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  • 24 Apr 19

A formidable Q1 19

Much stronger than expected volume growth in the Americas combined with Swedish kronor weakness have translated into much stronger than anticipated revenue and profit growth.

Companies: Volvo
  • 30 Jan 19

Earnings and dividend higher than we had anticipated

Although Volvo suffered a charge of SEK7bn from the early degradation of an emission control component, it has delivered what we had anticipated. The reasons for the excellent profit number were SEK weakness plus much higher capacity utilisation. However, a further margin increase is unlikely in 2019 as order inflow growth has clearly moderated as of late.

Companies: Volvo
  • 04 Jan 19

SEK7bn provision for emission problem

Volvo has long tried to suggest that it is producing ‘green‘ trucks but management has discovered that one emission control component is degrading faster than expected. This translates into higher emissions and it forces Volvo to make the above provision which represents more than 25% of our projected 2018 Truck division’s EBIT. The company’s press release suggests that this provision only covers initial costs such as the testing of vehicles, statistical analysis and the dialogue with the relevant authorities. Subsequent recall costs associated with the implementation of corrective measures are expected to burden divisional earnings at a later stage.

Companies: Volvo
  • 19 Dec 18

SEK1.5bn profit from disposal of majority stake in WirelessCar

Volvo is selling a 75.1% stake in its fully-owned subsidiary WirelessCar to VW. The disposal price is SEK1.1bn, which translates into the above profit, i.e. the company currently shows negative equity. The transaction is expected to be finalised in H1 19. The subsidiary provides connected vehicle services and solutions to global producers of passenger cars as well as commercial vehicles. By keeping a minority stake, Volvo will continue to have access to the know-how and it will continue to focus on connected solutions for its trucks. WirelessCar had 3m connected vehicles around the globe in 2018 and turnover is projected to reach SEK0.5bn this year.

Companies: Volvo
  • 19 Oct 18

Volume, revenue and profit growth accelerated in Q3

Volvo’s Q3 revenue increased by 20% to SEK92bn which brought the ytd number to SEK285bn (+17%). The respective EBIT growth rates were +38% (to SEK10.2bn) and +31% (to SEK30bn). We had expected a 9M revenue number of SEK280bn and EBIT of SEK28.6bn.

Companies: Volvo
  • 16 Oct 18

Volvo potentially incurs its own Dieselgate

Volvo says that it has detected the premature degradation of one emissions control component. This leads to NOx emissions that exceed legal limits over time. The trucks involved were delivered overwhelmingly to clients in Europe and North America. According to the company’s release, it is impossible to assess the possible financial impact at this time, but the costs could be material.

Companies: Volvo
  • 19 Jul 18

Q2 has been formidable

Volvo’s Q2 revenue surpassed the SEK100bn level for the first time ever and EBIT of clearly more than SEK11bn was above the SEK10bn level for the first time as well. Strong demand combined with cost reductions in the past have translated into these superb numbers.

Companies: Volvo
  • 24 Apr 18

Q1 18 has been superb

Q1 order inflow has been very convincing indeed which provides comfort for the next quarters. This, plus better than expected numbers for the first quarter, allows us to raise our projections.

Companies: Volvo
  • 26 Feb 18

Geely’s acquisition of Daimler stake changes Volvo’s Supervisory Board

Volvo is clearly unsatisfied with Geely’s latest announcement. It had acquired a stake in Volvo just a few weeks ago and has now decided to buy a stake in Daimler, Volvo’s fierciest competitor for trucks around the world. It remains to be seen whether the nomination committee will allow a new Geely representative to join its Supervisory Board.

Companies: Volvo
  • 31 Jan 18

Q4 17 dollar weakness took its toll, but not on profits

Volvo released the expected superb 2017 numbers and management’s optimistic view for 2018 is also reflected in the dividend which is raised by SEK1 to SEK4.25 whereas we had expected SEK3.75. This higher dividend proposal was also supported by much improved cash generation.

Companies: Volvo
  • 29 Dec 17

Chinese Geely acquires the shares that were held by Cevian

Geely, which does not have any expertise in manufacturing trucks, has acquired a stake of a good 8% from Cevian. Speculations suggest that this might eventually lead to the re-merger of Volvo Trucks and Volvo Cars as Geely had acquired the latter operation from Ford earlier this decade.

Companies: Volvo
  • 20 Oct 17

9M 17 numbers ahead of our expectations

Volvo has delivered superb revenue and profit numbers. Consolidated revenue increased by a good 12% to SEK77bn in the last quarter which brought the 9M number to SEK243bn, an increase of almost 11%. The respective EBIT numbers were +60% to SEK7.42bn and +67% to SEK23.0bn. We had expected 9M numbers of SEK240bn (sales) and SEK20.6bn (EBIT).

Companies: Volvo
  • 01 Sep 17

New financial targets

Management has changed the financial targets for the Volvo Group from benchmark targets for the divisions to absolute targets for consolidated accounts. The previous goals were requiring the individual divisions (i.e. Trucks, Buses, Construction Equipment and Penta) to generate profit margins that were ranked amongst the top two of the respective industries. The new targets are a consolidated EBIT margin >10% over an entire business cycle. We find this target as being extremely ambitious and, in the past, Scania was the only truck producer that generated a margin of this magnitude. Caterpillar, the market leader for construction equipment, achieved double-digit EBIT margins in the years 2011 through to 2013, i.e. not during an entire business cycle. Our current projections see the EBITDA margin going up to slightly more than 13.5% in both 2017 and 2018 from 12.5% in 2016. However, Volvo’s H1 17 accounts show depreciation charges of 2.0% on tangible assets, 1.1% on intangible assets and another 2.1% on leased vehicles. As a result and based on these numbers and assuming the ratios will be similar for the full-year, the EBIT margin will be in the vicinity of 8.5% which is also the margin we have pencilled in into our P&L. Because of the sheer size of the Truck division, its profit development is of utmost importance for consolidated accounts. This division generated a peak margin of a good 8% in 2007 and 9% in 2011. The divisional margin, based on management’s definition, was just below 10% in both Q2 and H1 17. Our conclusion is that an EBIT margin of more than 10% is possible once demand for construction equipment and trucks, in particular for heavy trucks, is strong in all regions and at the same time. This, combined with further cost cuts, will allow Volvo to generate the proposed consolidated margin. However, the past has shown that both trucks and construction equipment are very cyclical operations indeed. Even if we assume that the group has restructured itself so that it can react in time when demand falls, we doubt that it can avoid a severe margin retreat, but it could possibly avoid a loss similar to the one it suffered in 2009. However, can it avoid a margin fall to just above 2% as in both 2013 and 2014?

Companies: Volvo
  • 26 Jul 17

Caterpillar raises full-year revenue and profit projections

As demand for construction machinery is finally rising just about everywhere with the exception of EMEA, management raises its full-year revenue projection from $38-41bn to $42-44bn. The new EPS guidance is $3.50 compared to $2.10. The sales and profit trends turned around in Q2 17. Revenue was up by almost 10% to $11.3bn and operating earnings increased by 59% to $1.25bn. The profit number clearly benefited from management’s strict cost control which is indicated by the fact that the workforce fell by 1,700 to 111,200 during the last twelve months. As Q1 17 was still quite poor, H1 revenue was up by only 6.8% to $21.2bn and EBIT by 30% to $1.67bn.

Companies: Volvo
  • 19 Jul 17

Good H1 numbers plus recovering order inflow

The group’s H1 numbers have exceeded our expectations. Consolidated revenue increased by 10% to SEK166bn and EBIT recovered by 70% to SEK15.6bn. In fact, this profit number is the highest ever generated by Volvo during the last decade. We had expected an operating profit number of a good SEK11bn and revenue of SEK161.5bn.

Companies: Volvo

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Research Tree provides access to ongoing research coverage, media content and regulatory news on Volvo. We currently have 40 research reports from 1 professional analysts.

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  • 13 Jun 19

Significant momentum being generated

Volex had already signalled trading was ahead of expectations but with adjusted PBT increasing from US$9.6m to US$20.2m against initial expectations of US$18.3m, these results confirm the momentum generated by Volex. In addition, the cash balance of US$20.6m beat our estimate of US$15.7m and management now expects to reinstate the dividend in FY20. Trading on a FY20 PE rating of 9.6x, a FCF yield of 7.7% and offering a potential dividend yield of 2.3%, we reiterate our buy recommendation. We have also increased our price target from 130p to 140p to reflect increased contributions from the higher margin Cable Assembly division. Even then, at 140p the FY20 PE rating is still only 13x. Thus, with significant growth, net cash, a single digit rating and the expectation of a dividend, Volex offers substantial upside and remains undervalued.

Companies: Volex
  • 12 Jun 19

Turbo-charged growth at a modest price

“If it ain't broke, don't fix it” is synonymous with corporate life. However ‘laurel resting’ is not in Elektron’s lexicon, even after producing a 10-fold rise in the stock price over the past 5 years. No instead, the firm’s DNA is based on ‘continuous improvement’ and maximising shareholder returns, as characterised by this morning’s bumper results and encouraging outlook.

Companies: Elektron Technology
  • 13 Jun 19

Rating has not caught up with recovery

Volex has delivered a strong recovery in earnings over the last three years, with adjusted PBT increasing from $5.3m in FY16 to $20.2m in FY19. The strategy is on track to deliver further material improvements in growth and profitability, supported by a strong balance sheet. Management confidence in prospects is reflected in its guidance of the likely reinstatement of a dividend in FY20. We believe momentum is accelerating, but has yet to be recognised in the group’s valuation multiples (EV/EBITDA 5.4x FY20, P/E 10.0x), which sit towards the bottom of the sector. The shares have potential for significant upside both from continued recovery in profits and cash and from re-rating. We initiate with a 140p intrinsic valuation.

Companies: Volex
  • 11 Jun 19

Bolt-on acquisition of Booth Industries

Avingtrans has acquired the trade and certain assets of Booth Industries for £1.8m from the administrators for Redhall Group. Booth designs and manufactures performance certified steel doors for applications such as blast and fire protection, for markets including rail, nuclear and oil & gas. The acquisition brings complementary new expertise to Avingtrans, along with end market and customer overlap, and will be integrated into Avingtrans’ Process Solutions and Rotating Equipment (PSRE) division. Booth generated revenues of c.£11.7m and PBT of c.£0.3m in the year to September 2018, implying modest historic acquisition multiples of c.0.2x sales and c.6.0x EBIT. We have made no changes to our estimates to reflect the acquisition ahead of the FY19 year end trading update. However we would not expect Booth to have any significant impact on FY20 PBT, while management focuses on its integration into PSRE and restoring the business’ profitability. Our forecasts put the shares on undemanding EV/EBITDA multiples of 8.6x FY19 and 7.1x FY20, offering good upside as the group continues to deliver growth and build value.

Companies: Avingtrans
  • 12 Jun 19

Confirmation of strong FY’19

FY’19 results confirmed positive performance from all three businesses. Group sales grew 13%, whilst Bulgin delivered strong operating margin momentum (Bulgin +350bps) leading to FY’19 PBT up 77% (5% ahead of expectations). We have upgraded FY’20E forecast Adj FD EPS by 4%, and introduce FY’21E forecasts targeting growth of 50% (underlying: 14%) in sales, and 87% (underlying: 62%) in adjusted operating profit versus FY19. We have increased our SOTP implied valuation range to 68p – 76p including Next (from 62p – 65p), offering strong upside potential.

Companies: Elektron Technology
  • 07 Jun 19

AGM statement – April showers

The company has released a disappointing trading update, pointing to trading affected by adverse weather in the US, which has delayed customer purchasing in Somero’s usually strong spring trading months. While trading is expected to improve in the remainder of the year, it is unlikely to make up the shortfall in 2019 and signals a 12% EPS downgrade. A lower cash level also results in a cut in dividend forecast. We shave back our price target from 465p to 420p. Weather patterns should be a temporary set-back and do not undermine our positive stance; Somero’s premium dividend yield is also still attractive in our view.

Companies: Somero Enterprises
  • 11 Jun 19

Full-year results slightly exceed forecast

Full-year results were pleasing, coming in £0.2m ahead of our forecast at the PBT line and with net debt lower than forecast and a higher dividend than expected. The impact of UK automotive weakness and the effects of the Chinese-US trade dispute are being felt. The outlook is for no change to forecasts despite comments that market conditions remain tough. Market share and capabilities are still increasing and show the benefit of strong management and strategy. The shares trade on a forward P/E of 14.8x, and some upside remains to our 270p price target.

Companies: Trifast
  • 12 Jun 19

Anexo - Wrong again! 4th upgrade in 12 months, 80% upside

The Group has released yet another positive trading statement ahead of today’s AGM; Dec19 PBT is expected to be ahead of current market expectations. As such, we upgrade our forecasts for the fourth time since the June 2018 IPO. Fortunately for investors, there remains an opportunity to gain exposure to a +30% margin business growing at +20% per year at a price that is wrong, in our view (11.0x FY19 P/E). We re-iterate our Buy rating.

Companies: Anexo
  • 01 May 19

Highly synergistic £15m acquisition

Patience is a virtue, and an essential ingredient for M&A. Carefully surveying the environment, not swinging for every ball, nurturing the best ideas and thoroughly doing the due diligence. Before finally putting pen to paper, and signing on the dotted line. Likewise this morning, after waiting 18 months for the right deal, MPAC announced that it had purchased Lambert Automation Limited for £15.0m (excluding a 3 year £2.5m earnout). To us, this strategic acquisition is synergistic, relatively low risk (re similar businesses) and value accretive. Not only from the perspective of being earnings enhancing, but also more importantly delivering RoIs significantly above the enlarged group’s cost of capital.

Companies: Mpac
  • 06 Jun 19

Investing for growth

The AGM update from Xpediator provides further strong evidence of investment in management better able to support the Group’s rapid growth in revenues. The Group’s enhanced infrastructure should enable further acquisitions sourced from a strong pipeline of bolt-on opportunities. They can again be rapidly integrated and enhanced post-deal. Trading YTD has performed in-line with expectations, benefitting from strong progress within Freight Forwarding. The free cash flow (FCF) yield has risen to a hefty 10.9%. In our opinion, this factors in an excessive Brexit-related discount. In fact, our valuation models suggest a fair value of 74p/share, slightly reduced from 78p because of the impact of US-China trade talks on the global logistics operators based in America. Our fair value is still materially above current share levels.

Companies: Xpediator
  • 30 May 19

Boku - Growth on track

Boku’s capital markets day (CMD) highlighted the strength of the company’s platform, the growth drivers for the direct carrier billing business and outlined the progress of the newer identity services business. The recent trading update confirmed that the company is on track to meet our FY19 estimates, and recent contract announcements provide further support to the company’s growth outlook.

Companies: Boku
  • 13 Jun 19

LIBERUM: Equiniti* - Expect a strong operational performance despite tricky markets

We expect the 1H19 results to demonstrate the virtues of Equiniti’s business model. The highly recurring nature of its revenues combined with an attractive margin profile should help the group deliver 4% EBITDA growth, despite the challenging market environment.

Companies: Equiniti Group
  • 11 Apr 19

Quarterly Research Outlook

We’re just over three months in to 2019 and we’ve seen a 10% UK market rally, retracing much of the Q4 decline, such is the nature of fickle market sentiment. That said, many of the issues we wrote about three months ago that were impacting markets remain: notably Brexit, trade wars, geopolitics and global monetary policy. The 2019 rally thus far feels somewhat fragile, with competing forces of optimism on a potential trade deal which could underpin the rally, against the deterioration in underlying economic data that could ultimately undermine the recent market gains. In this context, we look at what the lead indicators and the market are telling us about the industrial cycle and the stocks most exposed to various industrial trends. The Q4 derating in short cycle industrials and autos had been vicious and while these sectors have seen a more solid footing in 2019, with earnings downgrades being priced in, it will likely take a trough in lead indicators before short cycle stocks can start to perform again and re-rate relative to the market.

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  • 28 May 19

Prelims: Progress since acquisition

Altitude prelims are in line with expectations and lead to unchanged forecasts. The focus on the performance of AI Mastermind (since rebranded AIM Smarter (“AIM”)) has continued to deliver momentum in member numbers (up 10% since January 2019). With the extension of the supplier partner agreements to cover all transactions with members, not just transactions on the AIMPro platform, the focus on ‘onboarding’ is now eased in favour of signing up suppliers to commit to service fees to Altitude/AIM regardless of how the order is placed with the supplier – this has already been achieved for 149 suppliers. Prospects remain strong, the acquisition is delivering the potential outcome in line with unchanged forecasts, and the valuation continues to expose more and more upside as proof of execution success is forthcoming. Our 140p target is reiterated and we look forward to a continuing news flow and the development and execution of a simplified set of KPIs to demonstrate growing service fees from a growing transaction flow from a growing number of distributors.

Companies: Altitude Group
  • 04 Jun 19

THE MONTHLY June 2019


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