Danske Bank: STG – Raises FY2020 guidance

STG (OW): Late on Friday the 18th December, STG (Scandinavian Tobacco Group) announced an upward revision to its FY2020 guidance. The group has seen very strong demand for hand-rolled cigars in the 4^th quarter, especially in the US both in physical retail but also online. Due to a timing effect on accounts payable STG is also able to upgrade its outlook for free cash flow before acquisitions. Overall the result is an expected organic EBITDA growth of more than 13% (vs. more than 9% previously) and FCF before M&A of more than DKK1.25bn (vs. more than DKK1bn previously). Overall we see this as quite strong and shows that the 2. Covid wave is having similar positive effects on STG as the first wave. We caution however that some of the effects could slow down as societies open up in 2021. Credit positive overall.