Tinexta’s Q320 results demonstrate that its business units are recovering post-COVID lockdowns better than management initially expected, while developing new revenue opportunities. Management’s increased FY20 guidance appears conservative, implying a y-o-y decline in Q420 EBITDA of 7%, reflecting its typical caution and the tough comparative. The announced acquisitions for Warrant Hub are consistent with the strategy of expanding outside Italy. The dissolution of the joint venture with LuxTrust will enable Tinexta to develop Digital Trust in France.
Companies: Tinexta SpA
Tinexta provides IT solutions, information and consulting services in niche markets, predominantly to corporate clients. In its fastest-growing divisions, Digital Trust and Innovation & Marketing Services, it is the domestic market leader and is expanding internationally. Tinexta has just announced, via M&A, its entry into the complementary market of cybersecurity, which will lead to the creation of its fourth business unit. We estimate that cybersecurity will accelerate Tinexta’s organic revenue growth from 4–5% to more than 8% from FY21, but will be dilutive to the group EBITDA margin initially before improving quickly. There will likely be further M&A to increase geographic coverage, client reach or expand the product offer. Q220 results were much better than expected, as all businesses improved organic revenue growth trends versus Q120.
Tinexta has announced three acquisitions that will lead to the creation of a fourth business unit, Cybersecurity. The acquisitions are consistent with the strategy of moving towards providing more digital services in high growth markets (9–10% pa in this case). As a result, they are expected to improve the group’s average organic revenue growth from c 4–5% to more than 8%, and lead to enhanced profit growth as margins expand following some initial dilution. While our forecasts are unchanged ahead of completion of the transactions, mostly in early FY21, in this note we discuss the implications for the forecasts and valuation. On a pro forma basis, EV/EBITDA is 12.8x in FY21e.
Tinexta’s Q220 results were much better than consensus expectations, as all business units produced improved organic growth trends versus Q120, in the face of the COVID-19 lockdown, and cost control helped improve profitability. The group is well positioned to benefit from structural growth drivers, including the digitisation of economies. We increase our EBITDA forecasts for FY20 by 7.6%, taking us 6.6% above management’s reiterated and recent guidance for FY20.
As promised, Tinexta has provided new financial guidance for FY20. Against a tough macroeconomic backdrop, the new guidance implies a y-o-y revenue decline of c 3%, but an improvement in EBITDA of 1%. This is encouraging given the cyclicality of some of the businesses and highlights that the cost base has been managed well. The expected improvement in margin for Digital Trust is impressive. The EV/EBITDA multiple for FY20e is 9.4x. We maintain our estimates.
Management believes the COVID-19 pandemic will have the greatest impact on Tinexta’s profitability in the current financial quarter, before an anticipated recovery later in FY20. There is a confident message on cost savings and ongoing efficiencies to help mitigate some of the expected decline in revenue. We downgrade our forecasts to reflect a slower recovery in Digital Trust and a lower margin in Credit Information & Management. The EV/EBITDA multiple for FY20e is 8.9x.
Tinexta performed well in FY19 and matched our forecasts, which were ahead of management’s guidance from the start of the year. Management has withdrawn guidance for FY20 given the economic uncertainty due to the outbreak of COVID-19. The portfolio includes a high proportion of resilient businesses but there will be some economic sensitivity in all business units, predominantly in Credit Information & Management and Innovation & Marketing Services. Our new assumptions factor in the Italian quarantine affecting the group in March and April 2020, with slow recovery thereafter, giving a downgrade to EBITDA for FY20 of c 6%. The EV/EBITDA multiple for FY20 of 7.7x is low versus the long-term average of 8.5x.
Tinexta’s FY19 headline results are ahead of management guidance, with strong revenue growth in Digital Trust and Innovation & Marketing Services, and strong margin delivery in all business units. Guidance for FY20–22e highlights the continued strong underlying compound growth the group has historically produced. The shares trade at a 14% discount to our maintained DCF-based valuation of €14.6. EV/EBITDA in FY20e is 9.1x.
Tinexta’s Q319 results confirmed trends from earlier in the year: improving momentum for its largest business unit, Digital Trust, given structural growth drivers of digital security, and weak growth for its least important division, Credit Information & Management, due to macro sensitivity. Q3 is typically a seasonally less important quarter (23% of annual revenue in FY18) ahead of a more important Q4 (29% of annual revenue in FY18). Our forecasts for FY19 and FY20 are unchanged, as is our valuation. Our DCF-based valuation of €14.6/share offers c 25% upside from the current price.
Tinexta provides IT solutions, information and consulting services in niche markets, predominantly to corporate clients. In its fastest growing divisions, Digital Trust and Innovation & Marketing Services, it is the domestic market leader and either expanding internationally or seeking opportunities. In aggregate, we believe the group is capable of c 6% organic revenue growth while expanding its EBITDA margin, cash flow conversion and ROIC. There is likely to be further M&A to increase geographic coverage, client reach or expand the product offer. We believe that management guidance for FY19 is conservative.
Tinexta’s interim results confirmed the outlook is positive for its two largest and most profitable divisions, Digital Trust and Innovation & Marketing Services. Overall revenue and profit growth for the group was slower in Q2 than in Q1, mainly due to one-off costs and a decline in Credit Information & Management. We maintain our PBT forecasts for FY19 and increase our FY20 forecast by 1%. Our DCF-based valuation increases to €14.6 per share (from €14.2), which offers 17% potential upside from the current share price.
Tinexta founded in 2009 and has expanded quickly through a combination of organic growth and M&A. It is listed on the STAR segment of the Italian Stock Exchange and provides IT solutions, information and consulting services in niche markets predominantly to corporate clients.
In this video director of corporate and financial communications, Lawrence Kay, provides an overview of Tinexta’s development, the business units and their competitive landscapes, historic growth rates and current financial guidance.
Read our initiation note or latest research on Tinexta here.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Tinexta SpA.
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What’s new: Ahead of the publication of the Group’s interims results for the six months to 31 December 2020, CLIG has released a detailed trading update which reveals:
Group consolidated FuM of US$11.0 billion (£8.0 billion), which is twice the FuM of US$5.5 billion (£4.4 billion) at the Group’s year end on 30 June 2020;
The merger with Karpus Management Inc ("KMI") added c US$3.6 billion from 1 October 2020;
Investment performance across CLIG’s investment strategies was “strong”, following “significant discount narrowing” and “good NAV performance”;
Rebalancing of client portfolios resulted in US$ 290 million of net outflows.
Companies: City of London Investment Group PLC
Although 2020 will probably go down in history as one of the most challenging years experienced during our lifetime, it will also likely be chronicled as one of the best years for the recognition and appreciation of science. As we entered 2020, the COVID-19 pandemic was in its infancy. However, it rapidly evolved through the exponential rise in infections and mortality globally. Much has been achieved during the past 12 months in the fight against COVID-19, but, as we enter 2021, there are considerable concerns about the emergence of a mutant version of the virus and the second wave that we are now facing.
Companies: AVO ARBB ARIX BBGI CLIG DNL FLTA ICGT OCI PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Finals (9mths to Sep-20) are in line with expectations. Recurring fee income from 3rd party AuM (incl. PRSR) ensured solid profitability. The balance sheet is well resourced with £26m to develop seed assets. With a positive outlook following the launch of the £1bn JV with EQT, we see accelerating returns over the medium term. PRSR is also on track to materially complete the initial 5,200 portfolio this year. Sigma trades below our 200p+/share intrinsic valuation – which attributes no value to AuM growth, which is a strategic priority.
Companies: Sigma Capital Group plc
Secure Trust Bank’s (STB) pre-close update confirms the upbeat trends evident in its Q3 update in November. The strong lending rebound continued into Q4, loan repayment holidays are at low levels, and the balance sheet has remained robust and liquid. STB reiterated that its FY20 PBT would be well ahead of £9.7m (we forecast £13.0m). However, the new COVID-19 restrictions introduced in December 2020 have affected consumer loan demand into 2021, as well as the Motor Finance business. Management expects to be better placed to disclose its outlook for FY21 when STB’s FY20 results are released on 25 March. Our forecasts (FY21 PBT £31.6m, ROE 9.1%) and fair value (1,756p per share) remain unchanged.
Companies: Secure Trust Bank Plc
Allied Minds has announced that Joe Pignato has decided to step down as CEO and from the board with immediate effect. However, he will continue to support the company as CFO for an interim period as the board continues its search for a permanent CFO. As part of a streamlining process, Allied Minds will now become a board-led company with no immediate intention to appoint a new CEO. The chairman and NEDs (experienced VCs and private company investors) will represent Allied Minds on portfolio company boards (including Federated Wireless, BridgeComm and Spin Memory) with an intention to accelerate realisations where possible.
Companies: Allied Minds PLC
Sirius Real Estate has been a stand-out performer within the UK listed commercial real estate sector over the last three years, delivering a total shareholder return of 107%. The shares also offer a valuable portfolio diversifier for investors, with a geographic focus on Germany, and a focus on pro
Companies: Sirius Real Estate Limited
Redde Northgate has come through the COVID crisis in very good shape so far. We expect minimal impact on the former Northgate business from “lockdown 2.0”, a strong recovery in profits and a re-rating as normality returns and Redde reverts to mean. We could see further useful earnings upside from acquisitions such as Nationwide and revenue synergies not yet included. The Group is transforming itself into a mobility business which is higher returning, more diversified and has sustainable compounding growth prospects.
Companies: Redde Northgate PLC
Urban Logistics REIT (“REIT”) has acquired another high quality “last mile” asset in the Wirral for £16.3m (5.0% NIY). The 169k sqft site is let to a subsidiary of Culina. It is leased through to 2032 and has clear rental progression, with an uplift on commencement of a reversionary lease in 2022 and a rent review in 2027. 99% rents for the Jan-Mar quarter have already been collected – highlighting the resilience in the tenant base/income. We do not change forecasts, already assuming full deployment by year end. We estimate that c.£75m capital capacity remains. We note a 6%+ dividend yield in FY22e – a 12m period of full capital deployment – and note that the discount ignores embedded NAV growth potential.
Companies: Urban Logistics REIT plc
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotech stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group of 25.3%. PHI is the top-performing trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, EV continues to be a significant theme and the manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
Companies: Pacific Horizon Investment Trust
Further media reports that Dr Martens, the British Boot brand is planning an IPO on the LSE. It is currently owned by PE group, Permira who is expected to sell down its stake at the IPO. March 2020 YE the group had revenues of £672m and EBITDA of £184m. Deal size TBC. Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC Due mid Jan. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. Due 14 Jan. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange. Due by Early Feb.
Companies: IUG CBP KAT APP RST DIS NICL BOKU CNIC HE1
AuM grew by +43% (+16% organic) to £29.4bn in Q3. Investment performance was strong (+£2.5bn) as COVID vaccine news propelled markets. Net inflows were maintained qoq (£792m). Sustainable was the stand out performer (+24%). AuM has broken through £30bn post-period end. Better than expected AuM drives +3% FY21e EPS and +5% in outer years. Continued distribution efforts in Sustainable, Global Equity and Multi-Asset funds stands to catalyse earnings. Alongside flow momentum, 12x FY22e PER is not reflecting this upside.
Companies: Liontrust Asset Management PLC
Martin Currie Global Portfolio Trust’s (MNP’s) manager Zehrid Osmani reports that his ongoing focus on long-term structural, sustainable business models was beneficial for the fund’s performance during the coronavirus-led market sell-off in Q120, with portfolio companies undertaking measures to protect their brand equity. He is encouraged by a general increase in investor awareness of environmental, social and governance (ESG) issues, an area of research that Martin Currie has focused on for several years, as he believes that ESG improvements can lead to higher total returns for shareholders. MNP’s performance has improved since the appointment of Osmani in October 2018, and its NAV is now ahead of its benchmark over the last one, three, five and 10 years.
Companies: Martin Currie Global Portfolio Trust
Manolete has announced a good set of interim results with strong growth across the board and good operational momentum in case investments and completed cases. The shares have been on a wild ride through 2020 and look genuinely inexpensive on an earnings basis, accepting that cash will continue to be invested in new cases, we see good value here. Buy
Companies: Manolete Partners Plc
Pacific Horizon (PHI) generated a very impressive uplift in its NAV over the course of 2020. This reflects its focus on growth, and technology and biotechnology stocks in particular. These performed well as we attempted to adjust to life under the pandemic, thereby accelerating a number of structural trends. PHI provided an NAV total return of 86.1%, which eclipsed the return on the MSCI AC Asia Pacific ex Japan index of 21.2%, the broader MSCI AC World of 12.7% and the average of its Asia Pacific sector peer group (see page 23) of 25.3%. PHI is the topperforming trust in this sector by a significant margin. Despite this stellar growth, PHI’s manager is not resting on his laurels. Emerging Asia still remains a high-growth and underresearched region, and he continues to focus on those themes he expects to do well over the next five years. For example, companies exposed to the growth in electric vehicles (EV) continue to be a significant theme. The manager has been increasing exposure to the commodities needed to deliver a greener future, but which the world is structurally short of, following long-term underinvestment.
Vietnam Enterprise Investments (VEIL) is the largest and longest-established Vietnamese equities closed-end fund. The last quarter of 2019 and most of 2020 marked a period of portfolio repositioning for the fund. The team sold 14 holdings, and bought two, making the portfolio more focused (28 stocks at end 2020 versus 41 at end Q319) but better balanced by market cap as well as domestic and international business exposure. Over H220 the performance has picked up, with NAV total return of 28% versus 24% for the VN Index, after marginally lagging the benchmark over the past three years. The trust is well positioned for longer-term investors looking for an exposure to the fast-growing Vietnamese economy via a relatively large and liquid listed equities vehicle.
Companies: Vietnam Enterprise Investments