Problem projects finally renegotiated

Estimates up 5-6% for ’18e and ’19e

30% discount to peers on EV/EBIT ’18e

A report that de-risks our forecasts significantly
Sales were 4% better than our forecast of SEK 2,613m, with organic growth at 10%. EBIT was SEK 100m, 23% above our forecast, while EPS was SEK 1.15, slightly lower than our forecast due to a SEK 11m charge for revaluating deferred tax assets. We think there were two positive conclusions from the report: 1) The underperforming projects in Supply Chain Solutions are almost resolved, resulting in a margin uptick 2) continued growth in Print & Packaging solutions due to strong growth in the US.

Estimates up 5-6% on ’18e and ’19e
While we were expecting that the aforementioned customer issues would be resolved and a margin uptick would follow by the end of this year, a confirmation of this and an uptick in margins already in Q2 clearly de-risk our forecasts. Our estimates are up 5-6% for ’18e and ’19e. This is due to the stronger than expected results in the quarter and a higher growth rate in Print & Packaging Solutions (7%) due to the growth in the US business.

EV/EBIT of 13.6x – trading at a discount to peers
Supply Chain Solutions accounted for 75% of revenues and 82% of EBIT in Q2. A peer group of global 3PL players is trading at EV/EBIT of 15.7x for ’18e and 13.8x for ’19e, which means that Elanders is at a c. 15-30% discount. If we assume that the remaining 25% of the business should be valued at a conservative 9x, the discount would be approximately 3%.

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ABG Sundal Collier - Introduce.se