Astor issued 8.4m new shares (+16%) at SEK 38 per share, yielding gross proceeds of SEK 320m, exceeding the original target of SEK 300m, via an accelerated book building without subscription rights after market close on Tuesday. In doing so,Astor communicated the following use of proceeds:
40% (c. SEK 130m) are for growth investments into the recently acquired AMMUNITY in the form of CAPEX and working capital. This should give the company the ability to roughly 6x its annual output (FY'24: SEK 105m) in the mid-term (eNuW: capacity c. SEK 600 of annual sales). By taking this further investment into account, the real acquisition multiple is implied at 10.3x FY'24 EBITDA (vs. 4.4x excluding this investment), which is still low for a defence company with such an enormous demand profile. Furthermore, by assuming the mid-term sales of SEK 600m and a constant EBITDA margin of 21% (i.e. SEK 126m annual EBITDA potential in the mid-term), a total investment of SEK 163m (SEK 33m purchase price + SEK 130m growth investments) seems highly sensible, in our view.
40% (c. SEK 130m) are reserved for future M&A, whose value accretion cannot be asserted prior, but Astor's history as well as acquisition strategy (high margin and niche focused dual-use/defence players at favorable prices) point towards further value-accretive additions to the group.
20% (c. SEK 65m) are planned for necessary growth investment into Marstrom (Sweden's only composite material producer of scale) and Oscilion (military drone and radar jammers) following large order intake and potential follow-up orders. The investments will also be in the form of working capital and CAPEX.
In sum, the capital raise further strengthens Astor's capitalization and ability to act upon attractive opportunities and should overcompensate the shareholders' dilution, in our view. In order to avoid additional shareholder dilutions going forward and to make the capital structure more efficient, the company also aims to issue debt (e.g. corporate bond) to finance growth and/or M&A, for which there is ample room (eNuW: SEK 167m of gross debt per Y/E'25e; 24% debt to equity), in our view.
Against this backdrop, we increase our CAPEX and WC estimates, but also our organic sales growth assumption, which in sum leads to a higher DCF-based PT of SEK 56.00 (old: SEK 54.00) despite a higher share count.
ISIN: SE0019175274
