C-Quadrat Accumulate (old: Hold) Target: Euro (old: Euro 27)

Transcription

1 C-Quadrat Accumulate (old: Hold) Target: Euro (old: Euro 27) 23 І October І 2012 Price (Euro) weeks range / Key data Country Austria Industry Financial Sevices Market segment Prime Standard ISIN AT Security ID-No. A0HG3U Symbol C8I Reuters C8I.DE Bloomberg C8I.GR Internet Reporting standard IFRS Fiscal Year 31/12 IPO 29/03/2006 Market cap (Euro m) Shares outstanding (m) 4.36 Free float 17.7% Free float market cap. (Euro m) 19.3 CAGR pre-tax profits 11-14e 55.4% Multiples e 2013e 2014e P/S ratio P/E ratio Dividend yield 4.0% 2.8% 4.8% 4.8% EV/EBITDA Key data per share (Euro) e 2013e 2014e EPS (Earnings per share) Book value per share Dividends per share Financial data (Euro m) e 2013e 2014e Total revenues Fee and Commission expenses Operating profit (EBIT) Pre-tax profit (EBT) Net profit after minorities Shareholders' equity Main shareholders Talanx Asset Mgmt. 25.6% Founder Alexander Schütz** 22.5% Founder Thomas Rieß** 22.2% Svoboda/Mayer/Neubauer** 9.0% Treasury shares 3.1% ** via private foundations and directly Financial calendar 3Q November 2012 Analyst Internet André Hüsemann, CREA 49 (0) andre.huesemann@src-research.de New acquisitions will boost assets from Euro 2.9bn to some 4.3bn by next year Target up! Recently we met the management of C-Quadrat and talked about the latest developments within the company. In particular the acquisition of BCM as well as APM is decisive for the company and its anorganic growth. The latest good news is, that the acquisition of a 74.9% share in Absolute Portfolio Management GmbH (APM) was finally accomplished in 3Q, meaning the full consolidation started on 30 September. APM is also headquartered in Vienna, has some Euro 430m assets under management and employs 12 people. The product portfolio offers products like mutual funds, fixed income funds as well as specialty products like precious metal funds (gold and resources) and microfinance certificates. Customers are institutional clients as well as retail clients. Besides CQ, founder and managing partner Günther Kastner holds a control stock of 25.1% in APM. However, impact on CQ s 2012 numbers will be rather low, due to late consolidation this year. Meanwhile, the purchase agreement for the acquisition of a 100% share in the British asset management company BCM was also successfully signed, already on 5 September, however the final approval by the Financial Services Authority (FSA) is still missing at present day. A consolidation of the subsidiary is therefore expected starting next year at the earliest. Hence, C-Quadrat s assets under management increased already by APM s assets (Euro 430m). In addition we assume BCM s assets (Euro 800m) to boost CQ s total assets under management to some Euro 4.3bn by beginning of next year. For fiscal year 2013 we assume revenues to jump by some Euro 7m to Euro 9m, based on a gross margin on new assets under management of some 0.5% plus potential performance fees. After minorities we calculate with a profit contribution of Euro 1.5m to Euro 3.0m. But for the time being, to be on the safe side, we calculate with Euro 2m additional net profit. Considering effects of both acquisitions and the adjusted P&L figures, our DCF- valuation results in a fair value of Euro per share, therefore we step-up our target price from 27 to 29 Euros and also lift our rating from Hold to Accumulate.

2 Investment Case Industry: Financial Services Management Board of C Quadrat Investment AG: Sub segment: Asset Manager Alexander Schütz StB Roland Starha Country: Austria Thomas Rieß Headquarter: Vienna Foundation 1991 Supervisory Board of C Quadrat Investment AG: Employees: 61 Dr. Markus D. Mautner Markhof (Chairman) Franz Fuchs Harry Ploemacher IR Contact Dr. Fritz Schweiger Walter Schmidt StB Roland Starha Dr. Hubert Cussigh r.starha@investmentfonds.at C Quadrat is an independent, quantitative asset manager operating across Europe. It belongs to the largest Austrian investment companies independent of banks and insurance companies. Founded in 1991, the company has its own asset management company with a bank licence since 2003 and is listed in the Prime Standard of the Frankfurt Stock Exchange since November 2006 and at the Vienna Stock Exchange since May At present fee generating assets amount to Euro 4.5bn while assets under management amount to some Euro 3.0bn, allocated in some 50 funds under management. C Quadrat has distribution agreements with distribution platforms, insurance companies and financial advisers. A total of more than 53,000 IFAs in Europe offer and distribute C Quadrats products. Countries of major importance are Germany and Austria. But in particular through unit linked life insurances C Quadrat's funds acquire assets in several CEE and SWE countries like Hungary, Czech Republic, Slovakia, Poland, Romania, Slovenia, Spain, et cetera. Retail Sales Institutional Sales IFAs (direct investments from retail clients) Insurance companies (unit linked life insurance) Platforms (direct investments from retail clients) Direct to institutional clients Source: Company Data, SRC Research 2 2 SRC Equity Research

3 Strengths SWOT Analysis Well established network of sales channel partners like the financial advisors AWD, OVB, Jung, DMS & Cie., insurance companies like for instance Skandia, Allianz, Deutscher Ring or distribution platforms like DAB Bank, ebase or DWS Highly scalable business model promises increasing efficiency Excellent track record in innovative fund of funds structures Business in unit-linked life-insurance policies guarantees highly stable and recurring fees, predictability of asset growth and management fees ensuring access to the lucrative insurance market Highly experienced management and sound expertise in innovative product development Well-diversified product portfolio of several different management styles (for instance Total Return-, Active Asset Allocation-, Multi Asset-, Specialized Funds) for some 50 funds under management at present Asset inflow and adoption of management mandates from major shareholder Talanx. Both companies clearly benefit from cooperation, therefore the current shareholder constellation is quite favorable Weaknesses Various awards as well as good ranking and rating (Morningstar, Lipper, S&P, Fund Award, Deutscher Fondspreis) showed the advanced competitiveness of C-Quadrat s fund products Volatile revenues due to significant share of commissions from performance fees Opportunities Asset management segment depends on capital markets, thus exposed to fluctuations New product approaches provide an attractive product line-up and match today s investor demand Scalable business model promises economies of scale Further product innovations and regional expansion allow for dynamic growth in assets under management Expansion into other European markets like CEE may accelerate growth Threats Very stable assets under management without severe backlash even under adverse conditions like seen within the financial crisis in the past years A slump in stock markets may dilute C-Quadrat s product performance, uncertainty and volatility of stock markets and economy linked to the overwhelming public debt makes it quite difficult to give a lasting projection for coming quarters 3 3 SRC Equity Research

4 DCF-Valuation for (Entity WACC Method) Assumptions: Equity ratio longterm 70% Beta factor 1.41 CoE Cost of Equity 7.8% Risk-free return 1.3% CoL Cost of Liability 5.1% Market risk premium 4.6% Weighted Average Cost of Capital (WACC) 7.0% Add.risk premium for C-Quadrat 0.0% Years until first pay-out 0.19 Growth in Terminal Value 1.0% ' 000 Euro 2012e 2013e 2014e 2015e 2016e Terminal Value Sales revenues Sales growth -5.7% 29.6% 2.0% 2.0% 2.0% 1.0% EBIT margin 5.5% 17.1% 17.2% 17.4% 17.6% 14.2% EBIT Tax on EBIT 21.0% 21.0% 21.0% 21.0% 21.0% 21.0% Net operating profit after tax (NOPAT) Depreciation /- Changes in Working Capital Payouts (net) for capex Free cash flow Present value of free cash flows PV of detailed period 37.7 PV of terminal value 70.5 Sum of free cash flows / Enterprise Value cash / cash equivalents interest bearing liabilities / long-term provisions 0 Market value of equity PV of terminal value 65% EV breakdown Number of shares in million 4.36 Fair market value per share in Euro PV of detailed period 35% Development of value drivers 2012e 2013e 2014e 2015e 2016e Terminal Value Sales growth -5.7% 29.6% 2.0% 2.0% 2.0% 1.0% EBIT margin 5.5% 17.1% 17.2% 17.4% 17.6% 14.2% Investment quota 0.6% 1.3% 0.7% 0.7% 0.7% 0.8% Working Capital quota 71.7% 71.7% 71.7% 71.7% 71.7% 68.9% Changes in Working Capital quota -1.2% 16.4% 1.4% 1.4% 1.4% -1.2% Sensitivity analysis (per share) Growth in Terminal Value Growth in Terminal Value EBIT Margin in Terminal Value EBIT Margin in Terminal Value % 13.7% 14.2% 14.7% 15.2% % 13.7% 14.2% 14.7% 15.2% 0.0% % % % % % % % % % WACC % 6.5% 7.0% 7.5% 8.0% 0.0% % % % % WACC Current share price (Euro) Up/Downside 18.0% Source: SRC Research 4 4 SRC Equity Research

5 P&L Account CAGR 31/12 IFRS (Euro million) e 2013e 2014e '11 - '14e Fee and commission income 40,2 28,1 37,5 59,9 45,6 43,0 55,7 56,7 7,5% Other operating income 1,5 3,4 0,2 0,4 0,4 0,4 0,4 0,4 Operating income 41,7 31,5 37,7 60,3 46,0 43,4 56,1 57,1 7,5% Fee and commission expenses -21,3-15,8-21,1-36,2-33,1-29,7-34,9-35,6 Gross profit 20,4 15,7 16,6 24,1 12,8 13,7 21,3 21,6 19,0% Gross margin 49% 50% 44% 40% 28% 32% 38% 38% Personnel expenses -7,2-7,2-7,4-8,4-6,6-5,6-5,7-5,8 Other administrative & operating expenses -7,9-8,2-5,0-6,1-5,4-5,4-5,6-5,6 Total expenses -36,4-31,1-33,5-50,7-45,1-40,7-46,2-47,0 EBITDA 5,3 0,3 4,2 9,6 0,9 2,7 10,0 10,2 126,0% EBITDA-margin 13,2% 1,2% 11,1% 16,0% 1,9% 6,2% 17,9% 18,0% Depreciation including one-off items -1,2-4,1-1,7-0,2-0,3-0,3-0,4-0,5 EBIT 4,2-3,7 2,5 9,4 0,6 2,4 9,5 9,7 149,8% EBIT-margin 10,1% neg. 6,6% 15,6% 1,4% 5,5% 17,0% 17,0% Income from participations 1,4-1,4 2,1 6,4 2,5 2,7 2,9 3,0 Interest earnings 1,7 2,9 0,4 0,9 0,5 0,7 0,7 0,7 Interest costs -0,6-1,2-0,9-0,8-0,2-0,3-0,3-0,3 Pre-tax profit / EBT 6,7-3,4 4,1 15,9 3,5 5,5 12,9 13,2 55,4% EBT-margin 16,8% -12,2% 10,9% 26,5% 7,7% 12,8% 23,1% 23,2% Taxes -1,4 0,2 1,6-0,8-0,3-1,2-2,7-2,8 Tax rate 20,2% n.s. n.s. 4,8% 7,8% 21,0% 21,0% 21,0% Net profit Continued Operations 5,4-3,2 5,7 15,1 3,2 4,3 10,2 10,4 47,6% Return on sales 13,4% -11,6% 15,3% 25,2% 7,1% 10,1% 18,3% 18,4% Net profit including Discontinued Operations 5,7-12,2 5,7 15,3 3,0 4,3 10,2 10,4 Minorities -0,2 0,5-0,1 0,0 0,0 0,0 0,0 0,0 Net profit after minorities 5,5-11,6 5,6 15,3 3,0 4,3 10,2 10,4 51,4% Weighted number of shares outstanding ('000) , , , ,2 Earnings per share (Euro) including Discontinued Operations 1,25-2,66 1,29 3,50 0,69 0,99 2,33 2,39 51,4% Book value per share 9,95 4,76 5,45 6,92 6,92 7,21 8,35 9,53 Dividend per share 1,00 0,00 0,60 2,21 1,00 0,70 1,20 1,20 6,3% Shareholders' equity (Euro million) (without minorities) 43,4 20,8 23,8 30,2 30,2 31,5 36,4 41,6 RoE after tax 13,9% -10,1% 25,7% 56,0% 10,7% 14,1% 30,0% 26,7% Key ratios & figures e 2013e 2014e Growth rates in % Revenues 2,6% -30,2% 33,7% 59,7% -23,9% -5,7% 29,6% 1,8% EBITDA -0,3% -93,8% 1174,9% 129,6% -90,8% 203,5% 272,3% 2,2% EBIT -0,2% -188,8% n.s. 277,7% -93,3% 281,0% 300,3% 2,2% EBT 15,1% -150,8% n.s. 288,8% -77,9% 56,2% 134,7% 2,4% Net profit after minorities 14,1% -312,7% n.s. 172,6% -80,4% 44,4% 134,7% 2,4% Margins in % Gross 48,8% 49,8% 44,0% 39,9% 27,9% 31,5% 37,9% 37,8% EBITDA 12,7% 1,0% 11,1% 15,9% 1,9% 6,2% 17,8% 17,8% EBIT 10,1% neg. 6,6% 15,6% 1,4% 5,5% 17,0% 17,0% EBT 16,2% neg. 10,8% 26,3% 7,6% 12,6% 22,9% 23,1% Expense ratios in % Personnel costs quote 17,2% 22,7% 19,7% 13,9% 14,3% 12,9% 10,2% 10,1% Cost of material to sales 53,1% 56,3% 56,3% 60,4% 72,7% 69,1% 62,6% 62,7% Depreciation to sales 3,0% 14,5% 4,5% 0,4% 0,6% 0,7% 0,8% 0,8% Tax rate n.s. n.s. 4,8% 7,8% 21,0% 21,0% 21,0% Profitability in % Net profit to sales ratio 13,4% neg. 15,3% 25,2% 7,1% 10,1% 18,3% 18,4% Return on Equity after tax (RoE) 13,9% neg. 25,7% 56,0% 10,7% 14,1% 30,0% 26,7% Return on Assets (RoA) 9,3% neg. 13,9% 27,8% 6,8% 9,9% 22,6% 23,1% Return on Investment (RoI) 8,3% neg. 12,0% 26,4% 6,4% 9,4% 22,0% 22,5% Valuation PE-ratio 20,0 neg. 19,4 7,1 36,4 25,2 10,7 10,5 P/E-ratio (historical share price by year-end) 32,7 neg. 7,8 7,2 34, Price/BVpS 2,51 5,25 4,59 3,61 3,61 3,47 3,00 2,62 Dividend yield in % 4,0% 0,0% 2,4% 8,8% 4,0% 2,8% 4,8% 4,8% EV/Sales 2,6 3,7 2,5 1,5 2,0 2,2 1,7 1,7 EV/EBITDA 19,9 317,5 22,3 9,4 105,5 35,7 9,6 9,4 Data per share Share price by year end 41,00 8,34 10,00 25,26 24, Number of shares in m 4,4 4,4 4,4 4,4 4,4 4,4 4,4 4,4 EpS 1,25-2,66 1,29 3,50 0,69 0,99 2,33 2,39 DpS 1,00 0,00 0,60 2,21 1,00 0,70 1,20 1,20 BVpS 9,95 4,76 5,45 6,92 6,92 7,21 8,35 9, SRC Equity Research

6 SRC Research The Specialist for Financial and Real Estate Stocks SRC-Scharff Research und Consulting GmbH Klingerstrasse 23 D Frankfurt Germany Fon: +49 (0)69 / andre.huesemann@src-research.de Internet: Rating chronicle Date Rating former share price former target C-Quadrat 14 Aug 2012 Hold C-Quadrat 10 May 2012 Accumulate C-Quadrat 27 Mar 2012 Buy C-Quadrat 15 Feb 2012 Buy C-Quadrat 08 Nov 2011 Buy C-Quadrat 17 Aug 2011 Buy Please note: The C-Quadrat share price mentioned in this report is from closing of 22 October C-Quadrat mandated SRC Research for mentoring the C- Quadrat share. Disclaimer 2012: This equity research report is published by: SRC-Scharff Research und Consulting GmbH (short name: SRC Research), Klingerstr. 23, D Frankfurt, Germany. All rights reserved. Although we feel sure that all information in this SRC report stem from carefully selected sources with a high credibility, we cannot give any guarantee for accuracy, trueness and completeness. All opinions quoted in this report give the current judgement of the author that not necessarily is the same opinion as SRC-Scharff Research und Consulting GmbH or another staff member. All in this report made opinions and judgements might be changed without a pre-announcement. Within the scope of German regulative framework author and SRC- Scharff Research und Consulting GmbH do not assume any liability for using this document or its content. This report is just for information purposes and not a request or an invitation or a recommendation to buy or sell any stock that is mentioned here. Private clients should search for personal advice at their bank or investment house and should keep in mind that prices and dividends of equities might rise and fall and that nobody can give a guarantee of the future development of equities. The author of this report and the SRC-Scharff Research und Consulting GmbH commit themselfes on a unsolicited basis to have no long- or short-positions in equities or derivatives related to equities mentioned in this report. Reproduction, distribution and publishing of this report and its content as a whole or in parts is only allowed with an approval of SRC management board in written form. With acceptance of this document you agree with all regulations mentioned here and all general terms and conditions you will find at anytime at our website SRC Equity Research