Acquires two additional sites in Germany

Expected to add SEK 265m in sales, 3-4% EBIT margins

Acquisition at 3.4-4.5x EV/EBIT (9-12x incl. rental debt)

Acquires German dealer Auto-Haas
Ferronordic intends to expand further into Germany by acquiring Auto-Haas, German dealer of Volvo/Renault Trucks and Volvo Cars (1/3 of sales). Through the acquisition, Ferronordic is expected to add two more sites with combined revenue of SEK 265m and an operating margin of 3-4%. According to the company, this acquisition combined with the previous Volvo site acquisition allows Ferronordic to cover a sales area representing c. 20% of the German heavy truck market (11 sites in total). The company aims to take over the business from January 2020, and expects operating cash flows to be positive from the start.

Acquisition adds 4% to ‘20e sales, 2-3% to ‘20e EBIT
On our current estimates for 2020, the SEK 265m would add 4% to sales and 2-3% to EBIT (assuming 3-4% margins). In addition, the combined (proforma) Volvo/Auto-Haas businesses would result in German sales accounting for c. 25% of 2020e group sales.

In line with its strategy, increases German exposure
The initial purchase price of c. SEK 36m (25m net assets), would imply an acquisition multiple of 3.4-4.5x EV/EBIT. However, Ferronordic will also assume Auto-Haas’ rental business which, including IFRS 16 revaluations, will result in an expected net debt increase of SEK 97m, implying an ‘all-in’ acquisition multiple of 9-12x EV/EBIT. We believe this acquisition strengthens our view that Ferronordic intends to make Germany a sizeable future contributor to earnings, while also further strengthening Ferronordic’s strategic partnership with Volvo. On our estimates (prior to this acquisition), Ferronordic is trading at 6x EV/EBIT ‘20e on 19% EBIT CAGR ‘19e-‘21e and 5-8% dividend yields.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se