Q3 was largely as we had expected, but the bigger news was the release of a new concept for smaller customers. Talenom will target even the smallest customers by offering free-to-use bookkeeping tools. The platform is scalable and as the customers grow, they can move up all the way to Talenom’s current services, where it takes care of all of the customer’s financial routines. The entry-level offering resembles what Fortnox offers, in our view. Talenom will also offer banking services to its customers, including IBAN accounts and cards (provided by an unnamed partner). Talenom updated its long-term vision and now aims to provide unbeatable accounting and banking services for SMEs, and export this expertise to Europe. In our view, the CEO’s recent purchase of 25,000 shares indicates management confidence in the long-term outlook of the company.
Q3 20 review.
Sales grew by 10% y/y (12% in Q2), of which we estimate around 6% was organic. COVID-19 has slowed new customer acquisition, but overall the impacts seem manageable. EBIT increased by 34% y/y and EBIT margin reached 21.5% (17.4% a year ago), which is a good achievement given that acquired companies had much lower margins.
Estimate changes.
We have made small changes, increasing 2021-22E sales by 1% and EBIT by 2% mainly due to recent acquisitions. We expect growth to accelerate in 2021-22E.
Valuation.
The share has performed well (+78% in 12M) which has increased near-term multiples (2020E EV/EBIT 37x; 2021E 31x). However, TNOM does not stand out from other growth companies, neither is valuation a reason to turn negative given the credible outlook for long-term growth, in our view. We increase our 12M fair value range to EUR9-11 (EUR810).
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