Bredband2: We lift '25e EBITA 5% on new M&A - ABG

We include Stockholms Stadsnät AB into our forecasts...
... raising '24e-'25e EBITA 3-5%
Share is trading at 10x '24e EV/EBITA


About the acquisition

Today, Bredband2 announced that it is acquiring Stockholms Stadsnät AB for an enterprise value of ~SEK 50m. In 2022/2023, Stockholm Statsnät reported net sales of SEK 48m, coupled with EBIT(A) of SEK 3.7m (a 7.7% margin, vs. Bredband2 at 9.1% r12m). Similar to recent acquisitions (e.g. A3 in 2020 and the acquired customer base from TH1NG in 2021), we argue that the acquisition makes good strategic rationale due to: 1) it is earnings accretive, 2) it enhances Bredband2's market position (~15% market share of total Swedish fiber subscribers, post-acquisition), and 3) good prospects for Bredband2 to reap cost synergies and consequently raise the pro forma-based margins. Looking at Stockholm Stadsnät's financials, we note that its gross margin of 39% is above Bredband2 at ~34%, reflecting the fact that the company's main customer group is housing cooperatives (which explains why the ARPU of ~SEK 100/month is well below Bredband2 at ~SEK 295/month).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/bredband2/Equity-research/2023/12/bredband2---we-lift-25e-ebita-5-on-new-ma/