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.

Ahead of NoHo Partners' Q1 report due on 9 May, we make only minor estimate revisions and note solid restaurant market demand. NoHo has continued with an active M&A agenda, and we see further potential for market consolidation following COVID-19-induced challenges among smaller restaurant units. Overall, market demand has remained favourable in Q1 and beyond. NoHo's January sales were EUR 22.7m, up 23% from January 2020. Based on Nordea card data, the Finnish restaurant market growth averaged ~40% y/y in Q1 and 24% compared to Q1 2019. We derive a DCF- and SOTP-based fair value range of EUR 11.4-14.3 (11.2-14.1). Marketing material commissioned by 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.