Torghatten Buy
Industrials Company Report Norway 22 January 2018 Torghatten Buy Key Data Share price (NOK) 85.75 Fasten seat belt while seated Target price (NOK) 115.00 A wise man once said: “70% of future financial performance is explained by historical financial performance”. And, we don’t disagree. Indeed, our long-term investment case in Bloomberg TORG NO TORG is based on three simple arguments. First, TORG has evidenced a solid track record Market capitalisation (NOKm) 4,124m of profitable growth for more than a decade. Second, the company has been able to Enterprise value (NOKm) 6,642m improve its position in both the Air-, Ferry- and Bus segment and is currently positioned as the leading (top 1-3) player in all segments. Third, we find valuation attractive at 4.5x and Shares outstanding (m) 48m 9.2x current 2018e EV/EBITDA and P/E, respectively, and hence, we see solid upside Shares fully diluted (m) 48m Average daily volume (000s) 50.0 potential in underlying values. Thus, based on these arguments coupled with a 2017e- Free float (%) 47.1 2018e EPS, which is upped 6% and 9%, respectively, we reiterate our Buy recommendation but increase our target price from NOK88 to NOK115. Our tp correspond to 6x and 5.5x 2018e and 2019e EV/EBITDA, respectively and 2018e P/E of 12.3x and 2019e P/E of 10x. Evidenced profitable growth for more than a decade Since the ‘90s, competition in the public transportation sector intensified with entry Share Price (12m) of public tenders and Torghatten has grown rapidly at a 20% CAGR to the ~NOK9.4bn 88 turnover transportation giant it is today and averaged 18% ROE at the same time.
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