We think that the strong Q2 numbers suggest good market conditions in Q2, where we note that 1) the default rates for SMEs has been low; 2) the number of newly started companies has been healthy; and 3) the demand for cloud-based solutions has been solid. Fortnox’s management agrees and says that the only real obstacle amid COVID-19 has been lower transaction-based revenues (which were flat q-o-q). We keep our sales estimates largely intact following Q2, but we lift ‘20e-‘22e EBIT by 2-6% on slightly lower opex assumptions.
New financial targets to be announced in H2’20
Interestingly, Fortnox stated that it is currently working on establishing a new business plan, in which it will set new financial targets for the next five-year period. The financial targets will be published in H2’20 and we are keen to see them. For ’19-’22e, we forecast a sales CAGR of 26% and an EBIT CAGR of 34%. Furthermore, we also look for increased M&A activity ahead, given the high potential in terms of sales synergies and Fortnox’s wealthy balance sheet (end-of-Q2 lease adj. net debt position of SEK -334m). The share has appreciated 72% YTD and is now trading at a 51x EV/EBIT on our new 2021 estimates.
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