I agree with Tershine, it seems like a very suitable acquisition target. In my opinion, segment lead Johan Carlos gave a good presentation at the CMD, which specifically delved into this topic of how such a product can have a really strong brand and loyal, passionate customers. Strands is, of course, a textbook example of this already.
Auroora vs. Relais is an interesting setup. Off the top of my head, I think the market values the following in Auroora:
- Currently, its businesses have significantly stronger market-driven organic growth than Relais.
- There is plenty of dry powder for acquisitions, as leverage is significantly more moderate than Relais’, and the coffers are full of funds from the share issue.
- Auroora is significantly smaller than Relais.
- In other words, it is easier for Auroora to grow faster than Relais for at least the next 3–5 years.
However, risks for Auroora might include:
- The fading of market-driven organic growth; is it necessarily as defensive in the long run as Relais’ commercial vehicles?
- So far, it is only focused on Finland, whereas Relais is well underway in other Nordic countries, and the game in continental Europe has also already begun. Auroora will eventually have to look for targets outside Finland, at which point it might not be as easy, as one of Auroora’s advantages is being a domestic alternative for Finnish entrepreneurs. Relais has better prerequisites and track records abroad.
- Auroora’s track record is still quite short; one cannot say for sure if the model works, and the risk level of individual acquisitions is therefore still higher.
In summary, Auroora is able to allocate significantly more capital to growth in the coming years, and it is easier to grow from a smaller size. Relais has plenty of debt, and they have to use their own shares for acquisitions, which makes the specter of dilution haunt some investors (myself included), even if value is being created.
On the other hand, Relais might be a better pick in the longer term due to its defensive industry if they reach, or preferably exceed, their targets in this new strategy period, especially regarding the return on invested capital.