Tokmanni (Buy, TP: EUR15.00) - A well-spent dollar
We consider the agreed acquisition of DollarStore a good strategic fit, with the potential to take Tokmanni to the next level. We believe it would be earnings-enhancing from day one and the targeted synergies could be conservative. We see an attractive combined entity by 2026–2028e, with twice the earnings capacity than Tokmanni alone. We have upgraded to BUY (HOLD) and raised our target price to EUR15 (12.5). International expansion deal. Tokmanni has agreed to acquire 100% of the shares in Storsjöbygdens Kapitalförvaltning AB, the holding company of Ahlberg-DollarStore AB and Ahlberg DollarStore ApS (together ‘DollarStore’) for cEUR170m (illustrative IFRS-adjusted EV EUR344.9m), to be financed with debt. DollarStore is one of the largest (c10% market share in 2021) and fastest-growing discounters in Sweden (2012–2021 sales CAGR of 21%, market 9%). 2022 sales were cEUR389m and EBIT was cEUR16m. Good fit. We consider DollarStore a good fit for Tokmanni, with a comparable product range (albeit less cyclical), similar growth strategy, solid price image, good synergy potential, and prospects for multiple growth opportunities. DollarStore has no official targets, but we see the potential for 2026–2028e sales of EUR500m–700m based on its historical expansion rate (10 new stores/year) and solid growth track record (twice market growth) assuming healthy markets. Our analysis suggests the combined entity could have sales of EUR2bn+ and clean EBIT of EUR175m+ by 2026–2028e. We see further upside potential from synergies. We calculate the combined entity could have twice the earnings of Tokmanni alone, suggesting a solid earnings trajectory. Our 2023–2025e forecasts exclude DollarStore until the acquisition has closed (expected on 1 August).Tokmanni Group Oyj is a Finland-based company, which is primarily involved in the retail industry. The Company operates a retail chain with more than 150 stores in Finland. Tokmanni Group Oy's product assortment comprises approximately 25 000 active stock keeping units (SKU's) in six different product categories, such as home cleaning and personal care, groceries, clothing, tools and electrical equipment, leisure and home electronics, home and garden decoration. The home cleaning and personal care product category is divided into four subcategories: personal care, home care, household paper products, other products. The groceries product category is divided into six subcategories: beverages, snacks, cookies and candies, pet food and pet accessories, diet and nutrition, canned food, fresh food. The clothing product category includes mainly casual wear for daily use. The tools and electrical equipment product category includes various do-it-yourself goods, power, hand and other tools.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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