Tinexta’s Q319 results, typically a seasonally less important quarter for the group, highlighted improving momentum at Digital Trust. Group organic revenue declined by 2.5% y-oy, within which Digital Trust grew by 11.2%, improving from 10% in H119. Management points to a strong pipeline for the TOP and GoSign products, which is driving the growth and enhanced margin (30.8% versus 28.2% in Q318). Innovation & Marketing Services reported a 10% y-o-y decline in revenue, which reflects a strong comparative in Q318, the lumpy nature of the businesses and the difficulties of completing bureaucratic requisites to certify projects as complete during the summer months. Management expects these issues to be less important in Q419. The economic slowdown is affecting Credit Information & Management, especially demand from financial institutions, such that the division’s revenue declined organically by c 14% y-o-y. Acquisitions in this business unit continue to perform well, contributing an improved profitability in Q319. Year-to-date, group organic revenue growth is 3.5% and organic adjusted EBITDA growth is 5.4%. 

Management has reiterated guidance for FY19: revenue of over €250m (a 4.7% increase versus 2018) and EBITDA of €68–70m (growth of 2.7–6.1% versus 2018). This implies a Q419 revenue decline of 1.5%; this looks too conservative given the growth profile of Digital Trust and the expected improvement for Innovation & Marketing Services in Q419. As a result, our forecasts remain ahead of management’s guidance by c 2–3%. 

Following recent share price weakness, there is c 25% upside to our DCF-based valuation of €14.60 per share, which is unchanged since our update at the interims, given no change to our forecasts. The EV/EBITDA valuation for FY19e and FY20e is 9.2x and 8.3x, respectively.