Humble Group: Firing up for further growth and M&A - ABG

Q1 report due on Wednesday 25 May…
…but the preliminary Q1 numbers are already out
We expect sales of SEK 897m and adj. EBITDA of 90m

Prel. Q1 numbers looks promising, despite softer quarter
Humble Group will officially report its full Q1 on 25 May. However, on 28 April, the group pre-announced preliminary Q1 numbers. Management expects sales in the range of SEK 875m-925m and adj. EBITDA of SEK 85m-95m. It also mentioned that pro forma organic growth amounted to 25% (27% incl. FX), well above its target of 15%, which we think is promising since Q1 is seasonally softer for Humble. Furthermore, we are seeing surging inflation on raw materials and freights, which affects food manufacturers/suppliers including Humble. To our understanding, Humble’s subsidiaries have and continue to successfully conduct price hikes to offset the cost inflation. However, we assume there to be some lead-time on this, and we pencil in a slightly weaker gross margin of 31.5% (vs. 33% in Q1’21).

Share issue to finance growth and acquisitions
In Q1 we expect one acquisition (Fitnessgrossisten A/S) to become visible. In sum, we estimate sales of SEK 897m (vs. SEK 88m Q1’21) and adj. EBITDA of SEK 90m, for a margin of 10% (+2.3pp y-o-y). This is in line with the preliminary figures, and we find the margin improvement especially reassuring, as management has mentioned increased investment costs for the quarter. Taking into account the additional newly-acquired subsidiaries we raise our ’22e-’24e sales and adj. EBITDA by ~9-12%. Following the recent capital injection and our revised estimates, we now look for a YE’22 ND/EBITDA incl. earn-outs of 4.3x (3x excl.), which is ~1x lower than our previous estimates.

Value range up to SEK 24-43 (22-39) per share
The Humble share is down 50% YTD. Although one could argue that the capital injection of SEK 530m could have acted as a short-term relief (as it partially de-risks the stretched balance sheet), this has not been the case. Following our estimate revis ...
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