Stobart Group - Targets on track, near-term volumes affected
Stobart Group continues to evolve from a holding company to an operating group, targeting £100m of underlying EBITDA by 2022 (from £35m in 2017), driven by material growth in the Energy and Aviation segments. Once mature, these segments should generate strong, dependable cash flows, and attract higher multiples and strong long-term value. Until then, the company is committed to paying a dividend of 18p/share (partly funded by asset sales), implying a current dividend yield of nearly 7%. We have adjusted our FY18 estimated earnings following slight delays in some projects and some higher than expected one-off costs. Modelling changes and a move to an exclusively DCF approach lowers our valuation to 285p/share, but we note that longer-term upside remains if the company can deliver on its targets.Stobart Group is a U.K. infrastructure and support service business and has investments in a national property and logistics portfolio. Co.'s operating segments are: Stobart Energy, which supplies sustainable biomass for the generation of renewable energy; Stobart Aviation, which operates commercial airports, airline operations and leases aircraft; Stobart Rail, which delivers internal and external civil engineering development projects; Stobart Investments, which holds a non-controlling interest in a transport and distribution business; and Stobart Infrastructure, which focuses on management, development and realization of property assets and investments in biomass energy plants.
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