TALENOM Commercial Services & Supplies/Finland, February 9, 2018 Spot comment

Transcription

1 Price/EUR Strong growth to continue Rating BUY Talenom s Q4 results were in line with our expectations except for a one-off write-off on software, which affected EBIT. The guidance for 2018 implies stronger growth than previously anticipated and we have made changes to our near-term estimates. We retain our BUY-recommendation with a target price of EUR 13.4 (13.2). Write-offs affected Q4 results Talenom s Q4 EBIT was EUR 0.9m against our estimates of EUR 1.3m. EBIT was affected by a one-off write-off on older software having an effect of EUR 0.4m. Sales in Q4 were EUR 10.7m against our estimates of EUR 10.5m. Guiding strong growth and slight profitability improvement Talenom expects revenue growth in 2018 to be clearly faster than in 2017 (12.1 %). We have revised our 2018 and 2019 sales growth estimates upward by 4 %p and 1 %p respectively. The sales from additional services (excluding advisory) in 2017 were EUR 0.45m, but as a larger part of the sales accrued towards the end of the year we expect major increases during Due to the in absolute figures still small volumes, we estimate the effect on Talenom s sales growth to only be around two percentage points. We further expect the acquisitions made in early 2018 to have an additional effect on sales of some EUR 1.5-2m. We also expect sales growth in bookkeeping services to remain strong, as Talenom s franchising-chain has seen good growth during 2017 and new customers will contribute to sales with some delay. Talenom expects the EBIT-margin to improve slightly from We have only made minor adjustments to our 2018 estimates and expect an EBIT-margin of 13.4 %. BUY with a target price of EUR 13.4 (13.2) We have revised our target price to EUR 13.4 (13.2) to reflect our changed estimates. The guidance leaves slight room for sales growth upside but with the low visibility into the additional services we remain conservative to sales development. KEY FIGURES /15 06/16 06/17 Talenom DJ STOXX 600 Share price, EUR (Last trading day s closing price) Target price, EUR 13.4 Latest change in recommendation 09-Feb-18 Latest report on company 09-Feb-18 Research paid by issuer: YES No. of shares outstanding, 000 s 6,859 No. of shares fully diluted, 000 s 6,859 Market cap, EURm 83 Free float, % 55.7 Exchange rate Reuters code TNOM.HE Bloomberg code TNOM FH Average daily volume, EURm Next interim report 26-Apr-18 Web site Analyst Jerker Salokivi jerker.salokivi@evli.com Telephone BUY HOLD SELL Sales EBIT EBIT Ptx profit EPS P/E EV/Sales P/CF EV/EBIT DPS EURm EURm % EURm EUR (x) (x) (x) (x) EUR % % E % E % E % Market cap, EURm 83 BV per share 2018E, EUR 2.4 CAGR EPS , % 17.0 Net debt 2018E, EURm 19 Price/book 2018E 5.1 CAGR sales , % 12.6 Enterprise value, EURm 102 Dividend yield 2018E, % 3.2 ROE 2018E, % 30.3 Total assets 2018E, EURm 50 Tax rate 2018E, % 20.0 ROCE 2018E, % 16.7 Goodwill 2018E, EURm 18 Equity ratio 2018E, % 32.7 PEG, P/E 18/CAGR 1.4 All the important disclosures can be found on the last pages of this report. 1(10)

2 VALUATION RESULTS BASE CASE DETAILS VALUATION ASSUMPTIONS ASSUMPTIONS FOR WACC Current share price PV of Free Cash Flow 31 Long-term growth, % 2.3 Risk-free interest rate, % 2.25 DCF share value PV of Horizon value 84 WACC, % 7.4 Market risk premium, % 5.8 Share price potential, % 18.4 Unconsolidated equity 0 Spread, % 0.5 Debt risk premium, % 3.3 Maximum value 16.4 Marketable securities 5 Minimum WACC, % 6.9 Equity beta coefficient 0.80 Minimum value 12.5 Debt - dividend -22 Maximum WACC, % 7.9 Target debt ratio, % 25 Horizon value, % 72.9 Value of stock 98 Nr of shares, Mn 6.9 Effective tax rate, % 20 DCF valuation, EURm E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E Horizon Net sales Sales growth, % Operating income (EBIT) EBIT margin, % Depreciation+amort Income taxes Change in NWC NWC / Sales, % Change in other liabs Capital Expenditure Investments / Sales, % Other items = Unlevered Free CF (FCF) = Discounted FCF (DFCF) = DFCF min WACC = DFCF max WACC (10)

3 INTERIM FIGURES EVLI ESTIMATES, EURm 2017Q1 2017Q2 2017Q3 2017Q Q1E 2018Q2E 2018Q3E 2018Q4E 2018E 2019E 2020E Net sales EBITDA EBITDA margin (%) EBIT EBIT margin (%) Net financial items Pre-tax profit Tax Tax rate (%) Net profit EPS EPS adjusted (diluted no. of shares) Dividend per share SALES, EURm Talenom Total SALES GROWTH, Y/Y % Talenom Total EBIT, EURm Talenom Total EBIT margin, % Talenom Total (10)

4 INCOME STATEMENT, EURm E 2019E 2020E Sales Sales growth (%) Costs Reported EBITDA Extraordinary items in EBITDA EBITDA margin (%) Depreciation EBITA Goodwill amortization / writedown Reported EBIT EBIT margin (%) Net financials Pre-tax profit Extraordinary items Taxes Minority shares Net profit BALANCE SHEET, EURm Assets Fixed assets % of sales Goodwill % of sales Inventory % of sales Receivables % of sales Liquid funds % of sales Total assets Liabilities Equity % of sales Deferred taxes % of sales Interest bearing debt % of sales Non-interest bearing current liabilities % of sales Other interest free debt % of sales Total liabilities CASH FLOW, EURm + EBITDA Net financial items Taxes Increase in Net Working Capital /- Other = Cash flow from operations Capex Acquisitions Divestments = Net cash flow /- Change in interest-bearing debt /- New issues/buybacks Paid dividend /- Change in loan receivables Change in cash (10)

5 KEY FIGURES E 2019E 2020E M-cap Net debt Enterprise value Sales EBITDA EBIT Pre-tax Earnings Book value Valuation multiples EV/sales EV/EBITDA EV/EBITA EV/EBIT EV/operating cash flow EV/cash earnings P/E P/E excl. goodwill P/B P/sales P/CF Target EV/EBIT Target P/E Target P/B Per share measures 101 6,084 6,807 6,812 6,859 6,859 6,859 (diluted) 101 6,084 6,807 6,812 6,859 6,859 6,859 EPS EPS excl. goodwill Cash EPS Operating cash flow per share Capital employed per share Book value per share Book value excl. goodwill Dividend per share Dividend payout ratio, % Dividend yield, % Efficiency measures ROE ROCE Financial ratios Capex/sales, % Capex/depreciation excl. goodwill,% Net debt/ebitda, book-weighted Debt/equity, market-weighted Equity ratio, book-weighted Gearing Number of employees, average Sales per employee, EUR 60,856 56,116 68,186 67,571 72,635 78,154 81,915 EBIT per employee, EUR 3,176 2,075 7,707 7,896 9,714 10,785 11,468 5(10)

6 COMPANY DESCRIPTION: Talenom Oyj operates as an accounting company. The Company offers accounting, bookkeeping, taxation, and legal services, as well as invoicing, financial performance monitoring and management software, and payroll services. INVESTMENT CASE: OWNERSHIP STRUCTURE SHARES EURm % Tahkola Harri 1,564, % Ilmarinen Mutual Pension Insurance Company 1,181, % Tahkola Markus 1,059, % Danske Capital Finland (through its funds) 474, % Finnish Industry Investment 344, % Hulkko Juha 170, % EQ Asset Management 160, % Siuruainen Mikko 155, % Varma Mutual Pension Insurance Company 145, % Dividend House 88, % Ten largest 5,342, % Residual 1,516, % Total 6,859, % EARNINGS CALENDAR April 26, 2018 August 02, 2018 October 25, 2018 Q1 report Q2 report Q3 report OTHER EVENTS March 14, 2018 AGM COMPANY MISCELLANEOUS CEO: Jussi Paaso CFO: Antti Aho IR: Töölönlahdenkatu 3B, Helsinki Tel: 6(10)

7 DEFINITIONS P/E Price per share Earnings per share EPS Profitbeforeextraordinary items andtaxes income taxes minority interest P/Sales Marketcap Sales DPS Dividend for the financial period per share P/BV Priceper share Shareholders' equity taxedprovisionsper share CEPS Gross cash flowfromoperations P/CF Priceper share Operatingcash flowper share EV/Share Enterprise value EV (Enterprise value) Marketcap net debt minority interest atmarket value share of associated companiesatmarket value Sales/Share Sales Net debt Interest bearingdebt financialassets EBITDA/Share Earningsbeforeinterest, tax, depreciationandamortisation EV/Sales Enterprise value Sales EBIT/Share Operatingprofit EV/EBITDA Earnings before Enterprise value interest, tax, depreciation and amortisation EAFI/Share Pretax profit EV/EBIT Enterprise value Operating profit Capital employed/share Totalassets non interest bearingdebt Div yield, % Dividend per share Priceper share Total assets Balance sheet total Payout ratio, % Totaldividends Earningsbeforeextraordinary items andtaxes income taxes minority interest Interest coverage (x) Operatingprofit Financialitems Net cash/share Financial assets interest bearing debt Asset turnover (x) Turnover Balancesheet total(average) ROA, % Operatingprofit Balancesheet total financial income extraordinary items interest free short termdebt longtermadvancesreceived andaccountspayable(average) ROCE, % Profitbeforeextraordinary items interest expenses other financialcosts Balancesheet total noninterest bearing debt (average) ROE, % Profit before extraordinary items and taxes income taxes Shareholders' equity minority interest taxedprovisions (average) Debt/Equity, % Interest bearing debt Shareholders' equity minority interest taxed provisions Equity ratio, % Shareholders' equity minority interest taxedprovisions Totalassets interest freeloans CAGR, % Cumulative annualgrowthrate Averagegrowthper year 7(10)

8 Important Disclosures Evli Research Partners Plc ( ERP ) uses 12-month target prices. Target prices are defined by utilizing analytical techniques based on financial theory including (but not limited to) discounted cash flow analysis and comparative valuation. The selection of valuation methods depends on different circumstances. Target prices may be altered on the basis of new information coming to light in the underlying company or changes in interest rates, changes in foreign exchange rates, other securities prices or market indices or outlook for the aforementioned factors or other factors that may change the conditions of financial markets. Recommendations and changes by analysts are available at Detailed information about the valuation or methodology and the underlying assumptions is accessible via ERP: Investment recommendations are defined as follows: Target price compared to share price Recommendation < -10 % SELL -10 (+10) % HOLD > 10 % BUY ERP s investment recommendation of the analyzed company is in general updated 2 4 per year. The graph above shows the distribution of ERP s recommendations of companies under coverage in 22nd of February If recommendation is not given, it is not mentioned here. Name(s) of the analyst(s): Salokivi This research report has been prepared by Evli Research Partners Plc ( ERP or Evli Research ). ERP is a subsidiary of Evli Bank Plc. Production of the investment recommendation has been concluded on [ , 8:30]. This report has been published on [ , 8:45]. None of the analysts contributing to this report, persons under their guardianship or corporations under their control have a position in the shares of the company or related securities. The date and time for any price of financial instruments mentioned in the recommendation refer to the previous trading day s closing price(s) unless otherwise stated in the report. Each analyst responsible for the content of this report assures that the expressed views accurately reflect the personal views of each analyst on the covered companies and securities. Each analyst assures that (s)he has not been, nor are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report. Companies in the Evli Group, affiliates or staff of companies in the Evli Group, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the publication or report. Neither ERP nor any company within the Evli Group have managed or co-managed a public offering of the company s securities during the last 12 months prior to, received compensation for investment banking services from the company during the last 12 months prior to the publication of the research report. ERP may pursue an assignment from the issuer(s) of the financial instruments mentioned in the recommendation or this report. These assignments may have a limited economic or financial impact on ERP and/or Evli. Under such assignments ERP may perform services including, but not limited to, arranging investor meetings or events, investor relations communication advisory and production of research material. ERP has signed an agreement with the issuer of the financial instruments mentioned in the recommendation, which includes production of research reports. This assignment has a limited economic and financial impact on ERP and/or Evli. Under the assignment ERP performs services including, but not limited to, arranging investor meetings or events, investor relations communication advisory and production of research material. ERP or another company within the Evli Group does not have an agreement with the company to perform market making services. For the prevention and avoidance of conflicts of interests with respect to this report, there is an information barrier (Chinese wall) between Investment Research and Corporate Finance units concerning unpublished investment banking services to the company. The remuneration of the analyst(s) is not tied directly or indirectly to investment banking transactions performed by Evli Bank Plc or any company within Evli Group. This report has not been disclosed to the company prior to its dissemination. 8(10)

9 This report is provided and intended for informational purposes only and may not be used or considered under any circumstances as an offer to sell or buy any securities or as advice to trade any securities. This report is based on sources ERP considers to be correct and reliable. The sources include information providers Reuters and Bloomberg, stock-exchange releases from the companies and other company news, Statistics Finland and articles in newspapers and magazines. However, ERP does not guarantee the materialization, correctness, accuracy or completeness of the information, opinions, estimates or forecasts expressed or implied in the report. In addition, circumstantial changes may have an influence on opinions and estimates presented in this report. The opinions and estimates presented are valid at the moment of their publication and they can be changed without a separate announcement. Neither ERP nor any company within the Evli Group are responsible for amending, correcting or updating any information, opinions or estimates contained in this report. Neither ERP nor any company within the Evli Group will compensate any direct or consequential loss caused by or derived from the use of the information represented in this publication. All information published in this report is for the original recipient s private and internal use only. ERP reserves all rights to the report. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in any retrieval system of any nature, without the written permission of ERP. This report or its copy may not be published or distributed in Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or South Africa. The publication or distribution of this report in certain other jurisdictions may also be restricted by law. Persons into whose possession this report comes are required to inform themselves about and to observe any such restrictions. Evli Bank Plc is not registered as a broker-dealer with the U. S. Securities and Exchange Commission ( SEC ), and it and its analysts are not subject to SEC rules on securities analysts certification as to the currency of their views reflected in the research report. Evli Bank is not a member of the Financial Industry Regulatory Authority ( FINRA ). It and its securities analysts are not subject to FINRA s rules on Communications with the Public and Research Analysts and Research Reports and the attendant requirements for fairness, balance and disclosure of potential conflicts of interest. This research report is only being offered in U.S. by Auerbach Grayson & Company, LLC (Auerbach Grayson) to Major U.S. Institutional Investors and is not available to, and should not be used by, any U.S. person or entity that is not a Major U.S. Institutional Investor. Auerbach Grayson is a broker-dealer registered with the U.S. Securities and Exchange Commission and is a member of the FINRA. U.S. entities seeking more information about any of the issuers or securities discussed in this report should contact Auerbach Grayson. The securities of non-u.s. issuers may not be registered with or subject to SEC reporting and other requirements. ERP is not a supervised entity but its parent company Evli Bank Plc is supervised by the Finnish Financial Supervision Authority. 9(10)

10 Contact information SALES AND TRADING HELSINKI Equity Sales Trading ETFs and Derivatives Ari Laine Lauri Vehkaluoto (Head) Tobias Björk (Head) Lauri Ahokanto Pasi Väisänen Joachim Dannberg Niclas Henelius Antti Kässi Kimmo Lilja Structured Investments Corporate Bonds sales and trading Derivatives Trading Heikki Savijoki Jukka Hyvönen Sami Järvinen Aki Lakkisto Thomas Kaukonen Evli Investment Solutions Johannes Asuja Markku Reinikainen SALES AND TRADING STOCKHOLM Urban Lawesson (Head) Thomas Kåhrström EQUITY RESEARCH Forestry, Pulp&Paper, Chemicals, Utilities, Packaging Retail, Consumer Goods, Telecommunications, Healthcare Research Analysts Markku Järvinen (Head of Research, Finland) Joonas Häyhä Olli Pöyhönen Jerker Salokivi Technology, Software Construction, Real Estate Jonas Forslund Tomi Lindell EVLI BANK PLC Aleksanterinkatu 19 A P.O. Box 1081 FIN Helsinki, FINLAND Phone Fax Internet firstname.lastname@evli.com EVLI BANK PLC, STOCKHOLMSFILIAL Kungsgatan 27, P.O. Box SE Stockholm Sverige stockholm@evli.com Tel +46 (0) Fax +46 (0) (10)