Cedergrenska: Work continues amid political uncertainty - ABG

Revenues up 33% y-o-y, driven by M&A

Higher goodwill amortisation behind revision

‘22/’23e EV/EBIT of 8x, 15% FCF yield

Q4: Adj. EBITA margin of 3.1% (0.1%)
Cedergrenska reported solid Q3 numbers, with revenues of SEK 217m (163m) up 35% y-o-y, mainly driven by the acquisitions of SPIRA and Växjö Fria Gymnasium. Revenues were 7% above ABGSCe, probably from a higher M&A contribution than we expected. Adj. EBITA was SEK 6.8m (0.2m) for a margin of 3.1% (0.1%). The worrying EBITA margin trend that we saw in H1 halted in H2, but we think it is too early to draw any major conclusions from the y-o-y margin improvements given that the firm mentioned some savings from pandemic-related costs (e.g. lower personnel costs due to difficulties sourcing temporary staff). The full year EBITA margin was 6.9% (8.1%), compared to the company’s financial target of an EBITA margin of 8%. Cedergrenska mentioned that there is a risk of insufficient voucher levels in Stockholm for the upper secondary school segment, where a first draft indicates a raise of 1.8% for next year, a level that will not compensate for cost inflation. Our assessment is that there is still a lot of time for negotiations before the voucher levels are decided and historically school vouchers have mirrored cost inflation for schools.

Sales uptick from Q4 beat and higher goodwill amortisation
We raise our sales estimates by 4% for ‘22/’23e following the Q4 beat that suggests a higher contribution from acquisitions than we expected. However, we also lower our EBITA margin forecast somewhat following a higher opex than anticipated in Q4. In addition, we also raise our goodwill amortisations further on the back of the higher amount in the Q4 report. In total, this results in a lowering of EBIT by 23% for ‘22/’23e and that the EBITA margin target of 8% is pushed back a couple of years in our forecast.

New fair value range of SEK 31-50 (30-49) We only make small adjustments to our fair value range of SEK 31-50 (30-49) ...
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