CapMan Q4'24: Earnings growth starts to accelerate

Translation: Original published in Finnish on 2/13/2025 at 7:18 pm EET.

We reiterate our EUR 2.1 target price and Accumulate recommendation for CapMan. The Q4 report was broadly in line with our expectations and the big picture of our forecasts is unchanged. We expect the company to deliver strong earnings growth, and the stock is not expensive relative to that. If our earnings forecasts are realized, we believe the expected return is good and the high dividend limits downside risk. 

No surprises in the Q4 report

CapMan's Q4 numbers were in line with our forecasts across the board. Management fees continued to grow briskly, driven by the acquisition of Dasos and new sales. New sales in the period were slightly better than expected and, for example, the company continued to sell real estate products in a challenging market. Assets under management increased to 6,062 MEUR (Q3'24: 5,975 MEUR). For the full year, the company raised 570 MEUR of new capital, a good performance in today's market. The result was slightly above our forecast due to the good development of investment income. However, the profitability of the Management Company business fell short of our expectations, eroding the earnings beat. The dividend was EUR 0.14 as previously announced and will be distributed in two parts.

No surprises in the outlook, the market is picking up

With regard to the outlook, CapMan expects to increase the profitability of assets under management and fee income. Somewhat surprisingly, the company is not guiding for an increase in fee income, although an increase in AUM should inevitably lead to an increase in management fees. In addition, we do not believe that an improvement in the profitability of fee income is realistic without an increase in fee income volumes. The report's comments suggest that the fundraising market is slowly picking up, which would be more than welcome for CapMan. Regarding the overcapitalized balance sheet, the company did not provide any new information in the first reading of the report, but this may be expected in next month's CMD.

No major changes in forecasts, earnings to start growing

We have made relatively minor estimate revisions with the Q4 report, and our estimates are broadly unchanged. We continue to expect the company's results to improve strongly as investment income recovers significantly. The profitability of the Management Company business, based on recurring fees, will also improve as new sales pick up.

The 2026 result will make yet another level correction, with carried interest income also rising to its potential level. The 2026 EBIT of ~40 MEUR reflects quite well the full potential of the company. For the time being, we do not foresee any major moves on the company's overstretched cash position, but expect more information on this in next month's CMD. In our interview, the company's CEO said that the company has several growth projects underway. We interpret this to mean that M&A negotiations are active and, based on the comments, could proceed at a relatively rapid pace.

Valuation is not high as long as profit improvement is realized

CapMan’s earnings-based valuation is quite low. P/E multiples for the coming years are 12-13x, whereas dividend yields are above 8%. We believe there is room for upside as the earnings improvement is realized. The upside potential of the multiples combined with the high dividend provides a good expected annual return of over 15% in our view. Our sum-of-the-parts calculation of EUR 2.1 per share also supports our view. We believe that the current valuation could provide room for a stronger view, but we would like to hear an update on the company's strategy at CMD and see more concrete evidence of a real start to earnings growth.