NoHo Partners

NoHo's Q3 EBIT of EUR 8.7m was in line with our estimate but 5% short of Vara consensus expectations. Net sales increased by 12% y/y in Q3, supported by acquisitions. The rainy end to the summer affected sales growth negatively, especially within entertainment venues. The company kept its guidance intact, while we continue to see a possible guidance upgrade in December. The company expects the solid demand situation to continue in Q4, which likely supports deleveraging following the Better Burger Society transaction. Our DCF- and multiples-based fair value range is EUR 12.0-15.0 (12.4-15.5). Marketing material commissioned by NoHo Partners.

NoHo Partners reported Q3 EBIT of EUR 8.7m, -5% versus Vara consensus and +1% versus our estimate. Q3 net sales were up 12% at EUR 96m, 3% below consensus and 2% below our estimates. Operational EBITDA (operating cash flow) was EUR 10.6m in Q3 (EUR 10.7m a year ago). When adjusting for EUR 1.5m impact from Better Burger Society transaction costs, operational EBITDA came 3% below our estimate. Finland profitability came slightly below our expectations, while International beat our expectation. Deviation to our estimates in Finland is likely due to rainy weather late in the summer that affected high season of terrace sales. The company recorder EUR 3.6m negative fair value change due to Eezy shareholding to its financing costs (we anticipated EUR -2.4m). Adjusted EPS was EUR 0.18 while consensus was expecting EUR 0.15. Leverage (net debt/operational EBITDA ex-IFRS 16) was 3.3x and was increased due to the acquisition of Holy Cow!. October sales were up 19% y/y to EUR 31.7m while we have anticipated 27% y/y growth in Q4, mainly driven by acquisitions. Holy Cow! integration is progressing well with KPIs developing above NoHo’s expectations. In CEO comments, the company notes that underlying restaurant demand has remained stable. The guidance was kept intact for 2023; NoHo expects around EUR 380m sales and around 9% EBIT margin from restaurant business. Pre-Q3 Vara consensus has expected EUR 379m sales and an 9.8% EBIT margin in 2023. We expect consensus to trim slightly top line and EBIT estimates for 2023E, while we expect 2024-25 estimates to remain largely intact.

Ahead of NoHo's Q3 report, we incorporate its latest acquisitions into our estimates. The current financial targets were set in 2021 and are likely to be reached ahead of the strategy cycle ending in 2024. We believe NoHo will continue with M&A in order to reach a market-leading position in Northern Europe. The market development in its operating countries has been solid, despite high inflation having had a slightly negative impact on volumes. We see room for a further guidance upgrade in December, while investor focus has likely turned to the new strategy period and financial targets. Our DCF- and multiples-based fair value range is EUR 12.4-15.5 (12.3-15.4). Marketing material commissioned by NoHo Partners.

NoHo acquires three restaurant in Oslo, Norway. Aggregated purchase price for all businesses is EUR 4.9m, of which approximately EUR 2m is paid in cash and EUR 1.4m remains as an interest bearing debt which shall be paid after six years. The rest of the purchase price is paid with new shares (169k with EUR 8.75 subscription price). We view acquisition to be in line with NoHo strategy and the company has noted its willingness to increase its Norwegian exposure through acquisitions. Based on earlier transactions, we believe EV/EBITDA multiple of the transaction to be between 4-5x which could indicate above EUR 10m positive top line (~2% of 2024E sales) and above EUR 1m positive EBITDA (~2% of 2024 operational EBITDA) impact on group level. In addition, NoHo is likely benefiting from rolling in its sourcing deals, which have traditionally lowered realized acquisition multiples by 1-2x. NoHo will report its Q3 on 7 November. We are 2% below post-Q2 Vara consensus on top line and 10% below on reported EBIT. However, we note our assumption of EUR 2m non-recurring costs related to incorporation of Better Burger Society and the acquisition of Holy Cow!, while we do not know how much of this is taken into consideration in consensus estimate. For 2024E-25E, we are 6-7% above consensus on EBIT.

NoHo reported Q2 EBIT 13% above Vara consensus, despite 4% lower sales. Operations in Finland are performing strongly, and the company improved its International operations despite the growth phase. Customer visits were down from the y/y comparison period when there was a lot of pent-up demand, while price increases, new openings and M&A supported growth. The company aims to accelerate its M&A pace, and the recent acquisition in Switzerland, combined with Friends & Brgrs, offers a good platform for international growth. Owing to the strong start to 2023, we believe that another guidance raise is plausible during Q4. We derive an unchanged DCF- and SOTP-based fair value range of EUR 12.3-15.4. Marketing material commissioned by NoHo Partners.

NoHo Partners reported Q2 EBIT of EUR 10.7m, +13% versus Vara consensus and +9% versus our estimate. Q2 net sales were EUR 93.3m, 4% below consensus and our estimates. Operational EBITDA (operating cash flow) was EUR 12.6m in Q2 (EUR 18.3m a year ago, including EUR 4.8m government grants), 9% above our estimate. Finland profitability came above our expectations, while International fell short of our expectation. The company recorder EUR 1.7m negative fair value change due to Eezy shareholding to its financing costs (in line with our expectation). Leverage (net debt/operational EBITDA ex-IFRS 16) was 2.9x and should increase in Q3 following the acquisition of Holy Cow! during Q3, we believe. July sales were up 4% y/y to EUR 30.4m. In CEO comments, the company notes that ASP has increased in food restaurants due to inflation, while there has been slight decline in consumer spending in entertainment venues and night clubs. The guidance was kept intact (upgraded on 6 July after Holy Cow! acquisition) for 2023; NoHo expects around EUR 380m sales and around 9% EBIT margin from restaurant business. Pre-Q2 Vara consensus has expected EUR 383m sales and an 9.2% EBIT margin in 2023. Long-term financial targets will be updated on H1 2024 and the company notes it will reach earlier targets ahead of time. We expect consensus to make slightly positive revisions on the back of Q2 results despite slightly more conservative comments for H2 and continue to view guidance raise possible later this year.

Ahead of NoHo's Q2 report, we incorporate the announced acquisition of Holy Cow! to our estimates. The acquisition will be done through a new company, where NoHo will have a majority stake, while PE investor and executive management will hold roughly a 47% stake. Given the ownership structure, we believe NoHo is targeting fast ramp-up in the European premium burger market. When considering the short-term outlook, it appears that the Nordic restaurant market has remained solid, and we believe the company could further upgrade its guidance later in the year. We derive a fair value range of EUR 12.3-15.4 (12.0-15.1) per NoHo share. Marketing material commissioned by NoHo Partners.

NoHo Partners announced today acquisition of Swiss premium burger chain Holy Cow! with 2023E EV/operational EBITDA multiple of ~5.3x. Transaction is expected to be completed during Q3 2023 with around EUR 2m one-off transaction costs. Acquisition will be made through a new company, Better Burger Society (where NoHo will have 53% ownership), which will acquire 76% ownership in Holy Cow! with EUR 24m. As a result, the company updates its guidance and now expects around EUR 380m sales (from previously above EUR 350m) and approximately 9% EBIT margin (intact). NoHo expects Holy Cow! to have around EUR 40m sales and around EUR 6m operational EBITDA in 2023. In 2022, Holy Cow! had CHF 38.8m sales and CHF 2.2m EBIT (roughly 5.7% EBIT margin) and it has 16 restaurants with intention to open several new units during the coming 12-months. Given slightly lower EBIT margin in Holy Cow!, it appears that NoHo’s underlying business has developed above earlier guidance. We however note that this has been well expected by post-Q1 Vara consensus modelling EUR 370m sales and 9.5% EBIT margin in 2023E.

NoHo Partners reported a strong Q1 with EBIT of EUR 5.9m, well above Refinitiv consensus of EUR 4.3m. We note the healthy EBIT margin of 7.8%, which was well above the pre-COVID-19 level in the seasonally weakest quarter. Improved portfolio quality, combined with a flexible business model and improving sourcing power, has clearly smoothed out the variation between quarters, we believe. Lower leverage allows for more active M&A execution going forward, and NoHo has seen a clear pickup in the availability of acquisition targets. The company keeps its guidance intact for now, but we expect a guidance increase later in 2023. We derive a DCF- and SOTP-based fair value range of EUR 12.0-15.1 (11.4-14.3). Marketing material commissioned by NoHo Partners.

NoHo Partners reported Q1 EBIT of EUR 5.9m, +36% versus Refinitiv consensus and +47% versus our estimate. Q1 net sales were EUR 75.9m, 6% above consensus and our estimates. Operational EBITDA (operating cash flow) was EUR 8.1m in Q1 (EUR 1.1m a year ago), 42% above our estimate. Both Finland and International profitability came above our expectations. Positive development is due to structural changes in NoHo’s portfolio, flexible business model and scale benefits from central purchases. The company recorder EUR 0.6m positive fair value change due to Eezy shareholding to its financing costs (likely not fully visible in consensus). Leverage (net debt/operational EBITDA ex-IFRS 16) was 2.4x, within the company target of below 3x. NoHo notes that it is moving into next phase of fully implementing growth driven by acquisitions. The guidance was kept intact for 2023 with cautiously optimistic outlook; NoHo expects above EUR 350m sales and around 9% EBIT margin from restaurant business. Refinitiv consensus has expected EUR 365m sales and an 9.1% EBIT margin in 2023. Long-term targets are kept intact and the company targets EUR 400m sales and EUR 40m EBIT in 2024. The company is getting ready to define targets for the next strategy period. We expect consensus to make positive revisions in the range of 3-5% on the back of Q1 results and view guidance raise possible later this year.