EBITDA excl. Adevinta of Nkr 542 million ($52 million) was broadly in line with the company's expectations and 2% ahead of InFrontFinance consensus, driven by a beat in Norway and Financial Services, partly offset by a miss in News Media on the weaker topline. The key Nordic Marketplaces segment was broadly in line with growth of 9% in third quarter (second quarter: 5%) — including verticals up +12% in third quarter after 11% in second quarter. Encouragingly, Sweden growth improved to +3.9% in local currency in third quarter (GSe +2.0%) after +1.2% in second quarter while display advertising continued to improve in both Norway and Sweden. This implies that Nordic Marketplace needs to deliver c.9%/c.7% revenue growth in fourth quarter to hit GS/consensus FY estimates, which we see as achievable given the momentum in the verticals.
Management reiterated guidance of medium- to long-term revenue growth of 8%-12% for Nordic Marketplaces (GSe 9% CAGR 2019-23E). For Lendo, while management continue to see uncertainty around the timing of the recovery in Norway, they noted the market was at a more stable level on a month by month basis and remain positive on the longer-term outlook for the business. Lendo's expansion costs are now expected to be at Nkr 100 million ($10 million), at the upper end of previous guidance range of Nkr 70-100 million ($7.5-10 million). Schibsted will also continue the previously announced a buyback of up to 2% of outstanding shares (of which 1.03% has been completed). The company looks for further color on the call regarding the outlook, uses of cash as well as consolidation opportunities in classifieds.
|SBSTA.OL||12m Price Target: Nkr307.90||Price: Nkr260.10||Upside: 18.4%|
|Market cap: Nkr61.7bn / $6.8bn|
|Enterprise value: Nkr66.6bn / $7.3bn|
|3m ADTV: Nkr60.6mn / $6.7mn|
|M&A Rank: 3|
|Leases incl. in net debt & EV?: No|
|Pan Europe Conviction List|
|Revenue (Nkr mn)||18,059.0||19,260.8||20,990.4||22,515.4|
|EBIT (Nkr mn)||2,537.0||2,986.3||4,053.9||4,836.6|
|EV/EBITDA (ex lease,X)||14.4||14.8||11.4||9.5|
|Dividend yield (%)||1.0||0.9||1.0||1.2|
|FCF yield (%)||2.1||1.5||2.1||4.1|
|N debt/EBITDA (ex lease,X)||1.5||1.1||0.4||0.2|
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 24 Oct 2019 close.
Norway Third quarter revenue growth came in at 10.7% (GSe 11.5%) after +7.4% in second quarter on 410bp easier comps, with classifieds remaining solid at +11% (second quarter: +11%) driven by the job and car verticals, with real estate declining due to a softer housing market. Display advertising in Norway was up 15% in third quarter after returning to growth in second quarter. Norway EBITDA came in 7% ahead of consensus due to lower marketing costs. Sweden growth improved to +3.9% in local currency in second quarter (GSe +3.0%) after +1.2% in first quarter, with underlying revenue growth (excl. the impact of termination of license revenue from Adevinta and certain revenue transferred from Blocket to News Media) even stronger at +7%. This was mainly driven by solid growth in the classifieds (+8% vs +6% in the second quarter) due to the cars vertical while display advertising was down -1%. Sweden EBITDA came in c.6% below consensus due to investments in growth initiatives.
Adevinta already reported a solid set of the third quarter results with proportional revenues up 15% yoy while proportional EBITDA was up 38% yoy.
In Financial Services, Lendo returned to growth at +4% in the third quarter (GSe 3.5%) after -1.5% in the second quarter on 16pp easier comps, with Sweden up 13% (second quarter: 10%), while Norway continues to be impacted by regulations, although the market has stabilized on a month by month basis. Segment EBITDA was c.16% ahead of consensus, with margins down 18pp yoy due to investments for the geographical expansion of Lendo (Nkr 27 million [$2.9 million] impact in the third quarter vs. 32 million [$3 million] in the second quarter). Schibsted now expects FY19 expansion costs for Lendo to be Nkr 100 million ($10 million), at the upper end of the previous guidance range of Nkr70-100 million ($7.5-10 million) in 2019.
In Growth, Prisjakt revenue came in below the company's expectations due to the impact of decreasing click volumes within their primary electronics verticals while Distribution revenues were up 18% yoy (second quarter: 14%). Segment EBITDA was 25% below consensus due to the weaker topline and increased marketing spend in Prisjakt.
News Media revenues came in 3% below expectations due to weaker digital advertising growth at Aftonbladet in Sweden while EBITDA was c.6% below consensus due to the weaker topline.
We are Buy rated (on CL) on Schibsted. The company's SOTP-based 12-month price target is Nkr307.9 ($33). Key risks to its view and PT include: Execution risk related to improving the monetisation and profitability of Adevinta's key markets; further deterioration in display advertising in various markets; increased competition from global tech players; a weaker macro environment; and a global internet stock de-rating.
Source: Company data, InFrontFinance Goldman Sachs Global Investment Research
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