StrongPoint reported Q4 revenues of NOK 284m, -2% y-o-y (in Retail Technology) and +45% q-o-q. Although the company is still being negatively impacted by FX and components shortages, sales were back following the Q3 low, driven by a strong rebound in both Payment Solutions (CashGuard) and In-store Productivity (ESLs). Q4’20 was boosted by a large delivery in Norway, affecting comparability, but in a historical context the revenues were strong. Gross margins were better due to more favourable mix, but were mostly offset by larger investments in product development, sales and marketing. EBITDA of NOK 20m was up 1% y-o-y. We have made significant negative estimate changes as StrongPoint is ramping-up investments in product development, sales and marketing. This makes us lift opex by NOK +20m and explains our negative estimate revisions.
One-stop-shop for grocery retailers
Following the divestments of both Cash Security and Labels, StrongPoint is now a pure retail technology company. Having signed a distribution agreement with Autostore in 2021, along with its Click & Collect lockers and picking solutions, we argue that StrongPoint’s product portfolio is well positioned to capitalise on the growth that we expect to see in online grocery retail over the coming decade. Moreover, StrongPoint is conducting M&As to broaden both its product scope and geographical footprint: on 14 February StrongPoint announced that it is acquiring the UK-based retail solutions company Air Link Systems (ALS). Terms and pricing are not final, but ALS has ~NOK 240m in revenues and a 10% EBITDA margin, i.e. potentially increasing ’22e adj EBITDA by ~25%.
2025 ambitions imply EV/EBITDA ~3.1x and P/E ~4.3x
On our updated estimates, StrongPoint is now trading at 10.5x 2022e EV/EBITDA and 18.6x P/E when excluding the NOK 3.6/sh. in net cash. If StrongPoint reaches its 2025 targets
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