No acquisitions suggest calm quarter…

…thus our estimates for Q3 remain unchanged

EV/EBIT 31x-25x for ‘19e-‘21e based on ABGSCe

Q3’19e +20.1% sales and 18.5% EBIT growth…
Vitec has not implemented any new M&A transactions in Q3’19, thus breaking the high transaction rate seen during H1’19. This is not likely due to a lack of targets, but rather due to negotiations taking longer than expected. We note that Vitec’s current cash and cash equivalent position stood at SEK 79m at the end of Q2, thus only enabling about two more relatively small acquisitions if Vitec is to pay its traditional 6x-8x EV/EBIT. Nonetheless, we expect continued strong growth for Vitec in Q3’19, with sales of SEK 314m, corresponding to total y-o-y growth of 20.1%, but organic growth of roughly 3.4%. Further, no acquisitions means no acquisition related costs, and thus our forecast EBIT of SEK 48m corresponds to an EBIT margin of 15.4% on a segment and group level. We see the Health & Education and Real Estate segments as the main EBIT contributors, with an estimated EBIT of SEK 12m and SEK 11m, respectively.

…however, the share price is up ~90% YTD…
That there have been no new acquisitions does not mean that Vitec hasn’t delivered any positive news flow over the quarter: Vitec’s Finance & Insurance segment signed a straightforward, but important, agreement with a Lichtenstein-based Family Office. The client will make use of Vitec’s portfolio management solution PORTMAN across its front, middle and back office. This new agreement continues the international expansion of Vitec’s portfolio management solution, where Oslo Pensjonsforsikring, a life insurance company wholly owned by the City of Oslo, chose to enter into an agreement with Vitec for use of the very same solution in June.

…bringing f12m EV/EBIT to 27.9x, for a 52.6% premium
At the current share price, Vitec is trading at an f12m EV/EBIT of 27.9x based on FactSet consensus. This represents a premium of 52.6% compared to the 5-year average f
...

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se