Transformative paradigm shift strategy well underway

Operational excellence strategy to triple EBIT by ‘22e

Price range of DKK 50-130 based on valuation scenarios

Paradigm shift strategy seems successful thus far
MT Højgaard Holding A/S (“MTHH”) is the listed owner of the MT Højgaard A/S operational companies. MTTH is currently executing a paradigm shift strategy, recently divested its Lindpro business (11% 2019 rev.) and launched a ‘Sustainable >22 strategy’. In 2019, it replaced its CEO and CFO, consolidated its ownership structure, received a DKK 400m loan and reduced its workforce by 130-140 employees (~10%). Following these developments and emphasising corporate decentralising, risk management and innovation, the firm believes that it can execute its order backlog while focusing more on new, more profitable projects. The operational companies are MT Højgaard (53% of revenue in ’20e), Enemærke & Petersen (34% in ’20e), Scandi Byg (7% in ’20e) and Ajos (6% in ’20e); the goal is to create a one-stop shop for construction, development, design/engineering and renovation projects.

A portfolio model to deliver operational excellence
Following ~10 years of a strong underlying market for new-build, renovation and civil works, Danish statistics signal a reduction in demand that is likely to continue unless there is an increase in investments from pension funds/the state. The construction and civil works market is expected to stand at ~DKK 228bn (with ~40% relevant for MTHH) in 2020 where the company has a ~80% book-to-bill. Growth is expected to follow the development of the Danish economy in the mid-term, which indicates general economic saturation where the company guides ~-3% organic growth for 2020. MTHH targets a >4% EBIT margin by 2022 by delivering operational leverage in a flat market by leveraging smaller projects. Success is dependent on maintaining momentum in its order intake of profitable projects, which currently looks promising.

Initiation
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