With Q1 sales of SEK 383m, Bredband2 had a solid start to 2022, albeit with a 3% shortfall versus our forecast. Sales grew 2% q-o-q, driven by the acquisition of TH1NG (contribution of 20,000 customers) together with an organic net customer intake of 500: the first positive number in several quarters. The gross margin of 35.7% fell from 36.8% in Q4’21 due to the margin-dilutive acquisition. We expect a similar metric in the coming quarter as we believe that Bredband2 will be cautious in terms of further price hikes given that it currently prioritises growing its customer base. Although gross profit was 4% below our forecast, the EBITDA margin of 16.4% was slightly ahead at 16.1% due to strong cost control where we deem that most cost synergies with A3 have now been reaped.
We lower ‘22e-’24e sales but raise our margin assumptions
We reduce our ’22e-’24e sales estimates by 3% following the Q1 report. While we continue to believe that increased marketing activities in 2022 will result in improved organic growth rates, we expect most of this to prevail in the latter part of H2, meaning that the full effects will not bear fruit until 2023. We now see 3% organic growth in ‘22e and 5% in ‘23e (vs. 3% in ‘21). In terms of EBITA, we cut ‘22e by 5% on our lower sales estimates together with lower gross margin assumptions. For ’23e-’24e, however, we lift our forecasts by 1% due to raised margin assumptions.
14x-10x ’22e-’23e EV/EBITA, 7-8% lease adj. FCF yields
On our new estimates, Bredband2’s share is trading at 14x-10x ’22e-‘23e EV/EBITA, coupled with lease adj. FCF yields of 7-8%. The lease adj. NIBD was SEK 8m in Q1, which in turn offers the company solid headroom to pursue further M&A opportunities.
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