Vitec - We expect a stable Q2’21e from Vitec

ABGSC Q2’21e EBITA of SEK 93m Raising ’21e-‘23e EBITA by 0. 7-1. 2% on recent M&A Trading at EV/EBITA 32-28x, ~15% above peer median Q2’21e sales of SEK 383m, +19. 3% y-o-y (4.

7% organic) We expect a stable Q2 2021. We estimate net sales of SEK 383m, for total growth of 19. 3% and organic growth of 4.

7% adjusted for M&A and FX. The Q2 figures include the recent acquisition of Nordman & Co (26 April), which has a similar recurring revenue percentage as Vitec. We expect that recurring revenues will be SEK 332m, or 86.

9% of net sales, up from 82. 9% in Q2’20. We expect service and license revenues to continue to normalise in Q2’21e, following an adjustment of the business model of recent acquisitions, which caused non-recurring revenues to be slightly elevated in Q4’20 and Q1’21.

We forecast EBITA before M&A-related costs (SEK 1m) of SEK 93m, for a margin of 24. 3%, down -3. 2% y-o-y.

Acquisition of Nordman & Co drives estimate changes We make only minor changes to our estimates, which are driven entirely by the Nordman & Co acquisition implemented on 26 April. Due to the acquisition, we now include SEK 1m in acquisition-related costs in Q2’21e. We also raise our sales estimates by 0.

7-1. 1% for ‘21e-‘23e, and our EBITA estimates by 0. 7-1.

2% for ‘21e-‘23e. Valuation down to ~15% above relevant roll-up peers In terms of valuation, Vitec is trading at a ‘21e-‘23e EV/EBITA of 32-28x, based on the current share price and our updated estimates. This is approximately 15% above the median of our peer group, which consists of relevant roll-up peers.

We argue that this could be justified, given the recurring nature of Vitec’s revenues, its above-peer margins and strong capital allocation track record.