Taaleri Q2'24 preview: Moderate result expectations

Translation: Original comment published in Finnish on 08/19/2024 at 7:26 am EEST

Taaleri publishes its Q2 result on Tuesday at approximately 08:00 am EEST. We believe no significant one-off income occurred during the review period, so our earnings estimate is rather modest. As usual, our attention in the report is on the sales outlook for the new SolarWind 3 fund and Garantia's development.

The absence of one-off income lowers the result from the comparison period

Taaleri’s revenue is a rather poor indicator of the development of the Group’s business operations, as most of the investment income that fluctuates by quarter is also reflected in revenue. We recommend focusing on the development of the individual segments. At Group level, we expect revenue to be 12.3 MEUR. The level is significantly lower than in the comparison period, as considerable investment income was recorded in the comparison period from the sales of Energy’s project portfolio and non-strategic investments. Our Q2 EBIT estimate is 3.9 MEUR.

We believe no significant sales gains or performance fees have been recorded during the review period, which means that the result consists almost entirely of recurring fees, whose profitability is still modest. The result is entirely dependent on Garantia, as Private Equity Funds and the Other segment are in the red. We note that Garantia’s investment income in particular can cause significant deviations from our earnings forecast.

Ramp-up of private equity funds again at the center of the report

In Private Equity Funds, the cost level of Renewable Energy is once again under scrutiny, since profitability should remain clearly positive, like in Q1, as the latest SolarWind 3 fund has grown to a significant size class. Other private equity funds are still clearly loss-making, however, as the Bioindustry's frontloaded growth investments in, e.g., personnel resources burden profitability. Therefore, we expect a small negative EBIT from Private Equity Funds as a whole.

In terms of new sales, the focus is naturally on the SolarWind 3 fund, which is in the fundraising stage. We are very interested in any management comments on sales development, even though actual sales figures concerning the fund are hardly available. For other funds, even small nuggets of information on the development of the demand outlook are welcome.

Garantia suffers from the quiet housing market

For Garantia, we expect insurance revenue to have decreased slightly from the comparison period as a result of the decrease in the guarantee liability portfolio. We expect that the guarantee portfolio has continued to decline moderately compared to the previous quarter, as demand for mortgages has remained subdued. We consider this to be a temporary challenge, however, that will pass as the housing market picks up. In turn, we expect that claims costs have been slightly elevated based on the loan loss develeopment published by banks.

The investment portfolio that focuses on interest-rate investments is supported by higher interest rates, but we estimate that the slight increase in market rates seen in the quarter dampens returns a bit. However, the equity market developed mainly favorably, so our investment portfolio return estimate at fair value is 1.3%. Our EBIT estimate for Garantia is 4.9 MEUR.

Investors should note that part of the investment portfolio return is recognized as comprehensive income items, in which case it does not affect EBIT. We have not made a distinction between these in our forecasts, so the reported EBIT may fall somewhat short of our forecast. However, we do not consider this a problem, as the impact on equity accumulation is the same in both ways.