Bong AB (publ)
Research by ALPHA
Author: Alpha
Bong Ljungdahl producer of envelopes (70%) and paper packaging materials (30%) is mainly active in Scandinavia & Baltic (15%), Central Europe incl. DE (30%) and rest of Europe. After a 20% increase in revenue the company turned profitable in 2022. Operating margins are low 5-7%, although the company managed to grow with slightly improved margins (most likely from the weaker EUR/SEK). Q4'2022 TTM earnings per share are 0.21kr resulting in a PE 5x at price of 1.00kr. In the report management also announced that orders declined. Even with 5x PE the risks are too high with such low profit margins.
Business (1)
Replacement of plastic bags
Paper bags as replacement for plastic bags has grown 40% in 2022 which represents around 30% of revenue. In 2023 the company will launch an improved product line.
26/03/2023 by ALPHA｜1
People (1)
Turnaround
Comparing sales and administrative costs between 2021 and 2022 do not show an improvement. The margin improvement is mainly in the gross margin. Increased raw material prices for paper could be transferred to the customer. With higher material costs the company realized a higher gross margin. It can be that this explained by the weaker SEK vs sales in EUR.
It is too early to conclude that management efforts realized a turnaround.
26/03/2023 by ALPHA｜1
Risks (2)
Return on Equity
Bong's earnings per share fluctuated between from -3kr to +3kr per share in the past 10 years. In the past 5 years there was hardly any profitability with an ROE low of -27%.
26/03/2023 by ALPHA｜1Envelops market
70% of the business comes from envelops, which is a declining market as result of the trend for replacement of paper with digital information.
26/03/2023 by ALPHA｜1