New Structure Will Optimize Facility Management In Norway And Denmark

Key Takeaways

• Coor's new structure and CEO focus on operational efficiency and strategic growth aim to improve margins and drive long-term earnings.
  
• Strong contract wins and a robust sales pipeline suggest stable revenue growth, enhancing liquidity and maintaining competitiveness in facility management.
  
• Negative organic growth and high personnel costs challenge Coor's revenue and margin goals, with declines in Denmark and Finland raising stability concerns.

Catalysts

Provides facility management services in Sweden, Norway, Denmark, and Finland.

• Coor's new organizational structure is expected to improve operational efficiency and reduce personnel expenses, leading to full-year savings of approximately SEK 120 million, which should positively impact net margins.
  
• The recent contract wins with Equinor in Norway and Copenhagen Towers in Denmark, alongside other smaller contracts, demonstrate strong demand and potentially stabilize revenue growth, especially in the integrated facility management sector.
  
• The company's focus on reducing working capital during 2025, evidenced by a SEK 200 million reduction in Q1, is likely to enhance cash flow and improve liquidity metrics.
  
• The new commercial team is building a strong sales pipeline, indicating potential future revenue growth, while maintaining Coor's competitiveness in the facility management market.
  
• The appointment of a new CEO, focused on operational efficiencies and strategic growth, could drive long-term earnings improvement and support the company's margin targets.

Coor Service Management Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Coor Service Management Holding's revenue will grow by 2.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.0% today to 3.1% in 3 years time.
• Analysts expect earnings to reach SEK 415.3 million (and earnings per share of SEK 4.51) by about April 2028, up from SEK 126.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK457 million in earnings, and the most bearish expecting SEK350 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.0x on those 2028 earnings, down from 28.4x today. This future PE is lower than the current PE for the GB Commercial Services industry at 17.6x.
• Analysts expect the number of shares outstanding to decline by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.52%, as per the Simply Wall St company report.

Coor Service Management Holding Future Earnings Per Share Growth

Risks

• Organic growth has been negative, with a decline of 2% in Q1 due to ended contracts and lower variable volumes, which could negatively impact revenue.
  
• Despite improved EBITA margins, there's still a challenge in achieving the 5.5% margin target. Current EBITA margin of 4.7% indicates that additional margin improvements are necessary, potentially affecting earnings.
  
• High personnel costs continue to negatively impact parts of operations, particularly in Sweden, which could hinder net margins.
  
• Denmark faced a 5% organic growth decline due to ended contracts and lower variable volumes, raising concerns about revenue stability in that market.
  
• Finland experienced an organic growth drop of 9%, impacted by contract terminations and variable volume decreases, posing risks to revenue from that region.

Valuation

• The analysts have a consensus price target of SEK51.167 for Coor Service Management Holding 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 SEK57.5, and the most bearish reporting a price target of just SEK42.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK13.3 billion, earnings will come to SEK415.3 million, and it would be trading on a PE ratio of 14.0x, assuming you use a discount rate of 6.5%.
  
• Given the current share price of SEK37.74, the analyst price target of SEK51.17 is 26.2% 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.