Johan Widmark | 2022-11-24 08:40
Saab alone not enough to drive 7x revenue growth to 2025
KebNi’s new strategic plan centres around leveraging the company’s advanced technological platform within stabilisation, positioning and satellite communication. In the plan KebNi targets a revenue of 150 – 200 MSEK already in 2024, 20-25% annual growth in the following years, positive cashflow and an EBITDA-margin of 5-10% in 2024.
With the first firm series volume production order from Saab of 76 MSEK received in October, which the company will start delivering on in 2023, the plan reflects a high conviction about receiving follow-on orders from Saab to start executing on in the spring of 2024. But with the ramp-up with Saab reaching some 170 MSEK in annual revenues in a couple of years, Saab alone is not enough to drive the near 7x revenue growth we forecast to 2025 (compared to trailing 12 moths). Instead, KebNi now plans for steep growth across the board.
Current cash position sufficient to avoid another raise
We find a couple of elements in the plan of particular interest. First, the ambition to drive revenue growth with a high degree of customer financed development, as the company has already done with Saab. This will enable the company to scale and continue investing in product development without raising new equity. Second, the ambition to reignite activity within Satcom Maritime, where we see ample growth opportunities to the east, with both IAI and an increased presence in Southeast Asia. For both Satcom Land and Maritime, Kebni is targeting the non-geostationary satellite market and also moves into the low profile antenna market expanding in the Coms-On-The-Move segment.
The ambition to make acquisitions mentioned in the strategic plan makes most sense if adding geographic reach, customer relationships or technology that bolts on well to existing portfolio. As for safety solutions for the scaffolding market, where we see significant long term potential, this will play a negligible role in driving growth to 2024.
Wide valuation range implied in new targets
Guided by the strategic plan we have raised our mid-term forecast to now expect sales in 2024 of 170 (113) MSEK, which is near the midpoint of the company’s own target. As for costs and profitability, it will be a stretch to grow at high double digit rates for years while maintaining a high gross margin and low OPEX growth. We would therefore need to see more of the company’s plan materialize before discounting the company’s target of an EBITDA of 5-10%.
Looking at implications, a future development in line with the high end of KebNi’s growth targets and a long term EBITDA-margin of 25% by 2027 and 30% beyond, would imply a DCF-value (WACC 20%) of SEK 3.0 per share. The low end of KebNi’s target and a 20% EBITDA in 2027 and 25% beyond, would on the other hand motivate a DCF-value of SEK 1.4. All in all, our own revised forecast and a combined peer multiple and DCF-approach now provide support for a fair value of SEK 1.4-2.5 (1.4-2.1) per share in 12-24m. We now view a follow-on orders from Saab and new Satcom orders as primary catalysts in the medium term.
DISCLAIMER
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers’ website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers’ policies on personal dealing and conflicts of interest.
Copyright: Copyright 2023 Incirrata AB (Emergers)
United Kingdom
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ”FPO”) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
United States
Emergers relies upon the ”publishers’ exclusion” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
