Modus Group’s 8.5% interest offering reflects reduced attractiveness

PLY Analytics co-founder Vitalij Šostak shared his assessment of “Modus Group’s” public bond offering and the company’s latest financial results in comments to Verslo žinios.

“From a risk-return perspective, this year’s offering appears significantly weaker compared to the 2023 placement. On one hand, we have a lower bond yield – pricing here is largely influenced by the general decline in interest rates – while on the other hand, debt metrics have deteriorated,” argues V. Šostak.

In commentary, V. Šostak highlights margin challenges: “despite increased revenue, in the first half of the year we see significantly lower margins and EBITDA of only EUR 12.5 million. This confirms trends visible in the financials of other major car dealers, for example, Tallinna Kaubamaja. The net profit line looks somewhat better than in the first half of 2024, but this is only due to certain financial engineering related to a change in the accounting method for the held Green Genius Int shares.”

V. Šostak also points out the “consistently” increasing net debt. By the end of the first half of this year, it had reached approximately EUR 120 million: “this figure excludes debts to related parties, which amount to around EUR 8 million. Accordingly, when all liabilities are taken into account, net debt already stands at approximately EUR 128 million. On the other hand, we have deteriorating operating results and, apparently, risks may materialize here due to the concentration of operations in a fairly cyclical business.”

“The company’s short-term financial debt, excluding related parties, amounts to approximately EUR 53 million. Meanwhile, half-year EBITDA totaled around EUR 12.5 million. This may raise certain questions regarding debt servicing,” assesses V. Šostak. “This is not critical when the debt refinancing mechanism functions smoothly and, it should be emphasized, when the new and used car market is operating well, but these are essential conditions.”

The full comment is available in the Verslo žinios article: „Modus grupės“ 8,5% palūkanų siūlymas atspindi sumažėjusį patrauklumą.