EQS Group — German whistleblowing law now before year end

EQS Group (SCALE: EQS)

Currency in EUR

Last close As at 07/02/2023

EUR25.90

−0.50 (−1.93%)

Market capitalisation

EUR260m

Research: TMT

EQS Group — German whistleblowing law now before year end

Progress of whistleblowing legislation through the German Bundestag has been slower than hoped, with transposition now likely in December, with a three-month implementation period. This delay means that management is now guiding to FY22e revenue growth of 25%, with EBITDA of €6.0m (was €6–10m). The EBITDA figure is in line with our forecast, despite the lower revenue (€3.2m below) reflecting a degree of flexibility on costs. The underlying boost from legislation coming into force across Europe remains a strong positive from FY23. EQS reported 9M22 revenue growth of 27% (10% organic), with 702 new SaaS customers signed up, including 555 for whistleblowing.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

EQS Group

German whistleblowing law now before year end

Q3 results

Software & comp services

15 November 2022

Price

€23.60

Market cap

€237m

Net debt (€m) at 30 September 2022

29.3

Shares in issue

10.0m

Free float

78.4%

Code

E1SX

Primary exchange

XETRA

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

10.0

(12.0)

(36.5)

Rel (local)

(4.4)

(15.2)

(28.6)

52-week high/low

€44.6

€22.5

Business description

EQS Group is a leading international provider of regulatory technology in the fields of corporate compliance and investor relations. Its products enable corporate clients to fulfil complex national and international disclosure obligations, minimise risks and communicate transparently with stakeholders.

Next events

Preliminary FY22 figures

February 2023

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Milo Bussell

+44 (0)20 3077 5700

EQS Group is a research client of Edison Investment Research Limited

Progress of whistleblowing legislation through the German Bundestag has been slower than hoped, with transposition now likely in December, with a three-month implementation period. This delay means that management is now guiding to FY22e revenue growth of 25%, with EBITDA of €6.0m (was €6–10m). The EBITDA figure is in line with our forecast, despite the lower revenue (€3.2m below) reflecting a degree of flexibility on costs. The underlying boost from legislation coming into force across Europe remains a strong positive from FY23. EQS reported 9M22 revenue growth of 27% (10% organic), with 702 new SaaS customers signed up, including 555 for whistleblowing.

Year end

Revenue
(€m)

EBITDA
(€m)

PBT*
(€m)

EPS*
(€)

EV/EBITDA
(x)

P/E
(x)

12/20

37.6

4.8

0.4

0.04

56.2

573.2

12/21

50.2

1.7

(5.9)

(0.70)

153.5

N/A

12/22e

62.8

6.0

(4.3)

(0.30)

44.6

N/A

12/23e

86.5

17.5

7.6

0.51

15.3

46.2

12/24e

107.0

27.0

17.7

1.19

9.9

19.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Compliance segment drives growth

Revenues from cloud-based compliance products, which comprise roughly half of 9M22 group revenues and include the whistleblowing products, were ahead 73% on 9M21 (+29% adjusting for the base effect of Business Keeper). This is without the stimulus of the German legislation coming into force, now expected in December. Sales through partners are yet to fully kick in, although the pipeline is building encouragingly. Compliance cloud service 9M revenues (18% of group) were up 6%, boosted by the European Single Electronic Format Regulation requirements in filing. On the Investor Relations side, cloud products revenues (16% of group) grew 9% as subscriptions built on the COCKPIT platform. However, cloud service revenues (16% of group) were down 11%, reflecting the complete absence of IPOs.

Refinancing agreed

EQS bought Business Keeper for €95m in June 2021, assisted by an acquisition loan of €50m from Commerzbank. Half of this was repaid with the proceeds of the subscription fund-raising in Q122 (at €33.0/share). The remainder has now been refinanced over five years, and extended by a further €5m, with Deutsche Bank and Kreissparkasse Biberach added to the banking consortium. Interest is at Euribor plus a margin, which varies with leverage and achievement of sustainability objectives. Repayments will be in equal instalments starting mid-2023.

Valuation: DCF indicates meaningful upside

EQS’s share price is down 47% year-to-date, while valuations of financial B2B companies have fallen 30% (excluding Euromoney, subject to a bid) and application software companies by 36%. With traditional valuation multiples unhelpful, we use a DCF, with a WACC of 9% and terminal growth of 2% (unchanged), deriving a value of €41.29/share (August 2022: €47.73), well above the current market price.

Key growth indicators show scale of progress

Looking at the quarterly figures shows the frustration inherent in the timing slippage of legislative transposition, which had been expected for Q322 for Germany. Other countries within the EU have also suffered delays, but the German market is the most significant within the EU and particularly so for EQS, for which it is the home market. Only Denmark succeeded in timely transposition of the law, with delays in France stemming from not obtaining Presidential decree until October.

Although the revenue line effectively stalled in Q322; the amount of new recurring revenue recorded of €5.54m was €1.99m ahead of the end H122 figure. The previous full year guidance was for this to build to between €11m and €16m, dependent on when the law finally took effect. Following these further delays, management has reduced this figure to €9m for the year.

Exhibit 1: Growth in key figures

€000s

Q122

Q222

Q322

9M22 y-o-y change (%)

Total revenue

14,115

15,802

15,051

+27

Compliance

Cloud-products

7,190

7,560

7,520

+73

Cloud-services

2,120

3,240

2,760

+6

Investor Relations

Cloud-products

2,560

2,460

2,470

+9

Cloud-services

2,250

2,540

2,300

-11

New annual recurring revenue

1,810

3,550

5,540

Operating expenses

(14,582)

(15,578)

(14,281)

+26

EBITDA

252

891

1,400

+12

Margin

2%

6%

9%

EBIT

(1,766)

(1,141)

(653)

Group earnings

(971)

(818)

(354)

Operating cash flow

879

(1,301)

1,654

+107

Equity ratio (%)

50

62

62

SaaS customers

4,405

4,591

4,786

+25

Source: EQS Group accounts, Edison Investment Research

Recurring revenues across the board now account for 88% of group revenues, reflecting the build up in cloud-based subscription products.

The Compliance cloud-based products growth is being driven by whistleblowing, as described above. The progress in cloud-based services of 26% growth January to September 2022 over prior year is higher than we might have anticipated, supported by new European Single Electronic Filing regulation and continued demand for legal entity identifier issuance.

Trim to revenue forecast, EBITDA intact

We were previously forecasting group revenues of €66.0m for FY22, which was equivalent to year-on-year growth of 31%. Revised guidance is for revenue growth of 25%, which equates to €62.8m. We have assumed some knock on to FY23e, where we reduce our revenue forecast from €90.0m to €86.5m, with year-on-year growth of 38% (was +36%) reflecting demand from Germany picking up.

Operating expenses were up by 33% in H122 over H121, with Business Keeper consolidated from mid-July 202, so ‘lapped’ in Q322. Personnel expenses make up the bulk of operating costs (65% of 9M22). Management guidance is now for FY22 EBITDA of €6.0m, as we had previously modelled, at the bottom end of the previously guided range of €6–10m. For FY23e, we now look for EBITDA of €17.5m, a small reduction from our earlier figure of €18.0m.

Exhibit 2: Financial summary

€'000s

2020

2021

2022e

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

37,636

50,223

62,800

86,500

107,000

Cost of Sales

0

0

0

0

0

Gross Profit

37,636

50,223

62,800

86,500

107,000

EBITDA

 

 

4,760

1,742

6,000

17,500

27,000

Operating Profit (before amort. and excepts.)

 

 

819

(4,417)

(1,364)

9,942

19,442

Amortisation of acquired intangibles

(656)

(1,090)

(1,350)

(1,350)

(1,350)

Exceptionals

0

110

0

0

0

Share-based payments

0

0

0

0

0

Reported operating profit

163

(5,397)

(2,714)

8,592

18,092

Net Interest

(396)

(1,461)

(2,903)

(2,305)

(1,697)

Joint ventures & associates (post tax)

0

0

0

0

0

Exceptionals

0

0

0

0

0

Profit Before Tax (norm)

 

 

423

(5,878)

(4,267)

7,637

17,745

Profit Before Tax (reported)

 

 

(233)

(6,858)

(5,617)

6,287

16,395

Reported tax

(599)

229

1,854

(2,075)

(5,410)

Profit After Tax (norm)

296

(5,682)

(2,859)

5,117

11,889

Profit After Tax (reported)

(832)

(6,629)

(3,763)

4,212

10,985

Minority interests

(34)

0

0

0

0

Discontinued operations

0

0

0

0

0

Net income (normalised)

296

(5,682)

(2,859)

5,117

11,889

Net income (reported)

(866)

(6,629)

(3,763)

4,212

10,985

Average Number of Shares Outstanding (m)

7.2

8.1

9.6

10.0

10.0

EPS - normalised (€)

 

 

0.04

(0.70)

(0.30)

0.51

1.19

EPS - normalised fully diluted (€)

 

 

4.12

(0.70)

(0.30)

0.51

1.19

EPS - basic reported (€)

 

 

(0.12)

(0.81)

(0.39)

0.42

1.10

Dividend per share (c)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

6.4

33.4

25.0

37.7

23.7

EBITDA Margin (%)

12.6

3.5

9.6

20.2

25.2

Normalised Operating Margin (%)

2.2

(8.8)

(2.2)

11.5

18.2

BALANCE SHEET

Fixed Assets

 

 

39,007

168,468

167,204

176,653

184,875

Intangible Assets

31,016

160,386

159,479

171,821

182,585

Tangible Assets

7,216

7,351

6,345

3,845

1,345

Investments & other

775

731

1,380

987

945

Current Assets

 

 

17,086

18,369

9,334

11,195

18,295

Stocks

0

0

0

0

0

Debtors

3,923

7,018

8,603

11,612

14,364

Cash & cash equivalents

12,074

8,653

(2,016)

(3,164)

1,184

Other

1,089

2,697

2,747

2,747

2,747

Current Liabilities

 

 

(12,381)

(89,171)

(47,072)

(35,062)

(29,876)

Creditors

(2,747)

(3,197)

(3,228)

(4,098)

(4,731)

Tax and social security

(56)

(214)

(552)

(760)

(941)

Short term borrowings (includes lease debt)

(3,278)

(73,095)

(27,756)

(24,756)

(18,756)

Other

(6,300)

(12,665)

(15,536)

(5,448)

(5,449)

Long Term Liabilities

 

 

(10,768)

(27,426)

(22,438)

(22,438)

(22,439)

Long term borrowings (includes lease debt)

(7,641)

(9,927)

(7,423)

(7,423)

(7,423)

Other long-term liabilities

(3,127)

(17,499)

(15,015)

(15,015)

(15,016)

Net Assets

 

 

32,943

70,240

107,029

130,349

150,856

Minority interests

0

0

0

0

0

Shareholders' equity

 

 

32,943

70,240

107,029

130,349

150,856

CASH FLOW

Operating Cash Flow

3,765

(1,306)

2,951

11,121

17,893

Working capital

1,294

(1,149)

(1,554)

(2,140)

(2,119)

Exceptional & other

1,037

4,721

1,101

4,432

7,161

Tax

(154)

(229)

1,854

(2,075)

(5,410)

Operating Cash Flow

 

 

5,942

2,037

4,352

11,339

17,524

Capex

(2,008)

(3,149)

(3,250)

(3,250)

(3,250)

Acquisitions/disposals

0

(96,428)

(1,608)

(2,310)

0

Net interest

(157)

(1,636)

0

0

0

Equity financing

9,124

43,929

39,104

0

0

Dividends

0

0

0

0

0

Other

414

(2,772)

(3,927)

(3,927)

(3,927)

Net Cash Flow

13,315

(58,019)

34,671

1,852

10,347

Opening net debt/(cash)

 

 

13,472

(1,153)

74,372

37,198

35,347

FX

(199)

126

0

0

0

Other non-cash movements

1,509

(17,631)

2,504

0

1

Closing net debt/(cash)

 

 

(1,153)

74,372

37,198

35,347

25,000

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by EQS Group and prepared and issued by Edison, in consideration of a fee payable by EQS Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by EQS Group and prepared and issued by Edison, in consideration of a fee payable by EQS Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Research: Investment Companies

HgCapital Trust — NAV resilient, but near-term outlook uncertain

HgCapital Trust (HGT) posted a 2.3% increase in NAV per share total return (TR) in Q322, as positive earnings growth across the portfolio over the last 12 months (LTM) again outweighed multiple contraction. Despite the latter, the average EV/LTM EBITDA across HGT’s top 20 holdings stands at 28.8x vs 27.4x at end-2021 (see our previous note for a discussion on HGT’s valuations). The weaker global economy and tightening credit conditions weigh on both HGT’s near-term portfolio performance outlook and private equity deal activity. Still, the secular digitalisation trend remains intact with, as Gartner forecasted in October 2022, growth in global software and IT services spending of 11.3% and 7.9% in 2023, respectively. HGT’s shares trade at a 18% discount to NAV, while they traded close to NAV in 2021.

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