LapWall to pay the last installment of the purchase of KW-Component in cash instead of shares

Translation: Original comment published in Finnish on 11/14/2023 at 7:20 am EET

LapWall will pay the final EUR 0.9 million installment of the KW-Component prefab business in cash instead of shares. We are positive about the change because of LapWall's strong balance sheet and the low valuation of the stock. However, due to the small size of the installment, the pressure on our estimates caused by the change in payment method is small.

After deductions, the remaining sale price is EUR 0.9 million and will be paid in cash

Yesterday, LapWall announced that the company and KW-Component had agreed that, contrary to the original payment plan, the remaining purchase price for LapWall's KW-Component prefab business will be paid in cash instead of shares. The last installment has been agreed at EUR 0.9 million after deductions. The payment will be made on November 17, 2023. In the opinion of LapWall's Board of Directors, the payment of the final installment in cash instead of a directed share issue is in the best interests of LapWall's shareholders.

KW-Component's prefab business was transferred to LapWall on June 1, 2023. Of the EUR 4.2 million unencumbered purchase price of the business, EUR 1.77 million has been paid in cash upon implementation, which is half of the purchase price minus employer liabilities accrued until April 30, 2023. According to the payment plan, the rest of the purchase price was agreed to be paid to the seller in LapWall shares in two installments: on June 29 and November 30, 2023. According to the company’s stock exchange release, the second installment was implemented as planned through a directed share issue on June 29, 2023.

We believe that cash is a better allocation of capital in the current situation

LapWall's balance sheet is strong thanks to the IPO and a very strong earnings development in 2022 (H1: net gearing of 10%). The company's profitability has remained satisfactory even in a much weaker market situation this year. In addition, we consider the valuation of the stock to be low, especially in the medium term and when compared to a more normal phase of the construction cycle (2025e: P/E 8x, EV/EBIT 5x). Therefore, we do not consider the use of the share as a means of payment to be necessary or otherwise reasonable, and we are positive about the change. However, due to the small size of the last installment, the pressure on our estimates caused by the change in payment method is limited.