CapMan - Near-term outlook still soft
Operatively CapMan’s Q3 fell short of our expectations mainly due to negative fair value changes, while the Management Company business profitability continued to develop nicely. The near-term outlook remains soft and we have pushed forward our expectations for market aided recovery.
Weak investment returns, core business developed well
CapMan’s Q3 results were below expectations partly due to the reclassification of CaPS as discontinued operations (not in our estimates) while mainly driven by negative fair value changes (partly due to FX) at EUR -0.8m (Evli EUR 2.0m). Turnover in Q3 amounted to EUR 12.8m (EUR 16.9m/16.7m Evli/cons.) and operating profit to EUR 1.7m (EUR 6.7m/7.6m Evli/cons.). Capital under management amounted to EUR 6.0bn, with some net growth q/q driven by Real Estate. The Management Company business continued its steady profitability development and ultimately, the quarter was rather eventless.
Market situation providing limited near-term support
In terms of near-term AUM growth, the anticipated first closing of NRE IV was pushed to 2025, in line with our expectations. Remarks relating to carried interest remained cautious and we have pushed our expectations forward in time, along with the recovery in investment returns, with continued market slowness keeping uncertainty at elevated levels. In the near-term we still continue to expect improvements in profitability in both the Management Company and Investment business, anticipating an ~80% y/y group EBIT improvement mainly through weak comparison figures for the Investment business. Looking ahead, we expect fee-based profitability to continue to scale at a decent pace assuming >5% net AUM growth y/y. Under improved market conditions, if and when investment returns start nearing target levels, we see that EBIT (excl. group expenses) should surpass EUR 40m p.a., with slightly below half from fee-based profitability. With the proceeds from the divestment of CaPS, CapMan’s financial situation will improve further and could enable new strategic initiatives, in such case likely aimed at further boosting fee-based profitability.
BUY with a target price of EUR 2.1 (2.2)
We see no changes to the long-term investment case but with market conditions further prolonging the near-term uncertainty and as such lowered estimates we lower our TP to EUR 2.1 (2.2), BUY-rating intact.