Vitec - Solid Q4 expected, M&A raises estimates
ABGSC Q4‘20e EBITA of SEK 80m, +50. 8% y-o-y ‘21e-‘22e EBITA up by 9. 8% on recent M&A EV/EBITA 37-31x ‘20e-‘22e, ~30% above peer median Forecast total Q4’20e growth of 13. 1%, -1.
6% organic For Q4’20, we forecast total net sales of SEK 337m, for a total y-o-y growth of 13. 1%, but a total organic growth of -1. 6%, as Vitec is still facing tough comparables from ’19 after the cancellation of low-margin “Other revenues”, etc.
This should abate in ‘21. We estimate Q4 recurring revenues of SEK 286m, or 85% of total revenues, +5. 6pp y-o-y.
We factor in opex of SEK 270m, corresponding to growth of 8. 8% y-o-y, driven by M&A. This yields a Q4e EBITA of SEK 80m, +50.
8% y-o-y, for a margin of 23. 7%. Inclusion of Unikum & Travelize raise EBITA by 9.
8% We raise our top-line estimates by 9. 2% and EBITA by 9. 8% for ’21e-‘22e following the inclusion of Unikum and Travelize in our estimates.
Note that we have added acquisition-related costs of SEK 11m for ‘21e. The acquisition of Unikum Datasystem is quite sizeable for a Vitec acquisition, adding ~SEK 110m in revenues (recurring in-line with Vitec) with a strong EBITDA margin of ~38% thanks to a streamlined organization, in which sales are driven by partners. We think the price will be at the higher end for a Vitec acquisition, in the 6-8x EV/EBIT range.
The inclusion of Travelize adds ~SEK 20m in revenues with an EBITDA margin of ~24%. Despite the COVID-19 pandemic, Vitec has shown that it can implement acquisitions through digital means only, and we expect the pace of M&A to continue throughout 2021. Valuation remains above peer levels At the current share price, and based on our updated estimates, we find that Vitec is trading at an EV/EBITA of 37-31x for ‘20e-‘22e, which is approximately ~30% above our peer group median based on FactSet consensus.
In our view, it makes sense that Vitec should trade above industrial roll-ups such as Lifco and Indutrade given the recurring nature of its revenues and margin profile.
