Midsona
Midsona - Decent growth but margin still under pressure (ABG Sundal Collier)

2019-01-21 17:36
Q4’18e: 31% sales growth and lower profitability y-o-y…
…driven by M&A and continued gross margin pressure
16-13x EV/EBIT and 17-14x P/E ’19e-’20e
Organic growth returned in ’18, ’19e more difficult
Following organic growth of -4% in ’17, organic growth picked up again in ’18 (~5% 9m’18 y-o-y), which together with positive FX and a lot of help from acquisitions lifted 9m’18 sales 33% higher y-o-y. Although opex control was solid, gross margin pressure muted the earnings development. We expect to see the same trends in Q4’18, taking full-year sales growth to 32.5%, and the full-year adj. EBIT margin to 6.8% (-40bp y-o-y). For 2019, we estimate organic growth to drop to -2.3%, in large part driven by the loss of the Alpro contract, but we expect recovering gross margins and synergy gains to support earnings.

Q4’18e: M&A-driven growth and GM pressure from FX
For Q4, we estimate sales of SEK 746m, up 31% y-o-y (of which 0% organic, 3.3% FX and 27.3% acquired). The low organic growth stems from fewer trading days y-o-y and seasonally low license sales from HRA Pharma. FX sourcing headwinds (EUR/SEK) and Davert dilution explain the expected gross margin decrease of 370bp y-o-y to 30.5%. We expect underlying opex to remain under tight control, somewhat offset by new system implementation costs, resulting in Q4e EBIT of SEK 50.5m and a margin of 6.8% (down 200bp y-o-y). We only make minor changes to our quarterly estimates. However, due to a technical error in our model, full-year EBIT and EPS for ‘18e increase by 6% and 9%, respectively.

Peer discount is gone, less room for M&A given gearing
Shares of Midsona are currently changing hands at 16x ’19e EV/EBIT. Although it is still trading at a small discount to its larger peers, it is trading at a 26% premium to smaller peers and the relative valuations are historically high. While successful future acquisitions could change that, the high current gearing (5.3x net debt/EBITDA vs company target of <2x) leaves little headroom for m&a in the near term (unless cash equity financed), in our view. the q4 report is due on 8 february.>


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ABG Sundal Collier - Introduce.se

Midsona B - I dag

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