Warsaw Stock Exchange: TIM SA – gaining an industry investor – part I
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The long-term process of searching for an investor for the company has ended positively for all TIM stakeholders. As a consequence of the signing of the investment agreement by the main shareholders with the German company Würth Elektrogroßhandel, a tender offer for 100% of the company's shares at the price of PLN 50.69 per share was announced and the company was delisted from trading on the WSE. Considering the high premium proposed by the caller and the forecasted deterioration of TIM Capital Group's results in 2023-2024, we consider the offer submitted by the German company as attractive for TIM’s shareholders. We expect a positive market response to the call and ultimately delisting of the company's shares from the stock exchange.
Current price 49.2 PLN
Valuation 41.6 PLN
Upside/downside -15%
Market cap. 1,092 PLNm
Free float 63%
Avg. Vol. 6M 39 658
The end of the investor search process
In March, the company announced that it had signed an investment agreement and acquired an industry investor in the form of Würth Elektrogroßhandel. The German partner (through its subsidiary FEGA - Schmitt Elektrogroßhandel) announced a tender offer for 100% of TIM SA shares at the price of PLN 50.69 (22% premium to our current valuation). Considering the high attractiveness of the offer submitted by Würth, we expect a wide response from investors. Only one condition of the tender offer remains to be met: consent to the concentration issued by the relevant antimonopoly authorities. However, we consider the risk of receiving a negative decision to be small and we believe that the tender offer will be successful and, as a consequence, the company will be delisted from the WSE..
Deteriorating medium-term outlook
The published monthly data on the level of sales in the retail business (TIM SA) shows a slowdown in the growth rate, and the local revenue peak (on a 12-month basis) occurred in February this year. PLN 1.46 billion. Adjusting the nominal figures for inflation, real revenues reached their local extremes a year ago. Since March 22, the increase in sales in the retail business has been driven mainly by the increase in prices, which clearly shows the deterioration of the economic situation in the industry. Recent quarters have also brought a decrease in the margin on goods, accompanied by an increase in costs. The narrowing spread had an impact on the decline in profits in the third and fourth quarters of 2022 (net profit -25% and -2% y/y, respectively, with an increase in revenues). We expect negative trends to continue in the following quarters of 2023.
We estimated the value of TIM shares based on the following valuation methods: DCF (in total for the entire group: PLN 37.2) and comparative (separately for the commercial business: PLN 29.5 and logistics: PLN 16.6), which, after weighing the above valuations, allowed set the present value at PLN 41.6.
COMPANY PROFILE
Leader on the wholesale distribution of electrical installation materials in Poland, with an exposure to the logistics market in the e-commerce industry.
SHAREHOLDERS
K. Folta with wife 23.45%
K. Wieczorkowski 13.51%
NN OFE 7.05%
Others 55.99%
Source: TIM, Noble Securities
Source: TIM, Noble Securities, earnings adjusted for on-offs
VALUATION
We calculated the value of one TIM SA share as the average of the comparative valuation and DCF, with a weight of 50% each. On this basis, we determined the current value of the shares at PLN 41.6. Using the comparative approach, we valued the commercial and logistics business separately (in both cases using ratio analysis), and the sum of the obtained values made up the total value. When selecting the group of companies for the comparative analysis, in the case of the commercial segment, we decided on domestic companies (operating in the wholesale and/or e-commerce segment) and foreign companies (distribution of products from the electrical engineering segment), while in the case of the logistics segment, Due to the lack of counterparts on the WSE, we chose foreign entities.
The increase in the valuation compared to our previous report is mainly due to the change in the parameters of the DCF model and the ratios for comparative companies (in the case of the retail business, the ratios decreased, in the logistics business they increased slightly). We did not make any significant changes to the financial forecasts (except for the announced limitation of the dividend payment from 2022 profit, which primarily affected the level of net debt).
Source: Noble Securities
Michał Sztabler
Equity Analyst
michal.sztabler@noblesecurities.pl
+48 22 244 13 03
