Additional investments appear forthcoming
Suominen’s business has received a pandemic boost, but high demand seems to persist. The company has also sharpened its own operational performance. Suominen recently issued a EUR 50m bond to be used for general corporate purposes. In our opinion the company had more than ample liquidity already before the transaction, and thus we see the extended financing hinting at growth plans. Suominen may be planning organic investments, but M&A is not off the table and we believe new geographies, in particular Asia, are now on the radar screen.
We still see some upside to current valuation multiples
Glatfelter, which in our view is the most relevant listed Suominen peer, has just announced the acquisition of Jacob Holm for an EV of USD 308m. Glatfelter estimates Jacob Holm’s Jun-21 LTM EBITDA of USD 45m includes pandemic demand benefit to the tune of USD 10-15m and expects to realize some USD 20m in annual cost synergies within 24 months of closing. These figures suggest, in the most optimistic scenario where the pandemic benefits persist and synergies are fully realized, an EV/EBITDA as low as 4.7x. If the benefits vanish the synergized multiple settles between 5.6x and 6.2x. Suominen is now valued around 6x EV/EBITDA and 9x EV/EBIT on our estimates; these levels are somewhat below those of Glatfelter and other peers. In our opinion Suominen’s valuation still appears conservative. Our new TP is EUR 6.8 (6.5) per share; we retain our BUY rating.
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