Catella: Awaiting better market conditions - ABG

- Activity remains subdued in Q1'24e
- We cut '24e EBIT by 2%, driven by lower corporate finance
- 2024e EV/EBIT of 4x with 4% dividend yield

Muted activity to persist in Q1'24e
For the Q1’24 report (due 6 May), we expect EBIT of SEK 26m (SEK 7m). We anticipate muted transaction activity to persist, which is negative for Catella's earnings. Looking at the operational segments, we estimate that the AUM within Investment Management (IM) will be up 3% q-o-q to SEK 157bn, helped by favourable FX. We expect the segment to deliver an operating profit of SEK 35m (SEK 31m), a slight improvement compared to the levels in H2'23, driven by reduced one-off costs combined with a larger AUM base improving the scalability. We anticipate only a small earnings contribution from Principal Investments in the first quarter of SEK 4m (SEK 9m). For Corporate Finance, we forecast SEK -7m (SEK -20m) in operating profit contribution from the segment as activity has remained low in Q1'24e. We also expect Q2e to be muted, and look for a gradual improvement when rates start to come down.

We cut 2024e EBIT by 2%, on lower corporate finance activity
We tweak our forecast scenario ahead of Q1’24 next week, primarily lowering our Corporate Finance estimates for H1'24e, which reduces our '24e EBIT by 2%. Positive FX tailwinds increase our '24e EPS by 3%, however.

2024e EV/EBIT of 4x with 4% dividend yield
The company has many attractive fundamentals, including an impressive historical track record within Investment Management and intriguing own-properties investments. The balance sheet and cash position remain strong, which provides Catella with the necessary dry powder if attractive opportunities were to arise. Applying our latest revisions, the stock is trading at a 2024e EV/EBIT of 4x and offers an appealing dividend yield of 4% during our forecast horizon. In the short term, however, we expect weak transaction activity to persist, which holds back the underlying earnings potential.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/catella/Equity-research/2024/4/catella---awaiting-better-market-conditions/