Seafire: Tax deferral brings ND under control - ABG

- Sales-1% and adj. EBITA +9% vs. ABGSCe
- Leverage down to 2.1x after SEK 94m tax deferral
- Consumer, construction weaker, industrial production stronger

Q3 results
Sales came in at SEK 233m (-1% vs. ABGSC 234m), +4% y-o-y (-5% organic). EBITA was 27m (+54% vs. ABGSC 18m), and adj. EBITA was 19m (+9% vs. ABGSC 18m) for a margin of +8% (ABGSC +7%). Adj. net income was 1m (-76% vs. ABGSC 4m) for a margin of +0% (ABGSC +2%). The company produced lease adj. FCF of 87m, +817% y-o-y. The strong cash flow was due to a tax deferral of SEK 94m, payable in instalments over the period '25-'27. This brings ND/adj. EBITDA pro forma R12m down to 2.1x, more than doubling the margin to the bank debt covenant of 3.25x, in our opinion significantly alleviating any balance sheet concerns.

Estimates and outlook
On numbers alone, '23e sales remain unchanged and adj. EBITA come up +8%. The outlook for the group companies remains mixed, with companies exposed to consumer and construction experiencing weak demand, while companies exposed to industrial production are faring better. A positive was that Nordbutiker saw improved results in the second half of Q3, as well as the beginning of Q4.

Valuation
The share is down -56% L3M (vs. peer group median of -19%), and is currently trading at 7-4x '23e-'25e adj. EV/EBITA or 11-5x '23e-'25e adj. P/E on our pre-report estimates.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/Seafire/Equity-research/2023/10/seafire---tax-deferral-brings-nd-under-control/