Investment case

NCAB believes that the successes, as well as the future prospects, derives from its strong position in a market benefiting from fundamental trends and drivers. Some of NCAB’s competitive advantages are:

  • Strong position in a market with stable growth and fundamental trends benefiting PCB traders
  • Unique proposition to customers and manufacturers
  • Long track record of profitable growth with resilience to macroeconomic shifts
  • Asset light business model with strong cash flows
  • Experienced management team with many years of experience of managing a company with growth and good profitability

Underlying market with stable growth and fundamental trends benefiting PCB traders

The global market for PCBs is expected to grow at a CAGR of approximately 3 percent from 2016-2021, primarily driven by increasing value of electronic systems and a stable price level for PCBs. The European and North American markets are expected to grow at CAGRs of approximately 1 percent, respectively, over the same period. At the same time as demand for PCBs in NCAB’s markets is expected to grow, production of PCBs has been, and is expected to continue to be, transferred to Chinese manufacturers due to more cost efficient production. In 2016, the domestic production corresponded to approximately 50 percent of total demand in Europe and to approximately 65 percent of total demand in North America. In 2021, the share of domestic production in relation to total demand is expected to be approximately 40 percent in Europe and approximately 60 percent in North America.

The above trend creates an undersupply of locally produced PCBs in Europe and North America of approximately USD 250m. This is to a large extent, expected to be captured by advanced PCB traders, such as NCAB.

Strong position in a fragmented market

NCAB is one of the largest advanced traders of PCBs globally. NCAB holds strong market positions in the Nordic countries, being the largest PCB trader in Sweden. NCAB is also one of the largest in Norway and Finland.

The markets in which NCAB operates are in general fragmented, characterized by a large amount of smaller and local traders. NCAB is one of few PCB traders with a broad geographical presence and NCAB expects that its strong market position and broad geographical reach will enable it to serve global customers, increase market shares, enjoy benefits of scale as well as drive market consolidation.

Unique proposition to customers and manufacturers

NCAB offers its customers an extensive range of PCBs and its wide manufacturer network can offer PCBs of almost all types. This enables NCAB to offer its customers high flexibility, capacity and capability, as well as to benefit from the purchasing power that NCAB has generated by aggregating the demand of its approximately 1,650 customers.

Quality is a top purchasing criteria in relation to PCBs, due to the fact that PCBs often represent a relatively small share of the value of the end-products, but are at the same time critical to the function of the end-product, where a faulty PCB can cause significant costs. Many customers source their HMLV components through an intermediary in order to focus its own purchasing organization on high-volume and high-value components. Through early involvement via design support and prototyping, NCAB can increase producibility and decrease the number of design errors, which decreases the customers’ total cost. NCAB has established processes for quality control as well as extensive factory presence with rigorous audits and evaluations of manufacturers. NCAB’s high delivery precision and flexible logistics solutions are crucial to shorten the customers’ time to market as PCBs are often the last component to arrive in an assembly line.

Manufacturers benefit from NCAB providing a large volume of PCBs through its large customer base as well as providing a route to market for the manufacturers through NCAB’s broad customer reach. Furthermore, the Company’s established factory management team helps the manufacturers to improve processes, quality and technological knowledge enabling further advancements in their product offering.

Long track record of profitable growth with resilience to macroeconomic shifts

NCAB has a robust and resilient business model supported by its position in the value chain and beneficial market drivers. The CAGRs of revenue and adjusted EBITDA between 2008 and 2017 were 15.8 percent and 21.1 percent, respectively, with adjusted EBITDA margins of above 4.5 percent every year despite organizational investments to drive growth as well as manage fluctuations in the general economic climate. NCAB has a flexible cost structure where the main operating expense is the staff costs. During the financial crisis in 2009, NCAB experienced lower sales than for the previous year but still managed to maintain an adjusted EBITDA margin of 6.2 percent (0.6 percentage units higher than in 2008), illustrating the resilience and flexibility of the business model.

Asset light business model with strong cash flows

NCAB operates an asset light business model which generates strong cash flows. Cash conversion amounted to 77.4 percent in 2017, 84.9 percent in 2016 and 76.1 percent in 2015. Since NCAB does not own any factories or premises the only capital expenditures are related to minor investments, for example IT systems and office equipment. Capital expenditures in intangible assets and property, plant and equipment amounted to 0.3 percent in 2017, 0.5 percent in 2016 and 0.2 percent of revenues in 2015.

In addition to the low capital expenditures NCAB has an efficient working capital management with limited inventories since all orders are custom made, furthermore, NCAB has attractive payment terms towards manufacturers and from customers. Net working capital corresponded on average to 7.8 percent of operating revenues 2015- 2017. The ability to generate strong and stable cash flows has enabled NCAB to invest in further growth initiatives.

Experienced management team with proven track record

NCAB’s current management team has been with the Company for on average ten years. The CEO of NCAB, Hans Ståhl, and the CFO of NCAB, Anders Forsén, have been with the Company since 2003 and 2008, respectively. The current management team has a proven track record, showing profitable growth, including organic geographical expansion as well as acquisitions.