Delen Private Bank And DEME Will Forge Future Investment Opportunities

Key Takeaways

• Strong growth and collaboration in financial services suggest sustained revenue increases and enhanced banking operations.
  
• Strategic investments and financial flexibility position for diversified revenue streams and potential earnings growth.
  
• Heavy reliance on specific subsidiaries poses concentration risk, while external growth and new investments carry execution and integration challenges, impacting future financial performance.

Catalysts

Engages in marine engineering and contracting, private banking, real estate and senior care, energy and resources, and AvH & Growth Capital businesses worldwide.

• The strong growth and record results achieved by Delen Private Bank and Bank Van Breda, with net inflows and synergetic collaboration, signal continued future revenue growth from financial services.
  
• DEME's record turnover and solid free cash flow generation, paired with reduced net financial debt, set the stage for improved net margins and earnings from enhanced operational efficiency and financial flexibility.
  
• The renewed and extended partnership with the Delen family indicates strengthened client relationships and potential for future revenue increases and net margin improvements in banking operations.
  
• Strategic investments, such as those in V. Group and Confo Therapeutics, point towards diversified future revenue streams and potential earnings growth from these sectors.
  
• The current net cash position of €362 million provides opportunities for further investments, likely leading to future revenue growth and potentially higher earnings through strategic acquisitions and financial growth initiatives.

Ackermans & Van Haaren Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ackermans & Van Haaren's revenue will grow by 1.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.6% today to 8.5% in 3 years time.
• Analysts expect earnings to reach €534.0 million (and earnings per share of €16.11) by about April 2028, up from €459.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.8x on those 2028 earnings, up from 12.9x today. This future PE is greater than the current PE for the GB Construction industry at 9.6x.
• Analysts expect the number of shares outstanding to decline by 0.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.48%, as per the Simply Wall St company report.

Ackermans & Van Haaren Future Earnings Per Share Growth

Risks

• Heavy reliance on specific subsidiaries like Delen Private Bank, Bank Van Breda, and DEME for growth could pose a concentration risk, potentially impacting revenue and earnings if these entities face downturns.
  
• Recent investments in new sectors and companies, such as V. Group and Confo Therapeutics, may encounter integration challenges or fail to achieve expected returns, impacting net margins.
  
• Continued investments, despite strong free cash flow, require efficient capital allocation; missteps could strain financial resources, affecting future earnings and profitability.
  
• While current cash positions are strong, economic downturns or unexpected market challenges could deplete cash reserves, impacting the company's ability to invest and sustain growth.
  
• External growth initiatives, though promising, carry execution risks, and any failure in execution might hinder expected revenue growth, impacting overall financial performance.

Valuation

• The analysts have a consensus price target of €226.167 for Ackermans & Van Haaren based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €253.0, and the most bearish reporting a price target of just €195.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.3 billion, earnings will come to €534.0 million, and it would be trading on a PE ratio of 16.8x, assuming you use a discount rate of 7.5%.
• Given the current share price of €182.0, the analyst price target of €226.17 is 19.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.