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Qlosr: Growing bit by bit - ABG

Buy & build IT solutions business

’22e-24e adj. EBITA CAGR of 44% (excl. new M&A)

Fair value range of SEK 4-11

Opportunities in a fragmented market
Qlosr is a Swedish provider of IT solutions with an XaaS (Everything-as-a-Service) business model. The company operates in a significantly fragmented market for IT hardware & services generalists, which makes for broad growth avenues for businesses with a buy & build agenda. Our assessment is that there is over SEK 6bn of inorganic growth (~12x Qlosr’s 2022e sales) up for grabs in the current environment, and that figure is likely to grow as the target businesses grow organically. Moreover, IT hardware & services businesses focused on small- and medium-sized enterprises (SMEs) are relatively profitable and typically rely on a lump-sum transactional model rather than an XaaS model. This industry attribute enables Qlosr to transform smaller IT solutions providers into generators of recurring revenues.

Cash flow-supported growth
On an organic basis, we anticipate Qlosr to generate free cash flow that can fund a sustainable M&A agenda to help consolidate the market and ultimately earn higher margins over time due to economies of scale. While the company has a brief operating history in its current state, we estimate that it should be able to achieve an EBITA margin toward the conservative end of its financial goal of a 10%-12% range (vs. adj. margin of 7% in 2022e) while maintaining double-digit organic growth. Due to uncertainties regarding the timing and price of future acquisitions, our forecasts only include organic growth and M&A from already announced acquisitions. Given Qlosr’s acquisition track record, we believe additional deals will come and will add to forecasts as they occur.

We initiate coverage with a fair value range of SEK 4-11
We estimate a fair value range of SEK 4-11 per share based on a variety of valuation methodologies. On our estimates, Qlosr is trading at 7.2x 2023e EV/EBITA, as compared to peers, which are ...
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