CapMan Q2'25: Sales performance needs to be proven in second half

Translation: Original published in Finnish on 8/7/2025 at 7:40 pm EEST.

The Q2 report did not offer any major surprises, and the clear earnings miss was entirely attributable to investment portfolio returns. We have not made changes to our forecasts and expect a significant earnings improvement in the coming years. For bottom-line growth to materialize, successful new sales are required, and the company has a clear opportunity to demonstrate this during the rest of the year. We reiterate our EUR 2.1 target price and Accumulate recommendation.

Report was in line with expectations

CapMan's Q2 revenue was slightly higher than our expectations due to higher-than-expected fees from the Midstar transaction completed earlier in the year. Overall, the fee level of the Midstar transaction seems to be clearly higher than our expectations, and the transaction seems excellent from CapMan's perspective. Assets under management were slightly higher than our forecast (6,526 vs. 6,450 MEUR) and increased by around 150 MEUR from Q1. The company seems to have raised capital for its open-ended real estate funds and wealth management services, and given the difficult market situation, Q2 sales were a positive surprise. Q2 EBIT was 2.7 MEUR, clearly below our forecast of 5.0 MEUR. We would like to point out, however, that the shortfall came entirely from the investment portfolio, and thus the significance of the miss is very limited. The result of the Management Company business, which is critical to the Group's value, was very much in line with our expectations, and there were no surprises in the cost structure.

No surprises in the outlook; success is needed second half

There were no surprises in the outlook, and the company reiterated its estimates for growth in assets under management and fee income. In terms of fee income, the company is clearly behind in the early part of the year (2.8 vs. 3.7 MEUR), and achieving the guidance will require success in raising capital for its flagship funds during the remainder of the year. The company also stated that investor interest in its flagship funds remains at a good level, but that decision-making is slow due to the prevailing market situation. The company is still under clear pressure to succeed in fundraising by the end of the year, as it should make the first closings into both real estate and forest flagship funds.

We continue to expect a meaningful improvement in earnings

We have incorporated the CAERUS acquisition into our forecasts, but otherwise our forecasts have seen only marginal changes. We continue to expect the company's results to improve strongly in 2025 as investment income recovers significantly. In 2026, the result will be further leveraged by the scalability of the management business and the increase in carried-interest income. The 2026 EBIT of ~40 MEUR reflects quite well the current potential of the company. Our dividend forecasts are unchanged, and we expect a steady dividend growth. The earnings mix is forecast to continue to improve as profitability from continuing operations, which is the most valuable area for investors, increases. Between 2024 and 2028, around 60% of revenue growth is expected to translate into earnings on average. It's a challenging level, but doable as long as revenue growth is strong and cost control is in place.

Valuation is cheap as long as earnings growth holds up

At the current share price, the value of CapMan's business is approximately 200 MEUR. Relative to assets under management of over 7 BNEUR, the price tag is small. However, the challenge at the moment is that AUM performance is far from its potential. Actual results do not justify a higher value than the current one, but our earnings growth forecasts for next year already put the price tag on the business at a quite inexpensive level (EV/EBIT 8-9x). Relative and absolute multiples send the same message as the sum-of-the-parts. Once the earnings improvement is realized, the stock is cheap and the expected return is excellent. We think the current multiples would also support a stronger view, but first we want to see more concrete evidence of accelerating new sales and improved cost efficiency.