Last close As at 05/08/2026
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Market capitalisation
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Research: TMT
EQS’s first half results show good revenue growth in its domestic market, boosted by the consolidation of ARIVA (67.5% owned). The build-up of business in new markets is starting to register, with Asia now breaking even. The costs of this expansion and investment in a number of new products and services is constraining operating profits, which were marginally (3%) below the comparative period. The group remains well positioned to benefit from trends in digitisation and globalisation and the growing complexity of corporate compliance requirements.
EQS Group |
Top-line growth offset by higher investment
Software |
Scale research report - Update
15 August 2017 |
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EQS’s first half results show good revenue growth in its domestic market, boosted by the consolidation of ARIVA (67.5% owned). The build-up of business in new markets is starting to register, with Asia now breaking even. The costs of this expansion and investment in a number of new products and services is constraining operating profits, which were marginally (3%) below the comparative period. The group remains well positioned to benefit from trends in digitisation and globalisation and the growing complexity of corporate compliance requirements.
Strong sales momentum
Good top-line progress, particularly in Germany, was both at an organic level (revenues up 11%) and from the consolidation of ARIVA. The upcoming PRIIP regulation implementation is stimulating demand for workflow solutions, while the Market Abuse Regulations are increasing the volume of corporate announcements. Good increases across all the Products & Services were achieved, including a recovery in Media revenues after a weak Q1. The regulatory requirements on companies both within the EU and in other markets constantly increase in number and complexity, giving a strong trading backdrop for EQS’s offering.
Investment in growth
With a substantial step up in employee numbers from ARIVA and continuing high levels of product development (including investment in COCKPIT capabilities), as well as the expansion into new markets, costs have continued to run at high levels. The reported adjusted EBIT number for H117 was 3% down on H116. Full year guidance is unchanged: revenues to be ahead by 20-25% and non-IFRS EBIT to grow by 10-20%. The medium-term outlook is for non-IFRS EBIT to grow by 20-25% over 2017-21, on a top line increasing by 10-15%, implying a good pick-up in margins as the group moves from an investment to a growth phase.
Valuation: Development risk discount overstated
EQS remains in its investment/growth phase, so comparisons with large global financial information companies are inevitably distorted. Using blended historical and forward multiples to revenue and EBITDA, it is clear that, although the shares have increased by over 50% over the last year, EQS still trades at a discount to peers of over 22%. We believe this overstates the development risk and expect the discount to close as EQS’s international expansion drives an attractive ROI.
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Consensus estimates
Source: Bloomberg |
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.
Financials
This commentary is based on the published results and the consensus forecasts as published on Bloomberg.
Exhibit 1: Half year to 30 June 2017 vs prior half year
€000s |
H117 |
H116 |
% change |
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Revenue |
15,014 |
10,377 |
+45 |
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Non-IFRS EBIT |
912 |
942 |
-3% |
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Non-IFRS EBIT margin (%) |
6.1 |
9.1 |
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Profit before tax (as reported) |
66 |
399 |
-83 |
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Net income (as reported) |
(176) |
103 |
N/A |
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Source: EQS accounts
For the full year FY17, company guidance is for non-IFRS EBIT to fall in the range of €3.6-3.9m, on revenues of €31.2m to €32.5m. This implies H217 revenues a little ahead of H117 but at a considerably healthier margin (in the high teens).
At the EBT level, H117 financial performance was affected by exchange rate movements between the euro and the group’s other operating currencies. Net financial charges increased from €263k to €497k, but the majority of this represented non-cash movements.
Increased working capital requirements and the investment programme referred to above (net investment spend was €3.6m in the half year) led to net debt at the end of June rising to €6.3m from €2.6m at the previous year end balance sheet.
Valuation
Peer valuation
We have looked at the valuation of EQS in comparison to three peer categories: global technology software companies in business services (principally US based); business-to-business media companies, principally based in Europe; and financial publishing companies (Thomson Reuters, Envestnet, Morningstar, and Dun and Bradstreet, with the addition of FactSet).
Exhibit 2: Comparison of valuation between EQS and global quoted peers
Aggregate market cap (US$) |
TTM EBITDA margin |
TTM Rev growth |
EV/TTM rev (x) |
EV/TTM EBITDA (x) |
Forward EV/rev |
Forward EV/EBITDA |
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Business intelligence |
2,710 |
13.6% |
13.5% |
3.0 |
12.2 |
2.8 |
12.0 |
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Financial & accounting |
3,329 |
24.6% |
5.0% |
3.7 |
16.4 |
3.5 |
16.0 |
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Vertical – finance |
6,669 |
34.5% |
8.5% |
4.4 |
14.0 |
4.2 |
13.6 |
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Weighted software companies |
12,708 |
26.2% |
7.9% |
3.9 |
14.5 |
4.2 |
13.1 |
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B2B media businesses |
60,864 |
18.3% |
11.7% |
4.4 |
3.6 |
13.8 |
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Financial publishing companies |
48,966 |
24.9% |
10.2% |
4.1 |
14.2 |
3.8 |
13.9 |
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EQS |
14.7% |
55.4% |
2.6 |
17.6 |
2.3 |
15.1 |
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Discount to software comparatives (on average of relevant multiples) |
21.8% |
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Discount to B2B media stocks (on average of relevant multiples) |
42.2% |
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Discount to financial publishing stocks (on average of relevant multiples) |
25.0% |
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Source: Bloomberg, Software Equity Group, Edison Investment Research. Note: TTM = trailing 12 months. Prices as at 14 August 2017.
The market valuations of the three subsectors that we have looked at are now all broadly aligned.
All three groups, though, are trading at higher sales multiples than EQS, although its business model has elements common to all of them, particularly in communications and delivery mechanisms.
Obviously, EQS is less well known than the companies we are comparing it to, particularly outside its original home markets of Germany, Austria and Switzerland, with a shorter record of delivering against objectives. With less liquidity in its shares, applying a meaningful valuation discount is sensible. As shown above, when compared to average multiples of historical and prospective EV/revenue and EV/EBITDA, EQS currently trades on a 22% discount to relevant software and 25% to financial publishing stocks, and on a substantial 42% discount to B2B media stocks (dominated by the large exhibition companies).
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