MT Højgaard Holding
MT Højgaard Holding - Puzzle pieces seem to be coming together (ABG Sundal Collier)
2020-08-03 19:32
Q2e: -5% organic growth and 2% EBIT (+0.5pp vs. cons)
Positive tailwinds for E&P during the quarter, but…
...market volatility and legacy projects poised to drag
Roughly five legacy projects remain a stone in the shoeWe reduce our order book estimate by 2% for 2021/22e on the back of fewer international projects (~7% of revenue), e.g. the DANIDA-supported projects in the Maldives and Portugal, following COVID-19. We maintain our operating margins but slightly lower the tax rate. We believe the company will deliver Q2 revenue growth of -16% (-5% organic), with an EBIT margin of 2% (+2.4pp y-o-y) and an order book of DKK 1.4bn (+2% y-o-y). We are thus 0.5pp above FactSet consensus on EBIT margin and ~40% higher on order intake for Q2. Following recent conversations with management, we believe the company will deliver flat order intake with continued tailwinds in E&P (Q1: +81% y-o-y) which could yield a margin on par with Q2’17 (following a turbulent Q2’18 and Q2’19). We remain watchful of MTHH (Denmark), where we see -23% growth and a -4% EBIT margin (-1.6pp) for Q2 due to the remaining roughly five legacy contracts with negative earnings pending completion in 2020.
Macroeconomic environment could be negative for H1’21e
We reiterate our FY estimates of DKK 5.9bn in revenue and EBIT of DKK 125m (in line with guidance and cons.). The euro area delivered Q2 GDP growth of -12%, with -10% in Germany We consequently see lower order intake during H2 (ABGSC: -10%) with ‘21e volume growth declining by 2pp (ABGSCe: -5%). This could pressure EBIT margins, where we are currently aligned with the MTHH’s ~3% target (+0.9pp y-o-y).
Increase fair value by 7% with minor estimate revisions
Incorporating the tax reductions due to incurred losses for the past years, we reduce our three-year tax assumption to 10% (23%). We maintain our DCF’s LT assumptions of -3%-3% sales growth, a 3-4.5% EBITDA margin and a risk factor (WACC) of 10-12%. The stock trades at 4x and 8x NTM EV/EBITDA and P/E vs.
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