- NM likely to deliver Q4 at high end of guidance range
- We see strong portfolio equity performance in Q4
- ’21-’23 strategic update lowers risk, FVR to DKK 75-105
Q4 likely at the high end of guidance with solid equity return
We think North Media will deliver 2020e EBIT of DKK 240m, which is towards the high end of its DKK 230m-245m guidance. NM Online and Bekey will likely deliver Q4e EBIT in line with their solid Q3 results, while FK Distribution’s EBIT margin will be 0.5pp below Q4’19 and 0.8pp below Q3’20 given one fewer week of activity during Q4 vs. last year. We see a company stock portfolio return of ~10% (DKK ~50m), with favourable positions in Orsted, Teradyne, MercadoLibre and SEA (~30% of the portfolio) collectively up 33% for Q4’20.
We think Bekey can become profitable in YE‘21e
For 2021/22e, we increase our EBITDA margins by 1pp and 1.5pp, respectively, and thus forecast 1% and 2% EPS adj. growth. This is driven by a slightly higher EBITDA margin in FK Distribution and a gradual increase in Bekey’s margins, where we now forecast a profit result by YE‘21e and for FY‘22e. Bekey will have a full-year profit effect in Homecare (~80% of rev., delivered break-even in Q3’20) and a gradual reduction of SmartRelay installations, which currently have ~55-65% penetration in Copenhagen. Overall, we think FK distribution’s EBIT will decline by ~2% p.a. alongside a revenue decline of ~3%, while NM Online EBIT will increase by ~10% p.a.
We think that new strategic update lowers risk
In connection with the full-year report, FK Distribution has flagged that it will provide a “strategic update for 2021-23” including financial ambitions. We think the main points will be an update on capital resources and M&A opportunities, expansion of FK Distribution’s product offering and future focus on NM Online and Bekey. We lower our WACC to 10% (11%) and roll our DCF model by one year. On our estimate changes we raise our fair value range (FVR) to DKK 75-105 (58-90). The company trades at EV/Sales and EV/EBITDA of 0.7x and 2.4x.
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