Bergs Timber: Expecting a seasonally better quarter - ABG

EBITDA likely up q-o-q on higher volumes and prices
We estimate Q2’21 EBITDA of SEK 88m, up from SEK 65m in Q1’21. We see EBITDA up q-o-q due to higher prices and volumes. Q2 is usually a seasonally stronger quarter for the value-added wood product segments (better volumes). Sawmilling prices increased during Q2 and were up ~20% q-o-q. Note that raw material costs could rise in H2’21. The company will report its Q2 numbers on July 29. Bergs recently announced that it has acquired UK-based company PTPG and expects the acquisition to increase sales by SEK 250m p.a. while contributing with an EBITDA margin of 9% over time. We lift our ’22/23e estimates by ~8-10% due to the acquisition. Our 2021e estimates are up based on the acquisition as well as higher prices and expectations of better demand.

Target to grow 10% p.a. organically and through M&A
Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally friendly). Its remaining assets are modern and well-invested, so cash flow generation will be strong. We see plenty of room to grow, both organically and inorganically. Bergs Timber has announced its new strategic focus and increased its growth target from 5-10% p.a. to 10% (both organically and via M&A); it has also identified organic growth investments of ~SEK 500m for 2021-2023. Bergs has already started to deliver on its new growth target, and has announced two new investments since the strategic update in March: i) organic growth investment in its wood protection segment and ii) the acquisition of PTPG, which will almost double its EBITDA from its Joinery segment.

Trading at ‘21e EV/EBITDA of 7x
We expect Bergs to generate EBITDA of ~SEK 270m in 2021, i.e. it is trading at a ‘21e EV/EBITDA of 7x.

https://www.introduce.se/foretag/bergs-timber/Equity-research/2021/7/bergs-timber---expecting-a-seasonally-better-quarter/