Vitec - Business as usual in Q1’21e

ABGSCe: Q1’21 EBITA of SEK 88m, +36. 0% y-o-y Minor estimate changes on M&A-related costs EV/EBITA of 35-30x for ‘21e-‘23e, excl. future M&A We factor in Q1 sales of SEK 371m, +5. 6% organic growth For Q1’21, we expect a stable quarter.

We estimate net sales of SEK 372m, for total growth of 20. 2%, with organic growth of 5. 6% adjusted for M&A and FX.

The Q1 figures include the recent acquisition of Unikum Datasystem (4 Jan) and Travelize (3 Feb), both of which have a similar recurring revenue percentage as Vitec. We expect that recurring revenues will amount to SEK 323m, or 87. 0% of net sales.

This is up from 78. 6% in Q4’20, which had abnormal levels of service and license revenues, as recent acquisitions had not adjusted their business models. We expect service and license revenues to normalize in Q1’21.

We forecast EBITA before M&A-related costs (SEK 9m) of SEK 88m, for a margin of 23. 7%, growing 36. 0% y-o-y.

We lower M&A-related costs in Q1’21e We make only minor estimate changes, slightly lowering M&A-related costs in Q1’21e, from SEK 11m to SEK 9m. Looking at the FY 2021, we expect Vitec will maintain a high pace of M&A. The company recently expanded its loan facility by another SEK 500m, now amounting to a total of SEK 1.

5bn. This is combination with the seasonally strong Q1 cash flow should leave Vitec well prepared to continue acquiring vertical software companies in the Nordics that fit its stated criteria. Vitec has already made two acquisitions in ‘21, where Unikum Datasystem was relatively large (~SEK 110m in annual sales) with a strong EBITDA margin of ~38%.

Valuation ~30% above relevant roll-up peers In terms of valuation, Vitec is trading at a ‘21e-‘23e EV/EBITA of 35-30x, based on the current share price and our updated estimates. This is approximately 30% above the median of our peer group, which consists of relevant roll-up peers. Given the recurring nature of Vitec’s revenues, its above-peer margins and strong capital allocation track rec.