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 several new investments since the strategic update in March including: i) organic growth investment in its wood protection segment, ii) the acquisition of PTPG and iii) organic growth investment in its Joinery segment in Latvia.
Trading at ‘21e EV/EBITDA of 5x and 8x for ‘22e/‘23e
We expect Bergs to generate EBITDA of ~SEK 400m in ‘21, i.e. it is trading at a ‘21e EV/EBITDA of 5x, and EV/EBITDA of 8x for ‘22e/’23e.
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