LHV Institutional 'Linas Agro (LNA1L LH) Company Update, May 19th, 2021'

* Linas Agro Group AB (LNA1L LH), an agribusiness company, is engaged in the business of agricultural supplies and machinery, farming, processing of agricultural products, food production, and agricultural commodities trading. LNA is one of the major exporters of grains, feedstuffs, and poultry products. Trade with foreign countries accounts for 71.8% (last five years’ average) of total revenues. During the previous five years, the major export destinations were Europe (except for Scandinavian countries, CIS, and Lithuania) (last five years’ avg. – 34.0% of total revenues), Scandinavian countries (11.9%), Asia (15.4%), and Africa (7.9%).
* The Group has signed share purchase and sale agreements with the shareholders of AB Kauno Grūdai, AB Kaišiadorių Paukštynas, and AB Vilniaus Paukštynas to acquire the block of shares of these and related companies (together referred to as ‘KG Group’). The main drivers behind this acquisition are 1) vertical integration, 2) better efficiency and economies of scale, and 3) improvement in profitability. The decision of the Lithuanian competition authority on the implementation of the concentration is currently awaited. The Group would use its own funds to finance 30% of the acquisition value, while the rest will be funded through other sources. In FY 2019, KG Group generated revenues of EUR 563m. If the Group is able to acquire KG Group successfully, then this transaction would almost double its revenues. If the Group completes the acquisition of KG Group, then we will revise our forecasts accordingly.
* We have reassessed our fair value range for Linas Agro Group AB based on its operating performance and macro factors in its key markets. Given the significant changes in the operating conditions in the Group’s key markets, we have revised our forecasts and, accordingly, have changed our fair value range from EUR 0.54-0.60 to EUR 0.71-0.78. This report contains a full set of financial forecasts and is useful for gaining an initial insight into the company. Please also refer to the tables and charts in the attachment.