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Research: TMT
4iG has reached the next milestone in its partnership with Rheinmetall, following on from Rheinmetall’s investment in the company earlier this year. The two companies have entered into a joint venture (JV) to provide IT services to Rheinmetall’s local and global subsidiaries, starting in 2023 and with the potential to service third parties in the longer term. The JV should strengthen 4iG’s relationship with Rheinmetall and represents a major step forward in 4iG’s international expansion strategy.
4iG |
Rheinmetall relationship steps up a gear |
Joint venture announcement |
Software and IT services |
9 November 2022 |
Share price performance
Business description
Analyst
4iG is a research client of Edison Investment Research Limited |
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4iG has reached the next milestone in its partnership with Rheinmetall, following on from Rheinmetall’s investment in the company earlier this year. The two companies have entered into a joint venture (JV) to provide IT services to Rheinmetall’s local and global subsidiaries, starting in 2023 and with the potential to service third parties in the longer term. The JV should strengthen 4iG’s relationship with Rheinmetall and represents a major step forward in 4iG’s international expansion strategy.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
41.1 |
3.3 |
30.8 |
22.0 |
23.3 |
3.1 |
12/20 |
57.3 |
4.2 |
37.7 |
22.5 |
19.1 |
3.1 |
12/21 |
93.7 |
8.7 |
74.6 |
29.0 |
9.6 |
4.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Following on from Rheinmetall’s investment in 4iG earlier this year (25% shareholder since March), when 4iG became Rheinmetall’s preferred digitalisation and IT partner, 4iG and Rheinmetall have set up a JV in Budapest, with ownership split 51/49%. Initially, the plan is for the JV to provide IT services (both project-based and operations-related) to Rheinmetall’s local and global subsidiaries, starting in 2023. In the longer term, the JV may expand into providing services to third parties. Rheinmetall is a leading defence and mobility technology company and in 2021 it generated 34% of revenue from Germany, 31% from the rest of Europe, 8% from the Americas, 18% from Asia and 9% from elsewhere. The JV therefore represents an opportunity for 4iG to expand its IT services business from its current stronghold in Central Eastern Europe into Western Europe and with the increasing IT requirements of the defence sector, to provide support for Rheinmetall’s digital technology offerings.
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Research: Investment Companies
In our Henderson Smaller Companies Investment Trust (HSL) initiation note in June, we highlighted the strong features the company brings to investment in UK small and mid caps, notably an experienced manager and team, an efficacious process and competitive fees. So far, 2022 has been the second most difficult year that the lead manager, Neil Hermon, has experienced in his near 20-year tenure at HSL and in his 33-year small-cap investing career overall (the most difficult being during the global financial crisis). The fund’s weak showing in 2022 might have affected its three- and five-year performance, but it has not derailed HSL’s 2.8% net annual outperformance of the index over Hermon’s tenure. In this adverse investment environment investors can be reassured by HSL’s experienced management team and established investment process, honed over many years and through multiple investment cycles.