EUR 426.30 For Business Accounts Only

B2Holding (Buy, TP: NOK24.00) - Solid earnings growth

B2 Holding reported Q2 EPS of NOK0.45, up 54% YOY. The rise in earnings was driven by a 71% increase in gross collections, while costs increased by 53%. ERC surpassed NOK20bn after B2 invested some NOK2.2bn in new portfolios in Q2. The company said that its current purchasing capacity was NOK2.1bn. Based on the updated expected remaining collections profile and amortisation guidance from the company, we have reduced our 2018e and 2019e EPS by 3% and 8%, respectively, while we have raised our 2020e EPS by 8%. We reiterate our BUY with a NOK24 target price. 2018–2019e EPS cut, 2020e EPS increased. The company updated its ERC profile, with in general somewhat later collection, implying somewhat lower expectations for 2019 and somewhat higher expectations for 2020. The company also provided more detailed amortisation estimates for the back book. The net effect of this new guidance is that we have cut our 2018e EPS by 3% and our 2019e EPS by 8%, while we have raised our 2020e EPS by 8%. Solid rise in gross collections. B2’s cash collection increased to NOK1,032m, compared with NOK604m in Q2 last year. With a high share of secured collection in the pipeline, B2 expects a further increase of 57% to NOK1,621m in Q4 this year. In addition to this comes the collection related to potential new purchases in the second half of the year. The cost of collection was fairly steady QOQ, down to 24% in Q2 from 25% in Q1. We expect this to continue to trend down somewhat, as a result of a higher share of secured NPL collection, in addition to scale effects materialising.