StrongPoint - Recent deals highlight strong momentum
15% organic growth in Retail Technology Several new contracts highlight strong momentum DCF range of NOK 28-44/share (P/E 6.6x on ’25 targets) 15% organic growth in Retail Technology, margin below Q1’21 revenues of NOK 296m was spot on consensus expectations. Organic growth in Retail Technology was strong at 15% y-o-y driven by several large installations of Click & Collect lockers and self-checkout solutions. Adj. EBITDA was however lower than consensus hoped for at NOK 20m, corresponding to an EBITDA margin of 6.6% (vs.
an adj. EBITDA margin of 7.8% in Q1’20). The reason is two-fold.
Firstly, there was a higher share of sales from third-party products with lower gross margins in Q1. This varies from quarter to quarter and is therefore temporary by nature. Secondly, the company continues to invest for future growth (hiring new sales personnel among others).
In addition, the Spanish operation continues to be negatively impacted by lockdowns (and is loss-making), which should provide a boost to both revenues and profitability once societies open up again from H2’21. Glovo deal is a testament to the quality of the technology StrongPoint has signed fast-growing delivery platform Glovo as the first customer of the recently launched SaaS-version of its picking solution for e-com to be used by grocery chains that deliver groceries through Glovo’s app. Such a large technology company choosing StrongPoint’s technology is testament to the quality of its software, in our view.
We lift our sales estimates by 1% for ’21e-‘22e, driven by a continued strong growth momentum and several exciting new agreements (Glovo and Norgesgruppen). However, we also increase our opex assumptions and lower our gross margin expectations somewhat as we expect the company to continue to invest for future growth. This lowers ‘21e EBITDA by 8% and ‘22e EBITDA by 3%.
If it reaches its 2025 targets, EPS will be over NOK 5 The long-term case with double digit organic growth and higher margins....