Seafire: Expands M&A headroom by SEK 200m - ABG

‘22e ND/EBITDA of 2.2x…
…would expand to 2.9x if Seafire executes on M&A…
…which could add 43% pf to EBITA, all else equal

Successfully issues SEK 200m of bonds
Yesterday, Seafire announced that it had successfully issued SEK 200m of additional bonds, bringing the total outstanding amount to SEK 600m. The bonds were issued with an interest rate of 7.89% + Stibor 3m. With the latter currently at 0.47%, the annualized interest cost for the new bonds is ~SEK 17m. Seafire’s annual interest cost for the total SEK 600m is ~SEK 50m (41% of ‘23e EBITA), given STIBOR 3m at 0.47%. Following this, we see that Seafire will have a ‘22e cash position of SEK 434m, and interest-bearing debt (including leasing and earn-outs) of SEK 702m, i.e., net debt of SEK 268m and ‘22e ND/EBITDA of 2.2x.

Execution on M&A targets would lift ND/EBITDA to 2.9x…
On 13 May, when Seafire announced its intention to issue the additional SEK 200m, it also announced that it has several ongoing M&A processes, of which two acquisition processes were in the due-diligence phase with final decisions expected in May and June (see our previous note on this). Combined, these two acquisitions have an initial purchase price including full potential earn-outs of SEK 247m, and 217m excluding earn-outs. If it were to execute on both of these, and assuming 1) both companies are cash- and debt-free, and 2) Seafire pays all cash, its ‘22e ND/EBITDA (including full EBITDA contribution from potential acquired companies) becomes 2.9x, or 2.2x for ‘23e and 1.5x for ‘24e.

…but decrease ‘22e EV/EBITA to 9.2x from 10.7x
To simplify calculations, we assume the potentially acquiried companies have the same depreciation level as Seafire; most likely its higher given that one of the companies is an industrial company, entailing higher capex requirements and thus higher depreciation, and the low EBITDA multiple indicates higher depreciation. In such a scenario, the two acquisitions could add pf SEK 42m to ‘22e EBITA, or 43% to our ‘22e e ...
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