CapMan - Picking up the pace with M&A

CapMan’s Q4 results were as expected weaker and in line with our expectations, despite our underestimation of the negative impact on the market portfolio. The acquisition of JAM Advisors (60%) is seen by CapMan as a means to expanding its customer base but we expect CapMan to also seek to rapidly grow the business. We retain our BUY rating with an ex-div TP of EUR 1.75 (1.80).

Weaker results, raises dividend

CapMan’s Q4 results were quite in line with our expectations, with revenue of EUR 8.9m (Evli 8.2m) and EBIT of EUR -2.9m (Evli -2.8m). Despite having underestimated the market portfolio decline positive fair value changes in especially Real estate and Infra aided Investment business returns. The dividend proposal is EUR 0.12 per share as expected (2017: 0.11).

Acquisition of the majority of JAM Advisors

CapMan announced the acquisition of 60% of JAM Advisors, to be paid for with 5.11m CapMan shares. The company, established in 2012, had EUR 3.3m revenue in 2018 and EBITDA was barely positive. Valuation appears reasonable as it is to be expected that CapMan will seek for rapid expansion of the business, likely also internationally. CapMan will also use JAM Advisor’s customer network to expand its own offering towards tier 2 and 3 investors.

BUY-rating with an ex-div target price of EUR 1.75 (1.80)

CapMan has during Q4, through among other things the additional BVK mandate and second Infra mandate, seen AUM growth of EUR over 400m, that will contribute with over EUR 4m annual fee income. Together with the acquisition of JAM Advisors this will boost revenue and profitability in 2019 and we have raised our 2019 estimates for revenue and operating profit by 13% and 5% respectively. We expect management fee growth of 23% in 2019. Despite the negative Q4 earnings from the impact of the non-core market portfolio CapMan is in our view continuing to show solid progress. With valuation still looking attractive we retain our BUY rating with an ex-div target price of EUR 1.75 (1.80).

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