DGAP-News: Report on Schaffner Holding AG: Investor's Day Update (News mit Zusatzmaterial)
10.06.2016 (www.4investors.de) -
DGAP-News: Research Dynamics / Schlagwort(e): Research Update
Report on Schaffner Holding AG: Investor's Day Update (News mit Zusatzmaterial)
10.06.2016 / 07:00
Für den Inhalt der Mitteilung ist der Emittent verantwortlich.
Uncertain scenario weighing on outlook
Management maintains "Strategy 2020" targets
On occasion of its Investors' Day (held on 8 June 2016), Schaffner management presented an update of its business, market situation and management focus for the next couple of years. Essentially, the group is maintaining the targets it set out under the Vision 2020, which was unveiled about 9 months back. The Group's EBITA margin is targeted to reach more than 8% within the next 24 months, while organic revenue growth is targeted to be above 5%. Though management is working hard to achieve these targets in the current difficult market scenario, entering new markets and making use of new opportunities by providing innovative technologies, we think these targets are looking increasingly difficult to be achieved. The current uncertain economic scenario, in addition to the volatile forex markets, makes the targets increasingly challenging.
Management currently is prioritizing to cut costs, while at the same time investing into the most promising growth technologies such as in Power Quality and Automotive. The first is being targeted by consolidating production facilities and cutting overhead costs. The group thus plans to continue with only one factory each in the US, Europe, China and Thailand. Further, it is transferring more of production (mostly from Shanghai) to its Thailand factory, which is the lowest cost production facility for the company. These initiatives should help Schaffner in reducing its production and overhead costs by CHF 6 million annually.
The company's external growth plans seem to have currently been put on the back burner as management concentrates on improving efficiencies and reducing costs, as well as a lack of suitable acquisition targets. Though management remains open to acquisitions in the range of CHF 20 - 70 million, nothing is imminent not least due to current uncertain market scenarios.
Automotive and Power Quality to drive growth
The Automotive division currently has the best visibility and offers consistent and stable growth potential. The segment is expected to increase its contribution to the top line on the back of a strong order book and growing markets. The company here intends to leverage its existing facility in Thailand to increase production volumes, which should support the division's profit margin. Power Quality is the other business division which management is excited about. Though the division is currently loss-making due to unabated investments into innovation, its future growth potential is enticing. The development of the second generation of harmonic filters, which offer state of the art technology, lower costs and extended functionality thanks to their modularity, is expected to boost top line growth. The company has made and continues to make significant investments into the unit, setting up a hi-tech power lab at corporate headquarters in Switzerland, strengthening its sales organization as well as the service and support network. These efforts are expected to drive the business unit's top line as well as profitability.
Management priority for the next twelve months
- Execute COGS and overhead cost reduction.
- Gain market share in all regions to expand Schaffner's lead
- Complete the development of Generation 2 product platforms
- Launch and global roll-out of new products
- Complete restructuring of division and reduce break-even
- Diversify customer base and return to growth
- Win customer RFQ to further expand market share in keyless entry
- Develop innovative EMC filter solutions for market introduction in 2017
- Manage volume ramp up at Thailand plant
Schaffner's share price has been moving higher over the past few months, supported by the overall rise in global markets. The company is going through yet another transitory phase where it is undertaking several restructuring steps to reduce costs. Due to the low profitability in 2016, we compare the group's valuations based on 2017 earnings expectations. Based on an 2017E EV/EBITDA basis, the company is at par with its product peers (discount to industry peers). However, looking on a PE basis, the stock is trading in line with its 3-year historical average. Its 2017E PE is at a premium to its peer group, which can be attributed to the transition year. Given management's confidence on execution, we believe a discount to peers at the EV/EBITDA level is not necessarily warranted.
Zusatzmaterial zur Meldung:Dokument: http://n.eqs.com/c/fncls.ssp?u=SVQOUOCBNXDokumenttitel: Schaffner Investor Day
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