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B2HOLDING Secured collections miss again We expect an EPS of NOK0.29 in Q1, driven by soft gross collections (pre-announced at NOK1,248m, 17% below the guidance) and an FX currency headwind. While we acknowledge collections of secured claims can be volatile, we now factor in a discount to the company’s stated projections following a series of misses. As a result, we have cut our 2020–2021e EPS by 11% and our target price to NOK18 (NOK19). However, we believe B2Holding is attractively priced at a 2020e EV/EBIT of 9.2x, and reiterate our BUY.
Pre-announced gross collections disappoint. The trading update B2Holding released in conjunction with a EUR200m senior unsecured bond issue revealed gross collections of NOK1,248m in Q1 – 13% below our estimate and 17% below the ERC guidance given with the Q4 2018 presentation. This marked the fourth consecutive quarterly gross collections miss versus the quarterly gross collections guidance: Q4 2018 undershot by 23%, while Q3 was short by 3% and Q2 by 2%. We acknowledge that collections on secured claims can be lumpy and volatile. However, following this series of quarterly misses in which collections appear to be taking longer than initially guided for, we now assign a lag effect to the ERC curves presented by the company. B2Holding also preannounced NOK570m of portfolio acquisitions, and ERCs of NOK21.4bn. The full Q1 results are due at 07:00 CET on 24 May.
We forecast Q1 EPS of NOK0.29, down 24% QOQ, primarily as a result of the ~2.3% appreciation in the NOK against the EUR (resulting in an estimated ~NOK30m FX loss for B2Holding as it primarily generates earnings in EUR but reports in NOK), soft gross collections, as described above, and costs marginally up QoQ.
2020–2021e EPS cut by 11%. We have reduced our 2019e EPS by 19%, mainly as a result of the lower than expected gross collections in Q1. We have also cut our 2020– 2021e EPS by 11% after factoring in a discount/lag effect to the gross collections guidance given the recent quarterly misses. BUY reiterated, target price cut to NOK18 (19). We continue to view B2Holding as an attractive investment and see ample upside potential from it continuing to build scale, which should boost its earnings materially across a well-diversified platform in the European debt collection market. As B2Holding has missed its guided collection estimates in recent quarters, we have assigned a 5% discount to the company’s stated ERC forecasts on the back book. In turn we have lowered our target price to NOK18 (19). However, we believe the stock is attractively priced at a 2020e EV/EBIT of 9.2x, and reiterate our BUY recommendation.
BUY