North Media - Starting 2021 with solid gross margins
Q1 EBIT +20% vs. our estimates driven by strong GM Raising the lower end of ’21 guidance slightly We raise our fair value to DKK 103-156 per share A solid Q1 versus our estimates North Media delivered Q1 revenue of DKK 243m (+3% vs. ABGSCe), EBIT of DKK 64m (+20% vs. ABGSCe) and EBT of DKK 65m (+4% vs.
ABGSCe). The return on securities was DKK 1m (vs. ABGSCe at DKK 10m).
The operational earnings benefitted from the leverage on direct expenses, giving a strong gross margin of 61% (+2pp vs. ABGSCe). FK Distribution delivered its strongest ever gross and EBIT margins of 56.
8% (+0. 2pp y-o-y) and 29. 5% (+1pp y-o-y), respectively.
Raising the lower end of guidance for FY’21 Management said that Q1 was in line with its expectations, but that it had given it greater confidence in its FY’21 guidance. Consequently, driven by FK Distribution, revenue guidance was increased to DKK 995-1,025m (DKK 985-1,025m) and EBIT raised to DKK 235-255m (DKK 230-255m), giving a ~1% increase to the mid-point. We increase our EBITDA margin by 1pp for 2021-23e, lifting EPS estimates by 4%, putting us at the high end of the guidance.
Despite a slower roll-out of smart relays for CPH stairwells, Bekey has started a new collaboration with a residential service company that administers 1,700 stairwells. FK Distribution’s appeal against the competition authority’s ruling in June ’20 was rejected, and the company is considering further legal action. There is no news regarding a potential fine related to the matter.
Fair value range up to DKK 103-156 (75-105) per share In this report we make some major changes to our long-term DCF assumptions. Previously, we have discussed the risk of FK Distribution’s service becoming redundant over time. We believe this risk has been minimized in recent quarters, with no real change in the number of subscribers to its service.
Our valuation is greatly influenced by our terminal value in our DCF. In this report, we increase our value range to DKK 103-1.
