Tinexta — Increasing exposure to digital

Tinexta (MIL: TNXT)

Last close As at 12/12/2024

EUR8.42

−0.15 (−1.75%)

Market capitalisation

EUR405m

More on this equity

Research: TMT

Tinexta — Increasing exposure to digital

Tinexta provides IT solutions, information and consulting services in niche markets, predominantly to corporate clients. In its fastest-growing divisions, Digital Trust and Innovation & Marketing Services, it is the domestic market leader and is expanding internationally. Tinexta has just announced, via M&A, its entry into the complementary market of cybersecurity, which will lead to the creation of its fourth business unit. We estimate that cybersecurity will accelerate Tinexta’s organic revenue growth from 4–5% to more than 8% from FY21, but will be dilutive to the group EBITDA margin initially before improving quickly. There will likely be further M&A to increase geographic coverage, client reach or expand the product offer. Q220 results were much better than expected, as all businesses improved organic revenue growth trends versus Q120.

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

TMT

Tinexta

Increasing exposure to digital

Professional services

Deutsches Eigenkapitalforum 2020

22 October 2020

Price

€19.26

Market cap

€894m

Share price graph

Share details

Code

TNXT

Shares in issue

46.4m

Net debt (€m) at 30 June 2020

113

Business description

Tinexta currently has three business divisions: Digital Trust; Credit Information & Management; and Innovation & Marketing Services. A fourth business unit, Cybersecurity, will be created on completion of the recently announced M&A.

Bull

Market leadership in two fastest-growing business units: Digital Trust and Innovation & Marketing Services.

Strong track record of improving cash flow generation.

We estimate that recurring revenue is c 7080% of the group total.

Bear

Two business units (Credit Information & Management and Innovation & Marketing Services) are vulnerable to economic slowdown.

Credit Information & Management’s market position leaves it exposed to the activities of larger competitors.

Tinexta has raised equity on two occasions since 2014 to fund acquisitions, although it was a smaller business and ROIC has subsequently improved.

Analysts

Russell Pointon

+44 (0)20 3077 5757

Fiona Orford-Williams

+44 (0)20 3077 5739

Tinexta is a research client of Edison Investment Research Limited

Tinexta provides IT solutions, information and consulting services in niche markets, predominantly to corporate clients. In its fastest-growing divisions, Digital Trust and Innovation & Marketing Services, it is the domestic market leader and is expanding internationally. Tinexta has just announced, via M&A, its entry into the complementary market of cybersecurity, which will lead to the creation of its fourth business unit. We estimate that cybersecurity will accelerate Tinexta’s organic revenue growth from 4–5% to more than 8% from FY21, but will be dilutive to the group EBITDA margin initially before improving quickly. There will likely be further M&A to increase geographic coverage, client reach or expand the product offer. Q220 results were much better than expected, as all businesses improved organic revenue growth trends versus Q120.

Digital Trust

This business unit offers solutions that provide surety with respect to the validity of digital identities, and the authenticity and secure storage of electronic documents. It should benefit from the transition to a digital world. The company is leveraging its expertise, given recent regulatory changes, by expanding on an EU-wide basis with a unified legal base, recently announcing the important expansion into Germany via M&A. In H120, organic revenue growth of 6.3% was better than expected.

Innovation & Marketing Services

There are two main businesses: helping SMEs obtain funding and tax credits to help finance research and innovation, and consulting services to help corporates expand outside their home markets. Thematically, the former is expected to drive growth, given domestic and EU-wide funding initiatives to boost the development and competitiveness of economies. In H120, organic revenue declined by 10.5%.

Credit Information & Management

There are two main operating businesses: data services to help banks and SMEs with granting, ongoing assessment and recovery of credit, and providing residential property valuations to banks. The former is a competitive market, although COVID has boosted the loan guarantee advisory business. Real estate valuation business is more stable and Tinexta is market leader. In H120, organic rev declined by 7.6%.

Valuation: DCF of CHF0.38/share

The share price has performed strongly in 2020, resulting in a P/E of 24.1x in FY20e (before inclusion of cybersecurity), as the group was resilient to the COVID-19 downturn and the proposed cybersecurity acquisitions have been well received.

Edison estimates

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

238.7

52.3

0.77

0.23

25.0

1.2

12/19

258.7

55.0

0.80

0.00

24.1

N/A

12/20e

266.6

53.3

0.80

0.24

24.1

1.2

12/21e

277.5

56.6

0.86

0.25

22.4

1.3

Note: *PBT and EPS are normalised. Estimates ex-cybersecurity M&A

General disclaimer and copyright

This report has been commissioned by Tinexa and prepared and issued by Edison, in consideration of a fee payable by Tinexa. Edison Investment Research standard fees are £49,500 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.

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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 2020 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

General disclaimer and copyright

This report has been commissioned by Tinexa and prepared and issued by Edison, in consideration of a fee payable by Tinexa. Edison Investment Research standard fees are £49,500 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 2020 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

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