DATAGROUP — IT services one-stop shop for Mittelstand companies

DATAGROUP (DB: D6H)

Last close As at 27/03/2024

84.10

−0.70 (−0.83%)

Market capitalisation

703m

More on this equity

Research: TMT

DATAGROUP — IT services one-stop shop for Mittelstand companies

DATAGROUP has established an interesting niche providing Mittelstand companies with a modular suite of technology solutions. The group’s CORBOX “cloud-enabling platform” is highly scalable, benefiting from a centralised approach and employing long-term, fixed-price contracts, which ensure stable recurring revenues (66% of FY16 revenues, which related to 85% of gross profit). This gives DATAGROUP a significant advantage over smaller domestic players, while large international IT services competitors are focusing their energy on larger enterprises.

Analyst avatar placeholder

Written by

TMT

DATAGROUP

IT services one-stop shop for Mittelstand companies

IT services

Scale research report - Initiation

23 May 2017

Price

€37.59

Market cap

€314m

Share price graph

Share details

Code

D6H

Listing

Deutsche Börse Scale (Xetra)

Shares in issue

8.33m

Last reported net debt (€m) at 31 March 2017

€23.9m

Business description

DATAGROUP is a full IT outsourcing provider, focused on the German Mittelstand market. The company offers the full range of IT services on a modular basis, through its CORBOX “cloud-enabling platform”. Services include service desk, end-user services, data centre services, application management and SAP services.

Bull

A compelling growth strategy, scaling the business across the Mittelstand sector.

Cloud services business model gives it a clear advantage over competitors.

Centralised SLA-based approach with a focus on customer satisfaction puts company in strong position to consolidate a fragmented market.

Bear

The group’s valuation metrics are more expensive than they have been.

Highly exposed to the German economy.

Acquisitions bring risks, but DATAGROUP has a proven track record in integrating acquisitions.

Analyst

Richard Jeans

+44 (0)20 3077 5700

DATAGROUP has established an interesting niche providing Mittelstand companies with a modular suite of technology solutions. The group’s CORBOX “cloud-enabling platform” is highly scalable, benefiting from a centralised approach and employing long-term, fixed-price contracts, which ensure stable recurring revenues (66% of FY16 revenues, which related to 85% of gross profit). This gives DATAGROUP a significant advantage over smaller domestic players, while large international IT services competitors are focusing their energy on larger enterprises.

Focusing on long-term, fixed-price contracts

DATAGROUP is a full IT outsourcing provider, focused on the German Mittelstand market. It focuses on three- to five-year fixed-price contracts, targeting companies with 250-5,000 IT users. DATAGROUP believes there is a huge opportunity in the Mittelstand space, as these companies typically rely on their own expensive in-house IT departments and have difficulty adapting to new technologies such as mobility and cloud security. Customers can select from a range of solutions, such as Service Desk, Network Services, Application Management Services and SAP services. These solutions are based on standardised processes that are certified according to ISO 20000 and backed by service level agreements (SLAs). The broad range of services allows customers to fully outsource their IT operations. Much of the work is done remotely, and the group can scale its data centre services and shared services desk to support a large number of customers.

Q2 organic growth accelerates to 10%

Organic revenue growth accelerated to 10% in Q2, up from 6% in Q1. Including the HPE acquisition, total revenue lifted by 33% to €54.6m. Q2 EBITDA surged by 77% to €6.3m as the margin rose from 8.6% to 11.5%, reflecting the benefits of the acquisition of IT specialists from Hewlett-Packard. In April the group raised €21.7m (gross) in a capital increase to strengthen the balance sheet to finance further acquisitions. Given the strong performance and the recent HanseCom acquisition, management increased FY17 revenue guidance by €5m and EBITDA by €0.5m.

Valuation: Premium reflects strong business drivers

While the shares are trading on more expensive metrics than historically, at 1.4x consensus FY18 sales and 12x EBITDA, the outlook remains underpinned by attractive business drivers, which provides a compelling case for acquisitions.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

09/15

157.6

15.3

0.65

0.25

57.8

0.7

09/16

174.9

19.1

0.75

0.30

50.1

0.8

09/17e

223.0

23.0

1.15

0.38

32.7

1.0

09/18e

248.3

27.2

1.54

0.43

24.4

1.1

Source: Thomson Reuters

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Company description: IT services one-stop shop for Mittelstand companies

DATAGROUP is a leading German IT service company with c 1,800 employees based at more than 30 locations across Germany. DATAGROUP designs, implements and operates IT infrastructure and business applications such as SAP. DATAGROUP is a full-service IT provider, through its CORBOX platform, which has c 136 clients, serving more than 600,000 IT workstations across the globe. In addition, the group has many smaller customers (c 100-250 seats), many of which are fixed-term project based, taking the customer base to more than 1,000. DATAGROUP provides IT services according to industry standards, and is certified with ISO 20000 (IT service management) and ISO 27001 (information security management). This differentiates the business from many smaller players.

The group has c 470 IT consultants, c 420 system engineers, c 60 service managers/project managers, c 600 first- or second-level support staff, c 60 trainees and c 170 working in sales, marketing, management and administration.

The group rents space in four data centres. However, it is focusing on two mirrored data centres in Frankfurt where it is renting state-of-the-art co-location facilities of Interxion and Zenium. As DATAGROUP does not own the properties, it can focus on its IT operations without worrying about buildings, climate and electricity and capex requirements are limited to IT infrastructure. Co-location provides DATAGROUP with a state-of-the-art and highly secure data centres facilities and gives it the flexibly to expand its capabilities in line with the requirements of its customers, ie, the facilities are virtually scalable at will. The company’s data centre in Bremen will be closed in FY17 while Nuremberg will be closed in the next two years. This will generate annualised savings of at least €0.5m per annum per data centre. Additionally, the HanseCom acquisition has added some small data centre assets that will also be closed.

Business model

The primary focus is to shift existing customers and new customers with 250-5,000 IT users to the group’s CORBOX “cloud enabling platform”. With CORBOX, DATAGROUP offers companies a one-stop service for their IT operations. Out of 12 combinable and compatible CORBOX service families, customers choose exactly those services which optimally support their business. Defined service level agreements guarantee maximum performance and cost transparency. DATAGROUP currently has c 136 CORBOX customers paying an average of €0.75m per annum.

There is a transition, or set up, phase, a period of which depends on the complexity of the chosen portfolio of services. If the customer just takes Service Desk, the transition period will be around three months, but if it involves an entire outsourcing, it will typically take six to nine months. The group is on target to onboard 20 new CORBOX customers in FY17, which would take total CORBOX customers to c 144. The group currently has the capacity to onboard 20-25 new customers per year, but onboarding more than that would be challenging, given the current level of resources. As the group’s headcount and skills base grows, it will increase its capacity to onboard new customers. This includes acquisitions, which also bring new specialist skills. Customer churn is very low at c 2%, and the vast majority of customers roll onto a second term. Some customers have been with DATAGROUP for more than 20 years.

Once the transition phase is completed, a 36-60 month fixed-term contract starts, along with a comprehensive service level agreement (SLA). The cost of the contract relates to a defined set of reference points, eg the number of IT users or IT systems and a chosen level of quality. The charge for Data Centre Services can be related to the size of user storage or dedicated or shared servers, while Network Services relates to the number of connections. Each service can be provided at different levels of quality, eg the level of availability from standard up to business critical. As a Service Desk example, an IT user's call or email ("incident" or "request") might be charged €12/month, so for 500 calls or emails the basic rate would be €6,000/month for an average of one IT user call to the desk per month. Should this rise to say 1.2 calls/month then there would be an additional pre-defined cost.

The contract also involves an SLA, and each service has a defined set of indicators for this purpose. An SLA requirement for Service Desk will be related to the solution rate for incoming calls. For example, an SLA might require that 90% of all incoming calls must be answered in 30 seconds. Alternatively, a customer might be happy with this set at 80% (of incoming calls) but require a high response rate and 24x7 availability. Another example is Cloud Services – downtime might be limited to 0.1% each month, while another customer might be happy with 1% for less business critical applications. Fees are paid on a monthly basis and generate steady and predictable cash flows.

The defined set of indicators and basic fixed plus variable components give safety to both parties. This is completely different to the traditional time and materials (T&M) approach, and means there is significant saleability in this business. This can be demonstrated by Service Desk, where the group operates on a virtual centralised basis and holiday cover alone is much more efficiently handled. Two personnel operating on a T&M basis could be replaced by 1.8 service people, which would result in a 10% margin increase.

Exhibit 1: Growth in CORBOX customers

Source: DATAGROUP

The group has four revenue categories, as follows:

Recurring cloud services (€76m or 44% of FY16 revenues)
This is the bulk of the group’s CORBOX recurring revenue streams, as outlined above.

Recurring non-cloud services (€39m or 22% of FY16 revenues)
This includes c €15m of legacy low-margin T&M business, which DATAGROUP is seeking to shift to CORBOX. The other €24m mostly relates to many smaller customers along with a small part of CORBOX including the onsite installation of IT workstations.

Other services (€21m or 12% of FY16 revenues)
This includes non-recurring projects and consulting work (c €5-10m) and is related to the onboarding of new customers and the onboarding of new services to existing customers.

It also involves software development work (€10-15m), which is not directly related to CORBOX customers. While this is not a core part of the business, it has attractive margins, and DATAGROUP can cross-sell this activity to its client base, and vice versa. The focus is on B2B apps and the software solutions can be resold to other customers.

Trade and others (€39m or 22% of FY16 revenues)
This is primarily hardware and software resales. However, this is low-margin activity, and DATAGROUP now only offers this function when CORBOX customers request it. This activity can be requisite for maintaining business relationships.

Strategy

DATAGROUP is focused on delivering cloud solutions to Mittelstand companies. The group chooses to focus entirely on Germany, given that the market is so large (BITKOM – IT services €38bn) and DATAGROUP estimates the Mittelstand sector alone is worth c €20bn, while CORBOX revenues are just c €80m.

The group’s strategy has involved improving the quality of revenues, by shifting to recurring cloud-based revenues on higher-margin, fixed-term contracts from the traditional time & materials (T&M) based work. By offering a centralised and standardised SLA-based approach, the group has been able to establish a significant competitive advantage over smaller competitors. Further, its strong focus on customer satisfaction gives it an advantage over larger players, which tend to focus their efforts on their bigger global customers. DATAGROUP has been highly active in the German IT service sector’s consolidation process, acquiring inefficiently run businesses as well as strategic assets and it has made 19 acquisitions since its IPO in September 2006. Merger drivers include benefits from the centralised support, virtually centralised Service Desk, along with economies of scale from accounting, HR, management, marketing and scaling data centre assets.

The plan remains to grow both organically and through acquisitions, which could take group revenues to c €500m by FY21, including c €170m from acquisitions. A prime objective is to lift EBITDA margins to 13-14% by FY21 (11.5% in Q217) by focusing on growing the group’s high-margin CORBOX business, with potentially 111 new customers being added by then (from FY16 levels). Growth will also come from upselling to existing customers.

Several market characteristics have enabled the group to establish a strong competitive advantage

Above-average customer satisfaction (as evidenced by a report on IT outsourcing in Germany by Whitelane Research & Navisco) is one of its most important competitive advantages.

It has a highly standardised approach, which makes it more efficient for onboarding new customers.

Smaller competitors offer suffer from high customer concentration while businesses operating on a T&M basis struggle to benefit from economies of scale. DATAGROUP can acquire these businesses (tempering any customer concentration) and transition them to fixed-price cloud services. HPE operated mainly on a T&M basis while HanseCom partly operated on a T&M basis.

Acquisition strategy

Since its IPO, DATAGROUP has acquired 19 companies or parts of companies. The acquisitions have been a key component in driving a revenue CAGR of 20% since FY06, and an EBITDA CAGR of 26%. Given the revenue growth and margin progression, the acquisition strategy has been highly earnings accretive as well as value creating in our view. Buying underperforming businesses and turning them around is a key part of the acquisition strategy. However, management is also looking to acquire more strategic assets in the cloud services space and also to expand the SAP implementation skills base. Management is conservative about leverage, hence the recent capital increase, which leaves the group with plenty of headroom to make bolt-on acquisitions.

The most recently acquired business is Hamburg-based IT service provider HanseCom, which was announced in early April, for an undisclosed price. HanseCom has c 70 employees and generates annual revenue of c €16m, and it will be consolidated into DATAGROUP accounts from May 2017.

In September 2016, DATAGROUP acquired 306 SAP and application management experts from Hewlett-Packard Enterprise, and signed an agreement for DATAGROUP to provide defined SAP and application management services for HPE’s customers. The deal guarantees revenues of €150m over five years, which can be extended, while DATAGROUP took on some pension liabilities. This was a very significant and important acquisition for DATAGROUP, as SAP Services is a part of CORBOX and this was a unique opportunity to acquire skills that are not available on the market. The deal will add €33m to DATAGROUP’s FY17 revenues, most of which will be in recurring cloud services.

Recent newsflow

Q2 results

Performance was strong in Q2 with organic revenue growth accelerating to 10%, up from 6% in Q1. Consequently, management increased guidance for FY17. Including the HPE acquisition, total revenue lifted by 33% to €54.6m. This was up from 29% in Q1, and provided for 31% growth over the whole six months to €108.0m. Q2 EBITDA surged by 77% to €6.3m with the margin rising from 8.6% to 11.5% and EPS nearly trebled to 36c. For H1, EBITDA rose by 92% to €11.5m and EPS jumped from 17c to 59c.

Given the strong performance and also considering the acquisition of HanseCom, management lifted FY17 revenue guidance to €215-225m (previously €210-220m) and EBITDA to €22.0-23.0m (previously €21.5-22.5m).

Exhibit 2: EBITDA and margin progression

Exhibit 3: EPS and DPS progression (€)

Source: DATAGROUP accounts

Source: DATAGROUP accounts

Exhibit 2: EBITDA and margin progression

Source: DATAGROUP accounts

Exhibit 3: EPS and DPS progression (€)

Source: DATAGROUP accounts

Fund-raising

In early April 2017, DATAGROUP placed 759,000 new shares with investors at €28.6 raising €21.7m gross. The purpose of the capital increase was to strengthen the group’s balance sheet, in order to give the group greater financial flexibility to make additional acquisitions. The equity ratio stood at 18% at the end of March, and the pro forma equity ratio, after including the capital increase, was 28%, while pro forma net debt fell from €23.9m to just €2.7m (prior to the HanseCom acquisition). The placement increased the number of shares outstanding from 7.572m to 8.331m. This was the group’s first capital increase since May 2012, when DATAGROUP placed 690,000 shares at €5.50, raising gross proceeds of €3.8m. In addition to the placement, DATAGROUP’s majority shareholder, HHS, agreed to sell 400,000 shares due to the strong demand. In combination with the capital increase, HHS’s shareholding in DATAGROUP SE has fallen from 61.1% to 50.8%.

Market overview

DATAGROUP has identified c 11,000 potential CORBOX customers in Germany and wants to serve 250-300 of them in FY21. These numbers are based on data from the German Statistics Bureau, representing the enterprises in Germany that have 250-5,000 IT seats. This is not the same as number of employees – a typical enterprise has 0.6-0.7 seats per employee, ranging from 0.2-0.3 in some basic industries to above one in some financial services firms.

The market in Germany is very fragmented and DATAGROUP competes with many small regional players, some of which might only have one or a few customers. DATAGROUP estimates there are more than 1,000 small companies with 5-200 employees. These companies cannot provide the same level of service to their customers – indeed it is all but impossible for them to build up their own offering like CORBOX based on SLA services – and they typically suffer from high levels of customer concentration. DATAGROUP’s main SAP competitor is All for One Steeb.

DATAGROUP also competes with larger players, but these typically are focused on customers with above 5,000 IT seats, targeting customers who generate revenue of at least €5m per annum. As a consequence, this leads to low customer satisfaction from smaller customers, and DATAGROUP can target these enterprises. Part of DATAGROUP’s pitch is that DATAGROUP is a Mittelstand company also. The group’s main quoted competitors include T-Systems (a subsidiary of Deutsche Telekom), IBM, Computacenter, and Frankfurt-listed IT services companies Bechtle and Cancom.

DATAGROUP estimates that around 75% of new DATAGROUP customers are switching their supplier. Most come from bigger competitors such as T Systems, IBM and Computacenter. The remaining 25% come from outsourcing their IT. DATAGROUP typically wins 40% of requests for proposals and the average new customer generates annual revenue of €750k.

Management

Max H.-H. Schaber (CEO)

Mr Schaber founded DATAPEC, a data processing company, in 1983, which later became DATAGROUP. Mr Schaber has been a member and chairman of the executive board (CEO) of DATAGROUP since 16 February 2006. He is responsible for finance, legal affairs, human resources and company development.

Dirk Peters (COO)

Mr Peters founded HDT Hanseatische Datentechnik in 1992, which evolved from being a classic systems house to an IT service management business and was acquired by DATAGROUP in 2008. Since 2008, he has served as managing director of DATAGROUP Hamburg GmbH (formerly HDT), and is also active in the management of DATAGROUP SE as COO.

Heinz Hilgert (chairman of the supervisory board)

Heinz Hilgert is CEO and founder of TransVise GmbH, senior management consultant in the financial services industry. Before that Mr Hilgert was CEO of WestLB in Düsseldorf and deputy CEO of DZ Bank in Frankfurt.

Financials

DATAGROUP has an impressive track record, having generated a 20% CAGR in revenue over the 10 years from FY06 to FY16 and a 26% CAGR in EBITDA. H117 saw revenues jump by 31% to €108m and EBITDA by 93% to €11.5m, aided by the acquisition of IT specialists from Hewlett-Packard in September 2016. Organic revenue growth was 10% in Q217, up from 6% in Q117.

The group added 18 new CORBOX customers in FY16, along with eight significant upsells, and the target is for at least 20 new CORBOX customers in FY17. DATAGROUP has a clear objective for onboarding new customers, with a target of 235 CORBOX customers to be achieved by 2021, prior to any acquisitions, including HanseCom.

Exhibit 4: Financial summary

(€000s)

FY11

FY12

FY13

FY14

FY15

FY16

Year ended 30 September

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

Income statement

Group revenue

108,550

146,183

156,935

152,380

157,574

174,918

Services & maintenance revenue

66,391

102,980

116,082

114,413

120,773

135,907

% group revenue

61%

70%

74%

75%

77%

78%

Trade reveune

41,838

42,923

40,541

37,707

36,592

38,821

Other/consolidation

321

280

312

260

209

190

EBITDA

6,016

9,549

12,553

11,686

15,339

19,103

EBITDA margin

5.5%

6.5%

8.0%

7.7%

9.7%

10.9%

EBIT

3,650

3,792

6,091

6,213

9,604

12,675

Year-end number of shares (000s)

5,722

6,892

7,572

7,572

7,572

7,572

EPS (€)

0.59

0.37

0.25

0.14

0.65

0.75

DPS (€)

0.20

0.20

0.20

0.20

0.25

0.30

Balance sheet

Total non-current assets

36,861

69,647

66,109

60,754

68,062

92,178

Total current assets

23,132

31,019

35,590

34,345

35,285

67,568

Total assets

59,993

100,666

101,699

95,099

103,346

159,746

Total non-current liabilities

(17,075)

(32,416)

(49,420)

(44,056)

(39,013)

(97,367)

Total current liabilities

(24,855)

(45,552)

(29,767)

(29,778)

(40,283)

(34,012)

Total liabilities

(41,929)

(77,968)

(79,188)

(73,834)

(79,296)

(131,379)

Net assets

18,064

22,698

22,511

21,264

24,051

28,367

Cash flow

Net cash from operating activities

1,253

8,456

10,947

9,286

9,431

9,518

Net cash from investing activities

(6,373)

(17,950)

(5,210)

(4,301)

(9,295)

(3,711)

Net cash from financing activities

5,897

12,056

2,778

(6,937)

(7,513)

16,545

Net cash flow

778

2,562

8,516

(1,951)

(7,375)

22,352

Cash & cash equivalent end of year

321

2,883

11,398

9,448

2,072

22,424

Source: DATAGROUP accounts

Sensitivities

We highlight the following points:

Economic downturn. IT budgets are subject to pressure in economic slowdowns. However, slowdowns can also speed up the pace of outsourcing as customers seek to reduce costs. We note Datagroup has long-term-relationships with its customers, including a high level of recurring work.

Country, sector and customer concentration. All revenues are generated from Germany, though many of the group’s customers have international operations. The customer base is well spread across sectors, and customer concentration is limited, with the largest customer generating 6% of revenue in FY17, while the top 10 customers generated 16-17% of revenue. Hewlett-Packard is expected to be the largest customer in FY17 and FY18, generating an estimated 15% of revenue, but this revenue is on behalf of HP’s own customers.

Operational risk. There is the risk of fixed-price projects going over budget or deadlines not being met.

Competitive environment. While competition in German IT services is fierce, it could intensify; for example, larger international rivals could make headway in continental Europe and shift focus on the Mittelstand market.

Customer considerations. IT departments might be reluctant to outsource, in particular mission-critical tasks. DATAGROUP’s growth might be limited by potential conflicts of interest related to supply of services to competing firms in similar key business areas.

Acquisitions. There is implementation risk in the acquisition strategy, though the group has established a proven track record in integrating acquisitions.

Valuation

DATAGROUP shares have had an impressive run, rising from €2 in 2009 to €38 without any major corrections. Nevertheless, the business is still small, with a market capitalisation of c €300m, while the target market is a growth market and huge.

Peer valuation

The shares trade on higher ratings to its peers, which reflects the superior growth prospects, healthy recurring revenues (66% of revenues) and strong business drivers.

Exhibit 5: Peers

Share price

Market cap

EV/sales (x)

EV/EBITDA (x)

PE (x)

local curr

(€ m)

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

DATAGROUP

36.99

309

1.51

1.38

13.4

11.6

23.6

19.3

Allgeier

19.145

174

0.47

0.43

8.3

7.3

26.0

19.5

ATOS

122

12,848

1.01

0.98

7.9

7.4

14.7

13.6

Bechtle

111.6

2,344

0.68

0.63

11.9

10.9

20.5

18.5

Cancom

50.6

828

0.67

0.63

9.0

7.9

20.1

17.7

CENIT

21.24

178

0.93

0.83

9.9

8.0

22.4

18.5

GFT

20.735

546

1.41

1.29

12.9

11.3

18.8

15.9

QSC

2.01

250

0.90

0.89

8.3

7.6

N/A

44.7

Realtech

1.5

8

N/A

N/A

N/A

N/A

N/A

N/A

S&T

13.08

640

0.92

0.83

15.3

11.6

28.3

20.9

SNP Schneider

41.785

208

1.94

1.66

19.8

14.0

42.3

27.1

USU Software

22.8

240

2.45

2.17

16.9

13.2

24.1

18.4

All for One Steeb

64.49

321

1.11

1.04

11.2

10.4

24.0

21.5

Medians excluding DATAGROUP

0.93

0.89

11.2

10.4

23.2

18.5

Source: Bloomberg. Note: Prices as at 22 May 2017.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

More on DATAGROUP

View All

Latest from the TMT sector

View All TMT content

Research: TMT

EQS Group — Q1 regulatory stimulus

EQS has produced strong Q117 figures, with revenues up 49% on the prior year, boosted by the consolidation of ARIVA, with organic growth at 13%. This performance is largely attributable to demand stimulated by regulatory changes, as built into our forecasts which are unchanged on these results. The mid-2016 introduction of the European Market Abuse Regulation greatly added to the compliance burden, while the impending PRIIP regulations for packaged products provide a fertile backdrop for ARIVA. Good share price performance (and underperformance by peers) has narrowed the discount to under 10%.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free