Bergs Timber - The strong market outlook continues
Q4 strong – sale of stock levels from Swedish sawmills Debt-free, ready to grow organically and via M&A Set for growth but only trading at ‘21e EV/EBITDA of 5. 5x Q4 strong – sale of stock levels from the Swedish sawmills Clean Q4 EBITDA was SEK 78m, up ~50% q-o-q and better than our estimate of SEK 45m. This was mainly driven by a positive contribution related to the sale of its remaining stock levels from the Swedish sawmills (which we had not included in our estimate). We estimate that this effect added ~SEK 25-35m to EBITDA in Q4, which we do not extrapolate further.
Higher sawmilling prices and higher sales for Further Processed also contributed positively vs. our estimate. The strong sawmilling and DIY market is likely to continue into 2021 with strong demand and higher prices, but raw material costs are likely to rise in 2021.
We raise our EBITDA estimates by 2-3% due to the strong market outlook. Our EPS estimate is up by 10% due to lower financial expenses. Expect a strategic plan and financial targets update Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally-friendly).
Its remaining assets are modern and well-invested, meaning that the cash flow generation will be strong. Combined with a debt-free balance sheet, we see plenty of room to grow both organically and inorganically. Bergs will update its strategic plan and financial targets around the beginning of March.
Here, we expect the company to communicate an organic growth target of 5-10% p. a. driven by organic growth in its Further Processed segment, and with growth from M&A on top.
We also expect the company to raise its profitability targets. New Bergs is trading at a ‘21e EV/EBITDA of ~5. 5x We expect the “new Bergs” to generate EBITDA of ~SEK 205m next year, i.
e. it is trading at a ‘21e EV/EBITDA of ~5. 5x.
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