Yesterday, the Swedish parliament backed plans to issue SEK 300bn in additional debt to boost defence spending. Mind you, Sweden's current defence budget stands at SEK 140bn for FY'25e (i.e. 2.7% of GDP) and in March, Sweden committed to raise spending even further. In order to meet the committed NATO target (3.5% of GDP by 2030), Sweden would thus spend SEK 250bn annually on defence by 2030, almost twice as much as today.
This translates into a defence spending per capita of € 2,100 (vs. € 1,000 in Germany), showing the large rearmament measures Sweden currently undertakes. Now, the Swedish parliament backed those plans by having approved additional debt. Mind you, the Nordics have a comparably low indebtedness in % of GDP (Sweden: 29%, Denmark: 31%, Norway: 42%) and thus have ample room to take on further debt, should it be required.
Next to the positive macro-newsflow, Astor has also announced positive newsflow:
- Large defence order for Marstrom: The carbon fibre specialist received a large defence order worth SEK 21.3m for composite products from a major northern European defence company (likely Saab, Kongsberg or BAE, eNuW). Deliveries will begin in Q3'25 and continue until '27e.
- Closing of NSG: Yesterday, Astor announced the closing of the acquisition of Nordic Shield Group, which is now a 30% associated company recorded at equity. The deal was under the requirement, that NSG itself gained approval of the acquisition of Cesium (producer of patented mobile security vaults for rapid military deployment, bullet- and explosion-proof), which has taken place yesterday as well. Mind you, Astor has an option to increase its holding in NSG (and thus indirectly in Cesium) to 39% within 15 months, provided that current NSG shareholders do not exercise their subscription rights.Cesium alone shows a very strong profile with sales of SEK 126m and a staggering 38% EBIT margin in FY'24. Financials for NSG (ex Cesium) are not disclosed, but we expect it to be profitable company as well. Going forward, the deal will not contribute to sales, but boost profitability as it will be recorded at equity.
- Carbonia acquisition closing soon. Astor gained National Inspectorate of Strategic Products (ISP's) approval to acquire Carbonia Composites. With that, Astor issued 442k new shares at SEK 37.29 (total: SEK 16.5m) as part of payment. Closing is expected to be on July 1st.
Although Astor's shares do not appear cheap based on multiples (which are based on reported numbers), we nevertheless see ample potential for the stock. On a proforma basis, where the most recent M&A is incorporated into sales and EBITDA on a full year basis, valuation multiples show a more better picture (see below).
Furthermore, we've added the recent AMMUNITY acquisition to our deal overview (see below), where Astor's ability to acquire companies at attractive prices becomes visible. Mind you, the acquisition of NSG only shows the financials of Cesium and excludes the financials of NSG on a standalone basis, which implies a blended acquisition multiple well below the 8.2x EV/EBITDA.
In sum, Astor continues to deliver on all fronts, is supported by positive macro-tailwinds and still offers upside for new investors. Against this backdrop, we reiterate our BUY recommendation with unchanged PT of SEK 54.00, based on DCF.
ISIN: SE0019175274
