Aspo - Still on an improving trend
Aspo downgraded guidance as ESL’s demand hasn’t picked up as fast as might have been expected earlier this year. Q4 EBITA will gain some, but expectations rest on next year.
We cut our Q4’24 earnings estimate by EUR 3m
Aspo first issued FY’24 guidance in February, when ESL seemed to have good potential for y/y earnings gains over the summer as the comparison figures were already low. ESL’s Q2’24 EBITA improved y/y, but Q3 remained soft. Telko by contrast had soft Q2 earnings while Q3 was very strong. The comparison figures for Q4 are not high, but the guidance downgrade suggests EBITA will now increase by only roughly EUR 2m y/y. We believe this softness is mainly due to ESL (the Baltic Handysize index has been declining in the past few months although it doesn’t have a very clear correlation with ESL’s results) in Q4, however in our view it did achieve lower earnings than might have been expected also during most other parts of the year. We thus cut our Q4 EBITA estimate for ESL by some EUR 2m. We also lower our respective estimate for Telko by EUR 0.7m.
Earnings still have many more drivers next year
We leave our estimates for Leipurin mostly intact as it has been a stable performer this year. We expect Aspo FY’24 EBITA to gain by less than EUR 3m y/y, yet it still has significant room to increase as the new green coasters add to ESL’s capacity while Telko has acquired EUR 85m in revenue and EUR 7.5m EBIT this year. The market may remain challenging for ESL especially in the early months of next year, so there’s uncertainty around how much its earnings could pick up from the bottom. We trim our FY’25 ESL EBITA estimate by EUR 1m and by a similar amount for Telko so that on Aspo level the estimate falls EUR 2.5m. We thus continue to see Aspo’s EBITA potential clearly above EUR 40m in the medium term, although the key question remains how much ESL will improve towards next summer.
Valuation remains low while earnings have room to gain
Aspo’s valuation seems to have mostly anticipated the guidance downgrade, and now the key driver remains the expected demand pick-up for ESL. Aspo is valued below 8x EV/EBITA on our FY’25 estimates, and although there’s uncertainty around the earnings gains pace then we don’t consider the level expensive. Our new TP is EUR 6.0 (7.0) as we retain BUY rating.