STS Group: Ace of Spades (BUY - initiation of coverage)
We initiate coverage of STS Group (STS) with a BUY and a price target (PT) of PLN 29.4/share. STS is an unquestioned leader in the Polish gambling market, with a 44% share. Its strategy is focused on continuing to ride the wave of growth in the Polish gambling market, which is strongly below the European average of 0.53%, at a GGR/GDP of 0.3%. H2 Gambling Capital expects the Polish market to grow at a CAGR of 15% in 2020-25E. Assuming a safeguarded market share and a 290bps EBITDA margin recovery by 2025E, we forecast STS’ 2020-23E EBITDA CAGR at 24%. Given its asset-light business model, focused on e-commerce, its EBITDA conversion to FCF of over 80%, its triple-digit ROE and its net cash position, we believe that such high growth is possible without sacrificing its hefty dividend stream. We base our 12-month PT for STS on our DCF analysis, with a DDM and the average 2021-23E P/E and EV/EBITDA multiples for the company’s peers as a cross-check.STS Group AG is a Germany-based supplier of vehicle parts. The Company develops and manufactures solutions for acoustic and thermal insulation (soft trim) and components made of plastics or composite material (hard trim) for the automobile and trucking industries, focusing on four categories of vehicles: medium and heavy commercial vehicles (MHCV), light commercial vehicles (LCV), agriculture and construction vehicles (ACV), and light vehicles (LV), and supplying its products directly to Original Equipment Manufacturers (OEMs). The Company operates through three business segments: STS Acoustics, which includes mainly soft trim products with acoustic and thermal features that reduce noise and protect against heat; STS Plastics, which includes mainly hard trim products used for exterior body parts or interior modules, and Materials, which includes semi-finished goods from mixed composite recyclables. The Company operates production facilities in Europe, China, Mexico and Brazil.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.