Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on GEMALTO. We currently have 9 research reports from 1 professional analysts.
Gemalto reported FY results broadly in line with expectations, with revenues decreasing by 5% to €2.97bn. At the same time, profit from operations decreased by 32% to a 10.4% margin. FCF also strongly fell due to the much lower operating cash flow and higher restructuring costs. For FY18, the group expects sales and operating profit growth in every segment. As a reminder, Thales is going to acquire Gemalto in H2 of this year for a price of €51/share.
Gemalto released its Q3 trading update, showing revenues of €751m which corresponded to a 0.2% decrease yoy on a reported basis (+3.4% at constant exchange rates). Payment & Identity came in at €481m, up 3% yoy, while Mobile showed a 5.6% decrease at €269m. Within these two businesses, the biggest down-movers were again Payment (€199m, -17.4%) and SIM (€129m, -15.1%). At the other end of the spectrum, Government Programs (€169m, +55%) and M2M (€88m, +8.6%) displayed strong growth, the former benefiting from €50m of the recently-acquired Identity Management Business. Platform & Services came in flat (€52m) and Enterprise slightly negative (€113m, -3.4%). By main activities, Embedded software & Products came in at €493m (-2% yoy at constant exchange rates) and Platforms & Services at €257m (+15%). Guidance for FY17 has been left unchanged: stable revenues yoy in H2 17, with a PFO of about €200-230m.
Gemalto released its Q2 earnings release, showing revenues of €742m which corresponded to a 7.8% decrease yoy on a reported basis (-9% at constant exchange rates). Payment & Identity came in at €471m, down 6.5% yoy; within the business, Payment was strongly down and worsening (€215m, -20.4% vs. -14.2% in Q1), Enterprise flat (€112m, -1.8%) and Government Programs strongly up (€144m, +20%) thanks to the integration of €22m from the 3M Identity Management acquisition (it would have been up 1.6% otherwise). Mobile showed a 9.7% decrease to €270m. The SIM business accelerated its fall (€121m, -18.8% vs. -11.3% in Q1), as well as Platforms and Services (€58m, -19.4% vs. +6%), while M2M showed a substantial rebound (€91m, +16.7% vs. flat). By main activities, Embedded software & Products came in at €937m in H1 (-9% yoy at constant exchange rates) and Platforms & Services at €453m (-8%). H1 gross margin came in at 31.6% (down 500bp yoy), leading to a profit from operations (PFO) of €92.7m. The IFRS net profit was also impacted by a €425m goodwill impairment charge related to the deteriorated perspectives in the SIM market. After the profit warning in July, the company confirmed its downgraded outlook: PFO is expected to be €200-230m, leading to a full-year PFO of €293-323m. The announcement of the new strategic plan has also been postponed to H1 18 from H2 17.
Gemalto released its Q1 trading update, showing revenues of €651m which corresponded to a 6% decrease yoy on a reported basis (-8% at constant exchange rates). Payment & Identity came in at €404m, down 7% yoy, while Mobile showed a 5% decrease at €246m. Within these two businesses, the biggest down movers were Payment (€200m, -14%) and SIM (€118m, -11%), the other units being flattish or in the low single-digit with the exception of Platforms & Services (€53m, +6%). By main activities, Embedded software & Products came in at €439m (-8% yoy at constant exchange rates) and Platforms & Services at €212m (-7%). After the previous downgrade from 22 March (profit from operations at a similar level to 2016, i.e. c. €450m), the company downgraded again its 2017 adjusted operating profit objective: H1 PFO is expected to be at €90-100m, and H2 at €300-350m including a minor contribution from 3M, bringing the total to €420m at the midpoint. A €50m savings plan has also been announced.
Gemalto has announced the acquisition of the identity management business of 3M, for a total of $850m. The acquired business is composed of biometric solutions with a focus in civil identification, border control and law enforcement, as well as 3M’s Document Reader and Secure Materials Businesses. It generated revenues of about $215m (in June 2016 TTM), with an operating margin of c. 27%, and is expected to grow by 10% per year until 2020. 450 people will join Gemalto and reinforce the Government Programs business unit, which recorded revenues of €391m in 2015. The acquisition is EPS accretive, will be funded through existing credit lines and cash, but the net debt/EBITDA ratio is expected to remain below 1.5x. The closing of the deal is expected during H1 17, after regulatory approval.
Gemalto released its Q3 trading update, showing revenues of €753m which corresponded to a 2% decrease yoy on a reported basis (-1% excluding currency effects). Payment & Identity came in at €467m, flat yoy, while Mobile showed a 5% decrease at €285m. By main activities, Embedded software & Products came in at €522m (-2% yoy) and Platforms & Services at €231m (flat yoy). The company downgraded its 2017 adjusted operating profit objective and now expects c. €500-520m instead of €660m previously. The objective of reaching €1bn of revenues in the Platforms & Services business unit remains unchanged.
Gemalto published its H1 16 results, with revenues of €1.5bn mostly flat vs. the previous year, i.e. up 1% at constant exchange rates but down 1% in reported figures. By businesses, similarly to Q1, the Payment & Identity business was strongly up (+11% reported, +7% at constant exchange rates) while Mobile was down (-5% reported, -7% lfl). The SIM business fell down substantially (-26%), while all the other businesses delivered growth: Payment +11%, Enterprise +12%, Government +25%, M2M +9%, Mobile Platforms & Services +3%. By activities, Embedded Software & Products decreased by 4% in H1 (€1,010m) while Platform & Services grew by 20% (€484m), now accounting for 32% of revenues (vs. 27% a year ago). The adj. gross margin was slightly up yoy by 92bp (39.2%), while the adj. EBIT came in at €172m, slightly up yoy, corresponding to an 11.5% margin (up 90bp yoy). The IFRS EBIT reached €108m, corresponding to a 7.2% margin (up 500np yoy), leading to a net profit of €59m. The company confirmed its 2016 objective of a 150bp improvement in the gross margin. The 2017 target of €1bn revenue from Platforms & Services may also be reached early, possibly as soon as this year. Finally, Gemalto confirmed that the company was interested in acquiring Safran’s Morpho, with a detailed offer due mid-September.
Gemalto published its FY 2015 results, with revenues reaching €3,122m, corresponding to 16% growth at constant exchange rates and 27% at historical exchange rates. SafeNet accounted for 12% of the growth, as 2015 was the first year of full consolidation, and currency effects represented a 9% boost to the top-line. At constant rates, Payment & Identity grew by 45% to €1,818m, while Mobile witnessed a 10% decrease to €1,279m. On a transversal basis, Platform & Services reached €898m, a 70% yoy increase, and now accounts for 29% of revenues vs. 20% in 2014. The gross margin came in at 36.5% (-180bp yoy), and profit from operations reached €423m (of which €172m for Mobile and €239m for Payment & Identity), corresponding to a 13.5% margin (-200bp yoy). EBIT came in at €203m, corresponding to a 6.5% margin, leading to a net profit of €137m. The company announced a dividend of €0.47 per share, and expects the 2016 gross margin to increase by 150bp; the 2017 objectives have been confirmed, that is to say €1bn of revenues in Platform & Services, and a profit from operations at €660m.
Gemalto’s stock dropped a sharp 12% yesterday to return to its level at the end of 2014 when we had switched our opinion from negative to positive after the stock had already slumped as investors worried that Apple's new SIM card for its latest iPads could threaten part of Gemalto's business. Even if this time the sharp drop is just following the release of its H1 results and could therefore be interpreted as a logical response to bad results, we instead believe that the real reason for the drop has once again to be rooted in the mistrust of investors. Although Gemalto’s H1 results are quite as expected and management remains confident of delivering on its 2017 objectives, major concerns exist among investors about the actual achievement of these 2017 objectives. And we share these concerns!
Research Tree provides access to ongoing research coverage, media content and regulatory news on GEMALTO. We currently have 9 research reports from 1 professional analysts.
|31Jan18 06:00||GNW||Gemalto's Discovery Service boosts on-demand connectivity activation for consumer devices worldwide|
|16Jan18 06:00||GNW||Gemalto and Ponemon Institute Study: Big gaps emerge between countries on attitudes towards data protection in the cloud|
|04Jan18 06:00||GNW||Gemalto launches the first biometric EMV card for contactless payments|
|17Dec17 07:00||GNW||Thales and Gemalto create a world leader in digital security|
|14Dec17 06:00||GNW||Gemalto research reveals hardware technology companies see 11% increase in earnings following shift to software-based revenue models|
|13Dec17 19:11||GNW||Gemalto rejects unsolicited and conditional proposal by Atos|
|12Dec17 06:00||GNW||Gemalto in the process of reviewing the unsolicited and conditional proposal by Atos|
We have completed another refresh of our value style screen, first established as of 12 May 2015. As usual the screen selected the 25 stocks exhibiting the most extreme value characteristics from our universe, and we have chosen 10 stocks to focus on. Since the last refresh, two days before the last general election, which resulted in a hung parliament, the screen has performed a little better than the small-cap index with our focus stocks outperforming by about 500bps. The weighting to UK consumer stocks noted last time detracted from performance, which came as little surprise given our cautious stance, much discussed in our other strategy work this year. One might have expected more consumer exposure in the refreshed screen given this year’s severe underperformance, but it appears forecasts have been similarly downgraded, keeping much of the sector outside our value criteria
Companies: AUG EHG GOAL MMH RTHM SDY TEF VANL
Following substantial funding rounds from both Blue Prism (Buy PT 2000p) and UiPath, with Blue Prism raising £40m, and UiPath raising $153m, we have revisited our bullish view on the space, established in our recent note “The force awakens; Automating Intelligently” published on 25th September 2017. We believe this funding is driven by a large and accelerating market opportunity in the Software Automation space.
Companies: Actual Experience Blue Prism Group
RhythmOne (Buy PT770p) has today announced a full year trading update. Results are in line with expectations and they also expect the year to march 2019 to be in line with market estimates. We will adjust our revenue numbers down as they are focussing on the highest quality sales, but we are not adjusting our EBITDA forecasts which are Year to march 2019E of $58.4, vs consensus $54m and 2020E of $68m which is consensus. With a 22% FCF we retain our Buy and PT 770p
A more detailed post YE update reveals FY March 2018 earnings were ahead of forecast; higher margins more than compensated lower than expected revenue as the software model transitions from perpetual licences to recurring SaaS business and reflecting the popularity of D4T4’s hybrid analytics cloud solutions. We ease revenue forecasts but lift our FY 2018 FD adj. EPS forecast slightly.
Companies: D4T4 Solutions
With Q1 2018 behind us, we evaluate the performance of the tech sector versus the broader market, and peers across the pond to see how the London listed technology universe compares to its bigger and better known US counterparts. We examine if the UK listed tech sector is overvalued on a relative basis. No tech sector review can be complete without analysing the performance of the big eight mega tech companies who had a very good year and currently have an aggregate market capitalisation of US$4.79tn, roughly the size of the Japanese economy.
Companies: APC ECSC EUSP FDM GETB SPRP SNX
Proactis has reported interims in line with the February trading update, confirmed as EBITDA of £8.4m from revenue of £26m. The challenges we anticipated following the acquisition are on track, and we expect progress with synergies in FY18 (July year end) and revenue growth in FY19: synergies are on track for delivery of the net £3m in the year’s income statement from a year-end run rate of £5m; and catalysts for growth into FY19 remain strong. While the expected challenges are in hand, FY18 revenue is now likely to be affected by the unexpectedly high churn of several single product customers, which – given the subscription nature of the new contract wins – is unlikely to be able to be offset in the current year; and also by the strengthening of the pound (56% of EBITDA is non sterling). Prospects remain undimmed and we see this as a bump in the road; however, forecasts are reviewed (FY18 revenue -6%; EBITDA -14%). Target price 250p unchanged.
Hays plc (HAS.L, 182p/£2,639m) Q3 trading update to March 2018 (12.04.18) | Hydrogen Group plc (HYDG.L, 36.5p/£12.2m) Final results to 31 December 2018 (10.04.18) | PageGroup plc (PAGE.L, 537p/£1,755m) Q1 trading update to 31 March 2018 (11.04.18) | Parity Group plc (PTY.L, 11.1p/£11.3m) Final results to 31 December 2018 (10.04.18) | Robert Walters plc (RWA.L, 699p/£528m) Q1 trading update to 31 March 2018 (10.04.18)
Companies: HAS HYDG PAGE PTY RWA
2017 results delivered the expected £0.1m EBIT on sales of £4.7m, which we believe marks a significant inflection point in the company’s development. As c.66% of FY2017 revenue is of a recurring/repeat nature and there is a strong pipeline of potential new business the company is on track to hit adj. PBT in 2018, in our view. The November 2018 deadline for e-tendering could provide further sales impetus. Consequently, we view the recent share price weakness as a buying opportunity and keep our 25p DCF-derived TP and Buy rating.
Companies: EU Supply
IMImobile, in the Year to March 2018, saw strong trading and organic growth with sales ahead of market expectations, up over 45%. Gross profit was up over 17%. EBITDA and PAT were in line with market expectations. Cash conversion was strong at 85%. We are not changing our forecasts at this stage, we are likely to update them at the FY results announcement. We retain our Buy rating and put our price target under review.
Momentum has continued in H2, such that the company now expects FY18E sales and EBITDA (of at least) $28.0m (prev: $26.0m) and $2.3m (prev: $2.0m), implying impressive y-o-y growth of 70% and 31% respectively. In view of this update, we upgrade our FY18 forecasts (sales: +8%, EBITDA: +16%) but make n/c to FY19E. Having said this, given our forecasts now imply just 14% sales growth in FY19, we believe there is a strong likelihood of future upgrades. ZOO remains one to watch.
Companies: Zoo Digital Group
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO ESG FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV
Strong momentum continues, with a checklist of positive catalysts into FY18 and FY19: repeat outperformance; reinstated forecasts, having been upgraded since being suspended at the time of the trading update in December; product excellence leading to global large enterprise adoption; regular product updates and functionality improvements to keep existing customers enthused and potential customers even more interested; a focus on distribution partners to further boost sales; and the financial strength and confidence in balance sheet to accelerate inward investment – while also instating a maiden dividend, showing a commitment to cash management, shareholder returns, and the broadening the potential investor base. Having delivered 23% organic revenue growth, and 53% EBITDA growth, management has taken the decision to invest for growth, accelerating the expansion of sales and marketing and R&D in order to create the platform to deliver accelerating growth. The stars are aligned and visibility is at record levels, with 62% of FY18 revenue (FY17: 51%) already contracted: we lift our 12-month target to 1000p (620p), Sopheon having shown the evolved maturity to merit a fuller enterprise software multiple of a target 17x FY18 EBITDA.
We have spoken to R1 and we are revisiting the buy case by addressing some of the questions impacting the shares. With 3 significant deals in last 12 months the market is looking for evidence of underlying performance and successful integration of these deals. As a result it is, in our view, looking at historic numbers, rather than the 2019 and 2020 forecasts. We see significant cash flow potential going forward, and the potential for a significantly enhancing buy back. We believe RhythmOne itself is increasingly vulnerable to the industry roll up, from Private Equity or another industry player, given the very low forecast cash multiples it trades on. We retain our Buy rating and 770p price target.
CALL’s solid FY’17 results continue to underpin our conviction. Growth continues at pace in all regions assisted by rising internal efficiency while the outlook statement points to management confidence, good momentum on product development and support from regulatory trends. While we have cut our FY’18E numbers on accelerated investment in growth (and FY19-20E on lower R&D credits – see detail inside), we view management’s FY19E aspiration of ~break-even and cash trough as intact, with tangible upside risk from further M&A by Bullhorn and improving ARPU from new products launches in the mid-term. We reiterate our Buy rating and retain our PT of 300p.
Companies: Cloudcall Group