Lollands & Nordfyns Bank

Lollands Bank og Nordfyns Bank banker sine konkurrenter

OM BANKSEKTOREN

Bankernes attraktivitet vurderes ud fra deres evner til at geninvestere de penge, de får ind fra nye kunder (udlån), i stedet for den traditionelle vurdering af pengestrømme. I led med Investment Panel Aarhus’ (IPA) investeringstilgang fokuseres der her på små og mellemstore bankers nøgletal.

I banksektoren er det essentielle, kvaliteten af deres kerneforretning; udlånsvæksten samt hvor meget de nedskriver på udlånene. Derudover skal det også vurderes, hvor godt de forvalter deres indtjening i forhold til markedets forventninger.

udlansvaekst-historik

Det ses af ovenstående, at de udvalgte banker generelt har været dårlige til at opretholde udlånsvækst (målt i %). Til gengæld nedskriver man meget mindre på udlånene, end man gjorde i krisens eftermæle. I en tid med de øgede krav til sektoren tyder det på, at bankerne drives sundt. Samtidig får aktionærerne en positiv forrentning på deres egenkapital. På trods af de skærpede krav fra regeringen, formår banksektoren nu at levere et afkast til sine aktionærer, der kan måle sig med de øvrige industrier.

Branchen formår altså at tjene penge. Målt på flere nøgletal handles banksektoren billigere end adskillige andre industrier på markedet. Dette hænger sammen med risikoen, som man påtager sig i bankaktier. Med en P/E på 11,3 for vores udvalgte banksektor, mener IPA, at der er potentiale for billige aktier, hvis man identificerer en lav-risiko-aktie, der samtidig handles billigt i forhold til andre banker. Risikofaktorer, der er relevant at se nærmere på, er eksponering overfor ejendomsmarkedet og landbruget. Da alle banker er følsomme overfor konjunkturer og renteniveau, bliver disse ikke uddybet i denne artikel.

IPA har screenet små og mellemstore banker, og ud fra historisk attraktivitet fremkom Lollands Bank og Nordfyns Bank som interessante kandidater. Godt nok har begge aktier oplevet en forøgelse af markedsværdi, men dette er med rette begrundet i deres performance de seneste par år. En grundigere gennemgang af Lollands Bank og Nordfyns Bank vil afsløre, om den tilsyneladende gevinst i aktierne skyldes risiko, eller om markedet har undervurderet aktierne.

LOLLANDS BANK

Lollands Bank er en lokalbank, med filialer på Lolland, Falster og Sydsjælland, som er kendetegnet ved en bankstrategi baseret på traditionel bankforretning.

Banken har i 2014 erhvervet den skræntende Vordingborg Bank og har i denne sammenhæng set store nedskrivninger i 2014. Opkøbet bringer dog, efter IPAs mening, gode muligheder for synergi samt naturlig udvidelse af markedspositionen i Sydsjælland. Dette kommer til udtryk gennem en mindre medarbejderstabel og lukning af filialer i den erhververede del af Vordingborg Bank, hvilket bør forklares med omkostningssynergier. Nedskrivningerne faldt i 2015 og forventes endnu lavere i 2016, hvor Lollands Bank tilbageførte nedskrivninger, hvilket tolkes som et stærkt positivt signal. Lollands Bank præsenterede et halvårsresultat 2016 før skat på 37,0 mio. DKK hvilket udgør en betydelig stigning i forhold til både halvårsresultat og årsresultatet for 2015, som udgjorde henholdsvis 11,4 mio. DKK og 33,3 mio. DKK før skat.

Det er vigtigt at pointere, at Lollands Bank har en anseelig eksponering overfor landbrug, hvilket kan blive betragtet som en risikofaktor ved investering. Lollands Bank adskiller sig dog på to vigtige parametre fra den gængse landbrugseksponering: Størstedelen af eksponeringen er overfor planteavl og landbrugsjord af høj kvalitet. Kvaliteten af jorden kommer til udtryk gennem høj hektarpris samt hurtig omsætning af landbrugsejendomme. Dette kan betyde, at risikoen bag den store landbrugseksponering bliver overvurderet, og aktien derfor ikke handles til en fair værdi.

Forventningen om lavere nedskrivninger samt lavere landbrugsrisiko, end markedet har prissat, giver IPA forventninger om et positivt afkast ved at investere i Lollands Bank. Derudover ser vi, at Lollands Bank performer godt sammenlignet med sine peers.

lollands-peergroup

Det ses af tabellen, at Lollands Bank handles relativt billigt i forhold til de udvalgte små og mellemstore banker, når man kigger på multiplerne P/E, P/B, P/S (hvor Sales er netto renteindtægter) og ROE. Lollands Bank er den billigste bank målt på P/E og har samtidig den næsthøjeste ROE. Samlet set giver multiplerne en estimeret kurs på 306 DKK eller 360 DKK baseret på hhv. median og middelværdi, svarende til et forventet afkast på hhv. 27% og 50%. Disse parametre er i høj grad med til at underbygge den positive investeringscase.

NORDFYNS BANK

Nordfyns Banks definerede markedsområde er Fyn samt Fredericia Kommune. Udover bankforretningen tilbyder koncernen også leasingfinansiering gennem Nordfyns Finans, hvis geografiske markedsområde omfatter hele Danmark. Nordfyns Bank beskæftiger i alt 102 medarbejdere og har haft sin CEO, Holger Bruun, på posten siden september 2009.

For mindre banker som Nordfyns Bank er det væsentligt at undersøge usikkerheder og markedsmæssige forhold. Én af de største risikofaktorer for banker er eksponeringen mod landbrugskunder, da denne sektor har haft økonomiske problemer i mange år. Sammenlignet med adskillige andre små banker med samme markedsværdi, er Nordfyns Bank dog blandt de banker, som er mindst eksponeret mod landbruget. Denne risikofaktor udgør dermed ikke en trussel for Nordfyns Bank. Generelle økonomiske risici ses især i forhold til fremtidig behov for nedskrivninger på udlån, og her fremgår der af årsrapporten 2015 følgende, som IPA vurderer som særdeles positivt:

Koncernens nedskrivninger på udlån er reduceret betydeligt i forhold til 2014. I lyset af de fortsat usikre udsigter for landbruget, er der i nedskrivningerne indeholdt en ekstraordinær porteføljenedskrivning på udlån relateret til landbruget. Denne nedskrivning udgør ca. 3,0 mio. kr. Koncernens eksponering mod landbruget er særdeles begrænset.”

Udviklingen i nedskrivninger som procent af udlån er faldet fra 1,88% i 2013 til 0,78% i 2015. Dette ses af nedenstående figur.

nedskrivningeripctafudlan

På adskillige nøgletal er Nordfyns Bank desuden billig i forhold til andre små og mellemstore banker, som ses af nedenstående multipelanalyse.

nordfyns-peergroup

Multipelanalysen af Nordfyns Bank viser, at aktien har den absolut højeste ROE, og samtidig er den billigste aktie målt på P/S sammen med Møns Bank. Analysen estimerer en aktiepris på 995 DKK eller 919 DKK baseret på hhv. median og middelværdi, svarende til en gevinst på hhv. 42% og 31% i forhold til nuværende kurs.

På kort sigt ligner Nordfyns Bank også en god investering ud fra det offentliggjorte halvårsregnskab for 2016. I regnskabet leverede koncernen et meget tilfredsstillende resultat. Udlån steg med 6%, og indlån steg med 3% i forhold til 1. halvår 2015. Forventningerne til basisindtjening for 2016 (før kursreguleringer, nedskrivninger, hensættelser og skat) er 35-45 mio. DKK. Med et halvårsresultat på 24 mio. DKK vurderer IPA, at Nordfyns Bank vil levere et årsresultat i den øvre ende af forventningerne eller måske overgå forventningerne.

KONKLUSION

Lollands Bank og Nordfyns Bank står ikke overfor risici, som nogle af de andre banker i samme sektor gør, hvorfor man kan argumentere for, at en discount i prisen ikke er så sandsynlig. Den udvalgte banksektor over små og mellemstore banker handles cirka til P/E på 11,3, så en P/E på 6-7 for en sund bank tyder på en signifikant upside. Ligeledes viser multipelanalyserne af både Lollands Bank og Nordfyns Bank, hvor undervurderede aktierne er. Ud fra adskillige nøgletal handles begge aktier markant billigere end sine nærmeste peers både på median og middelværdi. Med lavere nedskrivninger og lovende halvårsregnskaber i 2016 for begge banker, anbefaler IPA derfor et køb på Lollands Bank og Nordfyns Bank.

Disclaimer: Investment Panel Aarhus ejer selv  aktier i både Lollands & Nordfyns Bank på publiceringstidspunktet

Roblon

Roblon

About Roblon
Roblon comprises four product groups: fibre cable, offshore, TWM (machinery for twisting, winding, and rope manufacturing) and lighting. Roblon is the world’s leading supplier of both fibre-based products and machinery for the fibre cable industry.
Roblon’s largest department
Roblon both specializes in the development of high-tech fibre products and advanced machinery for the fibre cable industry. The industrial cable fibres from Roblon are acknowledged for the development-oriented approach and are frequently called upon, when novel solutions are needed. The extensive experience combined with their understanding of the customer’s needs enable them to offer the most future-oriented and efficient cable-making solutions in the market. Demand for fibre optic cables is driven by an ever-increasing demand for lightning-fast data transfer for faster Internet connections, server solutions “in the cloud”, video-on-demand services and online gaming.

 

The offshore department
As an experienced supplier to the offshore oil and gas industry, Roblon specializes in the development of high-tech fibre products. The offshore oil and gas industry is supplied with fibre-based products for strapping and piggybacking as well as products for reinforcement of flexible risers and composite pipes. Roblon Offshore & Composite Systems also produces special industrial fibre products, which require a high level of product development and innovation. In this field most products are customer specific and often developed in close cooperation with the customer. The market is growing and new uses for Roblon’s strong and lightweight fibre solutions are constantly being found. For the same reason, innovation and product development often take place in close cooperation with our customers. They turn to us with the expectation that Roblon’s know-how on synthetic fibres in off- shore environments can help to address a specific challenge.
The stable income
Since 1978 Roblon Industry has developed an extensive product programme consisting of equipment and accessories for the production of twine, rope, and cordage. The market for twisters, rope-making machinery and winders is highly globalized with a stable market trend. As a general rule, the demand for Roblon’s equipment follows the economic business cycles quite closely.
Quality lightning
Products for fibre-optic lightning and LED lightning. Many different grades of LED light fittings and solutions are now offered at various price levels, with the market dominated by a large number of low-price manufacturers. Roblon focuses on quality lighting and on customers with a strong business incentive to invest in good lighting. These are customers for whom perfect lighting is essential for presenting their products as attractively as possible.
The size distribution of each Roblon’s departments in terms of revenue:Revenue

Future expectations
An important factor that affects the prospects for 2015 is the rapidly falling oil price. Prices have fallen by more than 40% since the summer 2014. The falling prices will result in and does already result in a drop of new investments within the oil industry. Many oil companies that operate in the North Sea follow the rule of thumb that new investments are deferred when oil prices hit USD 80 per b arrel. The direct revenue from the oil industry accounts for 20% of Roblon’s total revenue.
One of the ways Roblon will continue business and market development is by having more of a presence in relation to both existing and prospective customers. In the current financial year this will take the form of investing in additional sales staff. In the short term this will lead to greater costs and some impact on the operating profit.
Valuation
We perform a Discounted Cash Flow Analysis based on unlevered free cash flow. We base our estimates on the periods from 2009 to 2014, which are the most recent annual reports.
Over this historic period Roblon have nearly had a 40% growth in revenue, as well as improving margins. What might be of concern is that in recent periods, revenue has not been improving and margins have remained good, but not improving. This will affect our estimate of future growth to be positive, and with slightly increasing margins.
Based on a WACC of 9% we find a target price of:

Valuation

 

We base the WACC on the offshore/manufacturing industry average. A WACC of 9% might seem high, but we believe that there is some unresolved uncertainty with Roblon’s offshore sector, which is a sector undergoing a downwards trend.
The scenario analysis is based on a matrix between expected WACC levels and growth levels:

Scenario
We see that the stock price is highly affected by changes in the WACC (as usual). In many of the scenarios we find the target price below the stock’s current price. This seemingly low to no upside leads to a hold recommendation.

 

Peers
As Roblon is operating in a highly specialised industry, we have chosen to compare peers on a matching industry level and neglecting the geographical dimension. This entails that the selected peers evaluation result should be acted upon with caution.

Peers

According to peers it seems that Roblon’s equity includes a pricing advantage on earnings and book value of equity compared to peers with P/B = 1,91 and P/E = 11,97. There seems to be no pricing advantage on the sales amount for Roblon’s equity. Also Roblon’s ROE figure is 25% lower than average (15,55%) where the ROE peer average is mainly driven by the AF Gruppen average of 20,75%. The ROA level for Roblon is 59% above average. When assessing D/E, Roblon is 37% above average of peers, which might indicate higher long term risks than that of the peers. The current ratio indicates a lower short term risk than Peers, which should make Roblon better able to meet its short term obligations.

Change in Roblon’s expected earnings on a quarterly basis:

EE

 

The Quarterly statements show no significant recent upwards adjustments of earnings expectations. The overview shows that Roblon is quite good at meeting their expectations on earnings, which is very positive. Therefore it is not expected that the company will make any shock downgrades of expected earnings.

 

Conclusion
Overall, we issue a hold recommendation on Roblon A/S. This is based on an estimated share price of 351, which reflect an upside of 2% and taking the P/E ratio into account we can see that Roblon is traded at a lower price than its competitors. Furthermore Roblon have been quite precise in their resent annual earnings expectations indicating that it is a trustworthy and stabile company.

RTX

Company information
Name: RTX A/S
Sector: IT
Industry: Communication equipment
Listed at: Small Cap Copenhagen – DK
1-year-historical performance: + 163 %

 

Activities
The company’s focus area is the design of advanced wireless short-range radio systems and products. The focus is solutions within the technologies of Wi-Fi, Bluetooth, VoIP, DECT and CAT-iq. RTX possess know-how of both soft- and hardware. The company also takes projects from specification, design, development, test and verification into the final product.
The company activities are separated in two main business units. The first: Design Services that entails R&D design partnership of wireless solutions, and delivery of wireless modules with Wi-Fi and DECT radio technologies. The other is Enterprise & VoIP where RTX operates as ODM/OEM supplier of advanced IPtelephony solutions for the Enterprise and SME market.

 

Share Repurchase
In FY14, RTX A/S bought back DKK 7,9 m. of treasury shares. The reasoning behind the share repurchase program was to adjust the company’s capital structure as well as to cover future share-based remuneration.
The same is held from January 27 to April 30, 2015 where the company again will repurchase shares for an amount of up to DKK 3,0 m.
Furthermore, the share repurchase can be interpreted as a signal from the RTX management that the stock is
undervalued.

 

Peer Analysis
The Danish company RTX operates in a specialised industry, which implies that the sector is very exposed to company specific risk. Therefore, the Peer Analysis should be carried through with deepest caution, as it might be less accurate than normal.
The companies selected to the Peer Analysis are picked based on the characteristic that they operating within
the subsector of wireless communication equipment and that they have a market cap similar to RTX.

 

Multiple

In the figure above, RTX has the highest P/B and P/S with respectively 18% and 10% on average, which might indicate that the company is overvalued. Nevertheless, when looking at the P/E-ratio the company is below the average with 23%, which may not be expensive for a company in this sector. On the other hand, when looking at ROE, ROA and the Operating Margin the profitability indicators beat the peers with two digit on average.
This could indicate that the higher price of RTX based on the P/B- and P/S-ratios’ is justified by a higher profitability. As a conclusion, we believe that RTX is best in class.

 

Risk
When looking at the figure below for RTX ratios, the solvency ratio proves that RTX is at a stable level with respect to their ability to pay back overall liabilities. Even though they experienced a decline in the ratio in the first part of the 2014, the ratio recovered throughout the fiscal year.
In the same fashion, it is clear from both the quick and current ratio that RTX excel in controlling their liabilities. With both ratios around 2,8 it is clear that RTX is a very stable company who is able to pay their short-term obligations.
Finally, RTX have experienced a steady growth in their net turnover and profit margin. This relation is revealed in their level of ROIC and ROE, which have been at a high level in both the whole fiscal year and the first quarter of each year. This combined shows that RTX is able to generate a profit from their invest capital.

 

Risk

 

Valuation
In order to get an absolute price target we apply the DCF valuation method.
Since 2010, RTX has made positive net profits with a strong yearly average growth. Furthermore, the future for the company’s business units possess a strong potential for continued growth. This substantiate a high growth in revenues in the forecast-period of 13%, which we apply in the final valuation.
Since RTX is 75% equity-financed with a stabile risk performance, we use a WACC of 8,5%.
Discounting the cash flows, we arrive at an estimated share price at 112 DKK. Comparing to the current share price as below, this leaves a potential upside of 79%.

 

Valuation summary

As illustrated below in the scenario analysis, two of the more important variables are used to show the sensitivity when changing the WACC and growth rate with 0,5% and 1%, respectively, at a time. The quick review of changing the two variables shows that the worst-case valuation is a share price of 88 DKK. In turn, the best-case valuation provides a share price of 146 DKK.

Senario analysis

 

Conclusion
We believe that the company’s business units have the ability to grow in the future. The Peer Analysis showed that RTX is best in class, both in terms of risk and operations. With an estimated share price of 112 DKK, and an upside of 79%, the panel recommends: BUY. It can be noted that while producing this article the share price
has already increased to 99,5 DDK as of March 12, 2015 which changes the recommendation from BUY to HOLD.
Authors: Allan Gjerløv Jensen, Anders Bager Rasmussen

 

 

 

Zealand Pharma

Business info
Zealand Pharma A/S is a Danish based biopharmaceutical company which is engaged in the discovery, development and commercialization of peptide medicines. Their pipeline contains:

  • Lyxumia (Lixisenatide)–At the market
  • Lyxumia/Lantus (Lixilan)–Phase III
  • ZP2929–Phase I
  • Danegaptide–Phase II
  • Elsiglutide–Phase II

The overall pipeline includes cardio-metabolic diseases that are the underlying medicine for diabetes, and obesity treatment and the company’s most valuable partner right now is Sanofi who is handled with the products Lixisenatide and LixiLan.
Exposition of the pipeline
-Lixisenatide
The product Lixisenatide is a drug for treatment of adults with Type 2 diabetes. In 2013,Lixisenatide was approved in both Europe and Japan and under regulatory review in anumber of other countries globally, paving the way for future sales growth. A general industryconsensus believes that once the product is approved in US (the worlds largest market fordrug of insulin), the sales will accelerate, leading to forecasted sales of € 696 mill. in 2018. Inour forecasted model, only a one-time milestone payment of € 19 mill. is incorporated, sinceLixisenatide is already a marketable product. The specific agreements regarding royaltyrevenues are unavailable for the public, but lies in the low-double-digit region. Based on thelittle given information, a fair estimate is royalty revenue of 15% of total sales. Due to the factthat the product is already marketable in Europe and Japan, and is expected to apply forregistering in the US in summer 2015, the probability of receiving the royalty revenues isfairly high compared to some of Zealand Pharma’s other products.
-LixiLan
This is a combination product of Lixisenatide and Sanofis Lantus. In the following two years,the key driver of expected income is milestone payments. LixiLan is currently in Phase III, andregulatory filings are expected to occur late 2015. Our sales forecast is based on theexpectation that LixiLan is marketable from 2016, which is also the last year that LixiLan willreceive milestone payments. The unpredictable nature of pharmaceuticals has made us relyon analyst consensus reports. Total sales in 2018 are expected to be € 734 mill. After 2018,the sales are forecasted to grow at the rate of inflation. Royalty revenues are expected to be15% of total sales, and the probability of receiving the milestone payments is considered to berelatively high. Due to the late development stage of LixiLan, and the fact that Sanofi is astrong market player, the optimism for the products succes in the market is rather high.
-ZP2929
The product ZP2929 is a drug for diabetics and obesity. The market is fast changing with many players, so naturally it is hard to find the money to develop the drug. Zealand recently lost Boehringer as their partner due to better potential in another drugs.
The main factor of the cash flow is the milestones from partners and we see low likelihood of a new partner for ZP2929, a once-daily glucagon injection, is a lesser attractive investment than the brand new drug in process of Zealand, a glucagon tablet that require no injection. As this new drug just emerged, we can only expect low cash flow with low probability of reaching the market and hence we tried to include this in the cash flow of ZP2929. We set a chance of obtaining a new partner to 15%.
Assuming the maximum sales is the sales of Novo Nordic’s Victoza we projected the royalties of ZP2929 that is, according to the previous Boehringer deal, is “… a high single to low double digit of global sales”. As the product is estimated to reach the market in 2021 and the similar Victoza already in stores, the sales are expected to be 15% of Victoza.
– Danegaptide This drug can bring oxygen to the heart musculature. The realty of the product is dependent on finding a partner who can truly or partial pay for the cost to take the drug to the next phase. The probability is expected to 20% because Danegaptide has succeeded in a lot of tests, which probably will make the attractive for a new partner to make a partnership. But of cause there is a risk.
-Elsiglutide
This is a drug to treat diarrhoea, which can break out under chemotherapy. The drug is not dependent of partnership agreement probability because Zealand Pharma already works together with Helsinn. The drug is only at phase II that makes a probability for succeed the coming phases approximately a bit under 50%, which makes the future milestone earnings less likely. Because the expected royalties for the product first lie in the future (expected six to eight years from 2014) and the probability to get the permission is estimated to be very low, the net present value of future royalties are very low. The induced milestone earnings are the most important earnings for Elsiglutide.

 

Cash burn
The company has a yearly cash burn of approximately € 24 mill. The majority is spent on research and development (€ 20 million) but administration cost is also significant (€ 4 mill.). With cash position of € 40 mill., Zealand Pharma can run 20 months without income or new capital. However Zealand Pharma is collecting significant revenue from milestones and is in addition starting to earn royalties. As long as Zealand Pharma has moderate success with their drugs going forward, we do not expect them to need to raise new capital.
As seen on the figure above, the calculation for the company’s valuation ends at a total net present value of € 150,7 mill. which corresponds to a share price of DKK 48,7.

Zealand Pharma - Table1
The conclusion of the valuation is clear, we recommend to not invest in the company, because the expected share price is DKK 48,7 and todays share price is DKK 62,0. It is important to underline the relatively high uncertainty of the future earnings, given the heavy reliance on the outcome of clinical tests.

 
Authors Allan Gjerløv Jensen, Thomas Tang Axelsen

Arkil

Introduction
Arkil Holding A/S is a Danish-based engineering and construction company with headquarters in Haderslev. The company is engaged in various types of construction works, performs asphalt surfacing and maintenance, foundation and marine construction and road service. Besides Denmark, Arkil also operates in Germany, Ireland and Sweden. The company has 1.166 employees and the revenue for 2013 was 2.776,4
million DKK. The foreign part accounted for a total of 29 % of revenues. Arkil’s expectations for 2014 are revenue of 3.000 million DKK. and a profit before taxes between 50-80 million DKK.

Valuation
Our DCF analysis is based on the free cash flow approach which assumes that shareholder wealth is directly related to the free cash flows generated by the company. In order to compute the free cash flow of Arkil the main drivers in the model has been forecasted: net profits, depreciations, CAPEX and net changes in net working capital.

 

In the revenues forecast we start out with revenues for 2014 of 3.000 million DKK equal to Arkil’s own expectations for the year. A future revenue growth of 7,4% in 2015 is assumed based on the 2010-2013
mean. This growth rate is from 2015-2018 set to fade linearly to 2% – our long-run growth rate. The associated costs are forecasted in a similar  manner, however company marginal taxes rates are set to 23,5%
in 2015 and 22% hereafter in accordance with proclaimed tax rules. This provides a net profit forecast asseen in the table below.
To forecast the net changes in net working capital of Arkil we notice from the table below that net working capital the last 3 years approximately has been a fixed percentage of revenues. We therefore set future net working capital equal to this fixed percentage and thereby get forecasted net change in net working capital.
The depreciations are assumed to remain on the 2013 level since there have only been small variations in the item and no obvious trend in the past years. Further, CAPEX is set to fade to this level in order to ensure
balance between the two items in the terminal part.

 

Arkil - table1

To sum up, the forecast for the main drivers is seen below.

Arkil - table2

We use a WACC of 9%, which again is reasonably conservative.

Computing the free cash flows and doing the valuation we get share price of DKK 1.727,58, which compared to the actual share price of 26-05-2014 of DKK 865 equals an up side of 99,7%.

Arkil - table3

Multiple – valuation metrics, P/E, P/B, P/S and EV/EBITDA.
Looking at the valuation multiples for the company, it seems obvious that it is relatively inexpensive company. All multiples are well below both the peer average and peer median.

– Growth and profit margin
In terms of profitability, Arkil is ranked among the top of its close peers, and well above the industry average and median. If we look at the profitability of the company, this is once again a point of relative strength;
however, there is a large variability within the sector. In terms of growth Arkil seems to be lagging behind its peers, with a geometric growth rate of 1.3% during the last five years against a peer average of 1.9%.

– Capitalization and return metric
Compared to peers, the company has a relatively high proportion of equity financing, this is an equity buffer is a desirable property to have in such a cyclical industry. Nevertheless, this capital structure has resulted in a lower ROE compared to peers.

Arkil - table4

 

In conclusion
At a DCF valuation with an up side at 99,7% build up with a conservative estimations and the multiples analysis where Arkil seems relatively inexpensive refer to a expectation that Arkil may be a cheap and solid
investment.
Authors: Allan Gjerløv Jensen, Anders Bager Rasmussen and Christian Montes Schutte