Sakset fra DNB engelske analyser.

AXACTOR NPL collections growing steadily Axactor reported a further improvement in NPL collections and margins in Q1, while writing-down expected remaining collections (ERC) on REOs by 2.5%, as well as guiding for later REO sales than previously. We have raised our 2020–2021e EPS by 1% to reflect the flatter collection curve and the EUR50m increase in the 2019 capex guidance. We continue to find Axactor attractively valued at a 2020e P/E of 5x, and reiterate our BUY and NOK50 target price.
NPLs progressing nicely, REOs face more headwinds but are smaller. Axactor’s Q1 report showed a continuation of trends from recent quarters. Gross collections on NPLs rose from a seasonally strong EUR40m in Q4 to EUR52m in Q1, and the collection performance was 4% better than the business case assumes. Collections on REOs picked up from the weak Q4 (affected by uncertainty on stamp fees), but the ERC for REOs was written down by EUR6m, and the collection curve has flattened, implying more sales are now expected at a later stage than Axactor had previously assumed. REOs now only make up ~14% of the company’s total ERC on a fully consolidated basis, implying they are below 10% of Axactor’s total exposure on a pro rata basis when adjusting for minorities. We therefore believe the positive trend in NPLs more than offsets the headwinds in REOs in our investment case. Axactor said it sees a steady flow of new NPL portfolios coming to the market. It also sees declining portfolio prices and IRRs climbing up to 12-14% from a level close to 10% earlier.
2020–2021e EPS raised 1% following the Q1 results. Driving the ~20% cut to our 2019e EPS is the ~40% EPS miss in Q1 driven by higher taxes and minority interests, along with a reduction in expected REO collections in 2019, with the total ERC written down by EUR6m and the collection curve being flattened. However, we have raised our 2020–2021e EPS by 1%, broadly reflecting more of the REO collections coming at a later stage (given the flatter curve) together with an increased capex estimate for 2019 after Axactor raised its CAPEX guidance by EUR50m.
BUY and NOK50 target price reiterated. We find Axactor attractively valued at a 2020e EV/EBIT of ~9.2x and a P/E of ~5x, combined with our expectation of strong earnings growth and a healthy revenue mix with a relatively high share of Debt Collection earnings. We expect a significant bottom-line improvement through 2019– 2020, as the ERC of EUR1.7bn has virtually doubled over the past year, driving higher revenues, while costs have not increased correspondingly. We also expect far better quarterly results YOY in 2019 on our view that the platform established in recent years will allow for higher margins from better utilisation, and economies of scale materialising due to high NPL investments.
BUY