Equity Research - 07 June 2022 06:52 CET
Axactor
Expect an uplift in the NPL market
- NPL portfolio purchases showing improvement
- Axactor's NPL platform scales better than Nordic peers
- We estimate ROE of ~11% in 2024e
Several trends point to an uptick in the NPL market
The total value of non-performing loans (NPLs) in the EU has decreased steadily since 2014, with the avg. NPL ratio declining by 1.8pp over the last 3 years (to 2.1% in Q4'21). There are large variations between countries, with the biggest drop seen in the "worst-in-class" countries - for Axactor, this means Italy and Spain. Although there has been a steady decline in the NPL stock, several market trends point to an uplift:
- more NPLs arising during the COVID-19 pandemic, ii) lower economic growth due to the war in Ukraine, iii) regulatory changes supporting increased supply in secondary markets, iv) increased amount of Stage 2 loans. Looking at investments for top collectors, we observe an upward trend in recent quarters towards 2019 levels. Given the supportive market trends, we believe this will continue throughout 2022-23.
A cost leader with improving collections and funding
Axactor still stands out in terms of the cost/income ratio compared to Nordic peers, with peers being at least ~7pp higher than Axactor. The company's collection rate increased to 100% for Q1'22, vs. an avg. for peers of ~104%. For funding, we estimate Axactor's funding cost at 6% vs. peers at ~5%, likely explained by its short history and size. We believe it can lower its funding costs by ~0.5pp (2021-24e) through refinancing and its recent efforts to clean its books. Furthermore, we increase our '23e-'24e NPL purchases by 10-20%, given an expected increase in supply, raising gross collections by 1-3%. We raise costs in '22e-'24e by 2-3% on higher expected inflation, reducing '22e-'23e cash EBITDA margins by ~1%. We lower funding cost in '24e on expected refinancing.
'22e P/BV of 0.5x; ~50% below hist. avg.
The '22e P/BV of 0.5x is ~50% below the historical avg. and ~50% below peers. We expect ROE to increase from -9% in '21 (~8% norm.) to ~11% in '24e, driven by higher cash-EBITDA, lower financials, and a stabilised tax rate (25%). Our fair value range is NOK 6-17/share.
Analyst(s): jan.gjerland@abgsc.no, +47 22 01 61 16 hanna.skolt@abgsc.no, +47 22 01 60 20
EURm | 2020 | 2021 | 2022e | 2023e | 2024e |
Sales | 165 | 156 | 240 | 255 | 276 |
EBITDA | 57 | 43 | 114 | 118 | 131 |
EBITDA margin (%) | 34.5 | 27.4 | 47.6 | 46.1 | 47.6 |
EBIT adj | 44 | 33 | 105 | 109 | 122 |
EBIT adj margin (%) | 26.5 | 21.1 | 43.9 | 42.6 | 44.3 |
Pretax profit | -7 | -22 | 52 | 53 | 67 |
EPS rep | -0.08 | -0.10 | 0.09 | 0.12 | 0.17 |
EPS adj | 0 | -0.04 | 0.13 | 0.13 | 0.17 |
Sales growth (%) | -15.1 | -5.4 | 54.2 | 6.2 | 8.3 |
EPS growth (%) | -177.9 | -22.6 | 188.4 | 38.4 | 34.0 |
Source: ABG Sundal Collier, Company data
Reason: In-depth research
Commissioned research
Not rated
Estimate changes (%) | |||
2022e | 2023e | 2024e | |
Sales | -0.1% | 0.4% | 2.5% |
EBIT (rep) | -2.2% | -3.3% | 2.3% |
EPS (rep) | 3.2% | -3.5% | 5.8% |
Source: ABG Sundal Collier | |||
Share price (NOK) | 06/06/2022 | 6.4 | |
Fair value range (per share) | 6.0-17.0 | ||
Financials, Norway | |||
ACR.OL/ACR NO | |||
MCap (NOKm) | 1,919 | ||
MCap (EURm) | 191 | ||
Net debt (EURm) | 890 | ||
No. of shares (m) | 302 | ||
Free float (%) | 54 | ||
Av. daily volume (k) | 2 |
Next event | Q2 report: 18 Aug | |||||||||||||
Performance | ||||||||||||||
30.0 | ||||||||||||||
25.0 | ||||||||||||||
20.0 | ||||||||||||||
15.0 | ||||||||||||||
10.0 | ||||||||||||||
5.0 | ||||||||||||||
0.0 | Aug 19 | Dec 19 | Aug 20 | Dec 20 | Jun 21 Aug 21 | Oct 21 Dec 21 | ||||||||
Jun 19 | Oct 19 | Feb 20 | Apr 20 | Jun 20 | Oct 20 | Feb 21 | Apr 21 | Feb 22 Apr 22 | ||||||
Axactor | OSE GI |
1m | 3m | 12m | |
Absolute (%) | 9.4 | 15.0 | -41.7 |
Source: FactSet | |||
2022e | 2023e | 2024e | |
P/E (x) | 7.1 | 5.1 | 3.8 |
P/E adj (x) | 5.0 | 4.8 | 3.8 |
P/BVPS (x) | 0.46 | 0.42 | 0.41 |
EV/EBITDA (x) | 9.5 | 9.8 | 9.4 |
EV/EBIT adj (x) | 10.2 | 10.6 | 10.1 |
EV/sales (x) | 4.50 | 4.51 | 4.46 |
ROE adj (%) | 9.6 | 9.2 | 10.8 |
Dividend yield (%) | 0 | 9.8 | 13.1 |
FCF yield (%) | -15.5 | -6.8 | -4.6 |
Lease adj. FCF yld (%) | -15.5 | -6.8 | -4.6 |
Net IB debt/EBITDA | 7.8 | 8.1 | 7.9 |
Lease adj. ND/EBITDA | nm | nm | nm |
Please refer to important disclosures at the end of this report
This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to
constitute an acceptable minor non-monetary benefit (i.e. not investment research) as defined in MiFID II.
Axactor
Company description
Axactor is a pan-European debt collector with operations in Finland, Germany, Italy, Norway, Spain and Sweden. Headquartered in Oslo, Norway, Axactor was established in late 2015 and has grown to become one of the ten- largest players in the industry, with support from its cornerstone- and co-investor Geveran. Its core business areas are purchased debt and 3PC (third-party collection), focusing on well-developed NPL markets with a legal environment beneficial for collection. Through its streamlined "One Axactor" operating model, it has developed a scalable, no legacy and low-complexity NPL platform.
Risks
Investment risk, macro risk and regulatory risk are the biggest risks in the Axactor investment case. We see investment risk as the largest risk as we estimate that the company will have high capex going forward, and an investment into a 'bad' portfolio and/or company could have a detrimental impact on earnings in the coming years. Furthermore, changes in the macro environment could affect cash collection and the 3PC business.
Annual sales and adj. EBIT marginEURm
300 | 50.0 | |||||||
250 | 40.0 | |||||||
30.0 | ||||||||
200 | ||||||||
20.0 | ||||||||
150 | 10.0 | |||||||
100 | 0.0 | |||||||
-10.0 | ||||||||
50 | -20.0 | |||||||
0 | -30.0 | |||||||
2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022e | 2023e | 2024e |
Sales (LHS) | Adj EBIT margin % (RHS) |
Source: ABG Sundal Collier, Company data
EPS estimate changes, 2022e, EUR
0.24 | ||||||||||||||||||||||||
0.22 | ||||||||||||||||||||||||
0.20 | ||||||||||||||||||||||||
0.18 | ||||||||||||||||||||||||
0.16 | ||||||||||||||||||||||||
0.14 | ||||||||||||||||||||||||
0.12 | ||||||||||||||||||||||||
0.10 | ||||||||||||||||||||||||
0.08 | ||||||||||||||||||||||||
0.06 | ||||||||||||||||||||||||
0.04 | ||||||||||||||||||||||||
0.02 | 21 | 21 | 21 | 21 | 21 | 21 | 21 | 22 | 22 | 22 | 22 | 22 | ||||||||||||
Jun | - | Jul | - | Aug | - | Sep | - | Oct | - | Nov | - | Dec | - | Jan | - | Feb | - | Mar | - | Apr | - | May | - | |
ABGSC | ||||||||||||||||||||||||
Source: ABG Sundal Collier, FactSet |
EPS estimate changes, 2023e, EUR
0.28 | |||||||||||||||||||||||||
0.26 | |||||||||||||||||||||||||
0.24 | |||||||||||||||||||||||||
0.22 | |||||||||||||||||||||||||
0.20 | |||||||||||||||||||||||||
0.18 | |||||||||||||||||||||||||
0.16 | |||||||||||||||||||||||||
0.14 | |||||||||||||||||||||||||
0.12 | |||||||||||||||||||||||||
0.10 | |||||||||||||||||||||||||
0.08 | |||||||||||||||||||||||||
21 | 21 | 21 | 21 | 21 | 21 | 21 | 22 | 22 | 22 | 22 | 22 | ||||||||||||||
Jun | - | Jul | - | Aug | - | Sep | - | Oct | - | Nov | - | Dec | - | Jan | - | Feb | - | Mar | - | Apr | - | May | - | ||
ABGSC | |||||||||||||||||||||||||
Source: ABG Sundal Collier, | FactSet |
7 June 2022 | ABG Sundal Collier | 2 |
Axactor
Table of contents | |
Supporting charts ........................................................................................... | 6 |
The NPL market ............................................................................................. | 7 |
Competitive position ..................................................................................... | 13 |
Valuation ...................................................................................................... | 17 |
Appendix 1: Axactor at a glance................................................................... | 22 |
Appendix 2: Purchased debt explained........................................................ | 27 |
7 June 2022 | ABG Sundal Collier | 3 |
Axactor
Estimate revisions
Estimate revisions | New | Old | Chg % | Chg | Chg % | Chg | Chg % | Chg | ||||
EURm | 2022e | 2023e | 2024e | 2022e | 2023e | 2024e | 2022e | 2022e | 2023e | 2023e | 2024e | 2024e |
Gross collection | 293 | 349 | 399 | 293 | 347 | 387 | 0% | 0 | 1% | 2 | 3% | 11 |
Third-party revenue | 57 | 60 | 62 | 57 | 60 | 61 | 0% | 0 | 0% | 0 | 1% | 0 |
Gross revenues | 350 | 409 | 460 | 350 | 406 | 448 | 0% | 0 | 1% | 2 | 3% | 12 |
Net Revenue | 240 | 255 | 276 | 240 | 254 | 270 | 0% | 0 | 0% | 1 | 2% | 7 |
Operating expenses | -126 | -137 | -145 | -124 | -133 | -141 | 2% | -2 | 3% | -5 | 3% | -4 |
EBITDA reported | 114 | 118 | 131 | 117 | 121 | 129 | -2% | -2 | -3% | -4 | 2% | 3 |
EBITDA-margin (%) | 48% | 46% | 48% | 49% | 48% | 48% | -0.9% | -1.6% | -0.2% | |||
EBIT (reported) | 106 | 109 | 122 | 108 | 112 | 120 | -2% | -2 | -3% | -4 | 2% | 3 |
EBIT-margin (%) | 44% | 43% | 44% | 45% | 44% | 44% | -0.9% | -1.6% | -0.1% | |||
Net profit | 26 | 37 | 50 | 25 | 39 | 47 | 3% | 1 | -3% | -1 | 6% | 3 |
Net profit (excl. REOs) | 37 | 40 | 50 | 39 | 42 | 47 | -4% | -1 | -6% | -2 | 6% | 3 |
EPS | 0.09 | 0.12 | 0.17 | 0.08 | 0.13 | 0.16 | 3% | 0.00 | -3% | 0.00 | 6% | 0.01 |
EPS (excl. REOs) | 0.12 | 0.13 | 0.17 | 0.13 | 0.14 | 0.16 | -4% | 0.00 | -6% | -0.01 | 6% | 0.01 |
ROE (norm.) | 10% | 9% | 11% | 10% | 10% | 10% | -0.8% | -0.6% | 1.0% | |||
Cash EBITDA (excl. REOs) | 224 | 271 | 315 | 227 | 274 | 308 | -1% | -2 | -1% | -2 | 3% | 8 |
Cash EBITDA margin (excl. REOs) | 64% | 66% | 69% | 65% | 67% | 69% | -0.6% | -0.9% | -0.1% | |||
ERC (reported NPL + est REO) | 2,587 | 2,768 | 2,968 | 2,586 | 2,723 | 2,824 | 0% | 0 | 2% | 45 | 5% | 144 |
CAPEX | 238 | 264 | 300 | 235 | 240 | 245 | 1% | 3 | 10% | 24 | 22% | 55 |
DPS | 0.00 | 0.06 | 0.08 | 0.00 | 0.00 | 0.00 | 0.00 | 0.06 | 0.08 |
Source: Company data, ABG Sundal Collier
ABGSCe vs. IR-collected consensus
ABG | IR consensus | Difference | |||||||
EURm | 2022e | 2023e | 2024e | 2022e | 2023e | 2024e | 2022e | 2023e | 2024e |
Gross collection | 293 | 349 | 399 | 286 | 340 | 371 | 2% | 3% | 8% |
Other revenue | 57 | 60 | 62 | 57 | 61 | 64 | 1% | -3% | -5% |
Gross revenue | 350 | 409 | 460 | 343 | 401 | 435 | 2% | 2% | 6% |
Portfolio amortisation & revaluation | -110 | -154 | -184 | -110 | -146 | -163 | 0% | 5% | 13% |
Net revenue | 240 | 255 | 276 | 233 | 256 | 272 | 3% | 0% | 1% |
Operating expenses | -126 | -137 | -145 | -125 | -136 | -145 | 1% | 1% | 0% |
EBITDA reported | 114 | 118 | 131 | 108 | 119 | 128 | 5% | -2% | 3% |
EBITDA margin | 48% | 46% | 48% | 47% | 47% | 47% | 1% | -1% | 1% |
EBIT | 105 | 109 | 122 | 100 | 110 | 119 | 6% | -2% | 3% |
Net financials | -53 | -55 | -56 | -53 | -55 | -57 | 2% | 0% | -2% |
Net profit (cont. operations) | 37 | 40 | 50 | 32 | 41 | 46 | 15% | -2% | 9% |
Discontinued | -11 | -3 | 0 | -8 | -2 | 0 | -51% | -39% | |
Cash EBITDA | 244 | 273 | 315 | 238 | 260 | 286 | 3% | 5% | 10% |
Cash EBITDA margin | 70% | 67% | 69% | 69% | 65% | 66% | 1% | 2% | 3% |
Source: ABG Sundal Collier, IR collected consensus 09 May'22
7 June 2022 | ABG Sundal Collier | 4 |
Axactor
Q2e forecast vs. consensus
Q1'22: Our forecasts vs. Consensus
q-o-q | y-o-y | Consensus | ||||||
EURm | Q2'22 | Q1'22 growth | Q2'21 growth | Q2'22 | Deviation | |||
Gross collection | 73.2 | 64.0 | 14% | 69.0 | 6% | 73.0 | 0.2 | 0% |
Third-party collection | 14.9 | 13.2 | 13% | 12.9 | 16% | 14.6 | 0.3 | 2% |
Gross revenues | 88.1 | 77.2 | 14% | 81.9 | 8% | 87.6 | 0.5 | 1% |
Portfolio amortisation & revaluation | -27.2 | -21.0 | 29% | -29.3 | -7% | -29.5 | 2.2 | -8% |
Net Revenue | 60.9 | 56.2 | 8% | 52.6 | 16% | 58.1 | 2.8 | 5% |
Total operating cost | -32.2 | -29.2 | 10% | -28.0 | 15% | -32.0 | -0.1 | 0% |
EBITDA reported | 28.7 | 27.0 | 6% | 24.6 | 17% | 26.1 | 2.6 | 10% |
EBITDA-margin (%) | 47% | 48% | -2% | 47% | 1% | 45% | 2% | 5% |
Depreciation and amortisation | -2.2 | -2.1 | 6% | -2.3 | -3% | -2.3 | 0.0 | -1% |
EBIT (reported) | 26.5 | 24.9 | 6% | 22.3 | 19% | 23.8 | 2.6 | 11% |
EBIT-margin (%) | 43% | 44% | -2% | 42% | 2% | 41% | 2% | 6% |
Net financials | -13.4 | -13.1 | 2% | -11.8 | 13% | -13.1 | -0.3 | 2% |
Net profit to equity holders (excl. REOs) | 9.8 | 7.9 | 23% | 10.1 | -3% | 7.6 | 2.1 | 28% |
Discontinued operations | -3.2 | -1.6 | -2.5 | 29% | -2.4 | -0.9 | 36% | |
Net profit to equity holders | 6.6 | 6.6 | -1% | 7.2 | -8% | 5.3 | 1.3 | 24% |
EPS | 0.02 | 0.02 | 16% | 0.01 | 0.02 | 0.00 | 24% | |
EPS (excl. REOs) | 0.03 | 0.03 | 23% | 0.03 | -3% | 0.03 | 0.01 | 28% |
ROE adj (excl. REOs) (%) | 6.6% | 6.8% | -4% | 6.9% | -4% | 6.9% | 0% | -5% |
Cash EBITDA (excl. REOs) | 55.9 | 48.1 | 16% | 54.0 | 3% | 55.5 | 0.4 | 1% |
Cash EBITDA margin (%) (excl. REOs) | 63% | 62% | 2% | 66% | -4% | 63% | ||
CAPEX | 50.0 | 79.6 | -37% | 28.9 | 73% | |||
ERC (ex. REOs) | 2,534 | 2,259 | 12% | 2,119 | 20% |
Source: Company data, ABG Sundal Collier, Company collected consensus on 09 M ay'22
7 June 2022 | ABG Sundal Collier | 5 |
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Axactor SE published this content on 07 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 June 2022 08:01:05 UTC.