Dovre - Focusing on Renewable Energy
Dovre will realize significant value through the announced sale, which should help it to better find growth within Renewable Energy, however the exit leaves valuation neutral.
Today’s Renewable Energy should again reach EUR 2m EBIT
The sale of Project Personnel and Consulting Norway will realize substantial value for Dovre so that it can focus on the remaining Renewable Energy segment, which has further growth potential in Finland and Sweden. Its profitability however has had its ups and downs, and as there were again some projects with challenges Dovre lowered its FY’24 EBIT guidance. We now estimate Q4 EBIT at EUR -0.8m, dragged down by Renewable Energy. The segment has averaged an EBIT of EUR 2.1m in the three previous years, and in our view it shouldn’t be too hard to reach a similar level again next year as its top line is then likely to near EUR 100m. We include the divested assets in our estimates for now as the transaction is yet to be completed.
There are some potentially suitable acquisition targets
The 7x EV/EBIT multiple is well in line with that of the Project Personnel peer Brunel, and above Dovre’s recent historical earnings multiples, while still clearly below many peers especially within Consulting. In our view any potential Renewable Energy acquisitions could be found at multiples above or below the 7x level. The segment has recently focused more on Swedish wind farms and solar power projects in Finland, where we believe there are at least a handful of companies Dovre might possibly acquire. The Finnish solar construction market still has considerable growth potential due to strong renewables demand, however the supply side is also competitive as larger players like Destia (Colas) participate too.
The exit leaves valuation quite neutral for now
The divestment should leave more than EUR 1m in reported EBIT for FY’25, assuming EUR 2.4m for Renewable Energy and EUR -1.2m for Other & Unallocated. Equity value will thus mostly rest on the estimated EUR 34m proceeds as Dovre owns no more than 51% of Suvic (in our view one use for the proceeds could be to add ownership), in addition to which it includes the solar development company Renetec (founded last year) as well as Consulting Finland. Our new TP is EUR 0.35 (0.50) to reflect the post-deal cash position; our rating is now HOLD (BUY).