This evening, Cavotec announced that it had signed an agreement to divest 100% of its Airports business to US-based investment company Fernweh Group for an all-cash deal of EUR 10m (according to Cavotec) that could become EUR 13m if certain conditions are met. Based on our estimates, this would imply an EV/Sales ‘22e-‘23e of 0.4-0.3x (vs. Cavotec at 0.9-0.6x) and an EV/EBITDA of 5-3x (vs. Cavotec at 8-4x). Although we had previously estimated an EV for Airports of EUR 40m, we still find it positive that Cavotec has found an all-cash deal that could yield a solid cash contribution by the summer of 2022 at the latest. Assuming an initial cash contribution of EUR 10m, this would lower Cavotec’s gearing ‘21e-‘22e from 4.4-0.8x to 1.6-0.4x. As a result, the Airports business will be reclassified as an entity held for sale, in line with IFRS accounting. Cavotec has therefore decided to delay its Q4 report from 25 February to 30 March, in order to adjust the annual accounts.
One less hurdle to clear, full focus on execution now
We find it positive that the exit has now been announced, as Cavotec can fully focus on execution of the strong backlog (EUR 93m in Q3’21) within ‘New Cavotec’ (‘NC’). If we conservatively assume that all corporate cost is allocated to NC, we forecast NC EBIT margins of 6.9-11.8% for 2022e-2023e on sales of EUR 144-194m, vs. 5.5-10.5% for the group.
Cash contribution lowers near-term financing risk
The key highlight in the near-term is that the sale of Airports provides an expected cash injection of EUR 10m. Looking further ahead, adjusting for the EV and earnings of Airports, we estimate that NC is currently trading at 15-6x EV/EBIT ‘22e-‘23e, vs. 16-6x for the group. In addition, we believe that the completed exit allows the future successor of ...
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