Catella: Market activity remains muted - ABG
Tough comps coming up, Q2e helped by performance fees
EPS cut by 7% for '23e driven by lower corporate finance revenues
2023e EV/EBIT of 6x with 4-9% dividend yield in 2023e-25e
Tough comps and muted activity ahead of Q2'23
For the Q2’23 report due on 18 August, we expect EBIT attributable to shareholders of SEK 100m (SEK 328m). Looking at the operational segments, we estimate that the AUM within Investment Management (IM) will be up 4% q-o-q to SEK 146bn, partly helped by favourable FX. We expect the segment to deliver an operating profit of SEK 109m (SEK 211m), with the European Residential Fund contributing SEK 85m in performance fees. We expect a small earnings contribution from Principal Investments in the second quarter of SEK 12m (SEK 102m). The muted transaction activity in the market has a negative effect on Corporate Finance, which is why we forecast SEK -16m (SEK 26m) in operating profit contribution from the segment
Lower corporate finance activity cuts 2023e by 7%
We make small negative revisions to our forecast scenario ahead of Q2’23, primarily lowering our Corporate finance estimates for Q2 and H2'23, which reduces our group 2023 EPS estimates by 7%. We have not yet included the acquisition of Aquila Group, announced earlier in Q2'23, as we await regulatory approval, but the acquisition would boost AUM by 11% and our EBIT to shareholders estimates by ~4% for 2024e-'25e.
2023e EV/EBIT of 6x with 4-9% dividend yields
On our updated estimates, Catella is trading at a 2023e EV/adj. EBIT of 6x with a dividend yield of 4-9% throughout our forecast horizon. In our view, the company has many attractive fundamentals, including a strong balance sheet and an investment management segment that has developed impressively for a number of years, with a growing recurring revenue base. However, in the short term we note tough comps from 2022 combined with a muted transaction activity, which negatively impacts all of Catella's business segments.
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