Solid Q3 report, beat on adj. EBIT

Positive revisions from acquisitions and margin uptick

DCF valuation range of SEK 70-131

Q3: Sales slightly lower, offset by higher EBIT margin
Atvexa reported Q3 ‘19/’20 sales of SEK 470m (436m), corresponding to y-o-y growth of 8% and -2% vs. ABGSCe. The deviation was driven by lower-than-anticipated organic sales growth; growth from acquisitions was in line with expectations. Adj. EBIT excl. IFRS 16 was SEK 24m (22m), 9% above ABGSCe on a higher-than-expected positive COVID-19 impact (4m). However, that will be partly offset in Q4 as the company expects lower state grants for COVID-19 alongside extra costs in order to follow pandemic-related guidelines. Atvexa also announced four new smaller acquisitions, opened its first organic (vs. acquired) preschool in Germany and hired a CEO for its German branch, signalling that there is more to come from that market. Overall, this report notably demonstrated a decreasing level of debt, which boosts the company’s ability to make larger acquisitions.

Efforts in Germany increasing, new acquisitions announced
We raise our long-term sales assumptions by 1% on the communicated acquisitions. We also raise adj. EBIT excl. IFRS 16, but not by as much as the Q3 deviation suggests, as we think any surplus will be invested to further raise quality, and that investors should not count on any significant margin expansion. Hence, we raise adj. EBIT excl. IFRS 16 by 3-2% for ‘20/’21e-‘21/’22e.

Lease adj. ND/EBITDA decreases to 1.5x
We update our DCF valuation range to SEK 70-131 (67-126) following the positive revisions to estimates. It has now been over a year since Atvexa acquired ULNA and its debt levels have been decreasing ever since. We view the stronger balance sheet as an opportunity for further acquisitions, and would not be surprised if a larger one is communicated in the coming year.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se