LHV Institutional "Apranga Group Valuation Update"
* Considering the post-pandemic recovery and resilience in the stagflation environment, we have decided to update our estimates for Apranga. Despite estimated setback in earnings in 2023 our long-term outlook is positive. We believe that Apranga´s competitive advantage comes from a combination of physical and online sales channels and selection of well recognized fashion brands. Thus, we believe that by successfully utilizing its strengths, the Group will be able to generate strong profits in long-term.* In valuing Apranga, we have used the weighted average of values derived from the DCF and relative valuation (based on three peer group multiples), applying different weights to each method. The DCF method is given a 50% weight, while 50% weight is assigned to relative valuation to derive an implied fair equity value range of EUR 3.01-3.32 per share.
* One of Apranga´s core investment cases has been its dividends. Overall, the Group has been generating a very solid free cash flow and distributing a substantial part of its net profits in dividends. For our forecast period we estimate payout ratio to be 90% and by using the share price of Apranga (EUR 2.94 on 2nd May 2023) the dividend yield is expected to reach 9.5% in 2023, 7.4% in 2024 and 9.9% in 2025.
Apranga APB is a Lithuania-based company that is principally engaged in the retail trade of apparel. Apranga Group, which consists of a parent company Apranga APB and its 16 wholly owned subsidiaries (located in Lithuania, Estonia and Latvia) control numerous stores and outlets in such Baltic States as Lithuania, Latvia and Estonia. Apranga Group develops trade systems and single-brand stores of five different types: ZARA franchise stores; APRANGA family fashion stores; Aprangos Galerija young fashion; Dshop a Desigual brand franchise shops; CITY business fashion stores and a franchise store Betty Barclay in Latvia, and Luxury clothes, footwear and accessories stores, which comprise franchise stores, such as Emporio Armani, GF Ferre, Hugo Boss, MaxMara, Burberry Limited, Mados linija and others. In February 2014 it established a subsidiary Apranga MDE OU which operates Massimo Dutti stores in Estonia under agreement with Inditex.
LHV Bank is an independent pan-Baltic bank, based on Estonian capital. The company was founded in 1999 by two founders of Hansapank (today’s Swedbank in the Baltics) and has been offering a full range of investment services for 15 years. In May 2009, LHV received a credit institution licence allowing it to provide all banking services.
The head office is situated in Tallinn, Estonia. Cross-border services are offered in Vilnius, Lithuania and in Riga, Latvia. LHV provides brokerage (institutional and retail), asset management, banking and capital markets services. Compared to other banks, we are more innovative and have more solid experience in investment and entrepreneurship.
The Bank, together with the Group asset management company employs over 320 people. LHV Group shares are listed on Nasdaq Tallinn.
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