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#Nordic Camping: Sanity check suggests major upside

Shares of Swedish camping operator Nordic Camping have had a bumpy ride ever since the new share issue at the end of May. The share issue was conducted in order to increase the shareholder base and to receive additional capital in order to finance future growth via investments in existing and new camping grounds. The share issue was heavily oversubscribed and shares were sold at SEK 22.15, a discount of 7% compared to the volume weighted average during the subscription period. Since the time of the placing in early June, the share has come down to below SEK 20. Compared with its high at the end of May at SEK 26, the share is now down some 24%.

What’s more, we believe that looking at the share price performance over the past 12-months serves as an important sanity check:

CAMP1

As you can see in the graph above, the Nordic Camping share is actually down 5% over the last 12-months, which simply cannot be seen as logical. During that period, the company reported yet another record fiscal year and added two new camping sites to its previous 12.

Admittedly, shareholders were diluted by 10.5% due to the recent share issue and while we would have preferred to see the share issue announcement in connection with a new acquisition and/or concrete investments schemes for existing camping grounds, we do believe that Nordic Camping deserves the benefit of the doubt. The company has a strong track record of consolidating the Swedish camping market, which is still highly fragmented and we believe that management will use the proceeds of the share issue wisely. At the end of Q1 2015 (pre-issue), Nordic Camping had a net debt position of just below SEK 44m (net debt/equity ratio of 70%). The net proceeds of the issue amount to slightly more than SEK 21m.

We understand that there could be some worries in the market due to rather mixed Swedish summer weather so far, but a recent channel check by Swedish business daily Dagens Industry suggested that the number of visitors is nationwide at least in-line with last year’s level. Mid- to long-term, we do expect Nordic Camping’s share price to be boosted by announcements about new M&A and investments in e.g. the recently acquired Halmstad camping ground, which has the potential to double in size, as well as the building permit for 45 cottages. At some point we also expect the company to realise its hidden value as real estate assets are currently booked at purchase cost value (i.e. large revaluation potential once IFRS accounting standards will be applied). We continue to be holders of Nordic Camping.

Nordic Investor

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