VBG
VBG Group - Growth across all divisions to wrap up the year (ABG Sundal Collier)

2019-01-18 11:34
Q4 report due on 19 February
Weaker trailer demand expected in 2020, EBIT -4%
7x EV/EBITA ’19e, 100% FCF conversion, M&A trigger
Positive momentum set to continue in Q4
For Q4, we expect sales of SEK 841m, up 14% y-o-y (9% organic, 5% FX) with strong growth expected within all divisions. We believe both automotive and industrial demand have held up well during Q4, while MCC will continue to gain market share (+13% organic growth). In terms of profitability, we expect the group adj. EBITA margin to improve by 70bp y-o-y, driven by operational improvements in Edscha and Ringfeder as well as less supply chain issues within MCC. For VBG TE, we believe the division will continue to make growth investments, which will pressure margins. To conclude, we expect adj. EBITA to arrive at SEK 101m, for a margin of 12.0%.

MCC expected to mitigate weaker industrial demand in ’19
We make minor revisions to our 2019 estimates, with a stronger performance from MCC expected to offset the weakening demand within Ringfeder. However, we reduce our adj. EBITA by 4% for 2020e as we now expect trailer demand to roll over and result in 5% (prev. -1%) negative organic growth for VBG TE. We remain confident in MCC’s earnings growth development, given efficiency improvements yet to be realised combined with growth being dependent on new order wins and air conditioning penetration, not the number of new buses.

M&A potential increases as cash flow keeps compounding
We expect VBG to announce a DPS of SEK 3.75 (+15% vs. SEK 3.25 in 2017), equivalent to a 36% payout ratio. Furthermore, VBG’s cash flow generation further adds to the potential headroom of c. SEK 900m in 2019, which could add 26% to sales. We believe further acquisitions could happen in the next two years should VBG not be satisfied with lower organic growth or if an opportunity presents itself. The company is currently trading at 8x EV/EBIT ’19e (7x EV/EBITA), a c. 20% discount to its history, and offers c. 10% FCF yields for ’19-’20e.


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info@introduce.se (Introduce.se)
ABG Sundal Collier - Introduce.se

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