NoHo Partners

NoHo Partners announced that it will acquire three well-known nightclubs in the Helsinki downtown area, making it the market leader in Finland's largest entertainment market, with around EUR 25m in annual sales. NoHo's ownership in subsidiary-owning restaurants is 60%. Overall, market demand has remained favourable in Q1. NoHo's January sales were EUR 22.7m, up 23% from January 2020. Based on Nordea card data, the Finnish restaurant market growth was ~16% in February compared to February 2020. Owing to the solid market demand and normalising debt levels, we expect further bolt-on acquisitions and find the company's 2024 targets reachable. We derive a DCF- and SOTP-based fair value range of EUR 11.2-14.1 (10.8-13.6). Marketing material commissioned by NoHo Partners.

NoHo Partners has signed an agreement in which ownership of three nightclubs in Helsinki downtown will be transferred under the ownership of group’s subsidiary. After the transaction, NoHo will hold 60% stake in the subsidiary (Stadin Night Oy). According to the company, following the acquisition, it becomes market leader in the Helsinki entertainment and nightclub market with around EUR 25m annual sales. Historically, NoHo’s market share has been smaller in Helsinki entertainment and nightclub market when compared to other student cities. Transaction price or top line impact is not disclosed, while we believe three nightclubs (Apollo Live Club, Maxine and Kaivohuone) to command around EUR 10m annual sales as a combined entity. Good to note that nightclubs have traditionally been the most profitable restaurant type. We believe that 2024 targets (EUR 400m net sales with 10% EBIT margin) start to look more achievable through the transaction. We have modelled EUR 378m sales with 10% EBIT margin for 2024E.

Nordea released Finnish card spending data until end of February today. We note continued good performance of restaurant market. Volumes have remained slightly above 2020 levels during January-February, while inflation is clearly supporting nominal sales growth. NoHo’s sales were up 23% in January when comparing to pre-COVID January 2020. Based on Nordea card data, Finnish restaurant market nominal growth was ~21% in January and ~16% in February when compared to 2020 levels. We note that January-February are traditionally the weakest months of the year and given the good restaurant demand across the Nordics, we view our estimates somewhat cautious both for Q1E and 2023E. We have modelled EUR 67.9m sales with EUR 2.8m EBIT in Q1E, while Refinitiv consensus is expecting EUR 70m sales and EUR 4m EBIT. For 2023E, we are 1% below consensus on sales and EBIT. We have a fair value range of EUR 10.8-13.6 per NoHo share.

NoHo reported Q4 EBIT 2% above Refinitiv consensus. More importantly, the company guided for more than EUR 350m in sales with a ~9% EBIT margin for 2023, indicating at least 12% sales growth. January sales came in 23% above the pre-pandemic level, while H2 growth will be supported by the new main supplier agreement for Helsinki Expo and Convention Centre. Market demand seems to be holding up well. Leverage is now within the company's target, while debt repayments will ease in 2023, allowing for growth investments. We expect the company to reduce leverage below 2.5x this year. Its financial targets for 2024 appear achievable, although they will require M&A, most likely in Denmark and Norway. We derive a fair value range of EUR 10.8-13.6 (10.0-12.5) per NoHo share. Marketing material commissioned by NoHo Partners.

NoHo Partners reported Q4 EBIT of EUR 8.5m, +2% versus Refinitiv consensus and +9% versus Nordea. Q4 net sales were EUR 88.1m in line with consensus. Operational EBITDA (operating cash flow) was EUR 11.5m in Q4 (EUR 9.8m a year ago). The company recorder EUR 2.9m negative fair value change due to Eezy shareholding to its financing costs (not fully visible in consensus). Dividend proposal stands at EUR 0.40 (consensus EUR 0.20). Leverage (net debt/operational EBITDA ex-IFRS 16) was 2.9x, within the company target of below 3x at the end of 2022.The guidance for 2023 expects above EUR 350m sales and around 9% EBIT margin from restaurant business. Refinitiv consensus has expected EUR 344m sales and an 8.7% EBIT margin in 2023. According to the company, January sales were 23% above pre-pandemic January 2020 level indicating solid market demand going into 2023. Long-term targets are kept intact and the company targets EUR 400m sales and EUR 40m EBIT in 2024. We expect consensus to make slightly positive revisions on the back of Q4 results.

Based on Nordea card data for the month of January, Finnish restaurant market nominal growth was up 31% compared to January 2019 with +15% real growth. Owing to restrictions in January 2021, y/y nominal market growth, based on Nordea card data, was +74% in January. In Q4 2022, average monthly growth was +13% compared to Q4 2019 on nominal terms while real growth was +1%. We have modelled NoHo Partners Q4 sales to be up 13% compared to Q4 2019 and up 22.5% y/y. We are 2% below Refinitiv consensus on sales and 7% (EUR 0.5m) below on EBIT for Q4. NoHo will report its Q4 on 16 February and we believe the focus will be on comments concerning outlook for Q1 and even more on 2023. We forecast 2023E sales to be up 10% y/y (1% below consensus), while we have expected 2023E EBIT to be EUR 29.3m, 2% below consensus. We view January card data to be supportive when thinking 2023 outlook. NoHo has target to reach EUR 400m sales with 10% EBIT margin in 2024, of which top line target requires M&A, we believe. For 2024E, we model EUR 366m sales (in line with consensus) and EUR 37m EBIT (10.1% EBIT margin), 4% above consensus at EUR 35.7m (9.7% EBIT margin). We have a fair value range of EUR 10-12.5 per NoHo share.

NoHo Partners has been selected as the main supplier for restaurant services by Helsinki Expo and Convention Centre (brand name Messukeskus) as 1 July 2023. Helsinki Expo and Convention Centre is the largest venue for exhibitions, meetings and congresses in Finland, hosting national and international events for about a million visitors annually. The annual revenue from the restaurant services at the convention centre is approximately EUR 15m. The cooperation is part of NoHo’s large urban projects that is one the key cornerstones towards EUR 400m top line target by 2024. Helsinki Expo and Convention Centre includes 15 different restaurant concepts and tailored restaurant services. The cooperation, mathematically, has around 4% positive top line impact on our top line estimates. Traditionally events business has high margins, while we believe rental levels could maintain EBIT margin of the cooperation at around group EBIT margin levels. Given the size of the cooperation, we believe NoHo needs EUR 2-3m capital expenditures, visible in Q2-Q3 2023. Next large urban project, Kulttuurikasarmi, is expected to be operational at the end of 2023 with four restaurants. We have a fair value range of EUR 10-12.5 per NoHo share.

Based on Nordea card data, the Nordic restaurant market has remained robust in Q4. When comparing to 2019 level, market growth appears to be strongest in Norway with close to 30% higher card spend in restaurants on nominal terms. In Finland, the most important market for NoHo, nominal growth was, on average, 13% when comparing to 2019 level. In real terms, growth was, on average, around 2%. We model NoHo’s Q4 sales up 13% from Q4 2019, 3% below Refinitiv consensus. Similarly, we are 3% below consensus on EBIT for Q4. We expect Finland sales to be up 12% from Q4 2019 level, while we model International sales to be up 19% from Q4 2019. Owing to robust market demand and NoHo’s growth ambitions, we believe the company will continue with its growth investments (e.g. scaling up Friends & Brgrs and M&A especially in Norway). We have a fair value range of EUR 10-12.5 per NoHo share.

NoHo issued today a positive profit warning, which was anticipated by consensus and Nordea. The company is now expecting EBIT margin to be over 9.5% (earlier: above 8.5%) with net sales of over EUR 300m (intact). NoHo is benefiting from actions implemented during COVID-19 pandemic (lower cost base), committed employees and good customer demand. Refinitiv consensus has been expecting 10.1% EBIT margin with EUR 312m sales in 2022, while we have modelled 10% EBIT margin with EUR 310m sales. Hence, we do not expect consensus to revise its estimates based on the profit warning. However, the company notes that balance sheet has recovered after the pandemic beyond company’s expectations, which bodes well when thinking possible dividend payments from 2022. In addition, we note that improved profitability levels and more agile operating structure could mitigate possible headwinds in 2023.

NoHo Partners' Q3 EBIT was 10% above Refinitiv consensus and the company seemed confident ahead of the high season. Guidance was kept intact, which we view as conservative considering that booking rates and current trading indicate sustained good demand in the restaurant segment. The company renewed its financing agreement, which should enable growth investments and dividend payments as early as in 2022. Despite low consumer confidence, we believe Q4 will be a good quarter in Finland, although there are uncertainties related to 2023 volume outlook. The company, however, appeared confident about reaching its 2024 top-line target of EUR 400m and a 10% EBIT margin. We derive a DCF- and SOTP-based fair value range of EUR 10.0-12.5 (9.9-12.1) per NoHo share. Marketing material commissioned by NoHo Partners.