Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally friendly). Its remaining assets are modern and well-invested, so cash flow generation will be strong. We see plenty of room to grow, both organically and inorganically. Bergs Timber has announced its new strategic focus and increased its growth target from 5-10% p.a. to 10% (both organically and via M&A); it has also identified organic growth investments of ~SEK 500m for 2021-2023. Bergs has already started to deliver on its new growth target, and has announced two new investments since the strategic update in March: i) organic growth investment in its wood protection segment and ii) the acquisition of PTPG, which will almost double its EBITDA from its Joinery segment.
Trading at ‘21e EV/EBITDA of 7x
We expect Bergs to generate EBITDA of ~SEK 270m in 2021, i.e. it is trading at a ‘21e EV/EBITDA of 7x.
