CapMan - Steaming ahead

CapMan’s Q2 results were above estimates, largely due to Scala’s success fees. The Buyout XI fund held a first closing at EUR 160m, to aid management fees during H2/19 and onwards. The Q2 report gave little reason to change our views on CapMan’s development; on the contrary, we have made upward revisions to our estimates. We retain our BUY-rating with a target price of EUR 1.95 (1.85).

Earnings boosted by significant Scala success fees

CapMan’s Q2 results beat both our and consensus expectations, with revenue at EUR 13.4m (Evli/cons. 10.8m/11.0m) and EBIT at EUR 5.8m (Evli/cons. 4.5m/4.2m). The stronger earnings were in our view largely due to stronger than expected Scala success fees. The solid Services business operating profit (Act./Evli 4.9m/2.1m) was slightly offset by weaker investment returns, due to weaker performance of certain portfolio companies, according to management of a more temporary nature. The Buyout XI fund held a first closing at EUR 160m, with management fees expected to kick in during Q3.

Solid Services business development

We have revised our 2019 estimates slightly upwards, mainly due to the strong Q2 earnings. We have further raised our estimates for the coming years, with our 2020 operating profit estimate up 10%, reflected mainly through the Services business. Our estimates continue to rely on more rapid accumulation of carried interest starting from H2/19, the timing and materialization of which remains the biggest near-term uncertainty. For 2019 we expect an operating profit of EUR 24.7m, with a diversified contribution split from all business areas.

BUY with a target price of EUR 1.95 (1.85)

Our SOTP implies a fair value of EUR 1.82 per share, which together with peer multiple valuation implies a limited valuation upside. However, when considering the top-class dividend yield and expected ~35% improvement in operating profit in 2020, CapMan in our view remains an attractive case. Following our estimates revisions, we lift our target price to EUR 1.95 (1.85) and retain our BUY-rating.

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