Investments to bear fruit in organic growth Vitec has increased both investment in software as well as its organic growth trend lately. We find this positive and appreciate that growth will be driven by both organic growth (in recurring revenue) and acquisitions to a larger extent than historically. We do not include acquisitions in our forecast, but we find it likely that Vitec will continue to add ~15% to annual sales from acquisitions (16% on average in 2012-21). From already closed acquisitions, we have a 6% contribution to 2022e sales. On the risk side, we also note higher activity and competition in the software market with new market entrants also looking to consolidate the vertical software industry. We think Vitec has a competitive advantage with its long track record and with a strong brand in the field, and looking at the underlying 2021 performance, we find that 28 of its 31 business units posted positive organic growth in recurring revenue and that the diversification is large. This support further stability in organic growth going forward, in our view. Financial headroom supports acquisition strategy With a lease adj. net debt/EBITDA of 0.8x in 2022e and an unutilised credit facility of SEK 800m, we find the acquisition headroom to be solid and support further acquisitions ahead. The vertical software market is fragmented and consists of smaller companies, so we expect to see around five acquisitions per year going forward. Valuation in line with historical 5-year average We have updated our estimates, still not including future acquisitions, and we focus on EBITA, as per the definition the company uses (before acquisition related amortization), in our valuation. On our new estimates, with slightly higher organic growth assumptions and including the latest acquisitions causing higher amortization (r ... Läs mer på Introduce
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