BHG Group - Set to close the year in style
Yet another strong quarter on the horizon M&A lifts our estimates by 14-15% Valuation range raised to SEK 83-209 (74-149) Q4 2020e EPS set to grow by 55% The already strong trends within online sales accelerated in 2020 as consumers spent more time at home and are less inclined to shop at physical stores. Furthermore, travel restrictions have fueled demand for discretionary spending as the “disposable income post travel costs” has increased. Approximately 15 million private cross-border trips are made from Sweden each year, corresponding to c. 6% of disposable income.
Going into the fourth quarter, we did not pencil in accelerated COVID-restrictions into our base case. However, the impact of the second wave turned out to be significantly more severe than we anticipated, affecting e-commerce players positively in the short term. Hence, we lift our Q4’20 sales estimates by 4% and ad.
EBIT by 8%. Overall, we pencil in 28% sales growth (of which 25% is organic), adj. EBIT growth of 72% to SEK 155m and adj.
EPS of SEK 1. 09, up 55% y-o-y. Nordic Nest adding c.
15% to our estimates After close to five months without any announced deals, BHG launched its largest acquisition by far on 13 December (see our 13 December note for further details). BHG expects Nordic Nest to reach sales of SEK 1bn and EBITDA of SEK 120m in fiscal ’20/’21e (ending March). Assuming 10% sales growth in 2021e, we pencil in Nordic Nest to add 12% to sales, 15% to EBITDA and c.
14% to EPS, explaining the lion’s share of our estimate revisions of 14-15% in ’21-‘22e. Valuation range raised to SEK 83-209 (74-149) To capture the long-term potential of BHG Group, we derive our valuation range from three-stage DCF model scenarios. Scenario 1 gives a fair value of SEK 186 (122) per share while scenarios 2 and 3 yield SEK 83 (74) and SEK 209 (149), respectively.
