Christian Berner Tech Trade - ’21-’23e EBITA up 6-4% after M&A

Acquires AB GF Swedenborg Ingenjörsfirma (~5x EBITA) ’21-’23e EBITA up 6-4% from M&A 14x ‘21e EV/EBITA, 8-10% ’21-’23e FCF yields M&A announcement – acquires Swedenborg Yesterday (15 April), CBTT signed an agreement to acquire AB GF Swedenborg Ingenjörsfirma (Swedenborg), which will be included in CBTT’s Process & Environment segment from 3 May ’21. Swedenborg is a Swedish company that markets and sells well-known pump brands, such as Dickow, DAB, Adams Armaturen and Rembe. In addition, the company manufactures industrial dampers, sold under its own Swedspjäll brand. In 2020, Swedenborg generated sales of ~SEK 45m and EBITA of ~SEK 6m, for an EBITA margin of 14.

0% (vs. CBTT at 6. 1%).

The purchase price amounts to SEK 25m on a cash and debt-free basis and will be financed through cash and new loans, which corresponds to an EV/EBITA multiple of ~5x (incl. an additional earn-out of SEK 6m, based on Swedenborg’s 2021 performance), while CBTT is trading at ~14x ’21e EV/EBITA. Finally, management highlights that Swedenborg fits well into CBTT’s organisation, with the ability to grow throughout the Nordic region and in Europe.

Value-creative deal, ’21-’23e EBITA up 6-4% We argue this deal is in line with CBTT’s focus on higher margins and M&A. The acquisition of Swedenborg, with above-group margins, offers margin expansion opportunities and higher profitability. Based on this transaction alone, we raise sales by 4-3% and EBITA by 6-4% in ‘21-‘23e in tandem with higher sales and slightly higher margins for the rest of the group.

Finally, we forecast a ’19-’23e sales CAGR of ~6% and a healthy ’19-‘23e EBITA CAGR of ~10%. Trading at 14x ‘21e EV/EBITA, 8-10% ’21-’23e FCF yields On our estimates, the stock is trading at ~14x EV/EBITA ’21e while offering FCF yields of 8-10% in ’21-’23e. Lastly, because of our higher earnings estimates and M&A, we raise our fair valuation range to SEK 29-49 (26-42) per share.