For the past five years, the development of Saab's share price relative to the Swedish stock exchange has been strong. The course has primarily been driven by better sales prospects and hopes that international contracts will improve the company's profitability. Saab has, however, found it difficult to convert increased sales to cash flow. This, in combination with the fact that large investments were required and will be required to gain ground internationally, meant that as late as October last year, the company carried out a directed new issue. The issue provided the company with approximately SEK 6 billion.
Saab's share price has been on the stock market during the past three years and is approximately 35 per cent below the top price of SEK 446, which was quoted in October last year - before the issue was announced. The share currently constitutes 4.7 per cent of the portfolio in the GDS fund.
What we think looks interesting
- Saab has a unique position in the Swedish market, with a near monopole-like position. 40 percent of the company's revenues originate from Sweden.
- There is much debate about the potential for the Swedish defense budget and what increase it is estimated to have until 2025. Analysts estimate that the increase can be as large as 70 per cent by 2025 - an annual increase of 9.2 per cent.
- An increased Swedish defense budget means that Saab has a high probability of increasing its organic growth.
- Opportunities to obtain new international contracts have been strengthened by the order won by the US Air Force on the school airplane TX together with Boeing last year.
- The share has developed significantly worse over the past five years compared to the US industry colleagues Lockheed Martin and Boeing, especially if the weaker krona is taken into account. This despite the fact that a stronger sales trend was noted.
Is Saab a good investment?
We believe that Saab looks interesting from a risk / return perspective. The key to future price increases lies in how well one manages to attract international orders, which all else equals higher margins.
Analysts see a motivated price of SEK 390, which we think is a bit high. Different fundamental values show the share can have an upside of 10-20 percent from today's levels. If the company can profit from continued strong growth and rising profitability, the motivated value is higher.