StrongPoint: Adjusted EBITDA 44% above ABGSC

Adjusted EBITDA 44% above ABGSCe
NOK 300 in orders announced in Q2
EV/EBIT will be 11x if it reaches break-even in Spain
15% organic growth YTD, i.e. delivering on its 2025 ambitions
StrongPoint reported revenues of NOK 251.5m in Q2. This was the first quarter were Labels is not included in continued operations. Excl. Labels we had revenues of NOK 255m, so sales were 1% below our numbers. EBITDA was NOK 12m, but it was impacted by a NOK 14m inventory write-down in Spain, which means that adjusted EBITDA was NOK 26m, 44% above our estimate of NOK 18m (excl. Labels). YTD, revenue growth has been 15%, which shows that the company is delivering on its 2025 financial ambitions, which imply 15% organic sales growth to 2025.

23% upside to adj. EBITDA when Spain reaches break-even
In addition to the write-down, the Spanish operation had an operational EBITDA loss of NOK 6m. In other words, if Spain had been break-even, adj. EBITDA had been NOK 32 (23% higher), indicating a run-rate EBITDA for the full year of NOK 128m. This shows the significant delta effect on earnings when things begin to normalize in Spain and the company reaches break-even. In this scenario, the company would be trading at 11x EV/EBIT. For comparison we have NOK 123m in EBITDA for 2022e and NOK 98m excl. Labels.

Strong order backlog and significant M&A firepower
During Q2, several new orders in Norway with a total value of ~NOK 300 have been announced that will be delivered over the next 2-5 years. This should help contribute to solid growth from H2’21e. Following the divestment of Cash Security and Labels, Strongpoint will also have a strong cash position of NOK 200-250m that it can deploy for M&A.

Research 20210714

https://www.introduce.se/foretag/StrongPoint/Equity-research/2021/7/strongpoint---adjusted-ebitda-44-above-abgsc/