Net Insight - Ready, set, action

Transitioning from product supplier to software provider Shareholder-friendly initiatives, realigned strategy M&A could add 90-100% to EBITDA Building the new Net Insight Net Insight is going through a transition involving a new management team, the divestment of non-core businesses and the build-out of a new foundation for growth and internal efficiency. In addition, the company has been investing heavily into R&D over the last couple of years. It now sits on a record pipeline of new products. With the Nimbra Edge cloud platform, it will be able to add modular features onto its customers’ existing Nimbra infrastructure of more than 16,000 installed devices, which could increase the value proposition of its offering.

We think this transition from a product supplier to a software provider is strengthening the company’s value proposition, as well as being margin-accretive. A turn in sight NETI has once again posted positive organic growth numbers (+8% and +12% FX adj. sales in Q4’20 and Q1’21, respectively) while managing to cut costs.

Multiple factors are currently working in the company’s favour. Media companies are increasing their network investments, the company is launching new products (including software solutions) and the business is realigned after two divestments of non-core operations (Sye and ScheduALL). We now expect organic growth as well as potential bolt-on acquisitions.

We view the initiatives from the new management team as positive, and we believe that they represent a worthy strategic shift. Following our estimate revisions, we expect a 22% ’21-‘23 EBIT CAGR. NETI is trading at 16x ’23e EV/EBIT, 23% above the median peer group.

M&A potential to add value We expect that management will start to investigate M&A. With SEK 300m in cash, and a supportive bond market, we expect that NETI could add 90-100% to EBITDA through M&A without issuing shares. With a R&D-to-sales ratio of 30%, the company needs to scale up to stay competitive.

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