SAAB - Launchers and Submarines

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Hello.

I asked the administration for permission to start a thread, and permission was granted immediately. I was advised to first lay some groundwork for the thread and share my own thoughts, etc. Well, I’ll give it a try.

GENERAL

As everyone (except for the youngsters) remembers, Saab manufactured Saabs for decades, ugly but warm and durable cars. Nowadays, car manufacturing has been abandoned, and efforts have been put into various weapons, weapon systems, and also something for the civilian aviation sector.

PRODUCTS

Among the most well-known products (IMO) are Gripen fighter jets and NLAW anti-tank missiles / launchers. When I explored the company’s website, I noticed that the company manufactures all sorts of defense-related items. For me, Saab brings to mind (besides cars) precisely the Gripen fighter jets, and I assume many others feel the same way. To my shame, I didn’t even know that NLAW is a Swedish weapon, even though I have followed the war in Ukraine very closely. If you are interested in what other weapons and radars Saab actually manufactures, then check out the links below.

SAAB GRIPEN E/F (a single example.)

96 units manufactured. Gripen E/F fighter jets have been ordered by Sweden (60 aircraft) and Brazil (36 aircraft). In addition to Sweden, the basic C/D version of the Gripen has been purchased and is used by South Africa (27 aircraft) and Thailand (12 aircraft). Furthermore, NATO countries Hungary and the Czech Republic have each leased 14 Gripens from Sweden for their air forces.
Source: Gripen E on testeissä Pirkkalassa ja ensi kertaa Ruotsin ulkopuolella – Saab kehuu koneen uudenaikaisuutta, mutta onko se valmis? | Yle

My own thoughts: The Gripen is certainly a capable aircraft, and it was indeed one of the candidates to replace the Hornet. Fighter jets are enormously expensive, regardless of the brand, model, or manufacturer. IF Sweden manages to sell these, it means a big pot of money. There’s a big question mark here. If and if. And what might one submarine manufactured by Saab cost? A lot! War, warfare, weapons, and developing and updating a credible defense cost absolutely insane amounts.

INVESTING IN PRODUCTS INTENDED FOR KILLING HUMANS

Everyone can ponder this title in their own mind and value system. Some may have to grapple with ethical-moral questions, others may not. I personally think about the matter in the following way: After Russia cowardly attacked its neighboring country and daily bombed civilian targets without any pangs of conscience, I have no obstacles whatsoever to supporting the arms industry in Western countries, on the side of good and right. Every country always has an army - if not its own, then a foreign one.

IMPACTS OF THE WAR IN UKRAINE

Immediately after Russia’s (sic) attack, the stock price shot towards the sky like a missile. Countries across Europe reacted, and (as I understand it) Saab’s order books are screaming red. And these weapons and weapon systems are not bought to attack Moldova or Portugal, but so that that one utterly mad dwarf doesn’t dare to attack Europe. These are ordered and bought for DEFENSE against the Russian threat.

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P/E, EBIT, P/S, EPS

Key figures, or at least their basics, should be familiar to every investor. For my part, I can tell you (again) that they are not. They just don’t sink in well enough, no matter how much I try to learn. That’s why I ask you, esteemed colleagues: What do you think of Saab’s key figures? Do you think the stock is now (with the war-driven price increase) cheap or expensive? Does any key figure stand out to you in a good or bad way? And I’m not begging or soliciting investment tips here, but perhaps I too can read and deduce something from the figures or between the lines.

FINALLY, MY OWN THOUGHTS

Next month I will receive my tax refunds and invest them in Saab. As I stated, I do not feel that I am acting ethically wrong by investing in weapons. I am investing in the security of Europe and, above all, Finland. The investment is also a kind of statement, at least in my own heart. Investing in one’s own and one’s loved ones’ security is never wrong. The amount to be invested is small for many of you, but for me, it is large. My largest single investment.

#slavaukraini #stopputin saab

EDIT: Stock chart added

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Kurssien ja niiden muutosten kyselyt, kauhistelut ja hehkuttelut (Osa 3)
Kurssien ja niiden muutosten kyselyt, kauhistelut ja hehkuttelut (Osa 3)
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Quite a good opening to the topic and the company.

You don’t need to calculate the multiples yourself; they can be found ready-made on many different websites. These were picked from Investing.com:

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So, based on these, it’s not exactly a cheap company.

From a domestic perspective, it is significant that Saab is supplying the combat management system for the upcoming corvettes and acting as the integrator for the combat systems. That package was about half of the total budget for the Squadron 2020 (Laivue 2020) project.

The Swedish Navy is also acquiring new corvettes (?) and the entire construction of these is expected to be in Saab’s hands. Although in Finland, hopes have been harbored that they would buy the Squadron 2020 series, in my view, this doesn’t seem realistic (especially since the Squadron 2020 project has been somewhat unnecessarily challenging for the RMC shipyard). That is also a billion-euro scale project, with decisions expected in the coming years. However, Sweden’s upcoming NATO membership may bring changes to these plans.

More broadly, it is also interesting to consider the effects of Sweden’s NATO membership on Saab. Could Investor and the Wallenbergs (Investor and Wallenberg Investments together own approx. 39% of the shares) be willing to sell Saab as part of a larger entity?

Let’s also add this image of how the business is divided into different segments, business areas, and geographically:

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And finally, perhaps Kongsberg Defence is in a way quite a good peer when comparing key figures and also helpful for considering what changes NATO membership could bring. One could even toy with the idea of those merging, but it certainly wouldn’t be the simplest merger to pull off.

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Defense procurement processes are almost always very lengthy. The war in Ukraine has consumed a great deal of materiel and, due to decades of neglect, has significantly increased the need—especially in Europe—to not only replace depleted stocks but also to increase military equipment in terms of both quality and quantity. I personally believe that strong demand will last for at least the next ten years, and that the actual major investments will only be finalized in three to four years because of slow political decision-making and the length of competitive bidding processes.

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Thank you for your answers. Good reflections. According to some, NATO membership has been priced into the share price for a good while now. Maybe, maybe not, but how many crowns is our neighbor planning to pour into its defense in the coming years? And if possible, every nation always strives to buy domestic production, provided that the competitive bidding allows it. And if it doesn’t, they find ways to maneuver.

As jps wrote above, these acquisitions are massive and expensive, and they are mulled over in various national organizations for a long time to get the best possible price-quality ratio. Just like Finland did with the Hornet replacements.

The Sirius surveillance system, developed for electronic warfare, is also an interesting product. A lot of Finnish expertise has been utilized here as well. Saab kutisti tehokkaan ELSO-ratkaisun – lentää vaikka kaupalliseen droneen kiinnitettynä | lentoposti.fi

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It depends on the perspective. Saab is indeed the cheapest company in terms of valuation multiples that offers fighter jets, submarines, etc.

If there’s speculation about a massive deal, I’d bet on submarines. Saab just submitted a bid for submarines to the Netherlands. Similarly, for example, Norway will likely have equipment to renew soon. And in this global situation, why wouldn’t new countries emerge as submarine users?

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Norway has already ordered U212CD class submarines from Thyssen. So Saab was not included in these.
Norway’s new subs especially designed for covert, shallow water operations | The Independent Barents Observer (thebarentsobserver.com)

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At least the investments in R&D and testing in Finland and Sweden are substantial. I’m following this with interest, with my finger on the so-called buy trigger.

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An investor letter arrived by email. Here it is machine-translated into Finnish.

Saab acquires BlueBear

Saab has today acquired UK-based BlueBear Systems Group Ltd.

The acquisition of all shares in BlueBear is part of Saab’s ongoing international growth journey in key markets, including the UK, Australia, the US, and Germany. BlueBear is a world leader in AI-enabled autonomous swarm systems for complex defense and security applications. BlueBear employs 65 people outside Bedford, England, and had a turnover of £8 million in 2022.

The combination of Saab’s world-leading products, services, and solutions and BlueBear’s experience as an agile integrator of AI-enabled autonomous swarm systems is a powerful driver of Saab’s future capabilities. BlueBear will contribute to Saab’s existing operations globally, and Saab will benefit from BlueBear’s expertise in autonomy and swarming, as well as command and control systems.

As emerging and disruptive technologies, such as AI, machine learning, and autonomous systems, can shape entire industries, Saab is adopting a proactive strategy for selected acquisitions. Through acquisitions and strategic partnerships with companies specializing in new technologies, Saab’s capabilities are enhanced, increasing the number of comprehensive solutions offered for even broader defense needs. AI enables Saab to improve system capabilities and enhance the efficiency of our world-leading product portfolio.

“This acquisition is another step in supporting our international growth strategy as we seek to ensure Saab’s strong position in key markets and maintain our competitive advantage. BlueBear, a world leader in AI-enabled autonomous swarm systems for complex defense and security applications, fits well with our approach of leveraging new technologies in the fields of autonomous systems and AI,” says Micael Johansson, President and CEO of Saab.

Within Saab, BlueBear will be a Rapid Concept Development center, providing expertise and scaling innovations.

“For BlueBear, this is an important step on our journey as we now move forward as part of Saab. We see many enhanced opportunities around maritime, air, and land autonomy, payload integration, next-generation command and control, AI-supported defense clouds, and next-generation platforms,” says Dr. Yoge Patel, CEO of BlueBear.

And here is the company’s website:

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Saab has some good momentum going. They are buying up small companies, expanding abroad, and signing follow-on contracts. Several investor letters have been released within a short period. The share price hasn’t reacted to this news at all.

Are there any Saab shareholders or followers here, and I’m not talking about the car. I’m just wondering if these kinds of business activities have been business as usual for Saab for ages, or is there an exceptionally good run going on right now?

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I can’t say much about the buzz, but years ago when visiting Saab’s defense R&D department for work, I noticed their heavy investment specifically in development. In my job, I visit the labs of various tech companies almost daily (e.g., your favorite company Kempower), so I see many different levels of investment in R&D; Saab had a strong focus already years ago, and it’s unlikely to have decreased. This is also on my watchlist to see if I should jump on board.

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Saab will likely get a nice slice of that. It could be that NATO membership is already priced in, either fully or partially. I don’t have the expertise to calculate it or even try. + of course, the major procurements from half of Europe on top of that. I believe there will be a huge number of those orders over the coming years.

And another thing. If you’re at all interested in Saab’s products, there’s plenty of material online, e.g., on Saab’s website or YouTube. They aren’t just dumb bombs, but top-of-the-line high-tech. Of course, other manufacturers definitely have expertise too, but Saab’s gear is unlikely to fall behind. Incredibly impressive machines.

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Saab receives order for additional functions for Gripen E

Saab and the Swedish Defence Materiel Administration (FMV) have entered into an agreement for new functions and refined delivery schedules for Gripen E and Gripen C/D. The agreement covers the period 2023-2030 and the order value is approximately 5.8 billion kronor.

FMV and Saab have agreed to revise their current agreement regarding the development and production of Gripen E by adding new functions, which include changes to electronic warfare, communication, and reconnaissance systems, as well as changes to the delivery schedules for Gripen E and Gripen C/D.

To secure the operational fighter capability of the Swedish Armed Forces, the Armed Forces, FMV, and Saab have agreed on adapted development and delivery plans that enable the continuous development and operation of Gripen C/D beyond 2030, in parallel with the introduction of the next-generation fighter, Gripen E.

“This agreement further underlines the very close cooperation between Saab, FMV, and the Swedish Armed Forces. I am very proud that we are contributing to the operational capability of the Armed Forces by further strengthening the capability of the Gripen system, which is a world-class fighter aircraft,” says Lars Tossman, Head of Saab’s Aeronautics business area.

Good, good. Long contract. Big money.

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Gripen to Ukraine? :slight_smile:

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EU covers 20% of defense procurements made within the Union

https://mil.in.ua/en/news/european-parliament-endorses-defense-procurement-mechanism/

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Here are the first three paragraphs of the investment letter, machine-translated.

Saab signs a strategic cooperation agreement and invests in Helsing
Saab has entered into a strategic partnership with Helsing, a defense company specializing in AI-based software technologies. The partnership is based on a cooperation agreement that combines Helsing’s advanced AI capabilities with Saab’s extensive range of solutions, as well as a €75 million cash investment by Saab for a 5 percent stake in Helsing GmbH.

Founded in 2021, Helsing develops AI-based capabilities through software alone, which has led to rapid market adoption across Europe. The company has offices in Germany, the UK, and France, and employs a total of approximately 220 people.

In line with Saab’s growth strategy and focus on future capabilities, Saab aims to enhance its capacity through acquisitions and strategic partnerships with companies specializing in new technologies. Through this partnership and investment, Saab is uniquely positioned with Helsing.

The shopping pace is intense. Yet another new partner, according to the strategy. More AI for the weaponry. Apparently, it’s still business as usual, as the share price isn’t reacting much.

If and when Gripens are sent to Ukraine, that will indeed also be a “great marketing moment.” Of course, the pilots will be UA pilots who have received crash-course training and have poor English skills, so it’s unlikely they’ll get the full performance out of the planes. May the Lord be merciful to these pilots and less merciful to the Z-bandit hordes.

There are good videos on YouTube about Gripens, for example, explaining the cameras and how information is transmitted to other aircraft in the flight.

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An interesting situation. I am writing now only from an investor’s perspective. If Sweden donates Gripens to Ukraine, will they be taken from the Swedish Air Force? As I understand it, the aircraft that might be donated are older models, which are already 30–40 years old.

Among other things, the Swedish government wants to know how the handover of the fighters would affect Sweden’s own combat capability.

The number of aircraft to be donated has been speculated to be around 15–20 planes. If those are removed from the Swedish Air Force’s strength, they will surely have to be replaced with new ones, and that will cost a hell of a lot of crowns. You can get an idea of the price range by looking at the offer to Finland from a few years ago:

Saab would be prepared to sell Finland 64 Gripen E/F aircraft and two GlobalEye surveillance aircraft. Saab estimates the price for the package consisting of Gripen and GlobalEye to be around 9 billion euros.

According to some very rough math, the price for one plane would be about €100,000,000. One hundred million euros! When you multiply that by 15–20, IF they intend to replace the donated aircraft on a one-to-one basis, it results in such an insanely large number.
However, it’s unlikely to be quite this simple, and there are still many variables involved. Nevertheless, the investigative work has begun, and according to some reports, training for UA pilots to fly Gripens has already started.

In May, the stance was completely different.

Swedish Defense Minister Pål Jonsson reiterated on May 9 in an interview with the Swedish public broadcaster SVT:n haastattelussa, that the country has no extra Gripen fighters to be sent to Ukraine. Therefore, the Swedish Ministry of Defense has no plan for handing over the aircraft; instead, it is focusing on maintaining already delivered weapons and training Ukrainian Armed Forces personnel.

So, this statement muddies the waters even more. Or should it be interpreted as there being no extras, but if Sweden buys more fighters from Saab, then there would be some again. On the other hand, if Sweden were to decide to hand over aircraft, new ones won’t be built to replace them in a day or two. We’re talking years. And would Sweden leave a gap in its air defense for years in the current global situation?

Interesting, from a shareholder’s perspective.

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The possibility of delivering Gripens to Ukraine is largely dependent on the approval of Sweden’s NATO membership. In any case, the production of new fighter jets takes a long time.

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On the Sijoittaja.fi website, there is a fairly extensive article about investing in the defense industry. The article was published in March 2023 but is still quite relevant. Saab is considered a good investment option when comparing six large companies.

I’ve picked out some quotes here and will include a link to the full article at the end. Boldings are my own.

Saab is the largest defense industry company in the Nordics with a market value of approximately 78.8 billion kronor. Saab has about 18,000 employees worldwide.

The Finnish Defence Forces have acquired, among other things, RBS 15 anti-ship missiles, RBS 70 anti-aircraft missiles, Tp 45 torpedoes, and NLAW anti-tank missiles from Saab Bofors Dynamics. Saab developed the NLAW in collaboration with Thales.

At the end of February 2023, Finland announced it would buy more NLAW anti-tank missiles, and at the end of December 2022 it announced it would buy more RBS 70 anti-aircraft missiles. The total value of the orders is approximately 112 million euros. The order books of Saab and other defense industry companies are bulging as Russia continues its brutal war of aggression in Ukraine. Some of the acquisitions are related to strengthening domestic defense, but also to replacing equipment handed over to Ukraine.

Based on consensus recommendations, European companies Saab, BAE Systems, and Rheinmetall are analysts’ favorites. The consensus is calculated according to recommendations given by analysts following the company, where 1 = buy and 5 = sell. The earnings per share (EPS) growth forecast over a three-year period is highest for Rheinmetall (26.1%) and Saab (20.2%). Raytheon Technologies (11.9%) and BAE Systems (10.8%) also perform well, but Lockheed Martin (2.0%) and Northrop Grumman (-4.6%) clearly lag behind in expected earnings growth.

The article is indeed already 6 months old, but I’m sure there’s something to be gained from it, especially since investments in weapons and various defense equipment will likely continue for years or even a decade; they aren’t bought like pick-and-mix candy, but tend to be long-term processes.

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Saab Q3 2023 results: Growth momentum in an evolving market

Saab presents the results for January-September 2023.

“The geopolitical tensions are impacting our industry and driving the largest increase in defence investments in the last 30 years, particularly in Europe. In the third quarter, high demand for Saab’s broad defence portfolio continued to result in significant order intake, strong sales growth and improved profitability,” says Micael Johansson, President and CEO, Saab.

Key highlights Q3 2023

  • Order intake amounted to SEK 14,977m (7,772) with strong growth in all order sizes in the quarter.
  • Sales increased to SEK 11,527m (8,751) with an organic growth of 31%, driven by growth in all business areas.
  • EBITDA increased 28% and amounted to SEK 1,424m (1,115), corresponding to an EBITDA margin of 12.4% (12.7).
  • Operating income (EBIT) increased 51% and amounted to SEK 859m (568). The EBIT margin was 7.5% (6.5) with improvements in several business areas in the quarter.
  • Net income for the period increased to SEK 656m (324) and earnings per share amounted to SEK 4.84 (2.28).
  • Operational cash flow in the quarter was SEK -2,058m (559) mainly due to timing of customer payments combined with higher investments.
  • Net liquidity position in the quarter was SEK 1.4 bn (0.4).
  • Upgraded outlook for organic sales growth 2023: organic sales growth to be between 19-23%, compared to previous outlook of 16-20%.

For more information and explanations of the above key ratios, please see www.saab.com/investors/financials/financial-data.

Presentation of Saab’s Q3 results 2023

Saab’s CEO and President Micael Johansson and CFO and deputy CEO Christian Luiga will present Saab’s interim report for Q3 2023.

Date: Thursday 26 October at 10.00 a.m. (CET).

You are welcome to watch the live webcast or dial in to the conference call. It is possible to post questions over the conference call and from the webcast page.

Saab Q3 2023 results: Growth momentum in an evolving market
Saab presents the results for January-September 2023.

“Geopolitical tensions are affecting our industry and driving the largest increase in defense investments in the last 30 years, especially in Europe. In the third quarter, high demand for Saab’s broad defense portfolio continued to lead to significant order intake, strong sales growth, and improved profitability,” says Saab CEO Micael Johansson.

Key highlights Q3 2023

Orders received were 14,977 million kronor (7,772), and all orders grew strongly during the quarter.
Revenue rose to 11,527 million kronor (8,751), and organic growth was 31%, driven by growth in all business areas.
EBITDA grew 28% and was 1,424 MSEK (1,115), corresponding to an EBITDA margin of 12.4% (12.7).
Operating profit (EBIT) grew 51% and was 859 million kronor (568). The operating margin was 7.5% (6.5) with improvements in several business areas during the quarter.
Net profit for the period rose to 656 million kronor (324) and earnings per share were 4.84 kronor (2.28).
Operational cash flow in the quarter was -2,058 million kronor (559), which was mainly due to the timing of customer payments combined with larger investments.
Net liquidity position in the quarter was 1.4 billion kronor (0.4).
Upgraded outlook for organic sales growth 2023: organic sales growth 19-23% compared to the previous 16-20%.
For more information and explanations of the key figures above, visit Financial data | Financials | Saab.

Presentation of Saab’s Q3 2023 results

Saab CEO Micael Johansson and CFO and Deputy CEO Christian Luiga present Saab’s interim report for the third quarter of 2023.

Date: Thursday, October 26 at 10:00 AM (CET).

Welcome to watch the live webcast or call into the conference call. It is possible to send questions via the conference call and from the webcast page.

Let’s see what investors think and how the share price reacts. There’s been a nice flow of new orders recently according to the investor letters. No multi-billion submarine or fighter jet deals, just the usual stuff. Anti-tank weapons, upgrades, etc.

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