With an organic growth beat in Q1, Vitec managed to deliver an adj. EBITA 2% ahead of FactSet consensus. The market continues to be solid, and Vitec benefited from price increases in the quarter. We find this positive, and supportive of the market position Vitec has achieved with its individual software entities. Although we do not have full insight into the different business units or any of the 32 separate companies on a quarterly basis, we feel confident that they are broadly contributing to the organic growth. In 2021, for example, all except three companies reported positive organic growth.
Price increases lift our EBITA estimates by 4-8%
The Q1 organic growth in recurring revenue of 8% was ahead of our estimate of 5%, and partly driven by price increases made in Q1 linked to index changes (~CPI). This should have a positive effect for the remainder of 2022e as well, and we increase our Q2e-Q4e organic growth rates to 7% (from 4-6%), raising our ’22e-’24e sales by 3%. With limited opex increases (1-2%), we lift our adj. EBITA by 4-8% for the same period, resulting in EBITA margins in the range of 29.3-29.5%.
Share trading at a 40% premium to its 5-year average
The share currently trades at 37.7x 2022e EV/adj. EBITA on our estimates, a 40% premium to its 5-year average of 27x, and 57.5x EV/EBIT (the best proxy for FCF). The financial headroom is still good for further M&A, with 2022e lease adj. ND/EBITDA of 0.7x; although we expect Vitec to continue acquiring market-leading niche software companies, we have not included future acquisitions in our estimates.
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