Fortnox - Earnings beat and acquisition of Offerta

Sales +23% y-o-y (0% vs. ABGe), EBIT +11% vs. ABGe Acquires Offerta Group for SEK 300m (22x 2020 EBIT) Expect positive cons. revisions Q4 results Sales SEK 188m (0.

1% vs ABGSC 188m and 1. 3% vs cons 186m), EBITDA SEK 89m (14. 9% vs ABGSC 77m and 30.

2% vs cons 68m), EBIT SEK 68m (11. 3% vs ABGSC 61m and 18. 5% vs cons 57m), PTP SEK 67m (11.

8% vs ABGSC 60m and 11. 6% vs cons 60m), EPS SEK 0. 87 / share (12.

0% vs ABGSC 0. 78 / share and 12. 99% vs cons 1 / share).

Customer intake was 16,000 vs. our forecast of 14,000, which was strong. Offerta could add 9% on our 2021e sales, all else equal Fortnox Finance saw 13% y-o-y growth and +10% q-o-q for an EBIT margin of 48%.

Fortnox Core grew 25% y-o-y. Fortnox cites that its transaction-based sales remain dampened by the COVID-19 pandemic. In conjunction with the report, Fortnox sent out a press release, in which it acquires the Swedish services intermediary company Offerta Group AB.

The company saw 2020 sales of SEK 85. 1m (+2% growth y-o-y), together with an EBIT of SEK 13. 2m (16% EBIT margin).

For this, Fortnox will pay an EV of SEK 300m, of which SEK 10m in cash and SEK 290m in new shares (which increases the share base by 1. 1%). Based on the company’s 2020 financials, consolidating the company into our estimates, and assuming all things equal, would raise our pro-forma based 2021e sales and EBITA by 9% and 4%, respectively.

We like the fact that Fortnox walks the talk in terms of increasing its M&A activity. At a first glance, Offerta seems to be a good fit with Fortnox, and the price tag also seems reasonable, given that some synergies should be found. Valuation and estimate changes Based on the Q4 report and the acquisition of Offerta, we believe that cons.

preliminary forecast changes could be double-digit on sales and mid to high-single digit on EBITA. Based on FactSet estimates, the share is currently trading at 80x f12m EV/EBIT.