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 Management has withdrawn guidance for FY20 given the economic uncertainty due to the outbreak of COVID-19.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.
Tinexta reported strong Q119 results, with c 10% organic revenue growth, c 32% organic EBITDA growth, 50% EPS growth and improving free cash flow (FCF) generation. All divisions contributed to profit growth and the acquisitions made in FY18 are performing well. Management has reiterated guidance for FY19, which appears conservative even though Q1 is a seasonally less important quarter. We maintain our forecasts for now but will review them later in the year.
Tinexta provides IT solutions, information and consulting services in niche markets predominantly to corporate clients. It has leading positions in its domestic markets. In aggregate, we believe these are capable of 6% organic revenue growth through our forecast period while expanding EBITDA margin, cash flow conversion and ROIC. There is likely to be further M&A in order to increase geographic coverage, client reach or expand the product offer. Our multiples-based SOTP and DCF valuations support a valuation of €13.5–14.2.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Tecnoinvestimenti.
We currently have 10 research reports from 1
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Equals' FY19A results confirm another year of strong, double-digit revenue and adj EBITDA growth. The move to a B2B focused offering continues to progress and looks well timed in view of Covid-19's impact on overseas travel. While the pandemic impacted Q2/20E trading early on, we note June KPI's indicate a positive rebound. Given the continued uncertainty as to Covid's full impact upon FY20E trading, we refrain from reissuing forecasts and thus leave our recommendation under review.
Companies: Equals Group
Accelerating activity in to FY21
Companies: Manolete Partners
Blackbird plc* (BIRD.L, 19.25p/£64.7m) | Mirada plc* (MIRA.L, 92.5p/£8.2m) | Tern plc* (TERN.L, 10.75p/£29.0m) | Checkit plc (CKT.L, 39.5p/£24.5m)
Companies: BIRD MIRA MIRA TERN CKT
The covid-19 pandemic has had a devastating effect on the share price of property companies, with 31% wiped off the value of their total market capitalisation during the first quarter of 2020.
Companies: AEWU CREI CSH BOOT INL HLCL THRL SUPR RESI RGL DIGS GR1T SOHO PHP BOXE ASLI UTG AGR UAI BLND UANC CAL SHED CWD WHR EPIC WKP GRI YEW HMSO PCA INTU NRR
S4 Capital has announced the merger of Lens10, a leading Australian digital strategy & analytics consultancy, with MightyHive, its data & programmatic media practice. Founded in 2010, Lens10 provides a range of data services including digital strategy, digital analytics, optimisation and tag management. It is a certified Google Partner in Google Analytics, Google Cloud & Google Marketing Platform and is an Adobe Analytics partner. It has 25 data specialists in Melbourne and Sydney, and has a blue-chip client list including CottonOn, National Rugby League, Australian Ballet and ME Bank. Data analytics continues to grow in importance as marketers accelerate their digital transformation and S4 Capital indicates it has seen explosive demand for these services. No financial information has been disclosed, though we note the group reiterates its commitment not to compromise its balance sheet, which remains net cash. Separately, the group has announced that Miles Young, previously Chairman & CEO of Ogilvy, is joining the board. He has particular expertise in creative work and talent, new technologies and Asia Pacific developed over 35yrs at Ogilvy
Companies: S4 Capital
Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.
FY20 results – increased firepower to acquire
Companies: First Property Group
REACT Group plc (REACT) is exploiting a gap in the market for specialist deep cleaning services for customers in the public and private sectors, with revenues split 50/50 between reactive work and regular maintenance. The Covid-19 pandemic has led to a significant upturn in activity in certain sectors (such as healthcare and transport) but temporarily weaker demand from others (such as hospitality). While its Covid-related work is by no means its biggest revenue generator, the legacy of the pandemic is likely to have a profound impact on future levels of activity as all businesses and organisations become more aware of the importance of maintaining high standards of cleanliness and hygiene. With a new management team and strengthened balance sheet, we believe the outlook is positive, a view that has been supported by the Group’s interim results which have generated maiden profits.
Companies: React Group
Wirecard UK’s suspension by the FCA has been lifted, allowing U Account business through Shelby Holdings and Morses Club to resume as normal, permitting customers full access to cash, which was previously frozen, albeit ring-fenced in a safe Barclays UK account. Morses Club has offered its U Account customers free use of the previously affected U Account accounts in July as compensation for the issue, helping to mitigate any negative impact and ensuring the relationship with customers remains strong.
Companies: Morses Club
Red Dwarf, the very British sci-fi comedy franchise, ran for 11 seasons – most recently in 2017; and The Promised Land is a feature-length TV movie – out this year. Yes, the programme is an acquired taste. Strangely, too, many episodes are impacted by a virus or three (physiological, not main-frame).
Companies: WJG BKG CSP CRST MCS INL BDEV RDW GLE SPR TW/ PSN VTY GLV CRN ABBY BWY
A robust set of FY20E numbers and the absence of evidence of material bad debts increases, should reassure today and provide evidence 1pm's multi-product, sector diverse, hybrid model can deliver in tougher conditions. Given a NAV p/s of 62p (30p tangible), which now includes enhanced Covid-19 provisions, the material discount to book is clearly unwarranted.
Today's reassuring AGM statement confirms strong trading over Q1/20E and a resilient Q2/20E performance to date, despite the shutdown of the UK housing market over that period. A further +£1.3m of net cash has been produced this year which will partly be used to restart franchisee assisted acquisitions. Given current uncertainty over the economic impact of COVID-19, our recommendation remains Under Review.
Companies: Property Franchise Group
FY20 Interim results
Companies: Litigation Capital Management
Companies: AGR CSH ESP DIGS IHR LXI PHP RESI SIR SUPR THRL SOHO BBOX SHED WHR