scanfil’s strong profitability track record as well as organic growth outlook justify higher than the current 6x EV/EBITDA and 8x EV/EBIT ‘20e multiples. Our new TP is EUR 5.75 (5.25), retain BUY.

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Gofore - Room for improvement in 2020

20.02.2020 - 08.30 | Company update

Gofore’s H2 results came in slightly better than expected. EBITA was at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects revenue and the comparable adj. EBITA to grow compared to 2019. We retain our HOLD-rating with a TP of EUR 8.2 (8.0).

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H2 EBITA slightly above our estimate at EUR 3.0m

Gofore’s H2 results were slightly better than expected. Revenue amounted to EUR 30.6m (pre-announced), with growth of 18.2% y/y, while EBITA remained at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Full year relative profitability declined slightly, driven by a 5% increase in average wages and a 1 %-point decrease in billing rates, while customer prices increased 2.3%.

Continued revenue and EBITA growth

Gofore expects revenue and the comparable adj. EBITA in 2020 to grow compared to 2019. Organic growth in H2 was according to our estimates clearly in the single-digits, affected by the drop in demand among certain larger customers in Q3. We expect organic growth to pick-up in 2020. Currently, the impact of inorganic growth in 2020 will be clearly smaller and we expect a decline in sales growth to 9.7% in 2020. Gofore is however sitting on a formidable cash position and continued M&A activity is not unlikely. Profitability in 2020 will be affected by one-offs relating to the divestment of the UK business but cost-savings will bring the impact to a net positive. We expect an improvement in adj. EBITA-margins to 13.6% in 2020.

HOLD with a target price of EUR 8.2 (8.0)

Gofore’s performance has slightly faltered, with slower organic growth and minor margin declines, but we still see performance and thus valuation at above peers. We value Gofore at 16x 2020 P/E (goodwill amortization. adj.) and adjust our target price to EUR 8.2 (8.0) and retain our HOLD-rating.

Open report

Gofore - Slightly above expectations

19.02.2020 - 09.30 | Earnings Flash

Gofore’s EBITA in H2 was slightly better than our expectations, at EUR 3.0m (Evli 2.8m). Revenue amounted to EUR 30.6m (pre-announced). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects that its net sales and comparable adjusted EBITDA will grow in 2020 compared to 2019.

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  • Gofore H2/19 net sales amounted to EUR 30.6m (pre-announced), with sales growth in at 18.2% compared to H2/18 figures. Growth was driven by organic growth and the acquisition of Silver Planet.
  • EBITA in H1 amounted to EUR 3.0m, slightly above our estimates (Evli EUR 2.8m), at a margin of 10.0%. EBIT amounted to EUR 2.0m (Evli EUR 1.7m), at a 6.5% EBIT-margin.
  • Dividend proposal: Gofore’s BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20)
  • Guidance: Gofore's net sales and comparable adjusted EBITA will grow compared to 2019. Adjusted EBITA means EBITA, adjusted for nonrecurring items.
  • The number of personnel at the end of the period was 582 (H2/18: 495).

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Exel Composites - Improvement potential still exists

19.02.2020 - 09.10 | Company update

Exel’s Q4 EBIT failed our estimate due to one-off items. We believe the company remains on an improvement track. Our TP is now EUR 6.75 (6.00), new rating BUY (HOLD).

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We continue to expect top line to grow at high single digits

Q4 top line, at EUR 26.6m, was flat y/y and a little soft compared to our EUR 27.8m estimate. This was due to Construction & Infrastructure, where Q4 revenue declined by 2% y/y to EUR 12.6m, while we expected EUR 14.3m. Q4 was thus a relatively slow quarter for the segment, as y/y revenue growth had amounted to 12% in Q3. Exel says there have been no changes to e.g. wind energy demand; there can be wide variations in quarterly figures. Industrial Applications’ Q4 revenue declined by 1% y/y to EUR 8.5m and so the figure was above our EUR 8.0m estimate. Other Applications’ Q4 revenue was in line with our EUR 5.5m estimate. Although Exel’s Q4 top line fell short of our estimate only slightly, adj. EBIT was only EUR 1.3m vs our EUR 2.3m estimate. The gap was due to other operating expenses, which were high at EUR 6.4m (had averaged EUR 5.4m in the last few quarters). Exel says the high expenses were due to items like temporary production plant overlap in China as well as certain production-related one-offs. We find no other surprises on the cost side as gross margin remained at a 60% level and employee expense share continued to decline (down by 200bps y/y to 28%). Order intake continued to increase by 9% y/y.

Exel guides increasing revenue as well as adj. EBIT for ‘20

Exel will likely record some EUR 15m capex in ’20 due to the production plant investment in Austria and residual payments related to a past Chinese acquisition. Overall, we continue to view Exel’s volume outlook favorable. We expect wind energy to provide further strong uplift this year. Exel highlights good volume potential in applications such as cable cores and certain defense-related equipment. With regards to profitability, cost savings measures by themselves should contribute another EUR 1m this year, following the EUR 2m achieved last year.

We see more upside as volume outlook remains good

Exel’s valuation (ca. 8x EV/EBITDA and 13x EV/EBIT ‘20e) is still more than 20% below peer multiples. Although we believe some discount is warranted, we see upside from current levels. Our updated TP is EUR 6.75 (6.00), rating now BUY (HOLD).

Open report

Scanfil - Not quite as high as we expected

19.02.2020 - 08.35 | Earnings Flash

Scanfil’s Q4 didn’t reach our expectations as top line missed our estimate by a few percentage points while operating margin was some 60bps lower than we expected.

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• Scanfil Q4 revenue amounted to EUR 155m vs EUR 159m/157m Evli/consensus estimates.

• Communication top line was EUR 21m, while we estimated EUR 23m.

• Consumer Applications’ revenue was EUR 28m, compared to our EUR 27m estimate.

• Energy & Automation recorded EUR 29m Q4 revenue vs our EUR 29m estimate.

• Industrial top line amounted to EUR 47m vs our EUR 51m expectation.

• Medtec & Life Science Q4 revenue was EUR 29m, compared to our EUR 29m estimate.

• Scanfil’s Q4 EBIT stood at EUR 10.0m vs EUR 11.3m/11.0m Evli/consensus estimates. Operating margin thus amounted to 6.5%, whereas we estimated 7.1%.

• The BoD proposes EUR 0.15 (0.13) dividend per share to be distributed, which we had estimated at EUR 0.16.

• Scanfil guides ’20 revenue in the EUR 590-640m range and expects adjusted operating profit to amount to EUR 39-43m. We find this guidance range unsurprising as FY ’19 revenue stood at EUR 579.4m while adjusted operating profit was EUR 39.4m. Scanfil says the guidance is subject to exceptional uncertainty due to the coronavirus situation.

• Scanfil updates its long-term financial target, according to which Scanfil aims to reach EUR 700m revenue organically in ’23 (previously EUR 600m in ’20) with a 7% operating margin.

Open report

Exel Composites - EBIT miss driven by elevated costs

18.02.2020 - 09.35 | Earnings Flash

Exel Composites reported Q4 revenue slightly below our expectations, while adjusted operating profit fell short of our estimate more dramatically, by about EUR 1.0m, as other operating expenses were higher than we had estimated.

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  • Q4 revenue amounted to EUR 26.6m, compared to EUR 27.8m/27.7m Evli/consensus estimates.
  • Construction & Infrastructure top line was EUR 12.6m (EUR 12.9m a year ago) vs our EUR 14.3m estimate.
  • Industrial Applications generated EUR 8.5m (EUR 8.6m) sales, whereas we expected EUR 8.0m.
  • Other Applications top line amounted to EUR 5.5m (EUR 5.2m), in line with our EUR 5.5m expectation.
  • Q4 adjusted EBIT was EUR 1.3m, compared to EUR 2.3m/2.2m Evli/consensus estimates. The figure missed our expectation as other operating expenses were about EUR 1.0m higher than we had estimated.
  • The BoD proposes EUR 0.18 (0.18) dividend per share be distributed, while we had expected EUR 0.20.
  • Exel Composites guides revenue and adjusted operating profit to increase in 2020 compared to 2019, which is as we expected. The company says the coronavirus will have an impact on its Chinese production volumes in Q1 yet is not ready to estimate the impact in more detail.

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Verkkokauppa.com - Shifts focus towards profitability

17.02.2020 - 09.35 | Company update

Verkkokauppa.com’s Q4 result didn’t meet the expectations as sales were negatively impacted by the postal strike and the changed timing of tax refunds. Q4 sales were EUR 159.9m (Evli 168.9m) while EBIT amounted to EUR 4.5m (Evli 6.0m). We keep our rating “HOLD” with TP of EUR 3.5 (3.3).

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Q4 result hampered by the postal strike

Verkkokauppa.com’s Q4 result missed expectations as sales growth of 2.6% y/y remained below market growth (Gfk: 4.4%), amounting to EUR 159.9m vs. our EUR 168.9m (cons. 164m). Headwind from the postal strike was stronger than anticipated and the changed timing of tax refunds hampered December sales. Black Friday sales were however better than ever. Gross profit was down by 3% y/y due to heavy campaigning during Black Friday. EBIT was EUR 4.5m vs. our EUR 6.0m (cons. 5.6m) resulting from weakened gross profit. ’19 dividend proposal was in line at EUR 0.21 vs. our EUR 0.21 (cons. 0.21).

Prioritizing profitability in ‘20E

Verkkokauppa.com has normally prioritized growth over profitability, which has weighed down margins, as the competition in the consumer electronics market has been extremely tight and price driven. In ‘20E, the company shifts its focus towards profitability and aims for more moderate growth. We thus expect the growth to be somewhat in line with the market growth (GfK ’19 estimate: 2.9% y/y). In order to strengthen efficiency especially in logistics, the company has commenced to seek opportunities within drop shipping (direct delivery from manufacturer to the customer). This allows Verkkokauppa.com to expand its product assortment without logistical pressures. The company also aims to launch a new subcategory in H1’20E and to increase its private label assortment during 20E, which should have a positive impact on profitability, as private labels normally provide better margins. We expect ‘20E-‘21E sales growth of 3.2-3.5% y/y and EBIT growth of 12-18% y/y.

“HOLD” with TP of EUR 3.5 (3.3)

Verkkokauppa.com guided ‘20E revenue of EUR 510m-530m and EBIT of EUR 12-15m. We have lowered our ‘20E sales estimate by some 5% and expect ‘20E sales of EUR 520m (3.2% y/y), which is at the midpoint of the guidance. Our view of EBIT development is rather conservative as the market is highly competitive and price driven. Despite of the good control over costs we expect to get more visibility on the actions to be taken for more efficient operations. We expect EBIT to grow by ~18% y/y in ‘20E, amounting to EUR 13.3m. On our estimates, Verkkokauppa.com trades at ‘20E-‘21E EV/EBIT multiple of 10.1x and 9.0x, which translates into ~60-70% discount compared to the peers. We keep our rating “HOLD” with TP of EUR 3.5 (3.3).

Open report

SSH - Small progress, but not enough

17.02.2020 - 09.10 | Company update

SSH’s Q4 was broadly in line, capping off a challenging year of sales decline. Given the weak performance in FY’19, SSH’s guidance for 2020 was a small disappointment. We’ve cut our estimates for the coming years and maintain our target price of EUR 1.0, our recommendation is now HOLD (prev. SELL).

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Q4 broadly as expected, capping off a disappointing year

Q4 net sales were EUR 4.1 million (vs. 4.7m our Evli). Net sales decreased by -35.8% compared to the previous year mainly due to the end of the patent licensing programme and reduced consulting revenue. Software business sales decreased -11.8% y/y due to the smaller initial project size compared to last year including a large license deal received in Q4’18. Software fees were EUR 1.8 million (2.2m Evli), Professional services were EUR 0.3 million (0.2m Evli), and Recurring revenue was EUR 2.1 million (2.3m Evli). Q4 operating loss was EUR -0.1 million (vs. 0.2m Evli). FY’19 as a whole; net sales of software business (excluding patent income in FY’18) decreased -8% y/y and EBIT was -1.2 MEUR (0.5 MEUR FY’18), attributed to lower sales (despite OPEX reduction), less larger license deals and with significant patent income received in FY’18.

2020 guidance disappointing given 2019 performance

SSH’s expectations for 2020 are revenue growth of 10-15 percent and an improving operating result (-1.2 MEUR FY'19). SSH expect clearly faster growth rates for PrivX and NQX, steady growth for UKM matching the industry growth rate, and modest growth for Tectia, which is the most mature product. The combined effect of these growth rates will result in moderate short-term growth, which SSH expects to accelerate over the next several years. Given the weak performance in SSH’s software business in FY’19, the guidance was a small disappointment and we have consequently cut our sales estimates. We now estimate 16.6 MEUR net sales for 2020E (prev. 17.5MEUR), resulting in 15% y/y growth, which is right at SSH’s guidance upper range. Reaching that level of net sales will require several larger one-off UKM license deals and/or some bigger NQX deals in 2020E. In conjunction with our estimates revision, we have also now amended our estimates regarding the 12 MEUR hybrid loan interest expenses, which as of March 30th 2020 will rise from 7.5% to 11.5%. Management did not provide any new commentary regarding hybrid loan and its possible redemption or re-financing.

Maintain EUR 1.0 target price, recommendation HOLD (prev. SELL)

Despite our estimates cut, the bigger picture remains unchanged in our view; with the underlying question in the investment case still regarding growth. SSH has made progress, but the progress is slow and given SSH’s historical and current growth profile, the question remains will growth materialize. We maintain our target price of EUR 1.0, our recommendation is now HOLD (prev. SELL). As noted before, SSH trades at a clear discount to the cyber security sector. Our target price implies an EV/Sales multiple of 2.4 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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Fellow Finance - Growth investments in 2020

17.02.2020 - 08.30 | Company update

Fellow Finance’s H2 results fell short of our expectations, with EBIT amounting to EUR 0.3m (Evli 1.0m), affected by non-recurring personnel expense items of EUR 0.7m. Margin pressure is expected to continue in 2020 due to growth investments while accelerated turnover growth is expected in 2021-2022. Fellow Finances BoD proposes that no dividend be paid for FY2019 (Evli EUR 0.04). We retain our HOLD-rating with a target price of EUR 4.0 (4.2).

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H2 EBIT below expectations mainly due to NRI’s

Fellow Finance’s H2 results fell short of our expectations. Turnover amounted to EUR 7.0m. Turnover grew 9.1%, driven by an increase in interest yields as commission income decreased slightly. EBIT amounted to EUR 0.3m (Evli 1.0m), impacted by NRI’s of EUR 0.7m. The BoD proposes that no dividend be paid (Evli EUR 0.04 per share). Turnover is expected to grow in 2020 while the operating profit is expected to decrease compared to 2019 (EUR 1.6m) due to growth investments.

Growth investments to lower margins in 2020

We have made downward revisions to our estimates post-H2. We expect an EBIT of EUR 1.3m (prev. 2.1m) and turnover growth of 4% (prev. 6%) in 2020. The consumer lending market in Finland is expected to remain challenging at least during H1/20. We expect limited growth in 2020 as the international operations ramp up and low average consumer loans in Poland, one of the furthest established international markets, will limit the growth pace but offer some upside through higher relative commission yields. We continue to expect growth pick-up in 2021. Profitability will be burdened by higher personnel costs and credit loss reservations associated with scaling up new markets.

HOLD with a target price of EUR 4.0 (4.2)

Fellow Finance’s growth story continues to be challenged by the competitive situation in the consumer lending market in Finland and the visibility into accelerated international growth remains limited. On our revised estimates we adjust our target price to EUR 4.0 (4.2) and retain our HOLD-rating.

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Pihlajalinna - Expecting a profitability turnaround in 20E

17.02.2020 - 08.30 | Company update

Pihlajalinna’s Q4 revenue was as expected at EUR 133.8m (Evli 133.6m) but profitability was weighed down by increased costs. Q4 adj. EBIT amounted to EUR 5.6m (Evli 7.8m). The tender offer by Mehiläinen is currently being reviewed in FCCA and the process is expected to be completed at the end of Q2’20 or latest during Q3’20. For ‘20E we expect a clear improvement in profitability. We keep our rating “HOLD” with TP of EUR 16.

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Q4 revenue in line – adj. EBIT missed expectations

Pihlajalinna’s Q4 revenue of EUR 133.8m (5.4% y/y) was as anticipated (Evli/cons EUR 133.6m/134.4m) but adj. EBIT of EUR 5.6m missed the expectations (Evli/cons EUR 7.8m/8.5m). Profitability was hampered by increased costs related to public specialized care which were concentrated towards the end of the year. Volume and profitability developed favorably in sales to insurance companies (revenue up by 18.1% y/y) but also in occupational healthcare, following the acquisition of Terveyspalvelu Verso. Due to the tender offer by Mehiläinen, no dividend for ’19 is proposed (Evli/cons EUR 0.15/0.15).

Expecting a turnaround in profitability

In ’19, the performance especially in occupational healthcare was good as revenue in the segment grew more than 25% y/y. Profitability was positively impacted by increased share of fixed price services and development of operational models. We expect further growth in occupational healthcare but also in sales to insurance companies, of which, the latest agreement with Pohjola Insurance is an example. Due to the uncertainties around the social and healthcare reform, municipalities have become more active on outsourcing projects. In late ’19, Kristiinankaupunki and Pihlajalinna agreed on a partial outsourcing deal, starting in ‘21E, with total value of EUR ~90m. The contract is at least for 15 years. For ‘20E we don’t expect any new outsourcings to occur. We expect profitability (adj. EBIT) to improve by 68% y/y in ’20E and by 7% y/y in ‘21E due to the cost savings resulting from the efficiency improvement program that was launched last summer. We expect ’20E-‘21E revenue growth of ~3-4%.

“HOLD” with TP of EUR 16 intact

The tender offer by Mehiläinen is currently being under review of FCCA. The first phase investigation will be completed by mid-March though it is highly likely that FCCA will initiate continued phase two proceedings after phase one, meaning that the process is likely to be completed at the end of Q2’20E or latest during Q3’20E. According to Pihlajalinna’s guidance, ‘20E revenue and adj. EBIT are expected to increase from ‘19. We expect ‘20E revenue of EUR 538m (3.8% y/y) and adj. EBIT of EUR 35.1 (68% y/y). Our target price is in line with the tender offer price of EUR 16. We keep our rating “HOLD”.

Open report

Gofore - Expect slightly lower margins in H2

17.02.2020 - 08.30 | Preview

Gofore will report H2 results on February 19th. Revenue in H2 amounted to EUR 30.6m based on reported monthly figures. We expect margin decreases compared to H1/19, driven by the weak development of Gofore’s UK operations and lower revenue, and expect an EBITA-margin of 9.0%. We expect a dividend proposal of EUR 0.20 per share. Growth will in our view slow down clearly in 2020 with a lower impact of inorganic growth and a weaker market outlook. We retain our HOLD-rating and TP of EUR 8.0.

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Expecting weaker margins in H2 due to lower revenue

Gofore will report H2 results on February 19th. Revenue in H2 has based on monthly figures been EUR 30.6m, with a y/y growth of 18.4%, of which a majority will have been inorganic growth from the Silver Planet acquisition. Revenue development during H2 has been sub-par, affected partly by a weak development of Gofore’s UK operations, which were divested in early 2020. We expect the revenue development to have had a negative impact on margins and expect the EBITA-margin to decrease to 9.0% (H1/19: 15.1%). Our dividend proposal estimate is EUR 0.20 per share (2019: EUR 0.19).

Relative growth pace seen to slow down

Gofore revised its long-term financial target for growth in December 2019. Growth is still seen to be faster than the target market, but the market growth estimate was lowered from 15-25% to above the general ICT service sector growth but below 10%. Our growth estimate for 2020 is 10.8%, of which some 9% organic (not including possible new M&A activity). Cost savings from divesting the UK operations will have a slight net positive effect on profitability in 2020 and we expect an EBITA-margin of 13.5%.

HOLD with a target price of EUR 8.0

We have not made any notable changes to our estimates pre-H2 apart from adjustments based on monthly revenue figures. We retain our HOLD-rating and target price of EUR 8.0 ahead of the H2 results.

Open report

SSH - Q4 result broadly as expected, 2020 guidance signals confidence in turnaround

14.02.2020 - 09.30 | Earnings Flash

SSH Q4 result was broadly as expected. Outlook for 2020: SSH expects revenue growth of 10-15 percent and an improving operating result.

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  • Q4 net sales were EUR 4.1 million (vs. 4.7m our expectation). Net sales decreased by -35.8% compared to the previous year mainly due to the end of the patent licensing programme and reduced consulting revenue.Software business sales decreased -11.8% y/y due to the smaller initial project size compared to last year including a large license deal received in Q4’18.
  • Software fees were EUR 1.8 million (2.2m Evli), Professional services were EUR 0.3 million (0.2m Evli), and Recurring revenue was EUR 2.1 million (2.3m Evli)
  • Q4 operating loss was EUR -0.1 million (vs. 0.2m our expectation)
  • EPS was -0.02 (vs. 0.00 our estimate)
  • Liquid assets were EUR 12.0m (11.6m Q3/19)
  • Business outlook for 2020: SSH expects revenue growth of 10-15 percent and an improving operating result (-1.2 MEUR FY'19)
  • SSH expect clearly faster growth rates for PrivX and NQX, steady growth for UKM matching the industry growth rate, and modest growth for Tectia, which is the most mature product. The combined effect of these growth rates will result in moderate short-term growth, which SSH expects to accelerate over the next several years.
  • CEO comment: “We are making progress with our new products, PrivX and NQX, which we expect to start having an increasing impact on our revenue and bottom line in 2020 and beyond.”

Open report

Marimekko - Investments into growth continue

14.02.2020 - 09.20 | Company update

Marimekko delivered good Q4 result. Sales grew by 17% y/y to EUR 34.7m (Evli 34.6m). Sales growth was strong especially in Finland and APAC region. Adj. EBIT was EUR 3.0m (Evli 2.9m). We keep our rating “HOLD” with TP of EUR 44 (39).

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Q4 revenue driven by strong sales in Finland

Marimekko’s Q4 net sales amounted to EUR 34.7m (17% y/y) vs. our EUR 34.6m (cons. 34.3m). Sales performance was strong especially in Finland, driven by increased retail and wholesale sales (retail LFL growth 21% y/y). APAC region performed well also, as revenue was boosted by increased wholesale sales and licensing income. Q4 adj. EBIT was EUR 3.0m vs. our EUR 2.9 (cons. 3.0m). Profitability was driven by strong sales but weighed down by increased fixed costs. Proposed ’19 dividend of EUR 0.90 was below expectations (Evli/cons EUR 1.14/1.08).

Expecting a strong year in home market

We expect the good performance in Finland to continue in ‘20E, driven by broader target audience. Domestic wholesale sales are expected to be substantially higher than in ‘19, due to nonrecurring promotional deliveries. We expect ‘20E sales growth of 12% y/y in Finland, representing some 58% of Marimekko’s total sales in ‘20E. We also expect sales to increase in APAC region, though the coronavirus and political uncertainties could have a negative impact on sales. The actions taken to control the grey export cases in APAC region will also have an impact on sales and result. We expect APAC ‘20E sales growth of 2.5% y/y (H2’19 sales included nonrecurring licensing income of EUR 1.6m).

Increased investments into growth

We expect profitability improvement of ~12-18% y/y in ‘20E-‘21E, supported by strong sales growth and improved gross margin. According to the company, investments into growth will be higher in ‘20E, resulting in increase in personnel and marketing expenses. Store network will be expanded by ~10 new stores and shop-in-shops and some existing stores will be renewed. The company will also develop further its digital business and IT systems. We expect total OPEX to increase by ~10% y/y, hampering profitability development.

“HOLD” with TP of EUR 44 (prev. EUR 39.0)

We have slightly increased our ‘20E sales expectation and expect sales growth of 9.2% y/y (136.9m) while we expect adj. EBIT of EUR 20.1m (17.5% y/y). 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 ‘20E-‘21E EV/EBIT multiple of 16.7x and 14.6x which translates into ~20% discount compared to the luxury peer group. We keep our rating “HOLD” with TP of EUR 44 (EUR 39).

Open report

Aspo - Higher EBIT remains missing

14.02.2020 - 09.15 | Company update

Aspo’s EUR 5.4m Q4 EBIT missed us and consensus by ca. EUR 1.0m. The miss was due to Telko. We believe Aspo has operational upside long-term, however we also view current valuation neutral given the uncertainty surrounding the improvement slope. We have made only minor estimate revisions. Our TP remains EUR 8.25, rating still HOLD.

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ESL didn’t disappoint, yet macro uncertainty still weighs

ESL posted EUR 4.4m Q4 EBIT i.e. a 5% y/y increase and slightly above our EUR 4.3m estimate. In our view this was a decent performance considering Q4 cargo volumes declined y/y from 4.5m tonnes to 4.0m tonnes as steel industry shipments fell dramatically. Energy industry shipment volumes were also soft due to warm weather. Aspo sees Baltic Sea steel industry cargo volumes now stabilizing. Even though the LNG-powered vessels as well as AtoB@C are performing well, there’s uncertainty regarding ESL’s EBIT improvement slope this year. Nevertheless, even if steel industry shipments don’t rebound meaningfully in ’20 we would still expect ESL to achieve significantly higher EBIT. Telko’s EUR 0.9m Q4 EBIT didn’t meet our EUR 2.2m estimate and declined significantly y/y from EUR 3.4m. EBIT took a EUR 0.9m hit due to low volumes and raw materials prices, and FX. Telko also destocked low-margin low-turnover inventory, which also had a negative EUR 0.9m effect. Leipurin bakery business seems to be improving especially in Russia, however given the macro uncertainties around ESL’s and Telko’s profit development we don’t see this as a meaningful enough value driver currently.

Aspo guides improving EBIT for this year

We still view ESL able to post some EUR 5-6m in quarterly EBIT; should steel industry volume development turn positive in ’20 the dry bulk carrier should have no trouble achieving EUR 20m (compared to EUR 14.6m last year). Aspo says Telko’s Q1 will still be burdened by destocking measures. In our view Telko should still be able to achieve quarterly EBIT close to EUR 3m this year.

In our view valuation is neutral given uncertainty

There’s significant upside potential relative to Aspo’s long-term targets, however in our opinion the bridge there is not as of now stable enough to turn our view more positive. Our TP is still EUR 8.25, while our rating remains HOLD.

Open report

Endomines - Growth story in need of financing

14.02.2020 - 09.00 | Company update

Endomines is nearing commercial production at Friday, after several bumps on the road, and ramp-up to design capacity is expected in March 2020. The production delay has put a clear dent in Endomines’ financial situation and additional financing will in our view be needed in the near-term to bring further assets into production. With the financing risk overshadowing the future potential we downgrade to SELL (HOLD) with a TP of SEK 5.0 (4.7).

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Nearing commercial production at Friday

Endomines continued to post meager figures in Q4, as gold concentrate sales from Friday have not yet commenced. Bottom-line figures were as a result clearly in the red, with EBITDA at SEK -15.1m. Endomines expects to ramp-up production at Friday to design capacity (3,445 tonnes/month) in March 2020. The concentrate sales agreement is yet to be confirmed but should in our view be signed during Q1. Built up ore stockpiles will speed up production ramp-up, but we expect head grades to be well below expected typical grades during the first half of 2020.

Financial position again at risk

Endomines financial situation has again become a reason for concern, as group cash fell to SEK 15.7m (Q3/19: SEK 61.9m) in Q4. The Friday production facility investments are largely behind and cash flows will improve once production at Friday picks up. Friday cash flows will however not suffice to develop new assets and Endomines will in our view seek additional financing in the near future. Previous debt-financing options have not been favourable and a rights issue could be on the table.

SELL (HOLD) with a target price of SEK 5.0 (4.7)

Endomines is finally nearing production start at Friday and has continued consolidating its land assets in Idaho and is seeking to expand further through the transaction with Transatlantic. The gold price development has further remained favourable. The positive drivers are in our view, however, overshadowed by the near-term financial risks. We adjust our target price to SEK 5.0 (4.7) and downgrade to SELL (HOLD).

Open report

Raute - Growth pursuit weighs EBIT this year

14.02.2020 - 08.40 | Company update

Raute’s Q4 was mixed relative to our estimates. More important was Raute’s commitment to pursue emerging markets growth. We retain our EUR 25 TP and HOLD rating.

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Q4 put an end to a year following the record-high one

Raute reported EUR 39.3m in Q4 sales, above our EUR 37.0m estimate but down by 27% y/y. Project deliveries sales declined by 36% y/y to EUR 24.1m, while technology services top line was also soft at EUR 15.2m (down 10% y/y) owing to the low demand for cyclical modernization projects. We had expected Raute to post EUR 3.0m in Q4 EBIT as the company indicated Q4 would be the strongest in ’19 in terms of profitability, however the figure was realized at EUR 1.8m due to certain unforeseen costs owing to the record-high workload in ’18. With regards to order activity, Raute booked EUR 17m in new orders during Q4. The figure was slightly below our EUR 19m expectation and declined by 39% y/y. The EUR 4m project order intake was indeed low, while services orders dropped by 32% to EUR 13m due to lack of modernizations. In our view the cool market is not, at least for now, a major problem for Raute as the company should still be able to post relatively stable top line this year thanks to the EUR 58m Segezha project (and total EUR 88m order book).

Raute guides flat sales and lower EBIT for this year

In our opinion Raute’s decision to guide stable sales development for ’20 wasn’t a surprise. In practice Raute’s guidance policy is rather loose and given the recent order flow we see sales slightly down this year. The picture could of course change swiftly should larger orders materialize. In our view the main takeaway was that Raute expects lower EBIT this year as the company is responding to the market shift by committing itself to increased efforts in R&D and marketing. As European activity remains low due to recent major investment cycle in new capacity, Raute aims to grow in emerging markets more seriously than before by segmenting its equipment to better reach lower price points.

We update our estimates following the report

We have cut our estimates for this year as the market environment has remained cool. While we previously expected Raute’s ‘20e revenue to amount to EUR 148.6m, we now expect EUR 141.8m. With regards to operating profit, we previously expected Raute to achieve EUR 11.1m this year. We now see the figure down to EUR 7.8m as Raute has decided to invest more in developing its offering more attractive for emerging markets. Raute used to spend some EUR 3m annually in R&D; looking at Raute’s latest figures we think the company is on track to spend more than EUR 5m this year. Moreover, the large Segezha order makes up a significant portion of workload this year and thus its lower margin will restrict operating profit potential.

We continue to view valuation neutral

In the long-term an expanded offering could have big financial potential. Still, the current picture is rather murky. We view Raute’s valuation (8x EV/EBITDA and 12x EV/EBIT ‘20e) neutral in the current environment. Our TP is still EUR 25, rating HOLD.

Open report

Verkkokauppa.com - Earnings miss in Q4

14.02.2020 - 08.35 | Earnings Flash

Verkkokauppa.com’s Q4’19 revenue grew by 3% and was EUR 159.9m vs. Evli EUR 168.9m and consensus of EUR 164.0m. Gross profit was EUR 22.2m (13.9% margin) vs. EUR 24.7m (14.6% margin) Evli view. EBIT was EUR 4.5m vs. EUR 6.0m/5.6m Evli/cons. 2020E guidance: The company expects revenue to be 510-530 million euros and comparable operating profit to be 12-15 million euros.

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• Q4 revenue was EUR 159.9m vs. EUR 168.9m Evli view and EUR 164.0m consensus. Sales grew by 3% while market growth was 4.4% (GfK estimate). Revenue growth in Q4 was boosted by record sales during Black Friday, additional marketing activities and campaigning. Tax refund changes and Posti’s strike had a negative impact on sales during the Christmas season.

• Q4 gross profit was EUR 22.2m (13.9% margin) vs. EUR 24.7m (14.6% margin) Evli view. Gross profit weakened due to heavy campaigning during Black Friday.

• Q4 EBIT was EUR 4.5m (2.8% margin) vs. EUR 6.0m (3.6% margin) Evli view and EUR 5.6m (3.4% margin) consensus. EBIT decreased mostly due to a lower gross margin.

• Q4 eps was EUR 0.07 vs. EUR 0.10/0.09 Evli/cons.

• 2020 guidance: The company expects revenue to be 510-530 million euros and comparable operating profit to be 12-15 million euros.

• The company also decided on a quarterly dividend of EUR 0.048 per share. Total ’19 dividend is EUR 0.21 vs. our EUR 0.21 and EUR 0.21 consensus.

Open report

Pihlajalinna - Profitability below expectations

14.02.2020 - 08.30 | Earnings Flash

Pihlajalinna’s Q4’19 revenue amounted to EUR 133.8m vs. EUR 133.6m/134.4m Evli/cons, while adj. EBIT landed at EUR 5.6m vs. EUR 7.8m/8.5m Evli/cons estimates. Organic growth increased by 3.1% y/y. 20E consolidated revenue is expected to increase from the 2019 level. Adjusted EBIT is expected to increase compared to 2019.

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• Q4 revenue was EUR 133.8m vs. EUR 133.6m/134.4m Evli/cons estimates. Revenue grew by 5.4% y/y. Organic growth was 3.1% y/y.

• Q4 adj. EBITDA was EUR 14.4m (10.8% margin) vs. EUR 16.7m/17.5m Evli/cons estimates. Profitability was affected by the costs of public specialized care that were concentrated towards the end of the year. Personnel expenses were also increased by stricter requirements imposed by the authorities.

• Q4 adj. EBIT was EUR 5.6m (4.2% margin) vs. EUR 7.8m/8.5m (5.8%/6.3%) Evli/cons estimates.

• Q4 EPS was EUR 0.16 vs. EUR 0.23/0.21 Evli/cons.

• Due to the Mehiläinen’s tender offer, no dividend for ’19 is proposed (EUR 0.15/0.15 Evli/cons).

• Guidance for 20E: consolidated revenue is expected to increase from the 2019 level. Adjusted EBIT is expected to increase compared to 2019

Open report

Fellow Finance - Miss on earnings, guidance weakness

14.02.2020 - 08.30 | Earnings Flash

Fellow Finance’s H2/2019 results fell short of our expectations. Revenue was as per co’s previous guidance EUR 7.0m, while EBIT and adj. EBIT amounted to EUR 0.3m and EUR 1.0m respectively (Evli EUR 1.0m/1.0m). Fellow Finance’s BoD proposes that no dividend be paid for 2019 (Evli EUR 0.04 per share). Fellow Finance expects turnover to grow in 2020 while growth efforts are expected to decrease the operating profit compared to 2019.

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  • Revenue in H2 amounted to EUR 7.0m (EUR 6.4m in H2/18), in line with our estimates (Evli EUR 7.0m, pre-announced). Growth in H2 amounted to 9.1%.
  • Fellow Finance facilitated loans during H2 for a total of EUR 92m (EUR 96m in H2/18).
  • Adj. EBIT in H2 amounted to EUR 1.0m (EUR 1.7m in H2/18), in line with our estimates (Evli EUR 1.0m). EBIT amounted to EUR 0.3m (Evli EUR 1.0m).
  • Adj. EPS in H2 amounted to EUR 0.01 per share (EUR 0.14 in H2/18), below our estimate of EUR 0.04. EPS amounted to EUR -0.07 (Evli EUR 0.04)
  • Guidance: In 2020, turnover is expected to grow, and the company's growth efforts are expected to decrease operating profit compared to 2019. The guidance implies weaker figures than we had expected, as we have estimated minor growth in 2020 but EBIT of EUR 2.1m. New guidance implies EBIT of less than EUR 1.6m.
  • Dividend proposal: The BoD proposes that no dividend be paid for 2019 (Evli EUR 0.04).
  • During H2 new services and market openings were prepared and a subsidiary established in Estonia.

Open report

Aspo - EBIT miss attributable to Telko

13.02.2020 - 10.40 | Earnings Flash

Aspo reported Q4 EBIT at EUR 5.4m i.e. missing our and consensus estimate by about EUR 1.0m. In our view the EBIT miss was wholly attributable to Telko.

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  • Group revenue amounted to EUR 147.0m in Q4, compared to EUR 150.5m/152.5m Evli/consensus estimates.
  • Aspo posted EUR 5.4m Q4 EBIT whereas the expectation was EUR 6.4m/6.6m Evli/consensus.
  • ESL Shipping’s Q4 revenue stood at EUR 45.3m, while we expected EUR 44.5m. ESL Q4 EBIT was EUR 4.4m vs our EUR 4.3m estimate.
  • Telko’s revenue amounted to EUR 69.8m in Q4 vs our EUR 71.9m expectation. Meanwhile Q4 EBIT was recorded at EUR 0.9m, in comparison to our EUR 2.2m estimate. Aspo says Telko’s EBIT was burdened by measures aiming to address the low-margin low-turnover material inventories (to the tune of EUR 0.9m). The figure was also burdened by decreased volumes and raw materials prices as well as FX (a combined EUR 0.9m).
  • Leipurin’s Q4 revenue was EUR 31.9m, compared to our EUR 34.1m estimate. Leipurin posted EUR 1.1m in Q4 EBIT vs our EUR 1.0m expectation.
  • The BoD proposes EUR 0.45 dividend per share to be distributed in two installments.
  • Aspo guides operating profit to increase this year compared to the EUR 21.1m figure last year.

Open report

Endomines - Full production at Friday sought during Q1

13.02.2020 - 10.00 | Earnings Flash

Endomines did not sell any gold concentrate from Friday in Q4, with commercial production expected to commence in March 2020. Full production at Friday is sought to be achieved during Q1. No numeric production guidance was given but ramp-up to design capacity (3,445 tonnes per month) is expected in March 2020.

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  • Endomines did not sell any gold concentrate from Friday in Q4 and had in early February announced the expected start-up of commercial production in March 2020, which was not included in our estimates.
  • Revenue* amounted to SEK 0.7m, with our estimates at SEK 22.0m, as we had expected gold concentrate sales from Friday.
  • EBITDA* in Q4 was at SEK -15.1m, below our estimate of SEK -0.8m given the lack of gold concentrate sales.
  • (*Not reported, derived from H1 and Q1-Q3 figures)
  • During December Endomines processed 420.5 ore tonnes with a head grade of 2.65g/t Au (low-grade pre-production development ore) resulting in 2.65 tonnes of concentrate grading 189.2g/t Au. In December Endomines took over all mining activities from the mining contractor at Friday. Endomines has mined approx. 5,000 tonnes of ore up to date, stockpiled at the mine and mill areas. Full mining production delayed to coincide with mill commissioning.
  • Endomines did not give a numeric production guidance for 2020, expecting ramp-up to design capacity (3,445 tonnes per month) in March 2020.
  • The BoD expectedly proposed that no dividend will be paid for 2019.

Open report

Raute - Guides lower operating profit

13.02.2020 - 09.35 | Earnings Flash

Raute reported Q4 revenue above our expectations, however operating profit fell clearly short of our expectations as Raute discovered costs attributable to ’18 workload. As expected, Raute guides flat sales development for ’20, however we didn’t expect the company to guide lower operating profit for the year.

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  • Raute reported EUR 39.3m Q4 sales (27% y/y decline) in comparison to our EUR 37.0m estimate. Project deliveries generated EUR 24.1m in sales.
  • Q4 EBIT amounted to EUR 1.8m, while we had estimated EUR 3.0m. The figure was burdened by unforeseen costs stemming from record-high workload in ‘18. Apparently Raute discovered these issues not before late ’19. Operating margin was thus 4.6% vs our 8.1% expectation.
  • Q4 order intake was EUR 17m vs our EUR 19m expectation. Order intake thus decreased 39% y/y. Order book stood at EUR 88m (EUR 95m a year ago).
  • The BoD’s dividend proposal is EUR 1.45 per share.
  • Raute guides flat sales development for this year (as expected) but expects operating profit to decrease due to adaption measures taken to respond to shifting markets as well as investments in marketing, product development and digitalization.

Open report

Vaisala - Valuation running ahead of things

13.02.2020 - 09.10 | Company update

Vaisala ended a solid 2019 with a good Q4 that beat expectations. The outlook for 2020 was rather cautious with current expectations already at upper range of guidance. Both acquired companies contributed significantly in last year’s growth, and we see further M&A as key to accelerate growth and maintain current valuation. Our estimates remain broadly unchanged post Q4 and thus we maintain previous TP of EUR 29.5. Due to continued share price rally our recommendation is now SELL (prev. HOLD).

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A good finish to a solid year

Vaisala ended a solid 2019 with a good Q4 that beat expectations. Q4 net sales grew 9% y/y to 118.1 MEUR (118 Evli, 116 cons) and EBIT improved +27% to 17.7 MEUR (16 MEUR Evli/cons.). Dividend proposal is 0.61 (0.60 Evli/cons.). Net sales growth was driven by good level of delivery volumes thanks to record high order book during end of last year. Q4 EBIT improvement was driven by gross margin improvement of 170 bps due to net sales growth and scale benefits.

Both business areas fuelled by M&A

W&E Q4 net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR (80.0 Evli), with growth in all regions except China. W&E Q4 EBIT was 12.1 MEUR (10 Evli). W&E order intake growth was -3%, -8% growth excl. FX and M&A, due to less larger projects during Q4. IM Q4 net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR (38.0 Evli) and was strong in all regions. IM Q4 EBIT was 5.5 MEUR (7.6 Evli). IM order intake grew by 19%, 8% excl. FX and M&A. Both acquired companies, i.e. Leosphere (W&E) and K-patents (IM), have been successfully integrated to Vaisala’s platform and contributed significantly in FY’19 growth. Half of IM’s FY’19 net sales growth came from K-Patents acquisition, while W&E FY’19 net sales growth excluding FX and M&A was 2%. Vaisala has indicated the possibility of further add-on acquisitions in liquid measurements area. With its platform, strong balance sheet and current valuation, Vaisala is in a good position to continue value accreditive acquisitions in our view.

2020 outlook slightly soft as expectations already in upper end

Vaisala estimates its 2020 net sales to be in the range of 400–425 MEUR and EBIT in the range of 38–48 MEUR, which practically means 0-5% growth and 9-12% EBIT margins. Given that our previous 2020 estimates, as well as consensus figures (FY’20E net sales 423M, EBIT 48.3 MEUR) were already in the upper end of the outlook, the guidance is cautious. Vaisala expects W&E market segments to be stable or somewhat grow, while industrial and liquid measurement market segments are expected to continue to grow.

Estimates unchanged, valuation is running ahead of things

Apart from a slight trim to our sales estimates, our estimates are unchanged for the coming years. With the acquired businesses integrated into Vaisala’s sales channel and continued stable to good organic momentum in both W&E and IM, we see Vaisala’s targeted above 5% sales growth achievable and road to >12% margins progressing well. The underlying main driver for growth is continued good growth in industrial business supported by further bolt-on acquisitions. As a result, we estimate IM share of Vaisala’s EBIT to grow to 66% in ‘21E (vs. 56-57% in ’17-’18), driving ~10% EBIT growth in coming years. Vaisala’s share har continued to rally, pushing new all-time highs. On our estimates, Vaisala is trading at PPA amortizations adjusted EV/EBIT multiples of 24.7x and 22.4x for ‘20E and ‘21E, a ~50% premium to our peer group median despite exhibiting lower profitability profile than our peer group. On our adjusted ‘20E P/E multiples, premium is roughly 50% as well. Despite Vaisala’s strong sustainability profile, growing dividend, and especially IM’s highly profitable growth with possibility of further add-on acquisitions, we see current valuation too stretched given our current growth and earnings estimates (which do not account for further M&A). We maintain previous TP of EUR 29.5, which values Vaisala at EV/EBIT 23.5x and 21x on ’20-21E, still at ~40% premium to our peer group. Due to continued share price rally our recommendation is now SELL (prev. HOLD).

Open report

Marimekko - Q4 result as expected

13.02.2020 - 09.00 | Earnings Flash

Marimekko’s Q4 net sales increased by 17% and amounted to EUR 34.7m vs. EUR 34.6m/34.3m Evli/cons. Adj. EBIT was EUR 3.0m vs. EUR 2.9m/3.0m Evli/cons. In 2020E, revenue is expected to be higher than in the previous year while adj. EBIT is estimated to be approximately at the same level or higher than in the previous year.

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  • Finland: revenue was EUR 21.9m vs. EUR 21.0m Evli view. Revenue increased by 20%.
  • International: revenue was EUR 12.8m vs. EUR 13.6m Evli view. Revenue increased by 12%.
  • Retail sales increased by 16%. Wholesale sales increased by 15%. Growth came primarily from retail and wholesale sales in Finland as well as increased wholesale sales and licensing income in the Asia-Pacific region.
  • Q4 adj. EBIT was EUR 3.0m (8.7% margin) vs. EUR 2.9m/3.0m (8.4%/8.8% margin) Evli/cons. Profitability was boosted by sales growth whereas higher fixed costs had a negative impact on result.
  • Q4 EPS was EUR 0.26 vs. EUR 0.29/0.28 Evli/cons.
  • Proposal for ’19 dividend: EUR 0.90 vs. EUR 1.14/1.08 Evli/cons.
  • Guidance for 2020E: revenue is expected to be higher than in the previous year while adj. EBIT is estimated to be approximately at the same level or higher than in the previous year.

Open report

Vaisala - Q4 result small beat, 2020 outlook signals 0-5% growth and 9-12% EBIT margins

12.02.2020 - 14.20 | Earnings Flash

Vaisala’s Q4 net sales grew 9% to 118.1 MEUR vs. 118 MEUR our expectation and 116 MEUR consensus. Q4 reported EBIT was 17.7 MEUR vs. our expectation of 16 MEUR (16 MEUR consensus). Dividend proposal is 0.61(0.60 Evli, 0.60 consensus).

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• Group level results: Q4 net sales grew 9% to 118.1 MEUR vs. 118 MEUR our expectation and 116 MEUR consensus. Q4 EBIT was 17.7 MEUR vs. our expectation of 16 MEUR (cons. 16 MEUR). EPS was 0.41 (0.35 Evli, 0.34 consensus).

• Dividend proposal is 0.61(0.60 Evli, 0.60 consensus).

• Gross margin was 56.0 % vs. 54.3 % last year.

• Orders received was 103.3 MEUR vs. 99.1 MEUR last year. Orders received increased by 4% and growth without currency impact and acquisitions was -3%.

• Weather & Environment (W&E) net sales grew 5% (1% excl. FX and M&A) to 81.9 MEUR vs. 80.0 MEUR our expectation. EBIT was 12.1 MEUR (10 MEUR Evli). Order intake growth was -3% in Weather and Environment, -8% growth excl. FX and M&A.

• Industrial Measurements (IM) net sales grew 18% (5% excl FX and M&A) to 36.3 MEUR vs. 38.0 MEUR our expectation. EBIT was 5.5 MEUR (7.6 MEUR Evli). Industrial Measurements order intake grew by 19%, 8% excl. FX and M&A.

• Business outlook for 2020: Vaisala estimates its full-year 2020 net sales to be in the range of EUR 400–425 million and its operating result (EBIT) to be in the range of EUR 38–48 million.

Open report

Etteplan - Some uncertainty heading into 2020

12.02.2020 - 09.00 | Company update

Etteplan’s Q4 results were below expectations, driven by the impact of the industrial strike in Finland. The guidance for 2020 EBIT was softer than expected, with some caution being taken due to the unpredictability in the impact of the coronavirus. Demand outlook comments were nonetheless slightly positive based on early 2020 development. We have slightly lowered our 2020 estimates to account for a likely weaker Q1. We retain our HOLD-rating with an ex-div TP of EUR 10.2.

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Clear negative impact of industrial strike

Etteplan’s Q4 results were below expectations. Revenue amounted to EUR 71.8m (EUR 72.1m/72.7m Evli/cons.), with 14.2% growth y/y (1.4% organic excl. FX), driven by the mid-2019 acquisitions. EBIT amounted to EUR 5.6m (EUR 6.1m/6.3m Evli/cons.) and EBIT excl. NRI’s to EUR 5.1m. Profitability was below comparison period figures in all service areas, driven mainly by the impact of the industrial strike in Finland in December. Challenges in certain projects also affected profitability of the Software and Embedded Solutions service area. The BoD’s dividend proposal is EUR 0.35 per share (EUR 0.36 Evli/cons.)

Coronavirus prompts EBIT guidance cautiousness

Etteplan expects revenue to grow clearly in 2020 and EBIT to be at the same level or improve compared to 2019. The EBIT guidance was softer than expected, reflective of a more cautious approach due to uncertainty related to the coronavirus. Comments on general demand outlook were slightly more positive, with signs of pick-up following slightly decreased political uncertainty. We have lowered our 2020 EBIT estimate by some 7%, expecting a weaker Q1 due to the coronavirus.

HOLD with an ex-div target price of EUR 10.2

On our revised estimates and slightly increased caution due to the coronavirus uncertainty we adjust our target price to EUR 10.2 ex-div and retain our HOLD-rating, valuing Etteplan at 14x 2020 P/E.

Open report

Etteplan - Some softness in results/guidance

11.02.2020 - 13.15 | Earnings Flash

Etteplan's net sales in Q4 amounted to EUR 71.8m, in line with our estimates and consensus (EUR 72.1m/72.7m Evli/cons.). EBIT amounted to EUR 5.6m, below our estimates and below consensus (EUR 6.1m/6.3m Evli/cons.). Dividend proposal: Etteplan proposes a dividend of EUR 0.35 per share (EUR 0.36 Evli/Cons.).

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  • Net sales in Q4 were EUR 71.8m (EUR 62.8m in Q4/18), in line with our and consensus estimates (EUR 72.1m/72.7m Evli/Cons.). Growth in Q4 amounted to 14.2 % y/y, of which 0.7 % organic growth.
  • EBIT in Q4 amounted to EUR 5.6m (EUR 5.7m in Q4/18), below our and consensus estimates (EUR 6.1m/6.3m Evli/cons.), at a margin of 7.7 %. EBIT (excl. NRIs) amounted to EUR 5.1m (Evli EUR 6.1m).
  • EPS in Q4 amounted to EUR 0.16 (EUR 0.18 in Q4/18), below our and consensus estimates (EUR 0.19/0.20 Evli/cons.).
  • Engineering Solutions: Net sales in Q4 were EUR 40.8m vs. EUR 40.5m Evli. EBITA in Q4 amounted to EUR 3.6m vs. EUR 4.0m Evli.
  • Software and Embedded Solutions: Net sales in Q4 were EUR 17.7m vs. EUR 19.1m Evli. EBITA in Q4 amounted to EUR 1.4m vs. EUR 2.1m Evli.
  • Technical Documentation Solutions: Net sales in Q4 were EUR 13.1m vs. EUR 12.5m Evli. EBITA in Q4 amounted to EUR 0.9m vs. EUR 1.0m Evli.
  • Dividend proposal: Etteplan proposes a dividend of EUR 0.35 per share (EUR 0.36 Evli/Cons.).
  • Guidance: revenue for 2020 expected to increase clearly and EBIT to be at the same level or improve compared to 2019. The EBIT guidance appears somewhat soft compared to our expectations.

Open report

Fellow Finance - Looking for signs of growth pick-up

11.02.2020 - 09.15 | Preview

Fellow Finance will report H2/19 results on February 14th. Revenue growth will based on company guidance have been around 10% during H2 despite a minor decline in intermediated loan volumes. We expect the slower growth and increased competition in Finland to have had a negative impact on margins. We expect a dividend proposal of EUR 0.04 per share. We retain our HOLD-rating and lower our target price to EUR 4.2 (5.0) ahead of H2 results.

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Slower loan volume growth puts pressure on margins

Company guidance for 2019 puts full-year revenue growth at around 19% and the implied H2/19 growth will be around 10%. Intermediated loan volumes during H2 have seen minor declines compared with H2/18, affected by the increased competition within consumer lending in Finland. Revenue growth is as such expected to be driven by higher interest income. We expect margins to have continued to decline with the slower revenue growth and the impact of the increased competition on broker commissions. We expect a dividend proposal of EUR 0.04 per share (2018: 0.04).

2020 expected to remain a ramp-up year

We expect 2020 to continue to be challenging for Fellow Finance. Fellow Finance’s growth story was heavily dented by the stalling intermediated loan volume development and profitability has declined. We expect 2020 to continue to be a ramp-up year for international operations but do not expect the growth to materialize significantly before 2021. Growth investments are also expected to have an impact on margins, and we expect a minor decline in operating profit in 2020.

HOLD with a target price of EUR 4.2 (5.0)

Without any clear signs of growth pick-up, we find it hard to identify clear near-term upside potential. The 2020 guidance should hopefully provide more light on the matter. We lower our target price to EUR 4.2 (5.0) and retain our HOLD-rating.

Open report

Detection Technology - Slight dent in growth story

11.02.2020 - 09.10 | Company update

DT reported a Q4 that clearly missed ours and market expectations. DT’s lowered medium-term financial target regarding sales growth also put a slight dent in our growth story investment case. Due to the miss and lowered medium-term growth target, we have clearly cut our estimates for the coming years. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. Our target price remains EUR 24, recommendation is now HOLD (prev. BUY).

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Q4 result missed clearly expectations, FY’19 growth decent

DT’s Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.). SBU had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y, but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer. MBU delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to continued softness in the medical imaging market. In FY’19, DT posted +9.2% growth (+5.5% in FY’18), with 16.6% EBIT-margin (19.7% in FY’18) hampered by increased costs and slowdown in MBU.

Growth to continue in 2020, but circumstances lower visibility

As usual, the visibility in DT’s case is quite low. DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but coronavirus may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020. DT still sees H1 growth despite headwinds. DT expects significant sales contribution in 2020E from recently launched Aurora product family for SBU as well as roughly 1 MEUR contribution from X-Panel on MBU side.

Updated financial targets puts slight dent in growth story

DT updated its medium-term financial targets; DT now aims to grow at least 10% (prev. 15%) and achieve EBIT-margin at or above 15% (no change) in medium term. DT announced in Q2’19 its updated strategy until 2025; the 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. DT 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, of which DT has roughly 20% share. Despite a larger market scope, DT sees moderating the sales growth targets as prudent as growth becomes more difficult as a +100 MEUR revenue company. We’ve emphasized the growth story in our investment case based on the strong growth drivers, especially in China, where Beijing’s “Made in China 2025” initiative has led to double digit growth rates for many local Chinese OEM’s that are DT’s clients. Although market drivers remain intact, we lower our sales growth estimates for 2020-21E from 14-15% to 10-12.5% based on the updated financial targets.

Estimates cut, we maintain target price of EUR 24

Based on the Q4 report and lowered longer-term sales growth targets, we have cut our sales estimates 7-9% and our EBIT estimates 17-20% for 2020-21E. We now estimate DT to grow 10% and 12.5% in 2020-21E (prev.14-15%). We estimate 2020E EBIT to grow 12% to 19 MEUR (17% EBIT margin) as SBU’s Aurora volumes ramp-up in H2 and MBU returns to growth mode after temporary slowdown. On our new estimates, DT is trading at ‘20E 17.2x EV/EBIT and 23.6x P/E, which is broadly in line with our peer group. Despite our estimates cut, we remain, as noted in our preview comment, positive towards the longer-term investment case as we continue to see DT executing well on a growth market with strong drivers. We do not however currently have enough conviction in our estimates; therefore, we maintain our target price at EUR 24, recommendation is now HOLD (prev. BUY).

Open report

Detection Technology - Q4 result miss, moderates its financial targets

10.02.2020 - 09.30 | Earnings Flash

DT’s Q4 net sales at EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. SBU sales grew +6% to EUR 16.4m (EUR 19m our expectation) and MBU sales declined -15.4% to EUR 8.6m (EUR 8.7m our expectation). DT’s Q4 EBIT came in at EUR 3.2m vs. our estimates of EUR 5.1m (EUR 4.7m cons). EBIT excluding non-recurring items was EUR 3.9 million (4.9 Q4’18). Dividend proposal is 0.38 (0.38 Evli / 0.39 consensus).

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• Group level results: Q4 net sales amounted to EUR 25m (-2.5% y/y) vs. EUR 27.7m/27.4m Evli/consensus estimates. Q4 EBIT was EUR 3.2m (12.8% margin) vs. EUR 5.1m/4.7m Evli/cons. R&D costs amounted to EUR 2.66m or 10.6% of net sales. Dividend proposal is 0.38 (0.38 Evli / 0.39 cons.).

• Security and Industrial Business Unit (SBU) had net sales of EUR 16.4m vs. EUR 19m Evli estimate. SBU sales grew 6% y/y but growth was affected by temporarily lower sales in CT products and delayed deliveries to one key customer.

• Medical Business Unit (MBU) delivered net sales of EUR 8.6m which was in line with our estimate of EUR 8.7m. Net sales of MBU decreased by -15.4% y/y due to softening in the medical CT market and the ramp-down of one key MBU customer’s product.

• Outlook update: DT estimates annual growth to remain at previous 5-6% level in all market segments in 2020, but the indirect impacts of the corona virus epidemic in Asia may have a temporary adverse impact on growth in H1. DT also estimates the temporary slowdown in the global medical CT market to continue in Q1, and the situation to normalize at the end of 2020, but demand may fluctuate significantly.

• New financial targets: DT aims to increase sales by at least 10% per annum and to achieve an operating margin at or above 15% in the medium term. (Previous target: to increase sales by at least 15% p.a. and to achieve an EBIT margin at or above 15% in the medium term)

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Finnair - Normalizing capacity growth in ‘20E

10.02.2020 - 09.25 | Company update

Finnair delivered strong Q4 result. Q4 revenue was EUR 774.9m vs. our 740m (cons. 744m) while adj. EBIT amounted to EUR 31.2m vs. our 8.2m (cons. 9.0m). Finnair expects ‘20E capacity growth of ~4% but didn’t provide more detailed ‘20E guidance due to the coronavirus. We keep our rating “HOLD” with TP of EUR 6.3 (6.5).

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Q4 better than expected

Finnair’s Q4 result beat the expectations in terms of both revenue and profitability. Revenue grew by 13.4% y/y and amounted to EUR 774.9m vs. our EUR 740m (cons. 744m). The difference is mainly due to Finnair’s better than anticipated revenue management (i.e. ticket fares). Revenue development was good especially in North America (38.5% y/y) and in Europe (17.3% y/y). Q4 costs were as expected with fuel cost of EUR 171m (Evli 171m) and other OPEX (incl. D&A) of EUR 588m (Evli 580m). Q4 adj. EBIT was EUR 31.2m vs. our EUR 8.2m (cons. EUR 9.0m). Proposed dividend for ’19 is EUR 0.20 vs. our EUR 0.11 (cons 0.10).

Expecting ASK growth of ~4% y/y

Finnair’s capacity (ASK) growth was strong in ’19 (11.3% y/y), driven by two new A350s, received last year and one A350, received in Dec’18. The added capacity was mainly put to Asian routes. Two more A350s are expected to be delivered during H1’20E. For 20E, Finnair guides capacity growth of ~4% y/y while our expectation is at 3.6% y/y. We expect the good performance to continue especially in Europe where many airlines have cut capacity but also in North America. We expect cargo to remain relatively soft in ’20E due to continuing uncertainties around global trade.

Weak visibility due to the coronavirus

Finnair did not provide a revenue estimate for 20E, as the total impacts of the coronavirus are still unknown. Finnair has suspended all the flights to mainland China, which might continue until the end of March. Finnair estimates that the Q1’20E financial impacts remain limited as the post Chinese New Year time is usually relatively quiet in terms of traveling. Due to the coronavirus, one delivery of A350 will be delayed from April to June. We have slightly decreased our Q1’20E revenue expectation (approx. -1%) but expect the impacts for the full year to remain limited.

“HOLD” with TP of EUR 6.3 (6.5)

We expect 20E revenue of EUR 3191m (3% y/y) and adj. EBIT of EUR 171m (5% y/y), resulting in adj. EBIT margin of 5.4%. However, as the visibility of the coronavirus is weak, there are uncertainties especially with our short-term estimates. On our estimates, Finnair trades at ‘20E-'21E EV/EBIT multiple 9.2x and 8.4x, which translates into ~10-20% premium compared to the peers. We keep our rating “HOLD” with TP of EUR 6.3 (6.5).

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Raute - This year relies on a record order

10.02.2020 - 09.20 | Preview

Raute reports Q4 results on Thu, Feb 13. Our estimates stand unchanged since we see market softness still exists as before. We retain our EUR 25 TP and HOLD rating.

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Raute did not disclose any large orders in late ‘19

We see no reason to update our estimates for Q4 and beyond as Raute hasn’t released information regarding any larger booked orders since the company disclosed the record-large EUR 58m Russian project. Raute booked the Segezha order at the end of Q3 and the project will be delivered this year, meaning Raute has a decent backbone from which to work on in an environment of cooling demand. All in all, our view towards Raute hasn’t changed in the sense that we continue to wait to see more positive signals in the market, which is still mostly cooling in the wake of a strong capacity investment boom in Europe.

We expect Q4 order intake to have declined to EUR 19m

Raute’s Q3 revenue decreased by 30% y/y to EUR 33.7m as project deliveries sales fell by 51% y/y to EUR 16.5m. Meanwhile technology services top line grew by 20% y/y to EUR 17.2m. However, we note services order intake fell to only EUR 8m in Q3 because of the slow demand for more cyclical modernization projects (the order intake had averaged some EUR 15m in recent quarters). Overall, Q3 order intake increased to EUR 73m from EUR 42m in Q3’18 owing to the Segezha order. We expect Q4 revenue to decline 32% y/y to EUR 37.0m as we see project deliveries down by 47% to EUR 20.0m and services up marginally to EUR 17.0m. We see Q4 EBIT at EUR 3.0m (EUR 3.4m a year ago); this would make Q4 the strongest quarter of the year in terms of profitability, as Raute suggested before.

Our TP of EUR 25 per share and HOLD rating are unchanged

We don’t expect Raute to report meaningful changes to current market environment i.e. the sentiment is still characterized by uncertainty. We expect Raute to guide flat revenue and EBIT for FY ’20; we see Raute’s profitability improving slightly this year as the company is in a relatively good position thanks to the EUR 58m order. Still, Raute’s conservative guidance policy is unlikely to reflect this. We view valuation (6.5x EV/EBITDA and 8.5x EV/EBIT ‘20e) neutral given the market softness. We believe the BoD will propose a dividend of EUR 1.40 per share.

Open report

Consti - Margin recovery progressing well

10.02.2020 - 08.30 | Company update

Consti’s Q4 results were quite in line with our estimates, with net sales at EUR 78.3m (Evli EUR 80.9m) and operating profit at EUR 2.8m (Evli EUR 3.0m). We expect sales to decline around 10% in 2020 due to continued weak order backlog development. The new organization along with the related cost savings should absorb the expected lower volumes and we continue to expect clear earnings improvement. We retain our HOLD-rating with a target price of EUR 8.0 (7.0).

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Q4 results largely in line, order backlog continued decline

Consti’s Q4 results were quite in line with our estimates. Net sales amounted to EUR 78.3m (Evli EUR 80.9m) and operating profit to EUR 2.8m (Evli EUR 3.0m). Profitability was still slightly affected by the project that had a significant negative impact on H1/19 profitability. Consti’s BoD proposes a dividend of EUR 0.16 per share (Evli 0.17). The order backlog continued to decline and was down 17.4% y/y at EUR 186m.

Expecting sales declines but clear profitability improvement

Following the continued weak order backlog we have lowered our coming year sales estimates by some 10% and now expect a 9.8% net sales decline in 2020. We expect Consti to be able to absorb the volume declines without major margin pressure due to the new organization and related cost savings. We have slightly raised our 2020 EBIT estimate, now expecting an EBIT of EUR 10.7m. The Q4 results in our view provided continued support for the sustainability of Consti’s successful profitability turnaround.

HOLD with a target price of EUR 8.0 (7.0)

On our slightly raised earnings estimates and increased confidence in the profitability turnaround, we adjust our TP to EUR 8.0 (7.0), valuing Consti at ~7.5x 2020E EV/EBIT, with the Hotel St. George arbitration proceeding still warranting the clear discount to peers. We retain our HOLD-rating.

Open report

Tokmanni - Towards EUR 1bn of sales

10.02.2020 - 07.50 | Company update

Tokmanni’s Q4 result was in line with expectations and the company executed well its strategy to improve profitability. We expect further improvement in profitability, driven by gross margin increase. We expect Tokmanni to reach EUR 1bn (6.2% y/y) of sales in 20E and adj. EBIT increase of ~17% y/y (EUR 82m). We keep our rating “BUY” with TP of EUR 16 intact.

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Good performance continued

Tokmanni’s Q4 result was broadly in line with expectations with revenue of EUR 284.8 (+6.1% y/y) vs. our EUR 287.7m (cons. 287.0m). Revenue was driven by successful campaigns whereas the timing of tax refunds, late winter in certain areas and the postal strike weighed down sales. Gross margin increased to 35.2% (Q4’18:34.4%) vs. our 35.5%, reflecting the increase in direct import (28.6% vs 26.4% of total sales in Q4’18). Costs were well controlled and the decreased relative share of operating expenses (18.9% vs. 19.8% in Q4’18) impacted positively on adj. EBIT, which improved by ~26.5% y/y to EUR 32.0m vs. our EUR 32.7m (cons. 31.8m). Proposed ’19 dividend is EUR 0.62 (EUR 0.62/0.60 Evli/cons).

Expecting profitability to further improve and sales of EUR 1bn

Tokmanni successfully executed its strategy to improve profitability in ’19 as adj. EBIT margin rose from 6.0% (2018) to 7.5%. In our view, there is still potential for further profitability improvement, especially through gross margin improvement. The company targets to increase its adj. EBIT margin gradually to ~9% and indicated that gross margin improvement potential is some 0.5-1.5% while the operating expenses improvement potential is ~0.5-1.0%. We expect gross margin (34.4% in ’19) to improve to 34.8% in ‘20E and to 35.1% in ‘21E, boosted by increased share of direct import (and own products). We expect the relative share of operating expenses to decrease by 30-40bps in ‘20E-21E, driven by more efficient supply chain. Tokmanni targets to reach revenue of EUR 1bn (timeline not specified) which we expect to be reached during 20E, as increased customer flows and new store openings are boosting revenue growth. We expect LFL sales growth of 2.0% and 1.7% in 20E-21E.

“BUY” with TP of EUR 16 intact

Tokmanni expects good revenue growth in ‘20E and slight growth in LFL sales. The adj. EBIT margin is expected to increase from the previous year. We have slightly increased our estimates and expect 20E sales of EUR 1bn (6.2% y/y) and adj. EBIT of EUR 82.1 (~17% y/y), resulting in adj. EBIT margin of 8.2%. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.6x and 13.7x which is on par with its Nordic non-grocery peers and 25-27% discount compared to the international peer group. We keep our rating “BUY” with TP of EUR 16.

Open report

Finnair - Earnings above expectations

07.02.2020 - 09.35 | Earnings Flash

Finnair’s Q4’19 adj. EBIT was EUR 31.2m vs. our expectation of EUR 8.2m and consensus of EUR 9.0m. Revenue was EUR 775m vs. our expectation of EUR 740m and consensus of EUR 744m.

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• Q4 revenue was EUR 774.9m vs. EUR 740m/744m Evli/cons.

• ASK increased by 10.6% in Q4. RASK increased by 2.5% y/y.

• Q4 adj. EBIT was EUR 31.2m vs. EUR 8.2m/9.0m Evli/cons. Q4 comparable EBITDA was EUR 120.7m vs. EUR 89.7m our view.

• Absolute costs in Q4: Fuel costs were EUR 171m vs. EUR 171m our view. Staff costs were EUR 136m vs. EUR 133m our view. All other OPEX+D&A combined were EUR 451m vs. EUR 447m our view.

• Unit costs: CASK was 6.42 eurocents vs. 6.31 eurocents our view.

• Q4 EPS was EUR 0.17 vs. -0.14/-0.12 Evli/cons.

• 2019 dividend: EUR 0.20 vs. 0.11/0.10 Evli/cons.

• Finnair expects capacity increase of ~4% in 2020 but due to the coronavirus the company does not provide a full year revenue estimate.

Open report

Tokmanni - Q4 result in line with expectations

07.02.2020 - 09.00 | Earnings Flash

Tokmanni’s Q4 revenue increased by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. LFL growth was 3.1% vs. 3.7% our expectation. Tokmanni’s adj. EBIT was EUR 32.0m vs. EUR 32.7m/31.8m Evli/cons. Gross margin was 35.2% vs. 35.5%/35.2% Evli/cons.

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• Q4 revenue grew by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. Revenue was boosted by successful campaigns but at the same time the change in the timing of tax refunds, delayed winter season and the postal strike slowed down year-end sales.

• Q4 adj. gross profit was EUR 100.1m (35.2% margin) vs. EUR 102.1.m (35.5 %) Evli expectation.

• Q4 adj. EBITDA was EUR 47.6m vs EUR 47.7m/46.3m Evli/consensus

• Q4 adj. EBIT was EUR 32.0 (11.2% margin) vs. EUR 32.7m (11.4%) our expectation and EUR 31.8m (11.1%) consensus.

• Q4 eps was EUR 0.39 vs EUR 0.41/0.39 Evli/consensus

• 2019 dividend: EUR 0.62 vs. EUR 0.62/0.60 Evli/cons.

• Tokmanni expects good revenue growth for 2020, based on the revenue from the new stores acquired and opened in 2019 and new stores to be opened in 2020, as well as on slight growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

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Consti - Quite in line with our expectations

07.02.2020 - 08.45 | Earnings Flash

Consti's net sales in Q4 amounted to EUR 78.3m, in line with our estimates and below consensus (EUR 80.9m/86.0m Evli/cons.). EBIT amounted to EUR 2.8m, slightly below our and consensus estimates (EUR 3.0m/3.0m Evli/cons.). Dividend proposal: Consti proposes a dividend of EUR 0.16 per share (EUR 0.17/0.17 Evli/Cons.). Guidance: the operating result for 2020 will improve compared to 2019.

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  • Net sales in Q4 were EUR 78.3m (EUR 96.8m in Q4/18), in line with our estimates and below consensus estimates (EUR 80.9m/86.0m Evli/Cons.). Growth in Q4 amounted to -19.2 % y/y.
  • Operating profit in Q4 amounted to EUR 2.8m (EUR -2.2m in Q4/18), slightly below our estimates and consensus estimates (EUR 3.0m/3.0m Evli/cons.), at a margin of 3.6 %.
  • EPS in Q4 amounted to EUR 0.25 (EUR -0.25 in Q4/18), slightly below our estimates and consensus estimates (EUR 0.26/0.26 Evli/cons.).
  • The free cash flow in Q4 was EUR 5.1m (Q4/18: 1.9m) and EUR 4.0m in 2019 (2018: EUR -7.1m)
  • The order backlog in Q4 was EUR 185.8m (EUR 225.1m in Q4/18), down by -17.5 %. Q4/19 order intake amounted to EUR 46.8m.
  • Dividend proposal: Consti proposes a dividend of EUR 0.16 per share (EUR 0.17/0.17 Evli/Cons.).
  • Guidance: the operating result for 2020 will improve compared to 2019.
  • Consti updated its financial targets. Consti now expects revenue growth at above the market pace (previously: average growth exceeding 10% p.a.), while other targets remain unchanged.

Open report

SRV - Short-term losses for long-term gains

07.02.2020 - 08.15 | Company update

SRV’s Q4 results were on paper rather catastrophic due to significant impairment charges relating mainly to the REDI shopping centre, with the Q4 operative operating profit at EUR -87.2m (Evli EUR 2.3m). SRV announced a series of measures to strengthen its financial position, that on a short-term perspective appear unfavourable, but will benefit SRV in the coming years. We retain our HOLD-rating with a target price of EUR 1.30.

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Earnings clearly in the red due to impairment charges

SRV’s Q4 revenue amounted to EUR 403.8m (Evli 370.2m) and operative operating profit to EUR -87.2m (Evli 2.3m). Q4 included impairment charges of EUR 92.9m, relating mainly to the REDI shopping centre, as SRV has agreed to divest its ownership. Although the Q4 results on paper were rather catastrophic, construction margins (excluding one-off charges) were in fact clearly better than we had expected, supported at least partly by the higher than expected revenue.

Taking measures to improve financial situation

SRV announced a series of measures to strengthen its financial position, of which the in our view in the near-term most important include the divestment of the ownership in the REDI shopping centre and a larger part of the Tampere Deck and Arena project, which should have a near-term positive cash flow impact of some EUR 45m. The measures do not appear favourable in the short-term but are in our view a positive sign as SRV is under CEO Saku Sipola clearly looking to create a more sustainable financial situation and improve operational performance.

HOLD with a target price of EUR 1.3

Our SOTP values SRV at EUR 1.9 per share. The valuation is still highly dependent on improvement in the construction business profitability, which we have yet to see significant proof of. The financial situation is still somewhat challenging even with the measures announced and as such the investment risks remain elevated. We retain our HOLD-rating and target price of EUR 1.3

Open report

Pihlajalinna - Profitability in focus

07.02.2020 - 08.15 | Preview

Pihlajalinna reports its Q4 result on 14th of Feb. We expect Q4 sales of EUR 133.6m (5.2% y/y) and adj. EBIT of EUR 7.8m, resulting in adj. EBIT margin of 5.8%. We have kept our estimates intact ahead of Q4 and retain our rating “HOLD” with TP of EUR 16.0.

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Expecting further profitability improvements in Q4

Pihlajalinna implemented its efficiency improvement program last summer, targeting annual cost savings of EUR 17m and indicated that already some EUR 5m savings could be seen in H2’19. In Q3, we saw improvement in profitability as adj. EBIT rose by ~60% y/y. Expansion particularly into regional capitals continued in ’19 as multiple new clinics were opened, boosting revenue growth. We expect Q4 revenue growth of 5.2% y/y (133.6m), driven by new clinics and adj. EBIT of EUR 7.8m (~13% y/y), resulting in adj. EBIT margin of 5.8%.

Increased ownership in municipal joint-stock companies

In late Q4, Pihlajalinna increased its ownership in its municipal joint-stock companies Kuusiolinna Terveys and Mäntänvuoren Terveys. After the transactions, Pihlajalinna’s ownership in Kuusiolinna Terveys is 89% (51%) and in Mäntänvuoren Terveys 91% (81%). Pihlajalinna pays EUR 16.3m for the shares of Kuusiolinna Terveys and EUR 2m for the shares of Mäntänvuoren Terveys. The transactions have no impact on our revenue or profitability estimates. In our view, the increase in ownership is positive as the joint-stock companies represent a significant part of Pihlajalinna’s revenue and profit (the combined revenue of Kuusiolinna Terveys and Mäntänvuoren Terveys represented some 29% of total ’18 revenue) and due to the transactions, the share of non-controlling interest decreases, increasing earnings attributable to the owners of the parent company. We expect ‘20E revenue growth of 3.3% (536m), driven by new clinic openings and adj. EBIT improvement of ~53% (EUR 35.1m). Mehiläinen’s cash tender offer of Pihlajalinna’s shares is currently ongoing and being reviewed in FCCA.

“HOLD” with TP of EUR 16 intact

With our estimates intact, we expect 19E revenue of EUR 518.5m (6.3% y/y) and adj. EBIT of 23.0 (~60% y/y), resulting in adj. EBIT margin of 4.4%. We expect a dividend of EUR 0.15 (cons. EUR 0.14) for ’19. Our share price is in line with the tender offer price of EUR 16.0. We keep our rating “HOLD” with TP of EUR 16.

Open report

SRV - REDI amortization driven miss

06.02.2020 - 09.00 | Earnings Flash

SRV's net sales in Q4 amounted to EUR 403.8m, above our estimates and above consensus estimates (EUR 370.2m/381.0m Evli/cons.). EBIT amounted to EUR -86.8m, below our and consensus estimates (EUR 2.3m/0.2m Evli/cons.). Q4 was affected by significant amortization charges relating mainly to the REDI shopping centre.

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  • Revenue in Q4 was EUR 403.8m (EUR 299.7m in Q4/18), above our estimates and consensus estimates (EUR 370.2m/381.0m Evli/Cons.). Growth in Q4 amounted to 34.7 % y/y.
  • Operating profit in Q4 amounted to EUR -86.8m (EUR 0.1m in Q4/18), below our estimates and consensus estimates (EUR 2.3m/0.2m Evli/cons.). SRV recorded amortization charges totaling EUR 92.9m, relating mainly to the REDI shopping centre sale.
  • Construction: Revenue in Q4 was EUR 403.1m vs. EUR 368.7m Evli. Operating profit in Q4 amounted to EUR 3.6m vs. EUR 8.8m Evli.
  • Investments: Revenue in Q4 was EUR 1.7m vs. EUR 1.5m Evli. Operating profit in Q4 amounted to EUR -87.5m vs. EUR -5.0m Evli.
  • Other operations and elim.: Revenue in Q4 was EUR -0.9m vs. EUR 0.0m Evli. Operating profit in Q4 amounted to EUR -2.9m vs. EUR -1.5m Evli.
  • SRV expects revenue in 2020 to decline compared with 2019 and the operative operating profit to be positive and improve compared with 2019.
  • SRV proposes that no dividend will be paid for 2019 (EUR 0.0 Evli/Cons.).
  • SRV further informed of a sale of its ownership in the REDI shopping centre and is decreasing its ownership in the Tampere Deck and Arena project along with a series of financing decisions.

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Detection Technology - Coronavirus could pose near term threat to our estimates

06.02.2020 - 08.45 | Preview

Detection Technology will report Q4 earnings next Monday, February 10th. As majority of DT’s production and personnel is located in China, with Asia representing some 2/3 of DT’s total net sales, the effects of the coronavirus will be a key focus. Despite possible headwinds related to coronavirus, we remain positive to the investment case. Our rating and target price of EUR 24 remain intact ahead of Q4.

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Q4 wraps up a year of decent growth

The security imaging market has been experiencing strong demand due to increasing CT investments related to new EU and US airport standards, while medical imaging market is going through a temporary slowdown. For Q4’19, we estimate SBU growing 23% and MBU declining 14% y/y, with total Q4 net sales growing 8% y/y to 27.7 MEUR (27.4 MEUR cons). Our Q4 EBIT estimate is 5.1 MEUR (4.7 MEUR cons), which is +15% compared to slightly low comparison figures of 4.4 MEUR in Q4’18. On a whole, we expect FY’19E sales growth of 12% (FY’18 5.5%) and flat EBIT growth due to increasing R&D investments and lower MBU sales and share in mix. Our DPS estimate is 0.38 (0.39 cons.), which is on par with last year’s dividend due to flat net profit growth in 2019.

Growth story to continue despite coronavirus posing a near term threat

DT usually doesn’t give full year guidance due to low visibility into customer demand. We look forward to hearing about the latest status of the medical imaging market and the effects of the coronavirus. Most of DT’s production and ~80% of personnel are located in China, with Asia representing some 2/3 of DT’s total sales. Our FY’20E sales growth estimate is +15% based on continued good growth, especially in China, and volume ramp-up of new Aurora and X-Panel CMOS products. Despite continued R&D spending, we expect EBIT improvement 2020E due to increase in sales growth and better GM’s due to mix and new products. We note however that coronavirus poses a clear near-term threat to our estimates.

Rating and TP of 24 euros maintained ahead of Q4

Despite the short visibility and possible headwinds related to coronavirus or trade politics, we see longer term 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 rating and target price of 24 euros remain unchanged ahead of the Q4 report.

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Etteplan - Expect good Q4 despite minor bumps

06.02.2020 - 07.45 | Preview

Etteplan will report Q4 results on February 11th. We expect Etteplan to finish the year on a positive note, although the industrial strike in December is expected to have had a minor negative impact. We expect revenue to grow 14.7% in Q4 and an EBITA-margin of 9.9%, near the comparison period figure. Guidance should reflect growth in revenue and operating profit. We expect a dividend proposal of EUR 0.36 per share. Following peer multiple appreciation, we raise our TP to EUR 10.6 (9.6) and retain our HOLD-rating.

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Industrial strike expected to have a minor impact on figures

We expect Q4 revenue of EUR 72.1m, with growth of 14.7% y/y, driven by acquisitions made during mid-2019. We expect an EBITA of EUR 7.1m, at a margin of 9.9%. Some uncertainty in Q4 figures is brought by the industrial strike in Finland in December, which we expect to have had a minor negative impact on Q4 figures. Etteplan made two smaller acquisitions during the quarter within technical documentation, with some 50 employees combined, which will have a minor impact on growth in 2020. We expect a dividend proposal of EUR 0.36 per share.

Continued revenue and earnings growth expected in 2020

The outlook for 2020 remains somewhat hazy following demand uncertainties and a slightly slower organic growth during 2019. We expect Etteplans guidance for 2020 to at least reflect clear growth in revenue and EBIT compared to 2019, supported by the acquisitions made during 2019. A guidance reflecting significant growth this early in 2020 would be a positive sign. We expect a sales growth of around 10% and growth in EBIT of 8% in 2020.

HOLD with a target price of EUR 10.6 (9.6)

Valuation multiples for both peers and Etteplan have increased post-Q3 and current valuation does not appear particularly attractive, although Etteplan still remains on good track. We raise our target price with the increased peer multiples and value Etteplan at 15x 2019E P/E, for a target price of EUR 10.6 (9.6) and retain our HOLD-rating.

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Verkkokauppa.com - Critical Q4 ahead

05.02.2020 - 08.40 | Preview

Verkkokauppa.com reports it’s Q4’19 earnings on 14th of Feb. We expect the competition has remained tight and price driven. We expect Q4E sales of EUR 168.9m (8.4% y/y) and EBIT of EUR 6.0m. We keep our rating “HOLD” with TP of EUR 3.3 intact ahead of Q4.

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Black Friday and Christmas sales boosting Q4 growth

During ‘19, Verkkokauppa.com has faced ups and downs in the highly competitive and price driven consumer electronics market. After a relatively weak H1’19, the company was able to show a positive turn in earnings development in Q3, despite of weaker sales growth. For Verkkokauppa.com, Q4 is critical, as most of its sales and profit are generated during this quarter, driven by Christmas sales and Black Friday. We expect only limited impacts resulting from the postal strike but the changed timing of tax refunds might have a negative impact on December sales compared to last year. We expect 8.4% y/y increase in Q4 sales (EUR 168.9) and EBIT to be on par with the previous year at EUR 6.0m (Q4’18: 5.9m).

No ease of competition ahead

We don’t expect the consumer electronics market in ‘20E to grow much from last year thus the management of sales mix plays an important role of supporting further sales and profit development. We expect the growth investments (e.g. increased marketing) to bear fruit in 2020E, resulting in new customers. We also hope to get more color on the new plans regarding B2B sales with the Q4 result. Due to the price driven competition and growth investments, we don’t expect profitability (EBIT%) to improve from last year, although the company’s cost base is scalable. We expect sales in ‘20E to increase by 7% y/y (EUR 549.1m) and EBIT increase of ~10% y/y resulting in EBIT margin of 2.6%..

“HOLD” with TP of EUR 3.3 intact

We have kept our estimates intact ahead of Q4. Verkkokauppa.com guides ‘19E sales of EUR 500-525m and EBIT of EUR 11-15m. Our estimates are in the mid-point of the guidance with ‘19E sales of EUR 513m (7.4% y/y) and EBIT of EUR 12.8m (FY18:13.3m). We continue to expect a growing dividend of EUR 0.21 (cons. EUR 0.21) vs. EUR 0.20 for ’18. We keep our rating “HOLD” with TP of EUR 3.3 intact ahead of Q4.

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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.

Open report

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.

Open report

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.

Open report

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.

Open report

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.

Open report

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.

Open report

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.

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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.

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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.

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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

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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.

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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.

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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).

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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.

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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).

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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.

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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.

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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.

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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).

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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).

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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.

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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.

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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.

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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.

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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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