Fortnox
Fortnox - Present growth trajectory to continue in Q4 (ABG Sundal Collier)

2019-01-15 15:54
+13,000 customers expected (vs +12,000 in Q4’17)
We forecast clean EBIT growth of 26% in Q4
Currently trading at 27x EV/EBIT ’19e
Projected ARPU of SEK 137
So far, 2018 has been a good year for Fortnox, as the y-o-y sales growth has amounted to 39% on a R12m basis, while the adj. EBIT is up 62% for the corresponding period. For Q4’18, we forecast sales of SEK 102.2m, representing like-for-like growth of 32%. Within this metric, our estimated customer intake is 13,000, which sums up to a total customer base of 257,000. Although the trend in terms of y-o-y growth for this base has been in decline for some time, we believe our estimate to be a fairly strong metric. By way of comparison, Fortnox’s listed competitor/peer 24SevenOffice grew its customer base by 1,600 in Q3 (+40% y-o-y). We acknowledge the disparity in terms of primary customer focus and size (both current customer base and revenues), but see good resemblance between the companies.

Est. changes: slightly raised costs & lowered capitalisations
We forecast EBIT to rise 108% y-o-y in Q4’18. This is mainly explained by economies of scale in conjunction with non-recurring items of SEK 7.9m in the year-ago period (about 40% of the quarter’s EBIT). Our estimate implies an EBIT margin of 25% for the quarter, which we believe will continue to expand in the longer term. However, in order for Fortnox to maintain its current trajectory of rapidly growing sales, we have raised some of our cost assumptions. Mainly, we think that costs for bought services, which recently have increased to some 17% of sales, will remain at these levels. Furthermore, we have lowered our estimated capitalised costs. In total, this results in a lowered EBIT of 2-6% for ‘18e-‘20e.

23% sales growth for FY’20e
On our new estimates, the Fortnox share is trading at 27x EV/EBIT ’19e. Given the positive outlook, with a low churn rate in tandem with a rapid customer intake and the potential for an increased ARPU, the ratio contracts to 19x for ’20e.


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