Relais Group Oyj: Vertical expansion through M&A in Sweden - Nordea

Relais acquires Swedish STS Sydhamnens Trailer Service AB, the largest independent nationwide repair and maintenance workshop chain for heavy and light commercial vehicles in Sweden. The company has 15 full-service workshops with 140 employees. 2021 net sales are expected to be approximately EUR 23m with EBITDA of EUR 1.2m. Purchase price of EUR 9.2m and additional purchase price of maximum of EUR 2.2m depending 2021 financial results is to be paid in cash. Purchase price corresponds to 2021E EV/EBITDA of 7.7x or 9.5x with full earn-out. Relais expects to realise EUR 0.5-1m annual synergies mainly from sourcing by 2023. If we plug in EUR 0.5-1m synergies, 2021E EV/EBITDA is 4.2-5.4x or 5.2-6.7x with full earn-out included. Hence, acquisition cost is well in line with previous acquisitions. With our estimates for 2021E and share price of EUR 24.5 (as of market close on 13 October), Relais’ trades with 15.8x EV/E BITDA. We view STS acquisition as a vertical expansion, similar than seen in Finland with Raskone acquisition. Hence, we would not be surprised if Relais would be able to extract more positive long-term synergies. STS acquisition should further reduce seasonality in Relais, which we view positively. Relais’ target market is fragmented and we expect the company to continue acquisitions towards its EUR 500m pro-forma sales target by 2026. Prior to the acquisition, we have modelled EUR 289m sales by 2026, while based on our illustrative M&A scenario, Relais could reach EUR 486m sales by 2026.