BoConcept

November 11, 2015/in Investment Panel Aarhus

OVER THE LAST COUPLE OF YEARS BOCONCEPT HAS BEEN THROUGH A TURN AROUND AND WITH THE RECENT REPORT MANAGEMENT HAS DEMONSTRATED THAT THEY ARE WELL ON TRACK TO GET COST UNDER CONTROL AND START FOCUSING ON GROWTH. INVESTMENT PANEL AARHUS BELIEVE THAT THE MANAGEMENT WILL DELIVER OVER THE NEXT COUPLE OF YEARS DUE TO THE HIGH FOCUS ON COSTS BUT WOULD LIKE TO SEE CONSISTENT RESULTS BEFORE WE ARE FIRM IN OUR BELIEF. HOWEVER IF BOCONCEPT ARE ABLE TO CONTINUE TO PERFORM WELL OVER THE NEXT YEARS DUE TO THIS COST-FOCUS, THE CAPABILITY TO SCALE THE BUSINESS WITHOUT BIGGER COST INCREASES AND GAINS FROM THE CO-OPERATION WITH A CHINESE COMPANY WILL MAKE BOCONCEPT ABLE TO INCREASE GROWTH GOING FORWARD. A CASH FLOW ANALYSIS SHOWS THAT SMALL IMPROVEMENTS IN THE EBIT-MARGIN WILL PROVIDE A LIMITED UPSIDE TO THE CURRENT SHARE PRICE AND ONLY FOR UNREASONABLE ESTIMATES IN THE WACC AND TERMINAL EBIT-MARGIN WILL RESULT IN NO UPSIDE. WE RECOMMEND INVESTORS TO WAIT UNTIL THE RESTRUCTURING HAS SHOWED CONSISTENT RESULTS, HENCE WE RECOMMEND HOLD.

Turnaround case på vej fremad

BoConcept er et dansk franchisekonceptet, som sælger højkvalitetsmøbler og andet indretningsdesign i ”Affordable Luxury” segmentet i hele verden. Franchise-modellen har den fordel, at den er meget kræver begrænset likviditet. Ved ekspansion er det franchisetagerne, som betaler, mens BoConcept blot er mellemled. BoConcepts primære opgave er at lave R&D, markedsføring og produktlanceringer. Derudover står BoConcept for logistikken til butikkerne samt rådgivning af franchisetagere. Normalt genererer franchisekonceptet høje cash flows hos moderselskabet (f.eks. McDonalds). BoConcept har dog siden finanskrisen været igennem en turbulent periode, hvor omsætning er stagneret pga. lukninger af butikker og samtidigt er kapacitetsomkostningernes procentandel af omsætningen steget. Selskabet har derfor brugt de sidste 2‐3 år på en turnaround, hvor urentable butikker er blevet lukket og der er startet nye op på bedre lokationer med bedre franchisetagere. Oprydningen startede i august 2012 fik ny CEO, da den daværende CEO, Viggo Mølholm, efter 17 år på posten valgte at fratræde sin stilling og træde ind i bestyrelsen. Torben Paulin overtog CEOrollen og gennemførte en række tiltag, som betød, at den negativ udvikling blev vendt, omsætningsvækst kom tilbage, kreditpolitik over for dårligbetalere blev strammet, der blev identificeret strategisk vigtige markeder og salgs- og markedsføringsressourcerne er fokuseret, hvor væksten er. Yderligere blev der i september 2014 sat yderligere fokus på omkostningerne, da ledelsen blev udvidet med en COO med ansvar for særligt logistik omkostningerne.
Vi ser tiltagene som naturlige i et selskab, hvor stigningen i logistikomkostningerne er løbet fra omsætningsvæksten, og hvor 95% af produktionen sker hos eksterne leverandører, primært i Kina og Østeuropa.

Horizon 16/17
Samtidig med tilgangen af den nye COO igangsattes næste step i turnarounden, hvor man introducerede den nuværende strategi, Horizon 16/17, som en strategisk optimering af forretningen, der skal genskabe vækst- og indtjeningskraften. Tiltagene er inddelt i tre kategorier: Simplificering, Differentiering og Eksekveringseffektivitet på tværs af BoConcepts strategiske value drivers. Simplificering skabes gennem større fokus på værdiskabende markeder, mens øvrige markeder lukkes. Differentiering sker ved redesign af product-to-market-processen, hvor samarbejdet på tværs af værdikæden styrkes, hvilket muliggør en væsentligt hurtigere lancering. Fokus på effektiv eksekvering skal øge effektiviteten i franchiseleddet og gøre omkostningsstrukturen mere skalerbar. Ifølge BoConcept vil 25 % af en potentielt øget omsætning gå direkte på bundlinjen, hvilket er relativt dramatisk for et selskab, der forventer en EBIT‐margin på 4% i 2015/16. Men som dog viser det store marginpotentiale, der er i deres forretningsmodel. Målet med strategien er, at BoConcept i regnskabsåret 2016/17 skal kunne realisere en overskudsgrad på 5-7%. Mens de langsigtede mål er en EBIT-margin på 25%, egenkapitalandel på 40-50% og nettoarbejdskapital på 10% af omsætningen. Resultaterne fra Q1 2015/16 viser, at selskabet er godt på vej; omsætning steg 15 % samtidigt med, at distributionsomkostninger blev nedbragt med 21%.

Fokus på Business Development og markedsudvikling
Med Horizon 16/17 strategien, etablerede BoConcept en dedikeret Business Development-afdeling, som har til formål at assistere og udvikle forretningsmodellen for butikkerne. Afdelingen skal fremad sikre et strømlinet selskab ved at styrke pipelinen af butiksåbninger og reducere antallet af organisationslag. Fokus er at forbedre butiksopstartsmodellen, hvilket bør medføre, at tab på debitorer bliver nedbragt.

Efter år med fokus på internationalisering har ledelsen med Horizon 16/17 valgt, at selskabet har brug for mindre kompleksitet i forretningen. Det betyder, at BoConcept lukker ned for fem markeder i 2015 og i stedet allokerer ressourcer til markeder med større potentiale. Eksempelvis fokuseres på markeder, hvor positionen allerede er stærk eller markeder med stor vækst som f.eks. Kina, der er et marked med en voksende middelklasse, som gerne vil have et unikt hjem, men som ikke har råd til high-end møbler. Det større fokus på væksten i Kina har betydet, at BoConcept har indgået en langsigtet strategisk samarbejdsaftale med det kinesiske selskab Kinetic, som skal hjælpe med at accelerere ekspansionen på det kinesiske marked. Kinetic beskrives som et selskab med en unik markedsindsigt og som har et stærkt netværk blandt ejere og operatører af indkøbscentre, potentielle franchisetagere og i møbelbranchen som helhed. Vi ser denne samarbejdsaftale, som en stor mulighed for at udbygge BoConcepts markedsposition i Kina, hvilket vil styrke væksten.
Omstruktureringer gør selskabet mere skalerbar og skaber værdi
Efter turnarounden blev igangsat, har de finansielle regnskaber for 2012/13 og 2013/14 vist en turbulnet oprydningsperiode, hvor man blandt andet har lukket et hovedlager i USA, lukket 36 mindre attraktive butikker og åbnet 25 nye butikker i områder med potentiel vækst, samt øget fokuseringen på salget til erhvervslokaler, hoteller, mv. Erhvervssegmentet har ofte har højere marginer pga. mindre lagerbinding, etc.
Resultaterne af omstruktureringerne har i 1. kvartal været stærke, hvilket betød, at ledelsen opjusterede af forventningerne for regnskabsåret 2015/16. De nye forventninger lyder på en EBIT-margin på mellem 6-7% (op fra 4%). Opjusteringen skyldes hovedsagligt en større vækst i omsætningen og ordreindgangen end ventet samt en forbedring af logistikomkostningerne, der tidligere har påvirker marginerne negativt. På baggrund af resultaterne forventer vi en høj ROIC i de kommende år og derved et stort vækstpotentiale for omsætning og EBIT-marginen. Vi forventer, at omsætningsvæksten vil stige mod et niveau på omkring 9% over de næste par år, hvorefter den forventes at falde mod et langsigtet niveau på 3%, samt en EBIT-margin stigende mod 7%, som er den øvre ende af intervallet for selskabets guidede niveau for 2017, og herefter faldende til et langsigtet niveau på 4%. BoConcepts margin for 2015 er på ca. 4% og antager vi, at de vil fordoble salget over de kommende 10 år, og at deres forudsætning om 25% omsætningen ryger direkte på bundlinjen, så vil EBIT-margin være på 12,5%, hvilket er langt mere end de 4% som er anvendt i denne værdiansættelse. IPA er imponeret over resultaterne for 1. kvartal, men ønsker flere konsistent resultater inden vi hæver vores estimater yderligere.

Den vægtede kapitalomkostning (WACC) for BoConcept er sat til 8,0%, hvilket ligger tæt på industriens europæiske WACC som er 7,9%.

Billigere end peers, men…
Som tidligere nævnt er BoConcept er en turnaround case, hvorfor den relative prissætning baseret på historiske nøgletal er høj. Den negative indtjening for regnskabsåret 2014/15 betyder P/E nøgletallet er væsentligt dårligere end peers. Det samme er tilfældet for EV/EBITDA nøgletallet. Hvis vi derimod ser på den estimerede fremtidige indtjening, P/E nøgletallet for 2016, så handler BoConcept med en rabat i forhold til peers på små 2%. Hvis vi ser på nøgletal relateret til omsætning såsom P/S og EV/S, så handler BoConcept med en rabat på over 36%, hvilket indikerer, at aktien handler billigt i forhold til den generede omsætning. Til sidste er det værd at notere sig, at BoConcept handler væsentligt højere målt på P/B end sine peers.

Samlet set indikerer peeranalysen en begrænset upside, hvilket ikke er mærkeligt givet den dårlige historik. IPA mener dog ikke, at BoConcept skal købes på den historiske indtjening, men derimod det fremtidige potentiale skabt som en følge strategiske ændringer.
Konservativ analyser giver mindre upside

Selve værdiansættelsen er baseret med en projekteringsperiode på fem år, da omstruktureringerne skal inkorporeres før vi projektere terminalledet. Vi finder en værdi af egenkapitalen på 814 millioner kroner, hvilket giver en aktiekurs på 284. Dette giver en forventet stigning på 9% fra den nuværende aktiekurs.

Analyser som denne er dog meget følsomme over for valget af WACC og EBIT-marginen i terminalledet. Derfor laves en følsomhedsanalyse, der tydligt viser en stor usikkerhed i aktiekursen. Vi er dog overbevist om, at vi i vores analyse har sat EBIT-margin i terminal ledet meget konservativt, og at en eventuelt lavere margin må anses som værende yderst urealistisk.

BoConcept er en aktie, der i en lang årrække har været igennem en svær periode, men hvor man nu begynder at se resultaterne af den turnaround, selskabet har været igennem. Investment Panel Aarhus tror på, at BoConcept vil vise sit værd på lang sigt, men vi ønsker dog at se flere positive resultater før en købsanbefaling. Men med ledelsens større fokus på omkostninger, skalerbarheden og skalafordelen samt det nye samarbejde i Kina tror Investment Panel Aarhus på, at ledelsen er den helt rette til at føre selskabet i den rigtige retning.
Investment Panel Aarhus har et overvejende positivt syn på aktien, men afventer resultaterne for de næste kvartaler før det besluttes om BoConcept skal tilføjes til porteføljen, og anbefaler derfor HOLD.

Gyldendal

October 2, 2015/in Investment Panel Aarhus

RECENT YEARS CLEARLY DEMONSTRATE THE MANAGEMENT’S FOCUS ON THE FUTURE. THE DIGITALIZATION OF BOOKS HAS BECOME INCREASINGLY IMPORTANT AND AN INTEGRATED PART OF THE BUSINESS. THIS MEANS THAT THE REVENUES ARE DECREASING NOW, WHILE THE MARGINS HAVE INCREASED. THE MANAGEMENT ARE FIGHTING VERY IMPRESSIVELY TO MAINTAIN THE COMPARATIVE ADVANTAGE AND MAINTAIN A 20%+ ROIC. WE EXPECT A CONTINUED DECREASE IN REVENUES, WHICH CAUSES A DECREASE IN COST OVERALL. THIS MEANS THAT THE EARNINGS WILL STAY POSITIVE AND, WITH A REDUCED AMOUNT OF WORKING CAPITAL OVER TIME, THE ROIC EXCLUSIVE GOODWILL WILL REMAIN AT A LOW 20% LEVEL. DUE TO A LARGE AMOUNT OF SHORT-TERM ASSETS, WE EXPECT WELL-CONSIDERED INVESTMENTS OR DIVIDEND PAYOUTS IN THE FUTURE. IN EITHER WAY, THE ENTERPRISE VALUE WILL BE AFFECTED POSITIVELY. WE BELIEVE THAT THIS IS NOT INCORPORATED IN THE CURRENT SHARE PRICE AS THE CASH FLOW ANALYSIS SHOWS THAT ONLY UNREASONABLE ESTIMATES IN THE WACC AND TERMINAL EBITA-MARGIN WILL RESULT IN NO UPSIDE. ADDING TO THIS, GYLDENDAL TRADES CHEAP COMPARED TO HISTORY AND EUROPEAN COMPETITORS.

Kompetent ledelse med fokus på fremtiden

Set i lyset af konservative forventninger til årets resultat, har Gyldendal opjusteret forventningerne til 2015 regnskabet. Efter første halvår i 2015, der var bedre end forventet, blev forventningerne til både omsætning og resultat før skat øget og forventes nu bedre end i 2014. En forventet vækst skal ses i lyset af en hård branche, hvor efterspørgslen på trykte bøger er faldende, samt et fokus på at reducere omkostninger frem for vækst.
Bogmarkedet bevæger sig fra analoge produkter, dvs. trykte bøger, til digitale produkter. Trykte bøger udgør stadig hovedparten af salget til private forbrugere, mens efterspørgslen efter online lærebøger snart udgør halvdelen af omsætningen for Systime, som er datterselskabet ansvarlig for undervisningsmateriale. Moderselskabet står stadig for langt den største del af omsætningen i koncernen, men ledelsen melder i 2014 regneskabet, at ”Den digitale omsætning steg betydeligt i 2014 og androg omkring 10% af salget til det private marked”. Systimes bogsalg udgør under 10% af koncernens samlede bogsalg, så fuld digitalisering er længere ude i fremtiden.

Gyldendal koncernen har de seneste år haft svagt faldende omsætning, men har gennem reducering af omkostninger, herunder bl.a. reducering af vareforbuget, bedre indkøbspriser og effektiviseringer, formået at forbedre indtjeningsmarginen og dermed bundlinjen. Gyldendal har outsourcet lager og logistik, hvilket medfører variable distributionsomkostninger og dermed mindsker risikoen i forhold til den faldende omsætning. Selskabet har f.eks. solgt datterselskabet Nordisk Bog Center for 88 millioner kroner i 2015, hvilket øger den likvide beholdning og kun trækker omsætningen marginalt ned.
Gyldendal har 263 millioner kroner i kortfristede aktiver, som kan anses som likvide midler. Ledelsen kan enten lade kapitalen være, bruge kapitalen til investeringer og virksomhedsopkøb eller udbetale dem til aktionærer i form af dividender eller aktietilbagekøb. Ledelsen har hidtil været dygtige til at tilpasse sig udviklingen, og administrerende direktør Stig Andersen har siden tiltrædelse i 1999 haft fokus på dette samt koncernens økonomiske situation. De større aktionærer støtter op om Andersens filosofi om at prioritere Gyldendals økonomiske udvikling over aktionærernes kortsigtede afkast. Bestyrelsesformand Poul Erik Tøjner, der samtidig er direktør i hovedaktionæren med 60% af stemmerne, Museumsfonden, har tidligere vist Andersen denne tillid. Det er udmeldt, at man leder efter mulige opkøbskandidater, og hvis en passende kandidat ikke findes inden august 2016, vil en andel af de opsparede penge blive udbetalt til aktionærerne. En forøgelse af udbyttet vil gøre Gyldendal til en sand udbytte aristokrat og have en positiv effekt på aktiekursen.
Selvom forlagsbranchen er under forandring, så er vi af den overbevisning at Gyldendal kan opretholde den nuværende position som Danmarks suverænt størst forlag. Gyldendal har haft held med at sikre rettighederne til bestsellere og de har det økonomiske råderum til at foretage investeringer i det digitale marked. Selskabet har i 2014 investeret yderligere i udviklingen af digitale produkter og leveringssystemer. Sammenspillet mellem de analoge og digitale produkter vil være en komparative fordel på markedet for undervisningsmateriale.
Ulovlig brug af rettighederne påvirker omsætningen, men denne værdiansættelse antager, at mange selskabers interesse for at minimere dette er så store, at det ikke er en større trussel i fremtiden end i dag.

Forbedret driftsresultat trods fald i nettoomsætning forventes at fortsætte
Den faldende efterspørgsel på trykte bøger har haft stor betydning på omsætningen. På bare seks år er nettoomsætningen faldet knap 10% på trods af, at ledelsen driver en sund forretning. De har formået at levere stabilt eller stigende driftsresultat, EBITDA, de seneste seks år. Den strategiske del redegør for grunden hertil, bl.a. at cost of goods sold er faldet. I takt med dette har Gyldendal også på balancen formået at formindske varebeholdningen, hvilket har reduceret arbejdskapitalen. Samtidig er kapital investeret i udgivelsesrettigheder, IT brugsrettigheder og domæne faldet markant. Som resultat heraf falder den investeret kapital i den historiske periode fra 2009 indtil første halvår af 2015.
Ser man bort fra 2009, som var påvirket af en betydelig nedskrivning af immaterielle aktiver på 85 millioner relateret til problem med introduktion af erhvervede spilfigurer, har årets resultat i gennemsnit været omkring 35 millioner kroner. Brutto finansielle omkostninger er ubetydelige, da deres langfristet gæld er tæt på fraværende. Indtjening før renter, skatter og nedskrivninger, EBITA, har været positiv og i underkanten af 100 millioner kroner indtil 2014, hvor den er 104 millioner. Dette medfører følgende net operating profit less adjusted taxes og return on invested capita:

Hvis vi igen ser bort fra 2009, er afkastet per investeret kapital 10% eller derover. En investering god, hvis dette tal er højere end prisen på kapital, weighted average cost of capital. Ifølge Reuters har industrien en gennemsnitlig WACC på 6,30%, hvor egenkapitalen kræver 10% i afkast. Da Gyldendal ikke har nogen væsentlige kreditorer at aflønne, må WACC’en være højere end gennemsnittet. Der kan dog argumenteres for, at beta er lav for Gyldendal, da bøger til private og undervisningsbrug købes uanset den økonomiske tilstand. Vi mener, at en repræsentativ, og endda konservativ, WACC for Gyldendal er 8,50%, hvilket er mindre end ROIC på 10% i 2010 og markant mindre ROIC på 27% i 2014.
Første halvår af 2015 bød på stigning i nettoomsætningen på 3% i forhold til sidste år. Efter salget af Nordisk Bog Center forventer Gyldendal 825 millioner kroner i nettoomsætning for 2015, hvilket vi anser som konservativt, når vi sammenholder med stigningen i første halvår og 845 millioner kroner i nettoomsætning sidste år. Vi har dog valgt en konservative tilgang og følger ledelsens forventninger til 2015. Herefter forventer vi, at omsætningen falder med 1%-0,5% frem til 2020 samt nulvækst i terminalperioden. Værdien af Gyldendal opnås altså ikke ved omsætningsvækst, men ved fokus på profitabilitet. Vi forventer, at EBITA-marginen i forhold til omsætningen i 2015 er 12,34%, ligesom den var året før, på trods af, at ledelsen ”forventer lidt bedre EBT-margin end 2014”. Herefter falder marginen til 9,20% i 2020 med et spring op i 2018 grundet forventet overgangen til digital salg og fremgangen heri.
Vi vurderer, at den fremtidige balance ikke kan følge den nuværende udvikling. Kapitalen i enkelte poster nærmer sig nul, men der er en grænse for, hvor meget man kan skære i varebeholdningen og materielle aktiver, som ledelsen har gjort indtil nu. Tilgodehavende og likvide beholdning forudsiges at være som den historiske del af omsætningen. Vi forventer en NOPLAT, der fortsat er positiv, men en smule faldende, mens investeret kapital også falder. Dette fører til en ROIC eksklusiv goodwill på mellem 22% og 24%, hvilket er på linje med de seneste par år.
Billig i forhold til europæisk industri
Manglende peers på det danske marked har betydet, at vi må se bort fra den geografiske sammenligning og i stedet koncentrere os om industrien. Dette skal naturligvis tages i betragtning, når resultaterne evalueres.

Peers analysen viser, at Gyldendal-B aktien burde koste 611,36 kroner, som svarer til en mulig gevinst på 16,5%. Der ses tydeligt, at Gyldendal har sine styrker på indtjeningssiden i forhold til industrien. Investorerne betaler 56% mindre per indtjente krone i forhold til konkurrenterne, mens investorerne betaler 55% mere per omsatte krone. Dette billede passer med den tidligere billede af Gyldendals regnskab; Ledelsen er dygtig til at forrente omsætningen, mens man har svært ved at skabe den.
Den historiske udvikling i EV-EBITDA viser, at Gyldendal i dag handles knap to standardafvigelser under gennemsnittet. Værdien af selskabet i forhold til driftsresultatet på et historisk lavt niveau set over de seneste tre år.
Historisk udvikling i EV-EBITDA

Historisk set har Gyldendal handlet 37% billigere end Pearson, mens den nu handles med en discount på 52% målt på EV-EBITDA. Sammenlignet med Lagardere er discounten 26% i EV-EBITDA konstant over perioden. Vi har altså en indikation på, at Gyldendal handles billigt samt en indikation på at den handles til korrekt pris givet at de øvrige selskaber handles til en korrekt pris. Vi har ingen indikatorer på, at den handles for dyrt.
Forventet gevinst i alle realistiske scenarier
Med en projektions periode på fem år, hvor vi forventer reduktion i omsætning og investeret kapital, ser vi stadig pæne pengestrømme. Per dags dato er stemmerettighederne (A aktier) cirka 30% mere værd end aktier uden stemmerettigheder (B aktier). Denne analyse værdifastsætter alene selskabet og spekulerer ikke i værdien af indflydelse, og som følge vil B aktien blive værdifastsat.

Værdien af egenkapitalen er 877,32 millioner kroner, som svarer til en kurs på 783,32 kroner pr. aktie, hvilet svarer til en mulig gevinst på 49%.
Vi ser Gyldendal som et solidt selskab, som vil stige i takt med at markedet indser potentialet, og som giver et højt løbende afkast i form af udbytter. Som kurstrigger ser vi en forøgelse af udbyttet. Gyldendal har det økonomiske råderum til at udbetalt hele årets overskud, hvilket vil svare til et dividend yield på ca. 11% baseret på sidste års tal.
Vores følsomhedsanalyse af EBITA-marginen og WACC viser, at aktien kun når værdien i dag eller en lavere værdi i usandsynlige tilfælde. Det vil kræve en EBITA-margin langt under det historiske niveau samt en usandsynlig høj pris for kapital, når selskabet kun er lidt korreleret med markedet.

Gyldendal-B er en aktie, som viser sit værd på lang sigt. Tillid til ledelsen er nøglen i en branche, hvor man må bukke under, hvis man ikke kan omstille sig. Gyldendal er ikke styret af gældsejere, har kapital til at foretage investeringer og generer et stort frit cash flow, hvorfor Investment Panel Aarhus tror på, at ledelsen fører an i en retning, hvor det høje afkast på kapital videreføres. Investment Panel Aarhus har valgt at tilføje Gyldendals B aktie til porteføljen.

Matas

May 10, 2015/in Investment Panel Aarhus

Strategy
With 296 stores operating in Denmark and as a market leader in each of their key segments (62% in high end) the incumbent status of Matas is undiscussable. However, whilst successfully penetrating the Danish market, their prospect of expanding into Sweden failed.

With this lesson learned, it seems improbable that they would initiate such undertakings in the nearest future. Instead, their focus rests on expanding their online shop as well as their big data experiment Club Matas. As they currently are in the second stage of implementing the Club Matas loyalty program, the database is now sufficient to start tailoring the marketing. Based on the historical purchases and costumer information, the targeted marketing has the potential to increase the brand value and the customer satisfaction.

The 1.4 million members, including 60% of all women in the age 18 to 65 years, receive marketing only for products relevant to them when it is statistically relevant. The consumer habits registered in the database will enhance the ability to help costumers select presents to a member. Based on what and when the members purchase, the database will suggest a product likely to be successful. In an effort to attract non-recurring customers, Matas has initiated the ClubM partner program with diversified partners such as Apollo, Saxo, fitnessdk, and more to expand the Club Matas.

The target marketing could prove beneficial to Online shoppen, as links to promoted products, for example, could feature in emails. Furthermore, it is an increasingly popular trend to shop at home, and the shopping for the regular, standard products becomes easy, as the database will know the members habits. However, a threat is present here. Matas will be challenged on the price of the goods, because other websites does not face the operating cost of 296 physical stores including staff.

The future holds a slurred potential. The concepts of the StyleBox stores is to provide high-end beauty products and gain market share from the saloon retail. According to the management, the concept will prosper because of the current edge and knowledge in the high-end beauty segment. Likewise, the management values the prospect of liberating the pharma market highly; two DKK billions is spend on prescription drugs. This is still remote, but Matas will surely profit from such liberation.

Management
Since the IPO (June, 2013), the board of directors has undergone significant changes. These changes are crucial to analyse and contemplate, as the board sets the main objectives for the enterprise. It is especially interesting to consider how the board wishes to emphasise investor relations compared to organic growth, thus changing and elucidates the perspective in which the stock is to be interpreted. The board has coerced directions for the capital structure of the company; marginally decreasing the debt load with an ultimate aim of total debt equal two times adjusted EBIDTA. This goal is nearly fulfilled and henceforth retained profits will be used for share repurchasing schemes (the first which was launched in November 2014 and last until ultimo May 2015), as well as a promised dividend flow to the investors of 60% adjusted after tax earnings. Indeed, this sends a clear signal to investors and evidences a resilient commitment from the management to emphasise investor focus, but it also substantiate our claims from above; organic growth opportunities are limited in an already penetrated Danish market. Due to the young age of this stock the commitments from the board must first stand the test of time, as the young stock has only paid out dividends one time (224 mil DKK or 5,5kr pr. share), the investment panel remains pendant to the promises of the board and intriguingly awaits the forthcoming annual statements.

Valuation
The valuation will feature a discounted free cash flow model based on the past five years of performance, as well as a 5-year forecast of key value and ultimately enforcing a terminal period. Moreover, due to the unique status of Matas in Denmark, no apparent peers exists, hence conventional remedies for triangulating the DFC results have been made problematic. Looking abroad, it is also difficult to find an enterprise resembling Matas, hence this valuation will not feature our traditional peers analysis. Lastly, due to the short data historical stock data available, it is also challenging to obtain reliable estimates of Matas beta.

Over the historic period Matas A/S have had a solid, but modest, revenue growth of 2-4% on a yearly basis as well as keeping strict cost margins of 45-46% throughout the period. As a mature company, these key value drivers have remained under control, and helped us estimating future values on a more steadfast basis. Additionally, as they have reached a state where their growth opportunities are not obvious, they have successfully turned their focus inwards and focusing on optimizing their balance sheets and costs structures. They have successfully decreased their working capital from 500 DKK millions (2010) to just above 100 DKK millions in (2014). Finally, their net investments also reflect the panel’s judgements about the nature of the stock; their historical capital expenditures have spanned from 40-60 DKK million on a yearly basis. However, depreciations have, in general, been above this i.e. they have had net negative investments throughout the historical period.

The investment panel establishes reasonable estimates on the individual future growth rate of the product series:

Finally yielding our estimates of their cash flow in the future

WACC
The calculation of the weighted average cost of capital was performed by the originally model. Since the area of WACC has a huge impact at the valuation, it is important to remember to be sceptical for the following calculation. At the following, it is only the more important variables there will be mentioned.
As a risk free rate the Danish ten year government bond is used plus a risk which end at 1,00 %. The risk is done to compensate for the high volatility of bonds at the time. Next, the stock sensitivity to the market was found by the unlevered beta for the retail of the special lines of Europe plus an adjusting. The value ends up at 1,19. Then the expected return of the market was found of the total equity risk premium for Denmark, which was 6,97 %. Together the calculation of the expected return ends at 8,10 % and in closing the total WACC ends at 6,50%.

With an estimated WACC of 6,5% this yields a fair value of 183kr DKK pr. share which gives and upside of 18,7%.

Conclusion
Matas A/S is classical dividend stock. It promises no bold prospects for the future, no large capital gains. Fundamentals and aims, established by the board, entail increasing focus on investor relations and dividend payout and less on growth. Ultimately, this motivates a twofold conclusion – contingent on the portfolio preferences embedded by the investor considering this stock.
For the investor actively seeking risk and short-term capital performance, this stock will not yield promising results hence enforcing a “HOLD” recommendation. Contrarily, the investor who instead wishes to exploit the long term opportunities rooted in this stock it just might be a good opportunity to buy a stock, which does not entail any significant industry or firm specific risk components, but comprises a dividend machine, satisfying long term investment needs and a solid dividend stream, thus inflicting a “BUY” recommendation.
Authors: Jesper Kjær Bahlke, Henrik Hallengreen Jensen, Johan Stax Jakobsen

Roblon

April 5, 2015/in Investment Panel Aarhus

Roblon

About Roblon
Roblon comprises four product groups: fibre cable, offshore, TWM (machinery for twisting, winding, and rope manufacturing) and lighting. Roblon is the world’s leading supplier of both fibre-based products and machinery for the fibre cable industry.
Roblon’s largest department
Roblon both specializes in the development of high-tech fibre products and advanced machinery for the fibre cable industry. The industrial cable fibres from Roblon are acknowledged for the development-oriented approach and are frequently called upon, when novel solutions are needed. The extensive experience combined with their understanding of the customer’s needs enable them to offer the most future-oriented and efficient cable-making solutions in the market. Demand for fibre optic cables is driven by an ever-increasing demand for lightning-fast data transfer for faster Internet connections, server solutions “in the cloud”, video-on-demand services and online gaming.

The offshore department
As an experienced supplier to the offshore oil and gas industry, Roblon specializes in the development of high-tech fibre products. The offshore oil and gas industry is supplied with fibre-based products for strapping and piggybacking as well as products for reinforcement of flexible risers and composite pipes. Roblon Offshore & Composite Systems also produces special industrial fibre products, which require a high level of product development and innovation. In this field most products are customer specific and often developed in close cooperation with the customer. The market is growing and new uses for Roblon’s strong and lightweight fibre solutions are constantly being found. For the same reason, innovation and product development often take place in close cooperation with our customers. They turn to us with the expectation that Roblon’s know-how on synthetic fibres in off- shore environments can help to address a specific challenge.
The stable income
Since 1978 Roblon Industry has developed an extensive product programme consisting of equipment and accessories for the production of twine, rope, and cordage. The market for twisters, rope-making machinery and winders is highly globalized with a stable market trend. As a general rule, the demand for Roblon’s equipment follows the economic business cycles quite closely.
Quality lightning
Products for fibre-optic lightning and LED lightning. Many different grades of LED light fittings and solutions are now offered at various price levels, with the market dominated by a large number of low-price manufacturers. Roblon focuses on quality lighting and on customers with a strong business incentive to invest in good lighting. These are customers for whom perfect lighting is essential for presenting their products as attractively as possible.
The size distribution of each Roblon’s departments in terms of revenue:

Future expectations
An important factor that affects the prospects for 2015 is the rapidly falling oil price. Prices have fallen by more than 40% since the summer 2014. The falling prices will result in and does already result in a drop of new investments within the oil industry. Many oil companies that operate in the North Sea follow the rule of thumb that new investments are deferred when oil prices hit USD 80 per b arrel. The direct revenue from the oil industry accounts for 20% of Roblon’s total revenue.
One of the ways Roblon will continue business and market development is by having more of a presence in relation to both existing and prospective customers. In the current financial year this will take the form of investing in additional sales staff. In the short term this will lead to greater costs and some impact on the operating profit.
Valuation
We perform a Discounted Cash Flow Analysis based on unlevered free cash flow. We base our estimates on the periods from 2009 to 2014, which are the most recent annual reports.
Over this historic period Roblon have nearly had a 40% growth in revenue, as well as improving margins. What might be of concern is that in recent periods, revenue has not been improving and margins have remained good, but not improving. This will affect our estimate of future growth to be positive, and with slightly increasing margins.
Based on a WACC of 9% we find a target price of:

We base the WACC on the offshore/manufacturing industry average. A WACC of 9% might seem high, but we believe that there is some unresolved uncertainty with Roblon’s offshore sector, which is a sector undergoing a downwards trend.
The scenario analysis is based on a matrix between expected WACC levels and growth levels:

We see that the stock price is highly affected by changes in the WACC (as usual). In many of the scenarios we find the target price below the stock’s current price. This seemingly low to no upside leads to a hold recommendation.

Peers
As Roblon is operating in a highly specialised industry, we have chosen to compare peers on a matching industry level and neglecting the geographical dimension. This entails that the selected peers evaluation result should be acted upon with caution.

According to peers it seems that Roblon’s equity includes a pricing advantage on earnings and book value of equity compared to peers with P/B = 1,91 and P/E = 11,97. There seems to be no pricing advantage on the sales amount for Roblon’s equity. Also Roblon’s ROE figure is 25% lower than average (15,55%) where the ROE peer average is mainly driven by the AF Gruppen average of 20,75%. The ROA level for Roblon is 59% above average. When assessing D/E, Roblon is 37% above average of peers, which might indicate higher long term risks than that of the peers. The current ratio indicates a lower short term risk than Peers, which should make Roblon better able to meet its short term obligations.

Change in Roblon’s expected earnings on a quarterly basis:

The Quarterly statements show no significant recent upwards adjustments of earnings expectations. The overview shows that Roblon is quite good at meeting their expectations on earnings, which is very positive. Therefore it is not expected that the company will make any shock downgrades of expected earnings.

Conclusion
Overall, we issue a hold recommendation on Roblon A/S. This is based on an estimated share price of 351, which reflect an upside of 2% and taking the P/E ratio into account we can see that Roblon is traded at a lower price than its competitors. Furthermore Roblon have been quite precise in their resent annual earnings expectations indicating that it is a trustworthy and stabile company.

NNIT

March 5, 2015/in Investment Panel Aarhus

Probably this years IPO

Listing the IT department

Friday the 6th of March the IT department in Novo Nordisk Group will offer 10 million shares to the public making NNIT an independent company. This accounts for 40% of the total shares in the company, as Novo Nordisk Group maintains the majority shareholder position with 51% of the shares. Because of the size and the costumer segment, the exposure of NNIT to Novo Nordisk is unrelated to the business; as a result, parent company wants to list the department.

The most important to Novo Nordisk Group was to ensure a success initial public offering rather than maximizing their gain. With the latest Danish IPO going bankrupt, analysts suggested that an IPO in this period would be risky. This is why the price range was initially set from 100 DKK to 120 DKK. The management have been very cautious in their estimations because they want make a successful IPO, because a less successful IPO would may damage Novo Nordisk reputation, which could be harmful for their own share price. This could be a reason why the price of NNIT is relatively conservative. But the time would tell this have not been a problem resulting in a new price range: 120 DKK – 130 DKK. Increasing the price range advocates an underestimation and a large demand for the stock. This could be a strong signal for the investor to buy.

The successful department

NNIT is one of Denmark’s leading consultancies in IT development, implementation and operations. NNIT focuses on delivering services for customers with complex IT solutions within industries influenced by intense regulation. Most of its customers is within the ‘life science’ sector in which Novo Nordisk is dominating.
NNIT used to be an integrated part of Novo Nordisk but is today an independent company thought fully owned by Novo Nordisk. NNIT has more than 2,300 employees dispersed around the world, but with the majority of the employees situated in Denmark.

A capable management

As part of the forthcoming IPO 182.125 stocks (0,73%) are reserved for the management as part of NNIT’s incentive program called ‘Long Term Incentive Program’ (LTIP). With the upper bound of the IPO share price of 130 DKK this constitute a premium of 23,7 million DKK. With a vesting period of 3 years, the program gives the management an incentive to perform well and remain within the company.
The key figures within the management of NNIT consists of CEO Per Kogut and CFO Carsten Krogsgaard Thomsen. Per Kogut, MSc in Political Science, has been CEO in NNIT since 2007. Per came from a position as CEO of CA Northern Europe and has previously been Director at SAS Group. Carsten Krogsgaard Thomsen was a member of NNIT’s board for a number of years before becoming CFO at NNIT in January 2014. Carsten has experience from management positions in Danish industry, most recently as CFO at Dong Energy and CFO at DSB. Overall, the management is very competent.

Challenges to be faced

Investment Panel Aarhus sees the follow three key challenges for NNIT in the approaching period. NNIT is operating in a highly competitive and fast changing global market. NNIT faces competitors with great financial and marketing resources as well as lower cost base especially from their offshore competitors. To mitigate this increased risk NNIT should concentrate on price competiveness.
We believe that customer concentration risk pose a great threat for NNIT since top five customers, including the Novo Nordisk Group, accounted for 52 percent of the net turnover in 2014. This means that NNIT is highly dependent upon the IT spending of these companies.
NNIT has grown considerably in recent time. In a seven-year period, the number of total employees has risen from 1,000 in 2007 to 2300 in 2014 with Novo Nordisk Group gradually account for a lesser percentage of the total revenue. In order to keep this development NNIT must expand its services in response to changes in technology and customer demands, which might be complicated and therefore poses a risk.

Is the new price range fair?

NNIT have managed to maintain a stable business and, hence, we expect the revenue grow at the same rate as historically. However, the CFO, Thomsen stated at the Investor Meeting that the company expected a growth rate of 5%-8%, but given the circumstances of recent Danish IPOs and the directors desire to be very careful, we set the growth rate of the revenue to 10% being a very likely case. With very volatile capital expenditures, the growth rate of 5 % – 6 % set by the directors is, however, very likely and paints a conservative picture, as the growth is 2% on average in the industry.

NNIT is an all-equity-financed, very stable business, suggesting that the cost of capital do not need any adjustments for risk. We consider a WACC of 7.6% plausible. Discounting the unlevered free cash flow results in an estimated market value of the equity in NNIT of 4,2 billion DKK and a share price of 167,35. Compared to the maximum bidding price of 130 DKK, an upside of 28,7% exists.

There are no evidence suggest that the cash flow needs a more aggressive discounting factor, but to evaluate possible changes in performance and risk, the scenario analysis proves, the maximum bid price of 130 DKK is below the likelihood.

A good case compared to competitors

The Company’s P/E is below the peer median with 17 %, which is positive, while the P/B and P/S is far over the peer median (respectively 124 % and 71 %) and influence negatively. Nevertheless, the high P/B and P/S analysis should take into account the significant better performance of ROIC with 177 % higher rate than the median, and the strong EBITDA margin to the median at a better performance of 58%. The current ratio at 43% better than peer median also indicates a strong company in good financial health with ability to pay back the short-term liabilities. The current ratio is also underlined by a 20 % better than peers in total equity / total assets and the 100 % better D/E to median indicates a low risk company compared to the other peers.
A short sum up indicates a relatively fair P/E, strong profitability and a solid financial strength. Overall NNIT beats relatively the other peers

Conclusion

The hectic time for IPOs have no effect, as NNIT is a healthy company with gains for investor. We expect an upside of 29% given the fair value of 167,35 DKK. This can prove that the management were careful when setting the price range at 120 DKK – 130 DKK and may have a great chance to outperform their competitors. Overall, our recommendation at NNIT looks like a great BUY.
The investment panel is yet to purchase NNIT, as the shares were unavailable at the time of analyzing. However, we will follow the price at NNIT and try to find a great entrance.

Authors: Allan Gjerløv Jensen, Casper Hofmann Larsen & Jacob Saugstrup Andersen

RTX

February 12, 2015/in Investment Panel Aarhus

Company information
Name: RTX A/S
Sector: IT
Industry: Communication equipment
Listed at: Small Cap Copenhagen – DK
1-year-historical performance: + 163 %

Activities
The company’s focus area is the design of advanced wireless short-range radio systems and products. The focus is solutions within the technologies of Wi-Fi, Bluetooth, VoIP, DECT and CAT-iq. RTX possess know-how of both soft- and hardware. The company also takes projects from specification, design, development, test and verification into the final product.
The company activities are separated in two main business units. The first: Design Services that entails R&D design partnership of wireless solutions, and delivery of wireless modules with Wi-Fi and DECT radio technologies. The other is Enterprise & VoIP where RTX operates as ODM/OEM supplier of advanced IPtelephony solutions for the Enterprise and SME market.

Share Repurchase
In FY14, RTX A/S bought back DKK 7,9 m. of treasury shares. The reasoning behind the share repurchase program was to adjust the company’s capital structure as well as to cover future share-based remuneration.
The same is held from January 27 to April 30, 2015 where the company again will repurchase shares for an amount of up to DKK 3,0 m.
Furthermore, the share repurchase can be interpreted as a signal from the RTX management that the stock is
undervalued.

Peer Analysis
The Danish company RTX operates in a specialised industry, which implies that the sector is very exposed to company specific risk. Therefore, the Peer Analysis should be carried through with deepest caution, as it might be less accurate than normal.
The companies selected to the Peer Analysis are picked based on the characteristic that they operating within
the subsector of wireless communication equipment and that they have a market cap similar to RTX.

In the figure above, RTX has the highest P/B and P/S with respectively 18% and 10% on average, which might indicate that the company is overvalued. Nevertheless, when looking at the P/E-ratio the company is below the average with 23%, which may not be expensive for a company in this sector. On the other hand, when looking at ROE, ROA and the Operating Margin the profitability indicators beat the peers with two digit on average.
This could indicate that the higher price of RTX based on the P/B- and P/S-ratios’ is justified by a higher profitability. As a conclusion, we believe that RTX is best in class.

Risk
When looking at the figure below for RTX ratios, the solvency ratio proves that RTX is at a stable level with respect to their ability to pay back overall liabilities. Even though they experienced a decline in the ratio in the first part of the 2014, the ratio recovered throughout the fiscal year.
In the same fashion, it is clear from both the quick and current ratio that RTX excel in controlling their liabilities. With both ratios around 2,8 it is clear that RTX is a very stable company who is able to pay their short-term obligations.
Finally, RTX have experienced a steady growth in their net turnover and profit margin. This relation is revealed in their level of ROIC and ROE, which have been at a high level in both the whole fiscal year and the first quarter of each year. This combined shows that RTX is able to generate a profit from their invest capital.

Valuation
In order to get an absolute price target we apply the DCF valuation method.
Since 2010, RTX has made positive net profits with a strong yearly average growth. Furthermore, the future for the company’s business units possess a strong potential for continued growth. This substantiate a high growth in revenues in the forecast-period of 13%, which we apply in the final valuation.
Since RTX is 75% equity-financed with a stabile risk performance, we use a WACC of 8,5%.
Discounting the cash flows, we arrive at an estimated share price at 112 DKK. Comparing to the current share price as below, this leaves a potential upside of 79%.

As illustrated below in the scenario analysis, two of the more important variables are used to show the sensitivity when changing the WACC and growth rate with 0,5% and 1%, respectively, at a time. The quick review of changing the two variables shows that the worst-case valuation is a share price of 88 DKK. In turn, the best-case valuation provides a share price of 146 DKK.

Conclusion
We believe that the company’s business units have the ability to grow in the future. The Peer Analysis showed that RTX is best in class, both in terms of risk and operations. With an estimated share price of 112 DKK, and an upside of 79%, the panel recommends: BUY. It can be noted that while producing this article the share price
has already increased to 99,5 DDK as of March 12, 2015 which changes the recommendation from BUY to HOLD.
Authors: Allan Gjerløv Jensen, Anders Bager Rasmussen

Bavarian Nordic

February 5, 2015/in Investment Panel Aarhus

Company introduction
Bavarian Nordic is an international biotechnology company developing and manufacturing cancer immunotherapies and vaccines for infectious diseases. The company has it’s headquarter in Kvistgaard, Denmark, where it also operates a commercial-scale manufacturing facility. Research and development facilities are located in Mountain View, CA, USA and Martinsried, Germany. Bavarian Nordic is especially known for its smallpox and prostate cancer vaccines but with the resent Ebola outbreak, some of the focus has shifted to their phase 1 “MVA-BN Filo” Ebola vaccine.
Consensus based analysis
Based on the gathered analyst consensuses, the target price for Bavarian Nordic spans from a low of 350 and a high of 415, which indicates a consensus spread of 415-350 = 65. At the moment of analysis (11-03-15) the stock price is 319 indicating a positive attitude towards the future stock price of Bavarian Nordic from all the included analysts. Due to the consensus spread, the expected one year gain relative to today’s price ranges from 9.72% to 30.09% with a weighted average of 16.30%.

Peer Based Valuation

In the above figure multiples for Bavarian Nordic and its peers is presented. Comparing multiples of Bavarian Nordic to its peers we find that Bavarian is relative inexpensive. The majority of Bavarian Nordics multiples are below the peer median and average.

We find a price estimate of Bavarian Nordic by comparing the average of price per P/B within the peer with the P/B of Bavarian Nordic. The peer median of P/(P/B) is 52.34 and since Bavarian Nordic has a P/B of 9.44 we find the expected value of Bavarian Nordic to be 494.12 which indicates an upside of 55%.

In the same fashion, we find a price estimate by using the peer median price of the current ratio between assets and liabilities. The median peer price to current ratio is 154.69 and since Bavarian Nordic has a Current Ratio of 2.30 the expected value is 357.82 indicating a upside of 12%.

Conclusion
At the time of the initial analysis (10-02-15), the price was 180.50 DKK, which resulted in a buy recommendation from the investment panel. In the meantime, the news of the partnership between the American medical company Bristol-Myers Squibb and Bavarian Nordic gave a significant rise in the share price, which means that the price was 319 DKK when this article was written (11-03-15). This rise in the share price means that, we issue a hold recommendation because of the time lag from the initial valuation to the final analysis conducted for the article.
To sum up we find that the analyst sentiment towards the Bavarian Nordic stock and the conducted peer analysis valuation was rather positive. Both the consensus and peer based analysis agrees on a positive upside with a price range from 371-494 DKK. Still we believe that the upside is not large enough in the lower end of the price range and therefore the Investment Panel Aarhus concludes and overall HOLD recommendation.

Authors: Jacob Saugstrup Andersen

Ringkjøbing Landbobank

December 1, 2014/in Investment Panel Aarhus

Teaser
Ringkjoebing Landbobank is one of the few banks that were profitable throughout the financial crisis. Today they are still one of the strongest and most profitable banks, which are reflected in the market valuation.
The question is, is Ringkjoebing Landbobank worth even more?

Ringkjoebing Landbobank at a glance
Ringkjoebing Landbobank is unsurprisingly based in Ringkjoebing with strong presence in the western part of Jutland. The bank has specialized in financing wind turbines and medical practices and has a long history, dating back to 1886. Ringkjoebing Landbobank is known for high credit quality and consistency in management. We have looked into their impairments during the financial crisis, which did increase, but far less that most other banks. The loans portfolio is very well diversified with the exception of a very high exposure to wind turbines. However the credit risk associated with wind turbines is very limited as long as governments subsidize them. If government support of wind turbines is decreased it will have a significantly negative impact on Ringkjoebing Landbobank earnings. That said, Ringkjoebing Landbobank looks to be on track to continue the past strong performance.

Equity Cash Flow Model
To make a valuation of Ringkjoebing Landbobank we have chosen to use two models: an equity discounted cash flow model, which gives an absolute valuation combined with a peer analysis that gives a relative
valuation. To apply the equity cash flow model, we need to implement different forecasting assumptionsfor the different value drivers in Ringkjoebing Landbobank.
The key forecasted factor is the interest rate. To precisely forecast the interest rate, a huge holistic approach is needed, which we do currently have the resources for in Investment Panel Aarhus. Therefore we assign a more intuitive approach to set the expected future interest rate at which Ringkjoebing Landbobank can borrow funds, also called the LIBOR‐rate. The expected LIBOR‐rate is higher for 2015 than2014, thus indicating an interest rate rise. Furthermore a survey conducted by The Economist predicts a small positive sentiment from leaders around the world:

Therefore we expect the interest rate in 2015 and the following years to increase.
To be able to discount the expected future cash flows to equity, we need to estimate the cost of equity (COE) for Ringkjoebing Landbobank. This is done by using the guidance by Aswath Damodaran, who assigns a COE of 6,5 % approximately. The stock value is stress tested with +1%/‐1% in COE. The net effect on loans versus deposits is difficult to estimate because of demand versus supply effects in the loan and deposits markets. Here we expect an average effect to occur. All growth in loans and deposits is expected to be equal to the inflation level of 2% from year 2020.

The resulting upside is around 50‐130%. The effect of changes in loan/deposit/interest rate is surprisingly small compared to changes in COE. We do find the COE to be rather low, and the indicated upside to be a little optimistic, however there is no doubt, there is a significantly upside, based on the equity cash flow model.

Peer analysis
While the absolute valuation indicates a significant upside in Ringkjoebing Landbobank, it is still relevant to look at the relative value compared to other listed banks of comparable size.

When looking at the peers, Ringkjoebing Landbobank stand out with the highest ROE and second best Risk index score, which is rather unsurprisingly given the quality of the bank. But the quality comes at a price;

Ringkjoebing Landbobank is the most expensive measured by P/E and P/B but has a great dividend yield, being only second to Groenlandsbanken in that parameter. Overall Ringkjoebing Landbobank is the most expensive bank when compared to the peer but if Ringkjoebing Landbobank can continue their growth, they still look attractive.
In conclusion, Ringkjoebing Landbobank is a very well managed bank with great credit quality and most likely a bright future. The stock is not exactly cheap at the current valuation, but quality comes at a price, and we believe there is more upside in Ringkjoebing Landbobank, thus we recommend BUY.
Authors: Thomas Tang Axelsen

Zealand Pharma

October 5, 2014/in Investment Panel Aarhus

Business info
Zealand Pharma A/S is a Danish based biopharmaceutical company which is engaged in the discovery, development and commercialization of peptide medicines. Their pipeline contains:

Lyxumia (Lixisenatide)–At the market
Lyxumia/Lantus (Lixilan)–Phase III
ZP2929–Phase I
Danegaptide–Phase II
Elsiglutide–Phase II

The overall pipeline includes cardio-metabolic diseases that are the underlying medicine for diabetes, and obesity treatment and the company’s most valuable partner right now is Sanofi who is handled with the products Lixisenatide and LixiLan.
Exposition of the pipeline
-Lixisenatide
The product Lixisenatide is a drug for treatment of adults with Type 2 diabetes. In 2013,Lixisenatide was approved in both Europe and Japan and under regulatory review in anumber of other countries globally, paving the way for future sales growth. A general industryconsensus believes that once the product is approved in US (the worlds largest market fordrug of insulin), the sales will accelerate, leading to forecasted sales of € 696 mill. in 2018. Inour forecasted model, only a one-time milestone payment of € 19 mill. is incorporated, sinceLixisenatide is already a marketable product. The specific agreements regarding royaltyrevenues are unavailable for the public, but lies in the low-double-digit region. Based on thelittle given information, a fair estimate is royalty revenue of 15% of total sales. Due to the factthat the product is already marketable in Europe and Japan, and is expected to apply forregistering in the US in summer 2015, the probability of receiving the royalty revenues isfairly high compared to some of Zealand Pharma’s other products.
-LixiLan
This is a combination product of Lixisenatide and Sanofis Lantus. In the following two years,the key driver of expected income is milestone payments. LixiLan is currently in Phase III, andregulatory filings are expected to occur late 2015. Our sales forecast is based on theexpectation that LixiLan is marketable from 2016, which is also the last year that LixiLan willreceive milestone payments. The unpredictable nature of pharmaceuticals has made us relyon analyst consensus reports. Total sales in 2018 are expected to be € 734 mill. After 2018,the sales are forecasted to grow at the rate of inflation. Royalty revenues are expected to be15% of total sales, and the probability of receiving the milestone payments is considered to berelatively high. Due to the late development stage of LixiLan, and the fact that Sanofi is astrong market player, the optimism for the products succes in the market is rather high.
-ZP2929
The product ZP2929 is a drug for diabetics and obesity. The market is fast changing with many players, so naturally it is hard to find the money to develop the drug. Zealand recently lost Boehringer as their partner due to better potential in another drugs.
The main factor of the cash flow is the milestones from partners and we see low likelihood of a new partner for ZP2929, a once-daily glucagon injection, is a lesser attractive investment than the brand new drug in process of Zealand, a glucagon tablet that require no injection. As this new drug just emerged, we can only expect low cash flow with low probability of reaching the market and hence we tried to include this in the cash flow of ZP2929. We set a chance of obtaining a new partner to 15%.
Assuming the maximum sales is the sales of Novo Nordic’s Victoza we projected the royalties of ZP2929 that is, according to the previous Boehringer deal, is “… a high single to low double digit of global sales”. As the product is estimated to reach the market in 2021 and the similar Victoza already in stores, the sales are expected to be 15% of Victoza.
– Danegaptide This drug can bring oxygen to the heart musculature. The realty of the product is dependent on finding a partner who can truly or partial pay for the cost to take the drug to the next phase. The probability is expected to 20% because Danegaptide has succeeded in a lot of tests, which probably will make the attractive for a new partner to make a partnership. But of cause there is a risk.
-Elsiglutide
This is a drug to treat diarrhoea, which can break out under chemotherapy. The drug is not dependent of partnership agreement probability because Zealand Pharma already works together with Helsinn. The drug is only at phase II that makes a probability for succeed the coming phases approximately a bit under 50%, which makes the future milestone earnings less likely. Because the expected royalties for the product first lie in the future (expected six to eight years from 2014) and the probability to get the permission is estimated to be very low, the net present value of future royalties are very low. The induced milestone earnings are the most important earnings for Elsiglutide.

Cash burn
The company has a yearly cash burn of approximately € 24 mill. The majority is spent on research and development (€ 20 million) but administration cost is also significant (€ 4 mill.). With cash position of € 40 mill., Zealand Pharma can run 20 months without income or new capital. However Zealand Pharma is collecting significant revenue from milestones and is in addition starting to earn royalties. As long as Zealand Pharma has moderate success with their drugs going forward, we do not expect them to need to raise new capital.
As seen on the figure above, the calculation for the company’s valuation ends at a total net present value of € 150,7 mill. which corresponds to a share price of DKK 48,7.

The conclusion of the valuation is clear, we recommend to not invest in the company, because the expected share price is DKK 48,7 and todays share price is DKK 62,0. It is important to underline the relatively high uncertainty of the future earnings, given the heavy reliance on the outcome of clinical tests.

Authors Allan Gjerløv Jensen, Thomas Tang Axelsen

Harboes Bryggeri

May 25, 2014/in Investment Panel Aarhus

The company
Harboe is the third largest brewery in Denmark, behind Carlsberg and Royal Unibrew. It was founded in 1883 and has been a publicly traded company since 1989. While it is an important player in the Danish Market, the company is still relatively small in the global scene. One of Harboe’s main efforts is growth through new markets. It currently received over 40% of its revenue from Germany, around 25% from Denmark and the rest is coming from other countries.

The primary strategic focus of the company is to produce low end products at low costs, hence using price as the competitive advantage. Nonetheless, changing consumer preferences have forced Harboe to look for other ways to improve profit and consequently, the company is beginning to put more emphasis on product development and marketing in an effort to differentiate its products towards markets with higher profit margins.

The Challenges
During the last decade, the company has been a poor performer in terms of growth and profitability; this has led to the rather poor performance of its stock when compared to peers. To put things into perspective we can compare Harboe’s performance with a close competitor Royal Unibrew. The company’s revenue has had a geometric growth rate of just 1.1% during the last five years, whereas Royal Unibrew achieved a geometric growth rate of revenue of over 13% over the same period. In terms of profitability the picture is almost as bleak. Harboe’s EBIT margin in 2013 is only 4.2% against 12.5% for Royal Unibrew.
Harboe’s poor performance is the result of two main factors: first, the company is competing on price and this leads to ever smaller profit margins in an industry that is characterized by low growth and high competitive rivalry. The beer industry has experienced market saturation in much of the developed world, which has limited the industry’s growth potential and forced many companies to focus on emerging markets. With fewer options for growth, competitive pressure has forced consolidation through mergers and acquisitions. This has further decreased the company’s ability to compete with bigger players that utilize economies of scale.
Second, there has been an overall decline in the size of the beer market in both Germany and Denmark.
From 2010-2012 beer consumption in the two countries fell with 4.8% and 3.6% respectively. From 2013-2018 Germany is expected to experience a further decline in volumes of 1-2%. Danish volumes are on a similar declining trend; however, in 2013 volumes received an upward shock in form of reduced duties and beer prices.
While these factors could imply a good case for turn around, we find this scenario to be highly unlikely given the third challenge, namely current management. Bernd Griese has been CEO of the company for almost three decades and he holds over 53% of the voting rights. He has stated his desire to stay in management and has blocked most possibilities for outside intervention or the possibility of an acquisition.

The valuation
As mentioned, the stock market has not taken too kindly on Harboe as a stock and its poor performance has been clearly reflected in the price. The company does not trade cheaply; it has a 12 month forward P/E of 76.8 against a peer average of 19.1. Forward EV/EBITA paints a different picture, since Harboe’s has a multiple of 6. 9 against a peer average of 8.9.
To establish is the company has upside potential we made a DCF valuation which indicates a fundamental value of 98 DKK per share (market price at date 8/28/14 is 94 DKK per share). The analysis is based on a growth rate of 2%, stable margins and a WACC of 8%. Since Haboes margins are very low, relatively small nominal changes in margins have significant impact on the value of Harboe. However, we do not expect to see positive developments in the value of the company and can conclude that the market is pricing it right.

Turnaround case på vej fremad

Kompetent ledelse med fokus på fremtiden

Roblon

Probably this years IPO

FinanceLab