27/05-2019 08:46:05: (B2H) Ex dividend NOK 0.45 today
06/06-2019 14:01:38: (B2H) Renteregulering
Notert på 11,69,- 8. juni 2016, og er ned nesten 20 prosent siden da. Står det virkelig så dårlig til med selskapet? Begynner jo å se ut som et attraktivt dividendecase på dagens kurser.
Nesten like dårlig stilt med Axa. Er det innstrammingene til myndighetene ovenfor forbruksbankene som drar disse med ned i dragsuget? (Til tross for at lite av virksomheten foregår her i Norge).
Godt spørsmål, men man skulle vel tro at med gjeldsregister at flere lån vil bli solgt til inkasso selskaper…
Hvis estimatene du limte inn her slår til (0,89 i utbytte 2021), så burde jo inngang på dagens kurs ikke være det dummeste man gjør. Men man blir jo nesten mørkredd av kursfallet som har pågått en liten evighet nå.
Har fulgt denne en stund og har ett lite lodd her. Med utbytte 0,45 i år, kanskje litt optimistisk at dette skal øke til 0,89 på 2 år uten at det er noen umulighet. Ser de fleste meglerhus anbefaler kjøp med kursmål opptil 19, men selv som ren utbytte gir den 5% i forhold til dagens kurs. Vanskelig og tro at den skal falle mye lenger ned, men hvem vet når ingen vil eie noen ting. En blir jo skeptisk når aksjen har falt 50 % de siste 18 mnd. og den handles på relativt høyt volum. Tror kanskje markedet priser denne for billig, har den derfor som kjøpskandidat.
18/06-2019 16:14:17: (B2H) New Regional Director Finland & Baltics
Denne har jo ikke akkurat gått veien hittil (lol), men kjøper mer på disse nivåene. Caset er:
Som mange sikkert vet går det tråere i forbruksbransjen ifm de nye direktivene som kommer. dette vil gjøre at inkassoselskapene kan kjøpe mer billig gjeld fra bankene. = mer omsetning med høyere margin?
Ser mot 5-8% utbytte neste år i B2H og skjønner fremdeles ingenting av kursutviklingen 
Er det store endringer i forbrukslånbransjen ellers i Europa også? Noen som vet? B2H har jo svært lite av virksomheten sin i Norge.
Basel 3
Har økt litt i dag, selv om Investtech er av en annen oppfatning.
https://www.hegnar.no/Nyheter/Boers-finans/2019/06/Analytiker-frykter-kursfall-anbefaler-salg9
@Nocturne Har du noen formening om bunn her? Har lyst å prøve å time den og mener den ikke kan være så langt unna
Ingen dyp analyse dette her men alt etter hvordan du tegner formasjonen (ascending wedge synes jeg det mest sannsynlig er) så kan det se ut som den har bunnet ut? Du har volum klimaks der siste to handelsdager og rent brudd opp i dag.
For å snu trenden på daily trenger du close over 10.35-ish, noe som også gir target for formasjonen (roughly) så enten får du en dobbeltopp der, eller så snur du trenden - men det vet vi ikke før vi kommer så langt og du ønsker kanskje å være inne før det?
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Takker! Ja det er noe slikt jeg også tenker. Liker å prøve å time bunner, men fort gjort å hoppe inn for tidlig i disse tider. Da enkelte aksjer ser ut til å være bunnløse.
https://www.hegnar.no/Nyheter/Boers-finans/2019/06/Analytiker-frykter-kursfall-anbefaler-salg9
Investtech pleier jo som regel alltid å komme med salgssignal etter de har falt voldsomt og treffer mange ganger med salgssignal på kursbunner, men så har de også hatt rett ang b2h til nå. Så man skal ikke undervurdere analysene deres totalt.
Vi har jo ulik strategi, når du sier “bunn”, så tenker du nok langsiktig bunn. Når jeg sier bunn mener jeg foreløpig bunn.
Du vet jeg traff ganske bra i TRVX (ca. 10 øre fra bunn), men er helt ute der nå. Liker å hoppe inn og ut og prøve å hente 5-10% i uken eller oftere enn å sitte å vente i flere år slik jeg har gjort med Nano. Blir siste aksjen jeg er long i.
Sorry off topic
Stemmer! Jeg prøver å time bunn og så sitte på aksjene i flere måneder, eller år for den saks skyld. Tror både trvx og b2h er i ferd med å snu den langsiktige trenden. Trvx mer nyhets-sensitiv, mens b2h tjener jo allerede bra med penger og er priset under bokførte verdier. Usikret gjeld er selvsagt også mye risk, men ser ut til at de tjener bra på deres porteføljer
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Snur nå 
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Norskbulls har hatt short b2h siden 11,86, og endelig snudd til kjøp igjen igår.
Kan hende vi snur her, så lenge markedene holder seg stabile…
Lengre, svært godt innlegg fra SA:
B2Holding - Stock At All-Time Low And Fundamentals At All-Time Highs; 150% Upside Potential
May 20, 2019 8:00 AM ET
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About: B2Holding ASA (BTOHF)
Contrarian
(72 followers)
Summary
B2Holding (B2) is a Norwegian NPL buyer/collector niched towards the European market, which I estimate will grow revenues 38% CAGR 2018-'20E.
Valuation has dropped from ~14x TTM P/E to 7x over the last 12 months although revenues, FCF and EPS continue to grow rapidly.
I believe investor worries about interest rates and deteriorating market conditions are exaggerated, and do not fully apply to B2Holding.
At 11x 2020 P/E I get a target price of NOK 28.7, representing ~150% upside from the current share price.
Investment Summary
With operational cash flow of NOK 4.8 billion (vs NOK 4.6bn market cap at 11.40 NOK/share) coming in during 2020, double-digit industry growth, best in class cost control and a founder/owner allocating capital for the long run, I think B2 is a very appealing investment opportunity. In this report, I will present why exaggerated negative investor sentiment has created an opportunity to buy B2 at ~4x 2020 P/E with 150% upside based on re-rating to an 11x multiple and a solid margin of safety.
Business Model
B2Holding (OTC:BTOHF) (trades with liquidity under B2H.OL) operates in the Non-Performing-Loan (NPL) industry, meaning they acquire large portfolios of overdue loans (usually 90 days) from banks or other lenders and then attempt to recover as much as possible of total face value. Companies such as B2 usually make their money by identifying attractively valued portfolios, of which they can utilize a streamlined in-house collection service to, in a cost efficient way, collect more than they pay. For more info, check out their presentations (I recommend the 2018 CMD) or annual reports.
Let’s consider a hypothetical example, where B2 is bidding on a portfolio of overdue loans with a gross face value of $1bn. Since it is costly for a bank to 1) hold the overdue loans on its balance sheet (has to write it down = negative for ROE), and 2) collect the loans, the bank will sell the portfolio at a discount to face value. While discounts will vary a lot, they will usually be around 50-80%. Ahead of this, B2 will have calculated how much they think they will be able to collect (in my example below, they estimate to collect 60% or $0.6bn). This will give us the money multiple, as can be seen below.
Chart 1: NPL portfolio acquisitions, the typical process from face value to ERC. Source: Idea Generation
The actual process, from portfolio acquisition to collection, is exemplified below. During the acquisition phase, the most important variable becomes large databases, credit information, and expertise in assessing the potential collection rate based on macro data, counterpart data, and individual claim data. During the collection phase, as is obvious below, an effective organization and well-established collection routines and processes become vital.
Chart 2: Example of business process of a pure-play NPL buyer and collector. Source: Idea Generation.
My view is that B2Holding has the organization, experience, and knowledge to execute well on their business plan. Indicative of their success thus far is, in my view, the EBIT-margin expansion from 3% in 2014 to 47% in 2018 , where much is coming from reducing SG&A/revenues from 96% in 2014 to 50% in 2018. Further, I think the scalability displayed below will continue to drive margins in the long run (in contradiction to many sell-side analysts), which I will explain more in-depth below.
Chart 3: An efficient collection organization has allowed for SG&A/revenue contraction and EBIT-margin expansion. Source: B2Holding, Idea Generation.
An Attractive Market Opportunity
B2’s Total Addressable Market (“TAM”) consists of the total stock of European bank NPLs, which is roughly estimated to €780 billion by the European Banking Authority (see Chart 4 below). Since NPLs basically share the same traits as many raw materials (relative homogeneous products), we can call this a commodity market for the time being. Everyone investing in commodity markets will recognize the importance of 1) supply, 2) demand, and 3) cost control and efficient scale (described above). Let us go through the supply and demand to better understand the situation faced by B2.
Chart 4: TAM is estimated to €780 billion, with a heavy weighting towards Italy, France, Spain and Greece. Source: B2Holding CMD
As mentioned above, the sellers will usually be banks, driven by: 1) regulatory demands, 2) accounting and cost incentives, and 3) macroeconomic factors and interest rates. Let us do a quick review of all three to better understand what is driving the supply side of the NPL industry:
First, regulatory demands and enforcement are pushing banks to sell NPL portfolio. Due to the high growth of NPLs, regulators are becoming increasingly worried about any associated system risk of holding too much risky debt on the balance sheet. Hence, the reduction of bank NPLs has been the European Central Bank’s (ECB) SSM supervisory top #3 priority since 2016. Further, regulation like Basel II/III demands that banks reduce their exposure to certain sectors or large lenders (see e.g. BIS or EC for more information).
Second, there are several incentives for banks to sell NPL portfolios. While avoiding cost of collection (which, as described above, demands scale), selling the portfolios also improve liquidity (as reserves no longer need to be held). Further, if sold above carrying value, banks are allowed to book capital gains. Thus, banks are motivated to sell NPLs as it drives both profit margins and ROA/ROE.
Third, the amount of NPLs will be heavily dependent on unemployment rates, GDP growth and interest rates. While these might be harder to properly estimate and understand the direct relation to, we can assess the healthiness of B2’s markets by looking at a few key metrics below.
Chart 5: Top 10 countries, representing 90% of ERC, all show positive developments in unemployment rates and GDP growth. Source: B2Holding
Based on the above, we can conclude that the supply side most likely will continue to grow steadily (double digit) as long as the current incentive structure continues to withhold. Add the implementation of IFRS9, which EBA estimated would increase provisions by 9%, and the sector could see >15% growth p.a. for the foreseeable future. While this article would become too lengthy if I were to account for all drivers of NPL supply, I would also like to add that the key drivers to look for (if doing more work on this) are (other than the above): 1) the NPL ratio, 2) loan growth, 3) interest rates, and 4) credit system development over different geographies.
Looking at the second most important factor in a commodity industry, demand, the situation is also somewhat complex. Demand will usually be counter-cyclical to supply, as a low supply of NPL usually means strong underlying macroeconomics (which means higher collections), while a high supply means worsening macroeconomics (and hence lower collections). Further, the credit cycle has significant impact as many collectors use substantial leverage and when the market becomes increasingly shaky, collectors are seen as risky by banks which then limits NPL players access to funding (limiting growth opportunities). Moreover, rising interest rates usually pressure the equity of collectors (just check the stock prices of PRA Group (NASDAQ:PRAA), Kruk SA Wroclaw (OTCPK:KRKKF), Intrum AB (OTCPK:ITJTY), in addition to B2) which means less access to capital market financing.
Looking at the competitors, the market is mainly dominated by hedge funds, private capital and specialized NPL-acquirers such as B2. Thus, some of the main competitors when bidding on larger portfolios will usually be either hedge funds such as KKR or Cerberus or specialized acquirers such as the aforementioned PRA Group, Kruk SA Wroclaw, Intrum AB, or Arrow Group (see peer table further down).
Chart 6: Intrum dominates the European market, although B2 has grown to become a significant player in the last few years. Source: B2Holding CMD.
While this sounds like (and usually is) a highly competitive market, it is currently large enough for players to generate 10-20% IRRs, especially when you have an efficient collection organization and the proper network with local banks and actors. Thus, given double-digit IRRs and growth and the option to become competitive through efficient cost structure and collection organization, I think the NPL market overall is very attractive and worth investing in.
Stock At All Time Low + Earnings At All-Time High
In 2018, revenues grew 40%, EBITDA 51% , FCF 83% (excluding portfolio acquisitions; otherwise negative) and ERC 46% as B2 continued to ramp up operations. At the same time, the stock declined 41% as investor sentiment worsened for the overall industry during the year. The P/E multiple has contracted from ~14x to 7x meaning ~50% de-rating, which can be compared to the sector de-rating of ~30% (see chart below). The stock is currently close to its 4 year low, which is relevant since the company became what it is currently during 2015.
Chart 7: Stock price is down ~50% since peak 2018 although fundamentals keep improving. Source: Bloomberg, Idea Generation
Chart 8: My sector TTM P/E (see peer table further down for all constituents) has contracted from ~26x in 2018 to ~18x currently, slightly below a 3y average. Source: Bloomberg, Idea Generation.
At the same time, I expect continued double-digit growth for the foreseeable future while EBITDA-margin expansion continues. The revenue growth is mainly coming from continued portfolio acquisitions, as well as collection on current portfolios. The revenue algorithm consists of “Interest Income from Purchased Loan Portfolios” (IIPLP), value change from the portfolio, profits from JVs and “other revenues”. IIPLP is the most important to understand, and can basically be understood as collection of the NPL portfolios (do not let the name confuse you, it is as such because of accounting reasons). Credit loss/gain is a revaluation effect based on internal estimates, and can be left alone as long as values do not get very high and start to materially affect earnings. Profits assessments from JVs are also straightforward and not a significant contributor at this point. Lastly, other revenues consist of collections for other actors and similar services, and this is usually a high margin business which means both cash flows and margin enhancements in the long run. Chart 9: Revenue constituents; do not let the complicated terms fool you, the revenue algorithm is actually fairly straight forward. Source: B2 2018 Annual Report.
To estimate revenues, I only make assumptions for IIPLP and “other revenues” as these are the most important contributors. First evaluating collection on current portfolios, IIPLP, B2 reported NOK 22.3bn ERC as per 4Q 2018. As seen below, B2 estimates collecting NOK 6.4bn in year 1 (2019).
Chart 10: ERC and year distribution (base year 2018) with red markings for most important values. Source: B2Holding March 2019 Bond Presentation, Idea Generation
So how much of that can they convert to actual revenues? Let us look at previous years:
Chart 11: IIPLP, ERC and conversion 2016-2020E (measured as IIPLP in year +1 vs ERC year +1 in year 0). Source: Idea Generation
As seen above, the average conversion has been 72% 2016-2018. The conversion has been calculated as e.g. reported IIPLP in 2016 vs estimated ERC for 2016 in 2015 reports. Thus, we get an idea of 2019-'20E revenues based on 2018-'19E ERC. My estimates are built on current market dynamics, which means 64% conversion (although I think this is at the lower end of what will actually happen = further margin of safety). With these estimates (and with ERC growing 25% and 17% respectively based on pre-acquisition FCF-generation), I get NOK 4.1bn IIPLP in 2019E and NOK 5.1bn in 2020E. With a stable 10% growth in other revenues, which is conservatively estimated, I get total revenues of NOK ~4.5bn in 2019 and NOK 5.6bn in 2020E (see chart below). Based on ~15% ROI for the period (~1.7x money multiple), some further small reductions in SG&A/revenues and ~15-20% ROE, I arrive at an EBITDA-margin of 51% and 57% for 2019E and 2020E respectively.
Chart 12: I estimate 55% and 24% revenue growth respectively for 2019E and 2020E, while the EBITDA-margin grows towards ~60%. Source: B2Holding, Idea Generation.
Looking further down the income statement, based on my estimate of a EPS CAGR 2018-2020E of 30% (vs 48% EBITDA CAGR for the same period), I arrive at NOK 2.6 in 2020.
Quick Look at Cash Flows And Balance Sheet
While I think revenues, EBITDA and EPS will be important to monitor since most sell-side analysts and investors will look to these measurements to value B2Holding, we should still understand incoming cash flows and the shape of the balance sheet to better assess the alpha opportunity of B2Holding.
During 2018, B2Holding generated NOK 2.3bn in operating cash flows (vs NOK 4.6bn in market capitalization). I estimate that this will grow to NOK ~4.8bn in 2020E due to the timing of collections of growth of the NPL portfolio. ERC grew ~50% during 2018 and the portfolio mix (shift to secured assets) should allow for higher cash flow generation during 2019-2020.
Chart 13: Cash conversion vs EBITDA and FCF, pre and post portfolio acquisitions. Source: B2Holding, Idea Generation.
The balance sheet also looks healthy, although somewhat levered. B2 currently contemplates issuing NOK 200-350 million in new unsecured bonds, which would result in a Net Debt/EBITDA multiple of ~7.6x vs 2018 numbers or 3.7x at 2019E numbers. In a non-investment scenario, B2 would pay down all their debt in 2-3 years. S&P has a BB- rating on the bond, and given the high amount of visible cash flows coming in during 2019-2020, I think the current situation is under control.
Risks
At this point readers should know that B2 is certainly not a risk-free investment opportunity. Let me review a few high-level risks that should be monitored for better conviction when buying B2 stock. However, I do think it is worth noting that the high level of visible cash flows provides a good margin of safety, which mitigates the risk level of B2.
The most important risks are mainly related to macroeconomics and the debt cycle. If economic conditions worsen across the board for the 10 most important markets for B2 (see chart further up) the stock will most likely not perform well. I still think the company has enough flexibility to perform fairly well, but again, it would probably not be good for shareholders.
Moreover, if the debt cycle were to take a nasty turn, restricting further lending for perceived high-risk companies such as B2, growth opportunities would be constrained, my estimates would fall and the stock would most likely under-perform. Hence, make sure to understand these two major factors when investing in B2Holding.
Valuation
My valuation relies on a P/E multiple based on historical and peer averages, but takes into account EV/ERC (important industry multiple), EV/EBITDA, ROE and Net Debt/EBITDA. First, I look at peer fundamentals and compare these to B2Holding. Then, I evaluate peer multiples vs B2Holding. Then I weigh the peer average multiple with historical multiples and apply the blended NTM P/E to 2021E EPS to get my December 2020 Target Price of NOK 28.7:
Chart 14: Relative fundamentals vs key peer group. B2 numbers does not, in my view, represent a reason to apply a valuation discount to peers as shown in the chart. Source: Estimates from Bloomberg and Idea Generation, calculations made by Idea Generation.
Chart 15: Significant discount to peers on next twelve months (NTM) EV/EBITDA (16% discount), NTM P/E (65% discount) and current EV/ERC (28% discount). Source: Bloomberg and Idea Generation.
Chart 16: Based on a blended NTM P/E (heavy weight towards current low multiples after above mentioned de-rating) I arrive at a upside of 152%. At my TP, B2 would have a ~6x EV/EBITDA multiple and 0.8x EV/ERC multiple. Source: Idea Generation.
Management
In these types of businesses, management and owners’ incentives also become decisive given the significant impact key managers’ decisions may have on the company’s development. I think this is another strong pitching point of B2Holding, given its across-the-board experienced management with a fantastic track record. Most of the high-level managers has been active at Aktiv Kapital, which was acquired by PRAA in 2014 for $880 million. Jon Nordbrekken, the Founder, Chairman and third largest owner (owns about 6%), also founded Aktiv Kapital in 1991. Olav Dahl, the current CEO, joined Nordbrekken at Aktiv Kapital in 1998 and has been the CEO of B2 since 2012 (as it is currently structured). Several other key managers has been active within Aktiv Kapital before joining B2Holding. To me, this strengthen the thesis a lot, given that this business model requires being strict and patient in terms of portfolio acquisitions, an extensive network and familiarity with selling banks as well as access to financing. In aggregate, insiders own about 8.7%, meaning incentives are well aligned with minority owners.
Investment Summary
In conclusion, I am buying B2Holding (B2H.OL) at NOK 11-12/share for 150% upside until December 2020. The target price is based on a 11.1x NTM P/E multiple, representing ~6x EV/EBITDA or ~0.8 EV/ERC.
I think the opportunity is due to a fundamental misunderstanding regarding the risk level in B2Holding and a sell-off of the sector, not taking into regard idiosyncratic fundamental development of B2. My estimates, which are relatively conservative, indicate operational cash flows in 2020 above the current market cap and a historically low valuation while market conditions and the competitive dynamic actually look favorable. This is to me a solid margin of safety.
Since my thesis in large relies on continued high growth in cash flows and portfolio acquisitions, investors would be able to maintain a high level of conviction by monitoring (in the following order): 1) ERC growth, 2) collections (revenues), 3) operational cash flows, 4) EPS growth, and 5) ROIC and ROE development. If any of these start to materially diverge from company guidance or the estimates I have provided above, investors would be wise to revise if the bull case is intact.
Author’s note: Sorry for the lengthy article, it is not the easiest of business models to explain. Further, I realize I do not cover all areas of relevance here since that would make the article too long. Let me know if you have any follow-ups and I would be happy to answer them.
Disclosure: I am/we are long BTOHF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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