ADDvise Group AB - Growth Platform Next Door

Stocks
, , , ,
1

My husband has been chattering for a while about a strange company in his portfolio that just seems to be rocketing upwards. He bought it somewhat casually, and now I’m asking what the swarm intelligence thinks about it.

It seems wonderfully expensive.

kuva
kuva1920×887 85.9 KB

Neither of us is particularly familiar with the healthcare sector, unless you count my own youthful experimentation with nursing studies. So it would be great to hear if any of these subsidiaries are familiar to professionals in the field and what their position is in the competitive landscape.

Here are the results of my digging:

Addvise Group AB was founded in 1989 and listed on Nasdaq First North in Stockholm in 1998. In 2010, the company changed its strategy and decided to purposefully expand and increase shareholder value through acquisitions in addition to organic growth. The aim is to expand the product portfolio and also expand geographically.

Excerpts from the Q2 report published on 23.7.2021:

kuva
kuva1989×861 167 KB

Geographically, nearly half of the revenue still comes from Sweden:

kuva
kuva1329×952 61.3 KB

In the Q2 report, the company reported improved margins. Inflation apparently did not cause undue pressure.

I am always most interested in the future. The COVID pandemic has caused a weakening in the revenue of companies offering non-urgent treatments. In the Q2 report:

kuva
kuva1707×1041 151 KB

On 23.9.2021, the company raised its long-term EBITDA from 15% to 20%.

Growth targets increased from 20% to 25%.

This has surely made investors put on their buying pants.

https://www.addvisegroup.com/news/D66C1286F37E6618/

Lab

Subsidiary websites:

Customers in both the public and private sectors.

Hettich Lavinstrument

  • Supplies various laboratory equipment, the uniqueness of which I cannot assess, to its long-term customers.

kuva

MRC Modular Room Construction Cleanrooms:

  • The company designs, builds, and supplies various structures for spaces requiring high hygiene.
  • Deals in July 2021.

kuva
kuva1170×1679 222 KB

Tillquist

  • 125-year-old manufacturer of measuring instruments.
  • Energy, Power Automation, Machine Builders, Process Automation, Photonics and the Electronics Industry.

Kebolabrum

  • 40 years of experience.
  • Design and supply laboratories with equipment on a “turnkey” basis and aim to be a partner in the future.

Healthcare

Subsidiary websites:

AB Germa

  • Various vacuum mattresses and pillows.

IM-Medico

  • Medical devices mainly in Sweden, but also internationally.
  • Design of medical bags in cooperation with an English company.
  • The company did not have English language pages.

Sonesta

  • Urology and gynecology chairs.

kuva
kuva600×400 13.4 KB

STI surgical tables

  • C-arm table
  • Streamline, Economax and Max

Sonar Oy

  • Located in Espoo.
  • Imaging equipment for healthcare: ultrasound, X-ray, and Doppler devices.
  • Industrial measuring instruments, e.g., Endoscopy, digital radiography, hardness testers, thickness gauges, eddy current and magnetization devices.
  • Industrial and healthcare isotope meters.
  • Maintenance.
  • Apparently, the equipment does not belong to Sonar. For example, the imaging devices are from Samsung.

kuva
kuva1170×948 91.2 KB

Merit Cables

  • Cable trading since 1983.
  • The company is located in California.

MediSuite

  • American online store specializing in men’s health medicines, e.g., for erectile dysfunction.
  • Intent to purchase announced 05/21 and deals agreed 08/21.

GraMedica

  • Specializes in the development of orthopedic implants and stents for foot and ankle surgeries.
  • The latest acquisition, intentions announced in March and agreement reached on 15.9.

This company certainly contains a comprehensive package of various healthcare companies. Boreo inevitably comes to mind with these enthusiastic acquisitions and stock price increases. The geographical expansion is positive.

22 Likes
2

Apparently, Redeye’s free analysis, updated on 13.9.2021, is available: https://s3-eu-west-1.amazonaws.com/rdey-cms-prod/app/uploads/2021/09/addvise_ny_update_2021-09-13.pdf

It seems that after that, the target prices have been updated upwards even further.

4 Likes
3

Addvise Group’s impressive stock rally continues today. Evergrande and the autumn blues of the stock market don’t seem to bother it much, as the stock has been fluctuating around +25%.

I didn’t find any special news for today. Could the company’s guidance change on September 23rd still be affecting it? The company expects SEK 1 billion in revenue for 2022 and has announced it can IMPROVE its margin. With prices rising, this is quite welcome news. Perhaps a bit incautious, given that it’s a company whose clients tend to publicly tender their procurements.

ADDvise Group AB raises its long-term EBITDA financial target from 15% to 20%. ADDvise also raises its long-term revenue growth target from 20% to 25%. Other long-term financial goals remain unchanged.

For the financial year 2022, on a pro forma basis rolling 12 months, ADDvise expects to reach revenue of SEK 1 billion with an EBITDA result of at least SEK 150 million before acquisition costs.

Redeye’s analysis on September 14th had the following Bull case:

kuva
kuva886×975 70.8 KB

Despite that, they didn’t raise the target price excessively.

kuva
kuva1049×436 42.9 KB

Well… Now it’s already well above SEK 17. Did the train already leave, or should we expect an equally impressive rocket surge in the future? There are certainly expectations for the future here. Swedes are definitely a “compound interest” people.

The analysis criticized the fundamentals but predicted they would improve, in his opinion. Time will tell.

Another thing that caught my eye in the analysis was this:

kuva
kuva2014×504 129 KB

The company has thus gained its first institutional investor, which, according to Redeye’s analysis, is a sign of good quality. This is certainly partly true. It would also be nice to get a skilled “pitbull” on the board alongside the “golden retrievers” with the arrival of institutional investors.

The company has been quite strongly owned by private individuals, and I noticed some of these largest shareholders joined through acquisitions.

It could be that with one institutional investor joining, others are expected to follow. Are they arriving already?

5 Likes
4

Heavily shorted

Not much discussion has arisen, but I’ll continue writing about Addvise news, as I’ve started.

Addvise’s stock is divided into A and B series.

The A-series stock has been on a fairly wild rise. This morning, the A-series stock was up a whopping +46%, while the B-series was in the negative.

There’s also a huge difference in YTD:

A-share YTD today
https://media.discordapp.net/attachments/750738134349906131/895243516240859156/unknown.png
B-share YTD today
https://media.discordapp.net/attachments/750738134349906131/895243470426505266/unknown.png

Today the company published this release:

https://www.addvisegroup.com/news/736558006FEA64AB/

In the release, the company stated that it cannot unequivocally explain the large difference between the A and B share series. One A-share gives you one vote, a B-share is 1/10 of that.
In practice, a -64% drop in 3 hours and the A-share ended up -35% today.

Well… The A-share is still up from what it was last week when I started writing about the stock. Today it’s 15.85 SEK and last week it was 14.3 SEK. At its best, it was somewhere around 35 SEK. :joy: But this serves as a cautionary tale of what can happen with strong price increases.

The first thing that comes to mind is, was this another pump-and-dump stock? :musical_notes:

Of course, it’s always possible that some institution hopes to gain greater voting power by buying A-shares. Be that as it may… This got exciting.

I’ll have to try to remember to check what happens to the stock in the future and whether there have been any surprising changes among the largest shareholders.

https://media.discordapp.net/attachments/749259353047171113/895362266936008704/image0.jpg

8 Likes
5

Addvise Group’s earnings report next week. Q1 was burdened by absences caused by the coronavirus, which should now be over. In addition, new acquisitions will be fully reflected in the Q2 results. Their EBITA margin has been better than Addvise’s. It will be an interesting earnings report. However, in the current situation, even a good earnings report may not be enough.

1 Like
6

Addvise Group reported a record Q2. Revenue increased by 97.1% and EBITA by 105%. The growth came from new acquisitions. Rolling 12-month Proforma EPS is 0.43 SEK and the share price is 6.70 SEK. Up 8.06% today.

Looks good, especially since orders increased by 112.5%, reaching 260.9 MSEK.

5 Likes
7

Incredible stuff!

This is definitely at quite a discount after the recent dip.

2 Likes
8

This is indeed an interesting company. Most of the growth is in North America. There is basically always demand for medical technology. Also, the sale of individual companies can generate earnings growth.

Can anyone figure out how much total debt this company has? They state the net debt is -500 million. I couldn’t find out if the debt from the latest acquisition was included in that.

Management holds a large number of shares in the company. The company’s A/B share classes are a bit unclear; I read that the B-share has 1/10 of the voting rights.

9

After the closing of the announced acquisitions, net debt is SEK 1,000.7M (Pro Forma). EBITDA is SEK 501M (Pro Forma).

It generates good cash flow, so I believe that the debt can be reduced quickly.

Currently, WACC > ROIC, so in a way, it’s a speculative investment… but it’s growing very fast and cash flow as well as EPS are also growing rapidly, so I think the potential for high returns is reasonably good.

Redeye’s Base Case scenario is SEK 23. In Redeye’s analysis, I think their revenue forecast for this year is too low. Q4 has previously been by far the best quarter, and I see no reason why it wouldn’t be this year. I believe that Redeye’s forecasts will be easily exceeded and they will raise their estimates after Q4.

2 Likes
10

If you look at the insider buys.
The first 7 pages are full of stock purchases. The latest line is when the CEO sold shares for 2 million euros.

1 Like
11

”Rikard Akhtarzand comments: “The divestment is solely made for private financial reasons, and I do not intend to sell additional shares and have therefore agreed to enter a lock-up agreement of 180 days on my remaining shares to emphasize this. The proceeds from the share sale will be used to finance costs related to a divorce. I have great faith in the future of ADDvise Group and I look forward to continuing to lead the company going forward.”

2 Likes
12

The company has certainly had a wild ride on the stock market, having already dropped 90% since last January, and today a new financing solution was announced, in which old owners who did not participate in the offering will be wiped out. The number of shares before the arrangement was 191M, and it can increase to almost 500M shares.

Debt at the end of Q3 was a staggering 1800MSEK, and net debt was 1400MSEK. The company will receive 457MSEK from the rights issue and a maximum of 172MSEK from warrants.

If the company uses all the funds received from the offering to repay debts, then the target of D/EBITDA being max 3 will just barely be met. A 2000MSEK bond matures in a year, and it would hardly have been possible to get a 5.5% margin on it in the current situation.

EV/EBITDA will remain at some level of 5 after the arrangement, but with a significantly lighter debt load. Would this be a good point to start with a clean slate?

2 Likes
13

The company has certainly had quite a fiasco throughout 2024, and this offering was the cherry on top. Management has changed and been dismissed, among other things.

In any case, this is cheap. The industry is interesting and relatively recession-proof, and management has even succeeded in their previous quarterly earnings calls in pinpointing the start of organic growth to “late Q4/24”, which seems to have materialized.

I already have significant losses from this in my portfolio, so I’m a bit hesitant to pour more money into this, even though the situation is clearly improving.

Still, this is indeed an attractive situation with the market cap, low multiples, and M&A (if successful), meaning theoretically years of growth. 10-bagger potential?

4 Likes
14

In my opinion, this summarizes well why the company’s stock price has plummeted. EBITA%, ROCE% and cash conversion have decreased quarter after quarter, and revenue growth has been solely inorganic. Additionally, reflecting on this, the company was run with an excessively high debt level, which led to a share issue made at a dismal valuation.
image

The share issue raised 457 MSEK (with warrants potentially raising an additional 172 MSEK in a year), in which insiders also participated, and in recent months they have also bought shares from the stock exchange. Net debt at year-end was approximately 1,435 MSEK, so the issue itself improves the net debt to 12M EBITDA ratio (3.8X at year-end).

image
Management itself has explained the weak FY24, mainly by an excessively good FY23.

Without taking a stand on how various tariffs might affect Addvise Group, I believe the current valuation includes a fair margin of safety.

  • Based on Quart’s data, Market cap is 233 MSEK and EV 1.7 BSEK; if the consensus estimate of two analysts materializes, EV/EBITDA is 3.9X based on FY25 figures (13.3% EBITDA growth). If EBITDA remains the same as FY24, the multiple would be ~4.5X.

Have others been following the company’s activities recently or bought shares?

2 Likes
15

Let’s try to revive the thread.

Half a year has passed since the rights issue, and on October 23rd, the first so-called “clean” quarter was published, which did not include costs related to the rights issue, nor one-time costs from subsequently restructured loans. The Q3 report and webcast reveal that organic growth is still challenging. The company is now emphasizing disciplined cost management, increasing EBITA%, and business cash flow. The net debt/EBITDA ratio of 3.2 was still above the company’s target of <3.0.

A smaller loan portfolio, decreased interest rates, and profitability enhancement measures are now nicely reflected in the bottom line and cash flow. EPS was SEK 0.09 (0.05) and operating cash flow was clearly positive at SEK 35 MSEK (-2.3 MSEK).

The CEO emphasizes that the focus is now on capital allocation discipline, which is at least desirable after all the past (in my opinion, reckless) years.

July–September 2025

Net revenue was SEK 363.2 million (403.6), an organic decrease of 10.0%, an organic decrease of 4.8% net of currency effects

Orders received was SEK 349.2 million (421.8), an organic decrease of 17.2%, a decrease of 12.1% net of currency effects

EBITA was SEK 56.4 million (55.4), an increase of 1.8%

Operating profit (EBIT) was SEK 44.8 million (66.4)

Profit for the period was SEK 56.0 million (11.8) and adjusted profit for the period was SEK 19.0 million (-5.4).

Basic earnings per share amounted to SEK 0.09 (0.05)

Operating cash flow was SEK 35.3 million (-2.3), an increase of 1,629.1%

5 Likes
16

Pareto lowered the target price to 2.0 kronor (previously 2.2 SEK) and reiterated its buy recommendation. The news does not provide any justifications. It would be interesting to know more, as there is almost 100% upside potential to the target price.

1 Like
17

The Chairman of the Board bought 580,000 shares. He previously owned 3 million shares. News on 4.11.

1 Like
18

I don’t have full insight into the company, other than hearing them mentioned a bit here at the Inderes office and they conduct their presentations with us. But after reviewing Q3, it feels like they are in a situation that many Swedish companies are in right now. Macroeconomic headwinds are mentioned as a factor for decreased organic revenue, and there is a full focus on operational efficiency impacting profitability. EBITA increased by 1.8% in Q3, and that in itself might not say much, but doing so while revenue decreased and order intake looks bleak might say more. However, this is likely the beginning of a journey for ADDvise, and they need to show more strength in their structure.

What do you think?

4 Likes
19

My simple Addvise investment theses are:

  1. The company’s new management has assured that cash flow and EBITA% are the top priorities.

  2. New acquisitions will be made disciplinedly, and Addvise’s debt situation will be carefully considered.

  3. The full exercise of warrants related to the rights issue would bring the company an additional 114-172 MSEK in Q1/2026 (dilution is 14.3%). After this, there should be NO further need for new directed issues or rights issues.

  4. Thanks to point 3) and improved cash flow, the net debt/EBITDA ratio will have fallen below 3.0 by the end of Q1/26. This is the company’s target level.

  5. The additional purchase prices for previous oversized acquisitions will have been almost entirely paid by the end of 2026. The cash flow profile will significantly improve as a result.

  6. Good comparables for Addvise can be found on the Swedish stock exchange: Addlife and Asker. Addvise’s key figures are favorable compared to them, and Addvise is valued at lower multiples. The reasons lie in Addvise’s history and are self-inflicted. However, the management has now been changed, and the main owners include Life Science experts. Many of them have significant shareholdings in Addvise.

With the spring refinancing, interest expenses/year are approximately 75 MSEK. The adjusted 12-month (LTM) P/E ratio is approximately 7. The EBITA margin is approximately 17%, meaning approximately 270 MSEK EBITA (non-IFRS).

If, thanks to the new management, confidence in the company returns and Addvise proceeds according to plan, then the multiples could rise closer to its comparables. In this case, Addvise will be a multi-bagger in the coming years.

The CEO summarized in the Q3 webcast that future acquisitions will be made thoughtfully: “No rush; it must be the right fit.” If it turns out that this principle is deviated from, I will be the first to sell my shares.

5 Likes
20

Amplex has made a tender offer for Addvise. A decent offer with approximately a 40% premium for us if one has jumped on the Addvise bandwagon this year. However, for those who bought Addvise in recent years, the news is not good. The tender offer is a method that has become sadly familiar even from the Helsinki stock exchange: The company’s insiders are buying. They already have approximately 30% of the shares and 40% of the voting power. Next, the board will “evaluate” the tender offer and will publish its stance on the matter within two weeks at the latest. The fox guarding the henhouse, I would say.

1 Like