Arise - Concerns about near-term project profits
Q1 EBITDA of SEK 23m (14% vs. ABGSCe SEK 20m) We lower ’21e EBITDA by 14%, ’22e-’23e down by 6-11% Slightly lower fair value range of SEK 49-114 (53-117) Q1: helped by solid production, but weaker project outlook Arise turned in a decent Q1 report but with a near-term project profit outlook on the weaker side. Q1 sales came in at SEK 47m (+21% vs. ABGSCe at SEK 39m), down 6% y-o-y.
Sales was mainly helped by the Production segment, with an avg. electricity income of SEK 463 (SEK 314) per MWh (ABGSCe at SEK 415 per MWh), but slightly weaker winds led to Production sales of SEK 38m (ABGSCe SEK 34m). Development and Solutions had sales of SEK 9m (ABGSCe SEK 5m), supported by asset management activities.
Group EBITDA came in at SEK 23m (ABGSCe at SEK 20m), for a margin of 49% (ABGSCe 52%), down from 51% in Q1’20. Arise still aims to complete the sales of the Ranasjö and Salsjöhöjden projects (240 MW) during Q2’21 (ABGSCe Q3’21), but management highlights that Salsjöhöjden (87 MW) is no longer likely to make any major profit contribution, and Ranasjöhöjden (155 MW) will be less profitable than it expected. Moreover, the final payment and project margin of the Skaftåsen project may come to be negatively affected by turbine delivery delays.
All in all, this gives us a cautious view about the near-term ’21e-’22e portfolio. We lower ’21e-’23e EBITDA by 6-14%; impact from project profits We lower our sales estimates by 13% for ’21e and by 5-10% for ’22e-’23e, due to the negative earnings contribution revisions from Ranasjöhöjden (coming down from SEK 1. 6m/MW to SEK 1.
0m/MW), and Salsjöhöjden (from SEK 1. 0m/MW to SEK 0. 1m/MW) in revenue recognition.
All in all, this leads us to lower our ’21e EBITDA by 16% and ’22e-’23e by 5-11%. Trading at 11x ’21e EV/EBITDA; LT case appears intact We reiterate our positive view regarding Arise’s long-term project portfolio, which despite near-term project headwinds shou.