Cavotec - Strategic decision to divest Airports
Airports: 25% of Cavotec, i. e. ~EUR 40m sales Will focus on growing Ports & Maritime and Industry Good strategic move, in our view Increasing focus on the core; Ports & Maritime Following recent years’ increasing focus on shifting Cavotec’s strategy towards the high-growth (and high-margins, in our view) opportunities within Ports & Maritime (‘P&M’), Cavotec has now announced its intention to divest its Airports business. Focus going forward will instead be on the core P&M as well as the remaining Industry business.
Airports accounted for c. 25% of 2020 sales (EUR 40m) and will be reported as a separate division from Q1’21 and onwards. To our understanding, the company has improved Airports in recent years so that it went from significant losses to a small profit in 2019.
In addition, we believe there are several larger players with a broad airport offering that would be interested in this asset. These include ITW, JBT and Hitzinger. Assuming 0.
7-1. 0x sales would imply SEK 3-4 per share Management aims for a divestment to occur in 2021. If we assume a transaction multiple of 0.
7x-1. 0x sales (Cavotec is trading on 1. 1x EV/Sales 2021e), the transaction value could amount to SEK 3-4 per share (14-20% of current market cap).
Finally, Cavotec already has a strong balance sheet (net cash excl. IFRS 16). Thus, we believe any eventual proceeds will be used for M&A within P&M or to be possibly repatriated to shareholders.
Assuming 0. 7-1. 0x sales would imply SEK 3-4 per share To conclude, we argue that the decision to divest Airports makes good strategic sense given its limited (to our understanding) overlap with the remaining businesses as well as the significantly higher growth potential within P&M.
The stock is currently trading at 11-8x EV/EBIT ‘21e-‘22e. The company will host a conf call later today at 12:00 CET to provide additional information. Dial-in: SE +468 505 583 55, UK +44 3333 009 260, weblink: https://tv.
streamfabriken. com/cavotec-press-conference.
