Bredband2 - Robust gross margins
Sales and adj. EBIT -2% and +2% vs. ABGSCe Stellar gross margins at 34% (ABGSCe 30%) Cons. likely to raise adj.
EBITDA ests. mid-single digit Q1 results Sales SEK 377m (-2. 5% vs ABGSC 386m), EBITDA SEK 47m (28.
0% vs ABGSC 37m), adj. EBITDA SEK 47m (12. 7% vs ABGSC 42m), EBIT SEK 19m (2.
2% vs ABGSC 18m). Q1 thoughts Sales slightly below our forecast, but gross margins as well as EBIT margins were higher than expected. We were a bit surprised of the strong gross margin, especially considering that A3 had a relatively low gross margin (~25%) before it was acquired by Bredband2.
In turn, this explained most of the EBIT beat vs. our forecast. As in Q4, Bredband2 did not split out private sales and business sales.
Furthermore, it did not disclose the exact customer base, which was “about 450,000” by the end of Q1. Based on 450,000 customers, the customer intake was -5,000 q-o-q (ABGSCe +2,000). The number was likely negative due to the consolidation of A3’s brands into Bredband2’s brand.
In addition, Bredband2 has recently stopped offering some of its services. That said, the report cites that the integration of A3 is developing according to plan. None non-recurring items were specified in the report.
Valuation and estimate changes Based on the Q1 report alone, we believe that consensus could upgrade its ’21-‘23e EBITDA estimates mid-single digit. Bredband2’s share is down 3% YTD and is trading at 10x EV/EBITDA on our unrevised 2021 estimates while offering a 6% FCF yield.
