StrongPoint: Sequential improvement expected - ABG

We keep our estimates unchanged ahead of Q2 Higher uncertainty for retailers, but long-term case intact ’23e adj P/E of ~10x Q2’22e: revenues of NOK 300m and adj EBITDA NOK 20m We keep our estimates unchanged ahead of StrongPoints’s Q2 report on 13 July, and expect revenues of NOK 300 (flattish q-o-q) and adj EBITDA of NOK 20m, up 6m q-o-q on higher gross margin assumption (Q1 was below historical levels due to high share of ESLs). As the ALS acquisition was closed in Q2, we have included NOK 2m in one-off expenses, implying a reported EBTIDA of NOK 18m. Several listed retailers has profit warned in Q2, which could potentially mean that outlook and demand uncertainty has increased also for retail technology players. At the same time, we argue the longer-term case for automation and efficiency-boosting products and services in grocery retail is still strong.

One-stop-shop for grocery retailers Following the divestments of the Cash Security and Labels businesses, StrongPoint is a pure retail technology company. Having signed a distribution agreement with Autostore in 2021, along with its Click & Collect lockers and picking solutions, we argue that StrongPoint’s product portfolio is well positioned to capitalise on the growth that we expect to see in online grocery retail over the coming decade. In Q2 it has also signed its first AutoStore installation contract with ColliCare, which could become a reference project for StrongPoint going forward.

’23 adj P/E of ~10x following ALS acquisition StrongPoint is now trading at 9.2x 2022e EV/EBITDA and 17.8x adj. P/E, which for 2023e drops to 5.5x and 10.2x with full effect of the ALS acquisition. If StrongPoint reaches its ‘25 targets (NOK 350m in EBITDA at mid-point), EPS could increase to ~NOK 5.5, giving a P/E of ~3x.

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