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Humble Group: Walking the talk: a busy start to 2022 - ABG

An eventful start to 2022

Q2’22 report due on 24 August

Valuation down to around 14x-12x EV/EBITA (’22e-‘23e)

An eventful H1’22
Humble has closed a large number of deals since the end of Q1’22, adding a total c. SEK 900m to annual group sales and c. SEK 120m to EBITDA at a valuation of 5.5x EV/EBITDA, according to our rough estimates. In addition, three more deals are yet to be confirmed, adding another SEK 1.2bn and c. SEK 95m to sales and EBITDA, respectively. A SEK 528m share issue was carried out alongside a bond issue of SEK 250m. Excluding the non-confirmed acquisitions, our estimates suggest a cash position of SEK 535m at the end of Q4’22e and SEK 201m in cash outflow in FY’23e (including earn-out payments of SEK 334m).

Q2’22 preview and short-term outlook
The group reports Q2’22 on 24 August and we expect continued strong organic growth of 25%. However, we assess that five additional companies will be included in the organic growth calculation versus Q1’22. As such, visibility is limited. Needless to say, the key growth driver will be M&A contributions: we estimate slightly above SEK 800m, bringing total sales to SEK 1.0bn (+513% y-o-y). Furthermore, we expect raw material headwinds and higher logistics costs to weigh on margins. We forecast an adj. EBITA margin of 9.6%, bringing adj. EBITA to SEK 98m. As we are in the process of transferring analysts, we have reviewed our estimates and trim our ’22-‘23e adj. EBITA by 9-10% on the back of a ~1pp lower margin, mainly due to external headwinds and slight dilution from recent M&A. Our K3 goodwill amortization forecasts have been adjusted to better reflect the current balance sheet, resulting in significant revisions below the EBITA line (cash neutral).

A seasonally strong period ahead
The stock is down 43% YTD, partly driven by a ~20% de-rating, and is currently trading around 14x-12x EV/EBITA (‘22e-‘23e). In H2’22, we see a seasonally strong period and potential completion of the abovementioned three acquisitions.
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