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Financial overview


Aspo - CMD notes

02.12.2021 | Company update

Aspo held its CMD, where the key message was that focus is more towards add-on M&A as opposed to exits (except for the sale of Kauko and Leipurin’s Vulganus machines).

EBIT margin target raised to 8% from the previous 6%

Aspo’s EBIT has gained a lot in the past year. Telko already had a strong ‘20, while the recovery has come through in ESL’s figures this year. The revised ESL and Telko EBIT targets, both up by 200bps to 14% and 8% respectively, are thus not very surprising. Aspo introduced a 5-10% p.a. growth target, and we view this the major update because it signals a commitment to hold and grow Telko. We make upward estimate revisions to reflect the targets. ESL reached a 15% EBIT in Q3, and while demand remains strong, we believe the next quarters will see some softening since AtoB@C time charter costs are growing. ESL’s performance is otherwise solid (e.g. contracts are better optimized from a logistics POV), and it has retained an advisor to source investors for a portion of the hybrid vessel capex. Leipurin retains its 5% EBIT target. There’s still way to go until the target is reached, but Leipurin has a profit boost initiative (e.g. category management) while the Food Industry is a good growth driver.

Aspo remains very committed to Telko and exit is unlikely

Aspo’s new 5-10% growth target reflects especially Telko add-on M&A potential. There’s no major change in the sense that Eastern performance is to rely on organic growth, but it seems Telko is now ready for somewhat larger deals should a fitting target come up for sale. Telko’s own profitability is already running so high that not every acquisition will provide an immediate boost to EBIT margin. The geographic scope has also been expanded a bit westward beyond the Nordics and Baltics. Aspo remains committed to the current three segments within logistics (ESL) and trade (Telko & Leipurin), however a new stand-alone subsidiary with an EV of some EUR 20-50m is also likely (B2C targets are not off the table). Aspo’s focus is still to hold and grow its segments without any definite exit plans/schedules.

Earnings growth outlook is attractive

We now expect FY ’22 EBIT margin at 7.0%, or EUR 42.4m (prev. EUR 40.9m). This represents an EV/EBIT of only about 11x, and there’s still further earnings potential in the following years. We retain our EUR 14 TP. Our rating is now BUY (HOLD).

Aspo - EBIT is headed above EUR 40m

28.10.2021 | Company update

Aspo’s Q3 EBIT was EUR 12.8m without the one-offs. Valuation is still not very high as we see scope for well above EUR 40m EBIT next year, but we consider multiples neutral. Our TP is EUR 14.0 (12.5), rating HOLD (BUY).

There were some EUR 5.2m in one-off Q3 items

ESL posted a record EUR 7.1m Q3 EBIT vs our EUR 4.5m estimate. The market is very favorable as cargo volumes grew by 26% y/y and freight rates are now good across the entire fleet. In our view the Supramaxes are already generating very high margins, while smaller vessels’ pricing should continue to advance from here on. Leipurin results were a bit better than we expected, while Telko achieved EUR 5.9m EBIT (vs our EUR 4.9m estimate) excl. the EUR 3.4m Kauko impairment. There was also the EUR 1.75m one-off item due to the CEO change-related costs.

Strong performance should continue for quite some time

We revise our estimates and now see EUR 10.8m in Q4 EBIT (prev. EUR 9.8m). The guidance constitutes in essence a positive revision and we wouldn’t be surprised to see Aspo upgrade the range more in the coming months (Q4 hasn’t historically paled in comparison to Q3). Port logistics challenges may limit ESL’s Q4 potential, but we view our EUR 6.5m EBIT estimate conservative. ESL and Telko now enjoy very favorable markets, therefore some softening could be due next year. Both subsidiaries nonetheless continue to progress strategy-wise. ESL’s new EUR 70m investments (financing will be some combination of own cash and external pooled funds) are to be ready in ’23 and we view the six small hybrid vessels a good strategy fit. Meanwhile Telko continues to focus on higher margin solutions with its latest acquisition of a small Estonian lubricant distributor.

FY ’22 EBIT should have no trouble topping EUR 40m

Our new FY ’22 EBIT estimate is EUR 40.9m (prev. EUR 39.7m), and on this basis Aspo is valued ca. 13x EV/EBIT. The level is not that high considering cash flow generation and further value creation potential yet reflects present strong conditions. We view our EUR 40.9m estimate a bit conservative as we model only flat EBIT for ESL: we see a reasonable chance for a well above EUR 25m ESL FY ‘22 EBIT. Telko has continued to surprise but for now we don’t expect much more than EUR 18m EBIT going forward. Our new TP is EUR 14.0 (12.5), and our rating is now HOLD (BUY).

Aspo - Very strong underlying performance

27.10.2021 | Earnings Flash

Aspo’s headline EUR 7.6m Q3 EBIT didn’t meet estimates, but the figure includes a EUR 3.4m Kauko impairment loss. Both ESL and Telko recorded new profitability highs.

  • Aspo Q3 revenue was EUR 148.0m, compared to the EUR 143.1m/141.0m Evli/consensus estimates. Q3 EBIT amounted to EUR 7.6m vs the EUR 8.5m/9.0m Evli/consensus estimates. The EBIT figure includes Telko’s EUR 3.4m Kauko impairment.
  • ESL Q3 revenue came in at EUR 47.3m (a 50% y/y increase) vs our EUR 43.6m estimate, while EBIT amounted to EUR 7.1m vs our EUR 4.5m estimate. ESL achieved the record-high 15% EBIT margin despite extensive dockings as cargo volumes grew by 26% y/y.
  • Telko’s top line was EUR 73.0m, compared to our EUR 71.6m estimate. EBIT was EUR 2.5m vs our EUR 4.9m estimate. EBIT margin was thus 3.4% but would have been 8% without the EUR 3.4m Kauko impairment. Telko’s own operating result represents a record high. Plastics and chemicals prices remained high.
  • Leipurin Q3 revenue amounted to EUR 27.7m vs our EUR 27.9m estimate, while EBIT was EUR 0.6m vs our EUR 0.4m estimate.
  • Other operations cost EUR 2.6m, compared to our EUR 1.3m estimate.
  • Aspo guides EUR 30-36m in FY ’21 operating profit. The guidance includes the EUR 3.4m impairment loss.

Aspo - Some more results to be accrued

12.08.2021 | Company update

Aspo’s Q2 group-level EBIT was known before the report. We make minor upward revisions to our estimates, and we see Aspo on a firm track towards full profitability potential.

H1’21 results display a solid foundation to build on

Aspo’s Q2 revenue grew 24% y/y to EUR 142.9m vs the EUR 133.6m/134.5m Evli/cons. estimates. ESL’s top line was up 40% y/y; the EUR 5.4m EBIT was a bit above our estimate as utilization and rates continued to improve throughout the fleet. That said, there should be more potential as efficiency obstacles like port congestion, varying loading demand, virus measures and high dockings limited Q2 profitability. We expect ESL’s EBIT to decline by EUR 0.9m q/q in Q3 as dockings will be roughly double of those seen in Q2. We believe ESL’s EBIT has now reached a firm foundation since cargo volumes were still not abnormally high (some 8% lower than in Q2’19 but up 19% y/y). Meanwhile the Baltic Dry Index has reached multi-year highs and we believe the Supramax vessels’ freight rates are now stabilizing. Telko’s revenue topped our estimate and the 7.7% EBIT margin also marked another record. Strategy work at Leipurin continues but Q2 figures remained soft compared to our estimates. We understand admin costs were a bit elevated e.g. due to the CEO recruitment; Aspo’s long-time CEO Mr Aki Ojanen is retiring and the successor, Mr Rolf Jansson, will begin his work next week.

The EUR 30-36m EBIT guidance moderates H2’21 estimates

We wouldn’t be very surprised to see Aspo top the current EBIT guidance range set for this year. There’s still some uncertainty regarding Q4 results, but we believe ESL’s contribution will then help Aspo reach another record quarterly EBIT. We make minor revisions to our estimates; we remain at the upper end of the FY ‘21 range while we now estimate FY ’22 EBIT at EUR 39.7m (prev. EUR 38.9m). Telko may find it hard to achieve further margin gains (in our view some softness is to be expected), but growth could help sustain high absolute profitability going forward.

Progression and cash flow generation back up valuation

Aspo is valued around 8x EV/EBITDA and 14x EV/EBIT on our FY ’21 estimates. We don’t view these levels challenging considering the profitability potential that is not yet quite fully realized. Our TP is now EUR 12.5 (11.5); we retain our BUY rating.

Aspo - A record Q2 profitability

11.08.2021 | Earnings Flash

Aspo released preliminary information regarding Q2 results already last week and so the Q2 report was no news event in terms of group-level EBIT. Telko’s profitability was higher than we expected.

  • Aspo’s Q2 revenue was EUR 142.9m vs the EUR 133.6m/134.5m Evli/consensus estimates. Q2 EBIT was EUR 9.6m.
  • ESL’s top line was EUR 46.0m, compared to our EUR 38.9m estimate, while EBIT amounted to EUR 5.4m vs our EUR 5.2m estimate. Market freight rates improved significantly y/y in all vessel categories, while there were strong fluctuations in loading demand. High dockings also limited profitability potential.
  • Telko recorded EUR 71.1m in revenue vs our EUR 67.3m estimate. EBIT was EUR 5.5m, compared to our EUR 4.9m estimate. EBIT margin was 7.7% and prices remained high. The availability situation now seems to be normalizing, which would cause price decreases on the one hand and help Telko’s volumes up on the other.
  • Leipurin revenue was EUR 25.8m while we expected EUR 27.4m. EBIT stood at EUR 0.3m, compared to our EUR 0.6m estimate.
  • Other operations cost EUR 1.6m vs our EUR 1.1m estimate.
  • Aspo guides EUR 30-36m in FY ’21 EBIT.

Aspo - Sailing towards EUR 40m EBIT

05.08.2021 | Company update

Aspo specified guidance and told Q2 EBIT was headstrong. In our view the latest update dispels any remaining doubts about ESL’s and Telko’s financial performance.

Aspo now guides EUR 30-36m in FY ’21 EBIT

The guidance range midpoint is a positive surprise compared to the EUR 31.2m/30.9m Evli/cons. estimates before the release, not by that much but the guidance appears on the conservative side considering Aspo achieved EUR 9.6m in Q2 EBIT. This record quarterly EBIT topped the EUR 7.1m/7.0m Evli/cons. estimates by a mile and in our opinion Aspo seems poised towards the upper end of the new guidance range. Steel and forest industry customers in particular drive high cargo volumes for ESL. We also believe Telko has once again reached an above 7% EBIT margin; there might still be some long-term downward pressure on such a high profitability level, but nonetheless the prolonged strong performance makes the long-term 6% target seem a bit modest.

Both ESL and Telko are hitting long-term margin targets

We estimate EUR 35.7m in FY ’21 EBIT. We see H2 EBIT at EUR 18.2m and so only a bit above the EUR 17.5m H1 figure. H2 EBIT has tended to be meaningfully higher than that for H1, and perhaps Telko’s recent high profitability faces some headwinds going forward. ESL’s dockings this summer will dent Q3 EBIT, but Q4 is shaping up to be another record and in our view the carrier’s Q4 EBIT could touch EUR 6m. We estimate ESL to reach its 12% long-term EBIT target this year, thus see ESL FY ’21 EBIT at EUR 20.1m (prev. EUR 18.3m) and estimate another EUR 1.5m gain next year. We expect Telko to reach EUR 18.4m (prev. EUR 16.2m) in FY ’21 EBIT. Telko may find it hard to improve from such levels, at least in terms of margin expansion, as it has already reached the 6% long-term EBIT margin target level.

Stable performance and cash flow turn valuation attractive

Aspo could reach EUR 40m annual EBIT in a few years. We expect EBIT to gain some further EUR 3m next year. Going forward we see relatively stable performance for ESL and Telko, while it remains to be seen how much Leipurin can improve. Aspo is valued ca. 7x EV/EBITDA and 13x EV/EBIT on our FY ’21 estimates; we see further earnings growth and deleveraging, thanks to cash flow generation, helping the multiples lower in the years to come. Our TP is now EUR 11.5 (10.5), retain our BUY rating.

Aspo - Long-term EBIT potential solidifies

06.05.2021 | Company update

ESL and Telko extended recent quarters’ strong figures. In our view Aspo now warrants more long-term valuation perspective. Our TP is EUR 10.5 (9.5), rating BUY (HOLD).

Aspo already reached 6% long-term EBIT target in Q1

Aspo’s EUR 132m Q1 revenue was in line with estimates while the EUR 7.9m EBIT represented a record high and topped the EUR 6.8m/6.2m Evli/cons. estimates. In our view the positive surprise was for the most part due to ESL, but Telko also once again reached a record high EBIT. ESL managed a record Q1 EBIT despite the cold winter, which caused challenges especially for the smaller vessels. Cargo volumes remained flat y/y while shipping freight rates increased for smaller and larger vessels alike. Supply challenges in plastics and chemicals limited Telko’s revenue prospects but contributed to sharp price increases and so helped profitability (in addition to mix improvement). The pandemic continued to limit foodservice as well as machinery potential and thus Leipurin’s profitability remained muted.

Vague guidance for now but long-term potential remains

The vague guidance is warranted by the chaotic conditions in the raw materials and logistics markets. Historically H2 has been the more profitable part of the year but now the effect may be more muted. ESL’s demand continues to look good for the summer months while high docking levels will have a negative effect on Q2 and Q3 EBIT. We expect Telko to reach a 6% EBIT margin going forward (vs the 7.4% Q1 EBIT margin) as the environment begins to normalize. We are now more confident towards ESL’s and Telko’s long-term profitability levels and see how Aspo’s EUR 7.9m Q1 EBIT hints at some EUR 35m annual potential.

ESL’s peer multiples now undervalue the niche carrier

In our view Aspo’s SOTP valuation doesn’t fully reflect ESL’s FV as the dry bulk carrier has a special value chain position compared to a typical peer. In Telko’s case the situation is more nuanced as the peers are large global players. It’s nonetheless clear Telko’s FV has risen a lot in the past few years. Leipurin also has plenty of yet to be realized potential. We saw ESL’s EV at ca. EUR 300m before the pandemic and view that figure still relevant. Meanwhile Telko’s EV has increased from some EUR 150-175m to above EUR 200m. We see Aspo’s EV now at around EUR 500m. Our TP is now EUR 10.5 (9.5), our new rating is BUY (HOLD).

Aspo - Profitability far above estimates

05.05.2021 | Earnings Flash

Aspo’s Q1 profitability was a clear positive surprise relative to estimates. EBIT reached a record high and both ESL and Telko topped our expectations.

  • Aspo Q1 revenue was EUR 132.3m vs the EUR 131.3m/132.4m Evli/consensus estimates.
  • Aspo Q1 EBIT amounted to EUR 7.9m, compared to the EUR 6.8m/6.2m Evli/consensus estimates. Markets continued to improve during Q1.
  • ESL’s revenue was EUR 43.4m vs our EUR 41.6m estimate. EBIT amounted to EUR 4.5m while we expected EUR 3.6m. The EBIT was the best such Q1 figure ever for ESL. Shipping freight rates have improved but development is hard to predict for the rest of the year.
  • Telko’s revenue stood at EUR 61.0m, compared to our EUR 64.3m estimate. Meanwhile EBIT was EUR 4.5m vs our EUR 3.9m expectation. Raw materials prices are expected to remain high at least for the next few months. Prices may begin their decline in H2’21, and a rapid decline would hurt Telko’s profitability.
  • Leipurin revenue was EUR 27.9m vs our EUR 25.3m estimate. EBIT amounted to EUR 0.3m while we estimated EUR 0.4m.
  • Other operations cost EUR 1.4m, compared to our EUR 1.1m estimate.
  • Aspo restates the previous guidance and expects FY ’21 operating profit to be higher than in FY ’20 (EUR 19.3m). The guidance didn’t seem that informative in February and now even less so. In our view, however, Aspo now appears poised to reach EUR 30m in EBIT this year.

Aspo - Performance is now appreciated

12.02.2021 | Company update

ESL helped Aspo Q4 EBIT top estimates. Both ESL and Telko now perform, but we see valuation already appreciates this fact. Our TP is now EUR 9.5 (8.75), rating HOLD (BUY).

ESL and Telko have now performed around target levels

Aspo’s EUR 133.5m Q4 revenue was in line with estimates (EUR 129.3m/132.9m Evli/cons.) while the EUR 7.6m EBIT was a positive surprise relative to the EUR 7.0m/7.1m Evli/cons. estimates. The EBIT beat was driven by ESL. The Q4 improvement in ESL’s operating environment didn’t come as a surprise, but in our opinion the EUR 4.8m Q4 EBIT was significantly better than expected (we estimated EUR 3.2m) considering the EUR -0.1m Q3 figure and the fact that top line and cargo volumes were still down from a year ago. ESL’s EBIT was indeed up from the EUR 4.4m comparative figure thanks to cost savings measures. Telko continued to perform close to expectations and posted a strong 6.2% operating margin. Meanwhile Leipurin EBIT declined to EUR 0.2m from the EUR 1.1m comparison figure.

Aspo didn’t issue numerical EBIT guidance range for FY ‘21

ESL’s strong Q4 profitability (already close to the 12% long-term margin target) is encouraging as there’s now sound evidence Aspo’s two main cylinders are firing and can perform close to their long-term target levels. In our view the recent performance levels indicate ESL and Telko should by themselves help Aspo reach EUR 30m EBIT this year. Aspo however didn’t give any numerical EBIT guidance range. According to the guidance EBIT will be higher this year, and as such the statement isn’t very informative. In our view ESL’s EBIT will improve a lot this year but is probably not going to reach EUR 20m yet. We revise our FY ’21 EBIT estimate for ESL only from EUR 16.3m to EUR 16.4m as environmental equipment installations mean there’ll be more lay-ups than usual. We expect Telko FY ’21 EBIT to grow by 9%.

We consider current valuation to land within a neutral area

We revise our Aspo FY ’21 EBIT estimate up only a bit to EUR 29.7m. This means ca. EUR 10m annual gain and in terms of EBITDA 25% y/y growth. In our opinion Aspo’s valuation, at least in terms of SOTP, already reflects significant earnings growth for this year. There’s likely to be more potential beyond ’21, however we don’t see these gains should be fully valued right now. Our new TP is EUR 9.5 (8.75) per share, rating HOLD (BUY).

Aspo - ESL drove a sharp rebound

11.02.2021 | Earnings Flash

Aspo’s Q4 EBIT topped estimates thanks to ESL’s strong profitability. It is clear EBIT is set to improve this year, however Aspo did not disclose numerical EBIT guidance range.

  • Aspo Q4 revenue amounted to EUR 133.5m, compared to the EUR 129.3m/132.9m Evli/consensus estimates. Top line therefore declined by 9% y/y.
  • Aspo Q4 EBIT was EUR 7.6m vs the EUR 7.0m/7.1m Evli/consensus estimates.
  • ESL Q4 revenue was EUR 41.2m, whereas we estimated EUR 40.8m. EBIT was EUR 4.8m vs our EUR 3.2m estimate. EBIT increased from the EUR 4.4m comparative figure despite a small decline in cargo volumes (from 4.0mt to 3.8mt). The result was thus already close to the 12% long-term EBIT margin target. Demand for loading and unloading operations was very high in Q4.
  • Telko’s top line stood at EUR 65.7m, compared to our EUR 60.9m estimate. Meanwhile EBIT was EUR 4.1m vs our EUR 4.3m estimate.
  • Leipurin Q4 revenue amounted to EUR 26.6m, while we expected EUR 27.6m. EBIT was recorded at EUR 0.2m vs our EUR 0.6m estimate.
  • Other operations cost EUR 1.5m vs our EUR 1.0m estimate.
  • Guidance: according to Aspo operating profit in 2021 will be higher than in 2020 (EUR 19.3m). The guidance as such has very limited informational value.
  • The Board of Directors proposes EUR 0.35 per share dividend distribution, compared to our EUR 0.44 expectation.

Aspo - Sailing towards EUR 30m EBIT

10.12.2020 | Company update

Aspo revised FY ’20 guidance, which prompts us to update estimates particularly for ESL and Telko. Our TP is now EUR 8.75 (8) per share, BUY rating remains intact.

We raise our total Q4’20 EBIT estimate by EUR 2.9m

Aspo states especially steel and energy industry cargo volumes have developed strong and so ESL has performed better than expected before. The upgrade is thus not due to e.g. additional cost savings but driven by improving business conditions. Aspo previously guided EUR 14-16m in FY ’20 EBIT and the revised range is EUR 18-20m. The positive outlook revision was not such a big surprise since the previous guidance seemed to us quite cautious with respect to Telko’s development. We now estimate ESL to post EUR 3.2m in Q4 EBIT (prev. EUR 1.7m) and Telko to improve slightly further to EUR 4.3m (prev. EUR 2.8m). The new range suggests Aspo will achieve about EUR 7m in Q4 EBIT, which implies the company is well on track towards more than EUR 30m annually in the coming years.

The upgrade is incrementally positive for our overall view

Only last year Aspo’s profitability development appeared to rely mostly on ESL. There was potential in Telko that always waited for its materialization. Earlier this year the roles reversed in a way when Telko delivered very strong Q2 and Q3 results while ESL was clearly suffering the pandemic’s adverse effects. It has now become more apparent that ESL has not been left nursing any permanent wounds. Given ESL’s intact prospects and Telko’s gains Aspo’s overall development towards long-term financial targets can even be considered positive in 2020 (despite that FY ’20 EBIT will likely decline a bit y/y). EBIT thus seems bound towards the EUR 30m ballpark in the coming years, compared to the EUR 20m level before the pandemic.

Current valuation still leaves good upside potential

The recently reaffirmed long-term financial targets now look maybe more relevant than ever. There’s strong potential in all three segments, however 2020 also raises macroeconomic uncertainty and thus the operational upside prospects should still be valued somewhat cautiously. In our opinion Aspo’s equity value per share could easily top EUR 10 in the future if ESL and Telko continue to perform well next year. Our new TP is EUR 8.75 (8) and we retain our BUY rating.

Aspo - CMD notes

02.12.2020 | Company update

Aspo reaffirmed its long-term financial targets for FY ’23. The CMD didn’t disclose any drastic news but we are slightly more positive than before regarding the earnings rebound. Our TP is now EUR 8.00 (7.25), retain BUY rating.

ESL’s long-term 12% EBIT margin potential is still there

While the dry bulk cargo market has been hit by the pandemic ESL has not lost market share. Large vessel operations have been especially challenging due to a lack of cargo demand, however smaller vessel types, such as those of AtoB@C, have performed better. ESL in fact reports the business has won market share in e.g. wood-based products shipments. The fleet can also serve e.g. the Baltic wind power industry in the effort to scale up renewable energy production in the area. In the long-term the Arctic area (incl. Russia) holds strong cargo volume potential for larger vessels. Such vessels’ cargo volumes began to increase in late Q3. ESL’s capacity is now fully in use. In our opinion dry bulk cargo markets are already on track to normalize in tandem with many industrial sectors even if the pandemic is yet to fade away from more everyday life. ESL also says it has achieved admin costs reductions that are not just one-offs in nature.

Telko already achieved long-term margin targets

Telko’s recent working capital management and pricing control measures have already produced significant results in cash conversion cycle, and there remains some more room for improvement relative to certain benchmarks. Telko now has established the lubricants business besides the plastics and chemicals ones. We believe lubricants is an area that can deliver more good results in the long-term as the business is still quite small relative to plastics and chemicals. We see Telko’s reinforced core is now better positioned to capture profitable volumes. Telko has indeed already managed to top the 6% EBIT margin target during the last two quarters. Leipurin however is yet to deliver gains towards its 5% EBIT margin target.

Significant EBIT improvement appears possible next year

Although the long-term financial target confirmation is good news as such focus nevertheless remains on more short-term profitability development. Our TP is now EUR 8.00 (7.25); we retain our BUY rating since profitability continues to improve and SOTP valuation supports further upside potential.

Aspo - Upside still more likely

30.10.2020 | Company update

Aspo’s earnings beat estimates, and even if the guidance doesn’t hint at a particularly rapid q/q Q4 EBIT recovery in our view profitability has already bottomed out. We retain our EUR 7.25 TP and BUY rating.

Telko delivered another earnings surprise in a row

Aspo’s EUR 3.6m Q3 EBIT clearly beat the EUR 1.7m/1.1m Evli/cons estimates. The surprise was largely due to Telko, which extended its Q2 performance by posting a similar EUR 4.2m in EBIT. Yet Telko’s market outlook remains cautious and Aspo’s new guidance in our view manages expectations slightly downwards. The results nevertheless do showcase sound long-term potential. ESL fell to red as expected and Leipurin’s profitability remained subdued. In terms of Q4 results it should be noted that demand for ESL’s larger vessels began to improve in late Q3. We see the implication of the earnings beat and Aspo’s specified guidance to be that Q3 marks out the low point in Aspo’s profitability, however the q/q dip was relatively small and thus Q4 results are unlikely to recover as sharply q/q as we estimated before.

We now see H2 EBIT EUR 1.2m higher than before

With respect to Q4 EBIT we revise our estimates down for ESL (from EUR 2.8m to EUR 1.7m) and Leipurin (from EUR 0.9m to EUR 0.5m) while we now expect Telko to reach EUR 2.8m (prev. EUR 2.3m). In our view Aspo’s guidance seems a bit conservative considering Telko’s recent development (that is unless we are overestimating the q/q profitability recovery rates for ESL and Leipurin). Although the pandemic continues to worsen some more, this spring’s initial shock is now history and supply chains are better prepared. In this sense we see it highly plausible that Aspo’s segments, essentially industrial logistics services providers, can show some meaningful improvement next year as well.

A lot of uncertainty remains but we view upside more likely

We still see Aspo’s valuation attractive in terms of SOTP, however we note especially ESL’s valuation is hard in such extraordinary times when dry bulk carriers are off their normal earnings levels. Aspo’s segments still have plenty to go before reaching their long-term financial targets, but we have grown more confident that this year marks the bottoming out for Aspo’s overall profitability. We thus view upside scenarios more likely than downside ones. We retain our EUR 7.25 TP and BUY rating.

Aspo - Q3 EBIT clearly above expectations

29.10.2020 | Earnings Flash

Aspo’s Q3 EBIT meaningfully topped expectations as Telko continued to perform strong.

  • Aspo Q3 revenue was EUR 118.4m vs the EUR 117.7m/122.3m Evli/consensus estimates.
  • Aspo Q3 EBIT stood at EUR 3.6m, compared to the EUR 1.7m/1.1m Evli/consensus estimates. The expectations implied quite steep q/q EBIT drop for Q3, and now we see the overall H2 development will be rather flat.
  • ESL Q3 top line amounted to EUR 31.6m, compared to our EUR 33.8m estimate. EBIT was EUR -0.1m while we expected EUR -0.2m.
  • Telko revenue was EUR 62.5m vs our EUR 56.8m estimate. Meanwhile EBIT amounted to EUR 4.2m vs our 2.3m estimate. The continued strong performance (of which a lot are due to internal measures) looks promising, however there are still many macro uncertainties.
  • Leipurin posted EUR 24.3m in Q3 revenue, while we expected EUR 27.2m. EBIT was EUR 0.3m, compared to our EUR 0.7m estimate.
  • Other operations cost EUR 0.8m vs our EUR 1.1m estimate.
  • Aspo specifies guidance to the new range of EUR 14-16m for FY ’20, compared to the earlier EUR 12-16m range.

Aspo - Improvement ahead in Q4

15.09.2020 | 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).

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).

Aspo - Navigation is still challenging

13.08.2020 | 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.

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.

Aspo - Major earnings beat due to Telko

12.08.2020 | 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.

  • 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.

Aspo - Improvement outlook unclear

06.05.2020 | 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.

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.

Aspo - Q2 will be weaker

05.05.2020 | 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.

  • 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.

Aspo - The pandemic stirs the picture more

14.04.2020 | 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.

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.

Aspo - Higher EBIT remains missing

14.02.2020 | 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.

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.

Aspo - EBIT miss attributable to Telko

13.02.2020 | 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.

  • 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.

Aspo - CMD notes; targets softened

27.11.2019 | 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.

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.

Aspo - Market softness to cut results short

21.11.2019 | 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.

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.

Aspo - Q4 needs to be strong

30.10.2019 | 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).

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).

Aspo - ESL’s EBIT not there yet

29.10.2019 | 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.

  • 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.

Aspo - Backed by ESL, lifted further by Telko

11.10.2019 | 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.

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.

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

15.08.2019 | 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).

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).

Aspo - Weak Q2, but improvement ahead

14.08.2019 | 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.

  • 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).

Aspo - Supramaxes posted losses in Q2

02.08.2019 | Company update

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

We update our estimates for ESL Shipping

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

We leave Telko and Leipurin estimates unchanged

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

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

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

Aspo - Value increasingly reliant on ESL

09.05.2019 | Company update

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

ESL’s operations on track towards higher EBIT

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

Telko now includes Kauko; Leipurin slow due to timings

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

Our expectations for ESL remain unchanged

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

Aspo - Sales above our estimate

08.05.2019 | Earnings Flash

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

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

Aspo - Larger EBIT gain to materialize in ‘20

01.03.2019 | Company update

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

We now expect flat H1’19 EBIT for ESL Shipping

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

Telko’s 2019 EBIT margin to improve by 30bps

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

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

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

Aspo - Teething problems with cranes

15.02.2019 | Company update

Aspo’s Q4 EBIT didn’t meet our expectations as ESL Shipping suffered from serious technical problems with cranes. Both MS Viikki and MS Haaga, the two new LNG vessels, were impacted, leading to inefficient operation. The warranty repairs should be completed by the end of Q1’19. Telko’s Q4 results were in line with our estimates, while Leipurin fell short. We update our rating to BUY (HOLD).

ESL is on path to EUR 25-30m EBIT in the coming years

The deployment of ESL Shipping’s new LNG vessels has been slowed down by both ships’ mechanical problems with cranes. The problem concerns all the six cranes. In the meantime, other ESL ships have been filling in the slack for the SSAB contract. The crane supplier, Cargotec MacGregor, is expected to fix the problem by the end of Q1. In other words, the first quarter of 2019 will be similarly sluggish for both vessels. While this is an inconvenient setback, the company expects the vessels to meet the high requirements starting from the second quarter. ESL Shipping has a target of net sales above EUR 200m and an EBIT margin of 12-15% by 2020. We expect ESL to reach an EBIT of EUR 23m in 2019 and EUR 28m next year. We previously expected comparable figures of EUR 25m and EUR 29m.

Telko should accelerate margin gains during 2019

Aspo has set Telko a 2020 sales target of EUR 300-350m, while the EBIT margin should be in the 6-7% range. One of the key measures for reaching this profitability level is the improvement of procurement efficiency. The company expects to see results regarding the planning and rationalization of raw material purchases by the end of 2019. Telko was able to reach an EBIT margin of 4.5% in 2018, improving by about 40bps.

Aspo long-term outlook intact, higher multiples boost SOTP

Our expectations for ESL and Telko are unchanged. Valuation multiples have lifted since late December, when Aspo revised its outlook for the final quarter. As a result, we see the sum-of-the-parts valuation providing added support for the shares. We raise our target price to EUR 9.75 (9.25) and upgrade to BUY rating.

Aspo - ESL operating profit disappoints

14.02.2019 | Earnings Flash

Back in December, Aspo restated its 2018 EBIT guidance. The company announced that the figure will land at the lower end of the initial range. ESL and Telko both topped our Q4 revenue estimates, while ESL’s operating profit failed to match our expectations (even after we adjusted our estimate following the December profit warning).

  • Group headline figures: Q4 net sales amounted to EUR 156.6m vs our EUR 154.0m estimate. Q4 EBIT stood at EUR 2.6m vs our EUR 3.9m expectation.
  • ESL Shipping: Q4 sales recorded at EUR 46.4m vs our EUR 42.2m estimate. Q4 EBIT came in at EUR 4.2m vs our EUR 5.3m estimate.
  • Telko: Q4 revenue amounted to EUR 69.5m vs our EUR 68.8m estimate. EBIT stood at EUR 3.4m, exactly as we expected.
  • Leipurin: Q4 sales totaled EUR 31.6m vs our EUR 33.0m estimate. EBIT was EUR 0.8m vs our EUR 1.1m estimate.
  • Kauko: sales were EUR 9.1m vs our EUR 10.1m estimate. EBIT (including the impairment loss) was EUR -4.4m vs our EUR -4.8m expectation.
  • Guidance: Aspo guides 2019 EBIT at EUR 28-33m. This compares to the EUR 25.4m 2018 figure adjusted for the EUR 4.8m impairment loss on Kauko’s goodwill. ESL Shipping aims at net sales of more than EUR 200m and an EBIT margin of 12-15% by 2020.
  • The BoD proposes 2018 dividend per share at EUR 0.44, to be paid in two installments.

Aspo - Guides EBIT at the range’s low-end

19.12.2018 | Company update

Aspo announced the restructuring of its subsidiary Kauko. Effective in 2019, Aspo will no longer report Kauko as a separate segment. The corporate action does not come as a major surprise, yet Aspo also restated its 2018 EBIT guidance at the lower end of the initial range. We adjust our estimates for Kauko accordingly, while making small adjustments to ESL’s estimates due to the new LNG vessels taking longer than initially expected to reach their full operational efficiency.

Kauko plays a minor role in the sum-of-the-parts analysis

According to the plan, Kauko’s energy solutions business will be either sold off or terminated, while the offering for mobile knowledge work as well as Kauko’s administration will be restructured. The energy solutions business generates approximately one third of Kauko’s revenue. It was expected that Aspo might take more concrete measures regarding Kauko as the subsidiary has not been able to reach its targets. We recognize the announced EUR 5m goodwill impairment in Kauko’s Q4 EBIT.

We expect ESL’s acquisitions to lift 2019 EBIT to EUR 25m

We make slight adjustments to ESL’s estimates, reflecting the longer learning curve for the new LNG vessels to reach their full operational efficiency (Q4 EBIT EUR 1.2m lower than previously expected, 2019 EBIT lower by EUR 0.4m). Nevertheless, the new LNG vessels and the acquisition of AtoB@C are expected to be major contributors to next year’s EBIT growth. Our EBIT estimates for Telko and Leipurin remain unchanged.

Lower peer multiples cut our target to EUR 9.25 (EUR 10)

Overall, we don’t see any significant changes in Aspo’s operations. We expect Aspo’s 2018 EBIT at EUR 21.9m (including the EUR 5m impairment of Kauko). We retain our HOLD rating but decrease our target price to EUR 9.25 (EUR 10). The change in our target price mainly reflect’s Telko’s lowered peer multiple, while the write-down of Kauko figures only as a minor loss in the sum-of-the-parts valuation.

Aspo company presentation 15082019

Aspo - Company presentation

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Aspo company presentation 15082019

Video presentation

Company Facts


Aspo's operating profit will be approximately EUR 30-36m (EUR 19.3m) in 2021, including the EUR 3.4m Kauko goodwill impairment

Financial targets

Aspo aims for 8% operating margin, 5-10% p.a. revenue growth, above 20% ROE, and gearing of no more than 130%

Share price (EUR)

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