Alcadon - Heading into a strong 2021
EBIT 5% better than ABGSCe Solid outlook with added sales option of SEK 1bn New fair value range of SEK 30-70/share (25-60) Margins were impressive Sales were on the soft side at SEK 111m, declining 5% organically y-o-y. We had higher hopes, as this was 6% below our estimates. As in Q3’20, the end markets held up well; however, access to commercial properties has been limited by COVID-19. Additionally, fiber customers are deferring investments until the government subsidies start, in mid-2021.
Alcadon delivered an impressive gross margin of 31%, with gross profit in line with our estimates. To top it off, opex was lower than we expected, resulting in EBIT of SEK 9.4m, 5% better than ABGSCe. Estimates relatively unchanged More restrictions because of COVID-19 are hampering market activity slightly for the commercial segment.
Although Alcadon has been relatively insulated so far, it should take its toll on Q1’21 sales in combination with deferred fiber investments. However, we expect solid growth of c. 47% in Q1’21e, solely through the contribution from the acquisition of 6X.
We expect organic growth to pick up to 8-12% for Q2-Q4’21e, supported by fiber subsidies, 5G rollouts and improving construction markets. Overall, we forecast FY’21 growth of 58% (M&A 51%, organic 7%), with EBIT margins of c. 10%, implying 71% EBIT growth.
Worth noting is the framework agreement Alcadon signed with EQT and its portfolio companies in FTTH/FFTX. For example, Deutsche Glasfaser, OMERS and inexio alone plan to invest EUR 7bn over the next few years in the German fiber rollout. It also has the largest FTTH/FTTX company in Spain, among others.
This adds the optionality of adding SEK 1bn in revenue for Alcadon in the coming years. Still trading at 10x ‘21e EV/EBIT The share is trading on a ‘21e EV/EBIT of 10x, c. 10% above its 2Y average.
Worth noting is that the historical valuation reflects a struggling company, far from the now-improving margins and solid growth outlook....