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Opus – DEKRA a potential suitor?

logoIn our opinion, vehicle inspection specialist Opus is one of the most attractive stories on the Swedish stock market right now. Despite strong cash-flows from its Swedish and US inspection business (where the company is the #2 and #1 player respectively), great growth prospects in emerging markets (recently gained big contracts in Asia and South America) and innovative technology that is about to be rolled out globally (Remote Sensing), the Opus stock continues to be out of favour among investors.

We believe this has a created an incredible entry point and we do believe that the sluggish share price performance has not gone unnoticed among potential players that could be interested in a takeover of Opus. Given the high M&A activity in the markets right now, Swedish business daily Dagens Industri picked-up on the story and mentions Opus as one of the most likely takeover cases in Sweden in today’s issue. 

We believe that one of the interested players could be German inspection giant DEKRA. DEKRA has entered the Swedish vehicle inspection market a few years ago and wants to expand here. Furthermore, DEKRA and Opus have only recently entered a co-operation to promote Opus’ Remote Sensing technology in Europe. They know each other well and DEKRA clearly knows about the potential of remote sensing.

Business is going well for DEKRA and they have and outspoken strategy to expand internationally. Opus would fit in perfectly in their plans.

Here is a closer profile of DEKRA:

images-5DEKRA is one of the world’s leading expert organisations. The company currently maintains a presence in 50 countries in Western and Eastern Europe as well as in the USA, Brazil, North and South Africa, Israel, Japan and China. More than 32,000 employees are committed to ensuring long-term safety, quality and environmental protection. The DEKRA Business Units “Automotive”, “Industrial” and “Personnel” provide professional and innovative services in the fields of vehicle inspections, expert appraisals, international claims management, consulting, industrial testing, product testing, certification, environmental protection and qualification.

The DEKRA expert organization is benefiting from the growing global demand for safety. In the 2015 financial year, consolidated revenues are expected to climb by more than 7% to around EUR 2.7 billion. As in previous years, DEKRA has boosted the number of employees by means of recruitment and acquisitions. At the end of 2015, the testing service provider will employ around 37,400 people in more than 50 countries. The number of employees in the current financial year has therefore increased by approximately 2,400 people and risen by a total of more than 15,000 people in the last five years. With further internationalization, DEKRA also expects to continue on its growth path in 2016, which has been sustained over the last 12 years: “We have set the course for the future with our ‘Vision 2025’ strategic program,” said DEKRA CEO Stefan Kölbl. “We want to be the partner of choice when it comes to technical and organizational safety.” DEKRA is already the largest expert company in Europe in terms of revenues in the so-called TIC (testing, inspection and certification) sector and the world’s fourth-largest expert organization.

In 1925, DEKRA was founded in Berlin. In 2015, it celebrated the fact that it has been “Ensuring Safety for 90 Years”. With the “Vision 2025” program, the company has focused on the dynamic development of global markets for safety services and on sustained growth in its anniversary year. “DEKRA is pursuing a clear goal: We want to save lives in the three elementary areas of life: on the road, at work and at home,” explained Stefan Kölbl.

In light of DEKRA’s excellent positioning on future markets, Kölbl anticipates another rise in the demand for DEKRA services. With the acquisition of AT4Wireless (Spain), QuieTek (Taiwan) and the formation of DEKRA iST Reliability Services, a 51% joint venture with Integrated Service Technology (Taiwan), the company has gained access to business areas relating to the Internet of Things. “Thanks to this newly acquired know-how, we will also be able to check whether machinery and everyday devices can safely communicate with each other using wireless connections,” reported Kölbl. In the product testing and certification service unit for global business relating to connectivity, DEKRA has already established a special unit at the Arnheim location (Netherlands). DEKRA experts provide support to customers already in the development phase of new products. Stefan Kölbl: “We ensure functional safety and unimpeded communication in the Internet of Things. Whether it is in an elevator, a car or a fire protection system. We also make sure that people stay in control.

Automotive – Dynamic Development
DEKRA Automotive will increase its revenues for 2015 by more than 6% to around EUR 1.4 billion thanks to product innovations, efficient processes and further internationalization. In addition, over EUR 130 million will be generated from periodic industrial testing services in Germany carried out by DEKRA Automobil GmbH. In the area of periodical industrial services, the development of business relating to elevator inspections was particularly dynamic, with growth of nearly 20%. Cooperation with a leading manufacturer was intensified. This alone led to an increase in the testing volume by more than 10,000 elevators.

In Germany, DEKRA Automobil GmbH has grown by nearly 6% to around EUR 1.1 billion. This strengthened its position as a market leader in testing with a market share of approximately 34% and over nine million so-called Hauptuntersuchungen (vehicle inspections) per year. The universal introduction of safety-relevant main inspection adapters was a highlight in the financial year. This allows tests to ensure that electronic systems in the vehicle function correctly.

As a global market leader with around 26 million vehicle inspections per year, DEKRA has positioned itself towards further international expansion. In Europe, the testing network in Sweden has grown by twelve stations to 50 locations. Periodic vehicle inspections have also gained a foothold in Bulgaria. In North America, the network in the USA was expanded to 48 stations with new stations in California and Utah. In Canada, DEKRA opened its first three inspection stations in the Ontario province.

DEKRA Automotive has also expanded beyond vehicle inspections, among other regions in southeast Europe. An expert network was created across the Balkans and DEKRA established used car management in Slovenia, Serbia, Hungary and Bulgaria. In New Zealand, the subsidiary VTNZ successfully initiated driving tests on behalf of the local Ministry of Transport.

Industrial – Sustained Growth
DEKRA Industrial will continue on its sustained growth path in 2015. Revenues are expected to rise by more than 15% to EUR 811 million. “We have already been able to significantly improve our market position over the past few years thanks to strategic acquisitions in terms of content and geography,” said Kölbl.

Business from the product testing and certification service unit has grown both organically and as a result of the QuieTek and AT4Wireless acquisitions and the DEKRA iST Reliability Services joint venture. With the development of innovation-driven and high-tech markets relating to mobility, health and electronics, the number of employees in this business area has doubled to 1,600. With 85% of employees outside Germany, this is also the most international of all DEKRA units with labs around the globe.

The material testing and inspection service unit has realized the best business year so far despite a challenging market environment in key customer sectors such as the energy industry. This success is attributable to a strengthened market position as a partner for extensive services from the component part to the final product: “We have combined our skills in robot-assisted inspections with our software and analysis expertise to offer attractive services relating to remote monitoring and predictive maintenance in the future,” reported Stefan Kölbl. Outstanding customer projects were carried out in power plants and industrial plants in Germany, Finland and South Africa, for example.

In the Insight service unit, DEKRA was able to strengthen its international consulting business relating to organizational and process safety again. After the acquisition of BST, Chilworth and RCI Safety in previous years, the acquisition of the Scottish company Optimus Seventh Generation Ltd. will improve access to the oil and gas industry, particularly in the area of offshore extraction in the North Sea. “As an expert consultant in occupational health and safety, we are now able to support high-risk industries throughout the entire production process with technical and organizational safety services,” explained Kölbl. Several major customers were acquired thanks to this expertise.

 

Positive Outlook for 2016
Thanks to its global positioning and extensive range of safety services, DEKRA anticipates a continuous positive business performance in 2016 at the high level of previous years. DEKRA CEO Kölbl: “Thanks to organic growth and the most recent acquisitions, there are huge growth opportunities in the following three areas of life: on the road, at work and at home. With Vision 2025, we have the necessary master plan to consistently take advantage of opportunities: We will be the global partner for a safe world.”

Nordic Investor

Disclaimer: Nordic Investor owns shares in Opus

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