The lock-ups expired quickly, and Arvo pulled the trigger even faster than my expectations. HANZA’s development has certainly been good, but IMO, expectations are also starting to get quite high. The valuation (with Tikr as the source) on a forward 12-month basis is at an adj. EV/EBIT level of around 14.5x, which is a fairly high level compared to history and contract manufacturing peers. Expectations for the company’s future profitability have also risen clearly, as EV/Sales (next 12 months) is at its historical high of 1.12x. On average, the level has been 0.70x in the 2020s.
High valuation helps in value creation through acquisitions, but I wouldn’t be surprised by some growing pains either, as the scale has already more than doubled compared to 2024.
I updated my view to positive also for the short term. I estimate that Arvo is now able to pay an average cooperative interest of 7.2% for the next three years. This strengthened outlook for cooperative interest, combined with a low balance sheet-based valuation and a good business trend, makes the expected return attractive. A steady profile, low valuation, and a well-diversified portfolio also stand out to their advantage, in my opinion, in the current volatile market, where average valuation levels have risen significantly.
Here is my full update.