Axactor: NPL portfolio purchases supporting growth - ABG

Stronger EBIT from improved costs and 3PC revenue
Portfolio purchases back to pre-pandemic levels
Fair value range of NOK 6-17

Q1: stronger EBIT from improved costs, +41% vs. ABGSC
Axactor reported net revenue of EUR 56.2m, up 10% y-o-y, driven by third-party collection revenue (3PC) and lower amortization (driven by 2021 revaluations). The 3PC grew 14% y-o-y, mostly due to the acquisition of Credit Recovery Service (CRS) in Italy. Gross collection was EUR 64m (+1% y-o-y), in line with our expectations. Costs improved 7% y-o-y and the lifted EBITDA margin from 39% to 48%, driven by a higher 3PC EBITDA margin and lower administration costs from the restructuring program. Further, Axactor reported lower depreciation and amortization (19% y-o-y) leading to an EBIT of EUR 24.9m, up 44% y-o-y and +41% vs. our estimates (+31% vs. company-collected consensus). Cash EBITDA was EUR 48m and improved 10% y-o-y, in line with ABGSCe.

Higher portfolio purchases and ERC curve lift estimates
Capex was EUR 77m in Q1’22 (vs. ABGSCe of EUR 55m), up from the low pandemic levels and increasing for the third quarter in a row. Along with secured forward flow contracts of EUR 78m, the replacement capex for 2022 is already exceeded by 50%. We raise our estimated capex by EUR 15m, EUR 4m and EUR 5m for ‘22e, ‘23e and ‘24e, respectively, and we expect a continuing strong market for NPL purchases and 3PC contracts (several contracts signed in Q1). In addition to increased portfolio purchases, Axactor lifted its ERC curve from the Q4’21 levels. Despite the recent positive collection trend, we acknowledge the risk of a negative impact from lower disposable income for consumers (rising inflation & interest rates). Hence, we lift our collection estimates by ~13% and make only minimal changes to 3PC, as we only see marginal growth outside the CRS acquisition. EPS (ex REO’s) is increased by 43% for ‘22e, 35% for ‘23e and 25% for ‘24e.
‘22e-24e EPS growth of 8%, fair value range of NOK 6-17 We expect solid ...
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