Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA
(v1.0.8.0)
COVERAGE INITIATION
Poland | Technology | Small & Mid Cap | 29-April-2015
Comarch
Equipped to keep on growing
We initiate coverage on Comarch with a BUY rating and FV of PLN
167.2, implying 32% upside. Comarch is a software house with 80% of
revenues generated from proprietary software & services. A continuous
push to sell its products abroad means that currently 60% of sales are
generated in Poland while its biggest presence abroad is in the TMT
and Trade & Services segments. In 2014, Comarch scored record high
results with revenues breaking the PLN 1bn level, EBITDA/adj EBITDA
of PLN 153m/163m and net income of PLN 73m while the CAGR 2010-
14 for revenues and EBITDA was 8%/21%. 2015 should see top-line
growth pull back to +4% as a result of the public segment (EU budget
transition) and EBITDA to PLN 149m due to labour cost increases (new
hires). However, we still believe Comarch should be treated as a
growth company as 2016 should bring a revival in the domestic IT
market while the growing international backlog should fuel foreign
expansion. We believe Comarch´s main attractiveness is a wide
portfolio of own products (like, eg. ERP, loyalty, billing systems and
eHealth), continuously growing backlog (high single digit),
international expansion in attractive markets (LatAm). We expect
Comarch to pay a DPS in 2015 of PLN 1.5, DY 1.2%.
Wide portfolio of own products supports global expansion: Comarch has a
diversified product portfolio, reporting revenues in nine segments (TMT is
currently the biggest followed by public and finance & banking). However, thanks
to a good portfolio of products in trade & services like loyalty systems, which are
sold internationally, this segment currently has the highest growth rate and in 2015
should become the third biggest contributor, outpacing F&B. Due to the EU
budget transition and delay in announcement of tenders / contracts, we expect
the public segment sales to fa11 by 11% in 2015. On the other hand, we expect the
trade & services segment to keep on growing at 16% YoY driven by margin
accretive products and services (eg. loyalty systems).
Growing backlog and revenues needs labour support: Over 2013-14, Comarch’s
revenues grew by 17% while its headcount remained unchanged at ca. 4.2k. As
the backlog is constantly growing (verbal guidance at high single-digit for
2015), Comarch says it plans to adjust its headcount by hiring 200-400
employees in 2015. Given the average salary in 2014 at PLN 10k/month, this
could result in PLN 24-48m higher annualized headcount costs. Comarch
expects the growing revenue base and improving revenue mix to offset the
expected higher labour costs in 2015.
Unwarranted valuation discount: Comarch trades on 2015E/16E EV/EBITDA of
6.0x/5.5x and P/E of 14.0x/13.3x, which are at 39%/40% and 26%/19%
discounts to international peers and 17%/25% discount to Polish peers on
EV/EBITDA. In our view, given its business profile and growth prospects, we
believe the valuation discounts are too wide and unwarranted.
1Q15 preview: We expect revenues to grow by 7% YoY to PLN 224m driven by
the Trade&Services, SME and Medical segments. The changing revenue mix
with more revenues from high margin services and cloud solutions should
have a positive impact on the gross margin and we forecast it to rise to 22% vs
20.6% in 1Q14. We expect SG&A costs to grow in line with revs. As a result, we
forecast EBITDA of PLN 24.5m (+16% YoY), EBIT of PLN 10.1m (+30% YoY)
and net income of PLN 8.4m (+55% YoY).
BUY 32% upside
Fair Value PLN 167.20
Bloomberg ticker CMR PW
Share Price PLN 126.30
Market Capitalisation PLN 1,026.26m
Free Float 57%
PLN m Y/E 31-Dec 2013A 2014A 2015E 2016E
Revenues 939.0 1037.7 1079.0 1131.1
EBITDA 98.9 153.3 149.2 154.6
EBIT 34.4 99.5 91.6 96.6
Net income 25.1 73.1 73.2 76.9
Net debt (37.9) (87.1) (136.5) (191.0)
Y/E 31-Dec 2013A 2014A 2015E 2016E
P/E 29.1 14.0 14.0 13.3
EV/EBITDA 7.1 6.2 6.0 5.5
net debt/EBITDA (0.4) (0.6) (0.9) (1.2)
ROE 4.0% 10.5% 9.7% 9.4%
ROA 2.2% 6.0% 5.7% 5.6%
DY 1.7% 1.2% 1.2% 1.2%
All share price data as at close on 28-Apr-2015
Source: BESI Research, Company Data, Bloomberg
80
100
120
140
160
May 2014
Jun 2014
Jul 2014
Aug 2014
Sep 2014
Oct 2014
Nov 2014
Dec 2014
Jan 2015
Feb 2015
Mar 2015
Apr 2015
CMR PW vs WIG Index
Share Price Performance
Analysts Konrad Ksiezopolski +48 22 347 4074 [email protected] Banco Espírito Santo de Investimento, S.A. – Warsaw Branch Poland 59 Zlota Street, 00-120 Warsaw
Page 2 of 24
Summary Financial Information
Valuation Metrics (Year end Dec) 2011 2012 2013 2014 2015E 2016E 2017E
Rating BUY Reported P/E (x) 11.7 13.9 29.1 14.0 14.0 13.3 12.6
Fair Value (PLN): 167.2 EV / Sales (x) 0.5 0.6 0.7 0.9 0.8 0.7 0.7
EV / EBITDA (x) 4.4 6.6 7.1 6.2 6.0 5.5 5.0
126.3 EV / EBIT (x) 9.2 18.0 20.4 9.6 9.9 8.8 7.8
32% FCF Yield (%) -1.9% -2.2% 6.1% 6.6% 8.2% 9.6% 9.8%
Dividend yield (%) 0.2% 2.1% 1.7% 1.2% 1.2% 1.2% 1.2%
#REF!
CMR PW Key Ratios 2011 2012 2013 2014 2015E 2016E 2017E
COMH.WA
EBITDA margin 10.3% 9.5% 10.5% 14.8% 13.8% 13.7% 13.6%
EBIT margin 4.9% 3.5% 3.7% 9.6% 8.5% 8.5% 8.6%
Capex / Revenue (x) 11.3% 10.9% 5.8% 8.2% 6.0% 5.0% 5.0%
8.1 Capex / Depreciation (x) 2.1 1.8 0.8 1.6 1.1 1.0 1.0
1,026 Net Debt / EBITDA (x) -0.9 -0.1 -0.4 -0.6 -0.9 -1.2 -1.6
(87) ROA 3.5% 3.5% 2.2% 6.0% 5.7% 5.6% 5.6%
13 ROE 6.0% 6.5% 4.0% 10.5% 9.7% 9.4% 9.2%
952
P&L Summary (PLN m, unless stated) 2011 2012 2013 2014 2015E 2016E 2017E
Revenue 786 884 939 1,038 1,079 1,131 1,173
% change 3.2% 12.5% 6.2% 10.5% 4.0% 4.8% 3.7%
1Q15 results 15-May-15 EBITDA 81 84 99 153 149 155 159
2Q15 results 28-Aug-15 % change 13% 4% 18% 55% -3% 4% 3%
% margin 10.3% 9.5% 10.5% 14.8% 13.8% 13.7% 13.6%
Depreciation & Amortisation (42) (53) (64) (54) (58) (58) (58)
EBIT 39 31 34 99 92 97 101
Konrad Księżopolski % margin 4.9% 3.5% 3.7% 9.6% 8.5% 8.5% 8.6%
+48 22 347 40 74 % change 27.7% -20.7% 12.0% 188.8% -8.0% 5.5% 5.0%
Net Financials 1 9 2 (5) 3 3 4
Other Pre-tax Income 0 0 0 0 0 0 0
Pre-Tax Profit 40 40 37 94 95 100 106
Income Tax Expense (7) (2) (13) (19) (21) (22) (23)
Discontinued Operations 0 0 0 0 0 0 0
Minority Interests (3) (3) (2) 1 1 1 1
Net Income 36 41 25 73 73 77 81
% margin 4.6% 4.6% 2.7% 7.0% 6.8% 6.8% 6.9%
% change -17% 12% -38% 191% 0% 5% 6%
Reported EPS (PLN) 4.5 5.0 3.1 9.0 9.0 9.5 10.0
Recurrent EPS (PLN) 4.5 5.0 3.1 9.0 9.0 9.5 10.0
DPS (PLN) 0.1 1.5 1.5 1.5 1.5 1.5 1.5
Payout Ratio 2% 33% 30% 53% 17% 17% 16%
Shares in Issue (Less Treasury) (m) 8.1 8.1 8.1 8.1 8.1 8.1 8.1
Cash Flow Summary (PLN m) 2011 2012 2013 2014 2015E 2016E 2017E
Net income 33 37 23 74 73 77 81
D&A 42 53 64 54 58 58 58
Change in Working Capital (6) (11) 25 41 (4) (12) (10)
Other Operating Cash Flow (10) (13) (8) (12) 0 0 0
Operating Cash Flow 59 67 104 157 126 123 129
Capital Expenditure (89) (97) (55) (85) (65) (57) (59)
Free Cash Flow (31) (29) 50 72 62 67 71
Acquisitions & Disposals 8 (0) (0) (6) 0 0 0
Dividend Paid to Shareholders (1) (12) (12) (13) (12) (12) (12)
Equity Raised / Bought Back 0 0 0 0 0 0 0
Other Financing Cash Flow 14 13 (2) (0) 0 0 0
Net Cash Flow (10) (47) 27 65 49 55 59
Balance Sheet Summary (PLN m) 2011 2012 2013 2014 2015E 2016E 2017E
Cash & Equivalents 193 143 169 232 282 336 395
Tangible Fixed Assets 328 358 361 387 465 463 464
Goodwill & Intangibles 37 44 44 44 44 44 44
Other Assets 464 602 568 552 501 523 540
Total Assets 1,022 1,147 1,142 1,216 1,292 1,367 1,443
Interest Bearing Debt 117 131 131 145 145 145 145
Trade liabilities 155 249 227 176 191 201 208
Other Liabilities 141 141 146 189 189 189 189
Total Liabilities 413 522 505 510 525 535 542
Shareholders' Equity 600 622 626 693 754 819 888
Minority Interests 9 3 11 13 13 13 13
Total Equity 1,022 1,147 1,142 1,216 1,292 1,367 1,443
Net Debt (76) (12) (38) (87) (137) (191) (250)
Source: Company data, Reuters, Bloomberg, BESI Research for estimates
Revenues and EBITDA margin (2010-2016E)
Shareholders
Enterprise Value (PLN m)
Forthcoming Catalysts
BESI Equity Research Analyst
Revenues Breakdown (2014)
Reuters
Shares in Issue (Less Treasury)(m)
Market Cap (PLN m)
2014 Net Debt (PLN m)
Adjustments for Associates & Minorities (PLN m)
Comarch
Share Price (28/04/2015, PLN):
Upside / Downside potential
Previous Fair Value (PLN):
% change to fair value
Bloomberg
Janusz Filipiak
41%
Elzbieta Filipiak
28%
MetLife OFE5%
ING OFE4%
Legg Mason TFI
3%Others19%
Share in votes
TMT25%
Finance&Banking
13%
Trade & serv ices
12%
Industry & Utilities
9%
Public16%
SME - Poland10%
Others2%
SME - DACH10%
Medical3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
200
400
600
800
1000
1200
1400
2011 2012 2013 2014E 2015E 2016E 2017E
Revenues (PLN m) EBITDA margin
Janusz Filipiak
33%
Elzbieta Filipiak
10%MetLife OFE
9%
ING OFE7%
Legg Mason TFI
6%
Others35%
Share in equity
Page 3 of 24
Comarch - 1Q15 preview – results due on 15th
May
Key highlights:
- We expect revenues to grow by 7% YoY driven by Trade&Services,
SME Poland, SME-DACH and Medical segments which in our view
could report a double-digit pace.
- The Public segment should still perform relatively well in 1Q despite the
expected slowdown related to the EU budget transition. The impact on
revenues from this should be visible in 2H15 but already visible in the
backlog, which is a leading revenue indicator. Comarch no longer
publishes its backlog, but the CFO has given verbal soft guidance to
analysts of mid-single digit backlog growth in 2015; the Polish part should
see a decline (impact from fewer public contracts) while the foreign
backlog should continue to grow at a double-digit pace.
- Changing revenue mix with more revenues from high margin services
and cloud solutions should have a positive impact on the gross
margin which we forecast to be 22% vs 20.6% in 1Q14. We expect
SG&A costs to grow in line with the revenue pace reaching PLN
39.3m (vs PLN 36.8min 1Q14) with an unchanged SG&A ratio at 17.5%.
- Weakened EUR vs PLN should negatively impact the EBIT line (value
of foreign contracts) to the tune of ca. PLN 4m but this should be
partially offset by a positive FX revaluation of EUR debt.
OUTCOME: POSITIVE. Overall, we expect Comarch to post a positive set of
results with a continued positive trend in the gross margin (supported in the
past few quarters by an improving revenue mix towards high margin services).
Given the record high results reported in 2014, we also would expect Comarch
to pay at least the same dividend as in 2014 with a DPS PLN 1.5, implying a DY
of 1.2%.
Figure 1 Comarch – quarterly results
Source: BESI Research for estimates, Company Data
Figure 2 Comarch – quarterly revenues by sectors
Source: BESI Research for estimates, Company Data
(PLN m) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15E % YoY
Revenues 188.1 203.6 233.5 314.0 208.7 221.0 244.8 363.3 224.4 7%
Gross income 37.6 44.4 36.1 87.8 43.0 53.7 80.6 127.9 49.4 15%
gross margin 20.0% 21.8% 15.5% 28.0% 20.6% 24.3% 32.9% 35.2% 22.0%
EBITDA 17.9 16.8 13.9 45.3 21.0 26.3 46.3 59.7 24.5 16%
EBITDA margin 9.5% 8.3% 6.0% 14.4% 10.1% 11.9% 18.9% 16.4% 10.9%
D&A -16.5 -15.3 -16.8 -15.9 -13.3 -13.2 -13.3 -14.1 -14.4 9%
EBIT 1.4 1.5 -2.8 29.3 7.8 13.1 33.0 45.6 10.1 30%
EBIT margin 0.8% 0.7% -1.2% 9.3% 3.7% 5.9% 13.5% 12.6% 4.5% 21%
Net income 1.4 1.0 0.2 22.9 5.4 7.9 21.4 38.3 8.4 55%
Net profit margin 0.7% 0.5% 0.1% 7.3% 2.6% 3.6% 8.8% 10.5% 3.8%
Comarch 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15E YoY
TMT 46.3 51.7 45.9 74.3 54.3 56.1 50.4 99.4 57.0 5%
Finance&Banking 26.6 36.8 32.1 46.2 27.5 34.2 33.1 44.2 28.0 2%
Trade & services 22.3 24.9 19.2 35.9 24.7 28.7 31.7 35.1 29.7 20%
Industry & Utilities 26.5 18.9 20.7 27.8 17.8 22.8 22.2 31.2 17.8 0%
Public 21 29 60 48 26 23 54 70 26 0%
SME - Poland 17.1 13.9 17.7 35.6 21.6 20.8 21.3 35.8 24.9 15%
Others 2.7 3.2 4.0 5.3 5.7 4.8 4.3 4.7 5.8 3%
SME - DACH 24.6 22.6 26.3 27.4 23.0 26.6 25.0 27.8 25.3 10%
Medical 1.5 2.2 7.8 13.4 8.6 4.1 2.9 15.5 10.3 20%
Page 4 of 24
Financial forecasts
We are in line with Bloomberg consensus on revenue forecasts but we are
visibly above (by 7%/14%/8%) on the EBITDA line in 2015-17E. In our view, this
could because the much better than expected results in 2014 came from the
improved revenue mix which in our view can be maintained in 2015 and
onwards. As a result, this has had positive impacts on our EBITDA and
bottom-line forecasts. We would not be surprised to see some street
upgrades.
BESI vs Bloomberg consensus
Figure 3 BESI vs BBG
Source: BESI Research for estimates, Bloomberg for consensus
Valuation
We value Comarch using two methods: DCF and peer multiples. Our final fair
value is an average of these two methods (each with a 50% weighting).
DCF
We use a DCF with a 10Y forecast period; we use net debt 2014 and FCF in
2015E-2023E. We use a RFR of 2.5% and beta of 1.0x.
Figure 4 DCF
Source: BESI Research for estimates, Company Data
Figure 5 Comarch – sensitivity analysis
Source: BESI Research for estimates, Company Data
(PLN m) BESI BBG % diff BESI BBG % diff BESI BBG % diff
Revenues 1,079 1,074 0% 1,131 1,108 2% 1,173 1,190 -1%
EBITDA 149 139 7% 155 136 14% 159 147 8%
EBIT 92 99 -8% 97 102 -5% 101 114 -11%
Net income 73 75 -2% 77 69 11% 81 87 -6%
2015E 2016E 2017E
(PLN m) 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E >2023
EBIT 91.6 96.6 101.4 106.3 111.4 116.8 122.5 128.6 135.0
Tax rate 22% 22% 22% 22% 22% 22% 22% 22% 22%
NOPAT 71.4 75.4 79.1 82.9 86.9 91.1 95.6 100.3 105.3
D&A 57.7 58.0 58.0 57.8 57.2 56.5 56.1 56.0 56.2
CAPEX -64.7 -56.6 -58.7 -54.7 -50.4 -52.3 -54.2 -56.3 -58.4
Change of Working Capital -4.4 -11.7 -10.1 -10.0 -10.6 -11.1 -11.6 -12.2 -12.9
FCF 59.9 65.2 68.3 75.9 83.1 84.3 85.8 87.8 90.2 90.2
FCF change -32% 9% 5% 11% 9% 1% 2% 2% 3% 1%
WACC Calculation
debt/equity 11.3% 10.6% 10.1% 9.5% 9.0% 8.5% 8.1% 7.6% 7.2% 7.2%
risk free rate 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
credit premium 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
market premium 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
beta 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
cost of debt 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 4.5%
cost of equity 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
WACC 7.1% 7.1% 7.1% 7.1% 7.1% 7.2% 7.2% 7.2% 7.2% 7.3%
PV (FCF) 503
PV (RV) 792
net debt, end 2014 -87
Fair Value 1,382
# of shares (m) 8.13
Fair Value/share 170.1
DCF valuation
Sensitivity table
WACC WACC
### 5.8% 6.3% 6.8% 7.3% 7.8% 8.3% 8.8% 5.8% 6.3% 6.8% 7.3% 7.8% 8.3% 8.8%
-1% 161.1 155.0 149.7 145.1 141.0 137.3 134.0 -1% -5% -9% -12% -15% -17% -19% -21%
0% 177.4 169.1 162.0 155.9 150.5 145.8 141.6 0% 4% -1% -5% -8% -11% -14% -17%
TGR 1% 200.6 188.5 178.5 170.1 162.9 156.7 151.3 TGR 1% 18% 11% 5% 0% -4% -8% -11%
2% 236.0 217.0 201.9 189.7 179.5 171.0 163.8 2% 39% 28% 19% 12% 6% 1% -4%
3% 296.9 262.8 237.6 218.4 203.1 190.8 180.6 3% 75% 55% 40% 28% 19% 12% 6%
Page 5 of 24
Peer valuation
Figure 6 Peer valuation – priced as on 28/04/2015
Source: Bloomberg consensus estimates for not rated stocks and Sygnity and Asseco Poland, BESI Research for Comarch estimates. ASSECO POLAND (BUY, FV PLN 60), SYGNITY (BUY, FV PLN 24).
2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E
Microsoft msft us 49.0 10.3 9.7 8.9 18.9 17.5 15.8 34.1% 35.3% 34.6% 2.5% 2.5% 2.9%
Oracle orcl us 43.7 8.8 8.9 9.1 14.8 14.4 13.7 53.5% 51.1% 48.5% 1.2% 1.3% 1.3%
SAP sap gr 69.9 13.1 12.4 11.8 19.2 18.0 17.0 34.5% 34.5% 34.6% 1.6% 1.8% 1.9%
Accenture acn us 93.4 11.6 10.9 10.2 19.6 18.3 16.9 16.5% 16.6% 16.6% 2.2% 2.4% 2.5%
IBM ibm us 171.4 8.6 8.6 7.9 10.9 11.0 10.2 27.6% 28.0% 29.5% 2.7% 2.9% 2.8%
Atos ato fp 71.1 5.6 5.2 4.7 13.0 11.8 11.1 11.0% 11.2% 12.1% 1.1% 1.3% 1.5%
Cap Gemini cap fp 81.8 9.5 8.4 8.0 18.9 16.5 15.1 11.3% 11.7% 12.1% 1.7% 1.8% 1.8%
Indra Sistemas idr sm 11.3 9.4 8.9 8.4 15.6 14.0 12.6 8.9% 9.1% 9.4% 2.6% 2.8% 3.0%
Tieto tie1v fh 21.2 7.8 6.9 6.8 15.4 13.5 12.9 13.2% 14.5% 14.6% 5.6% 6.1% 6.5%
Gemalto gto na 82.4 12.0 10.5 9.3 20.1 17.5 15.5 18.4% 19.4% 20.1% 0.6% 0.6% 0.7%
Softw are AG sow gr 26.5 9.7 9.3 8.9 16.1 15.3 14.3 28.0% 28.5% 29.5% 1.9% 2.0% 2.2%
Dassault Systemes dsy fp 69.3 18.3 16.4 14.9 32.8 29.2 25.5 32.5% 33.5% 33.8% 0.7% 0.8% 0.9%
Sage sge ln 486.8 13.3 12.6 11.9 19.6 18.4 17.2 30.0% 30.2% 30.5% 0.0% 0.0% 0.0%
HP hpq us 33.0 4.9 5.0 5.5 8.9 8.6 8.7 12.8% 12.7% 11.7% 2.0% 2.1% 2.2%
Wincor Nixdorf w in gr 35.2 10.0 7.3 6.0 36.2 15.8 11.4 6.6% 7.5% 8.3% 2.1% 3.4% 5.0%
Sopra Group sop fp 75.6 6.8 5.7 4.9 14.4 10.7 8.5 7.3% 8.4% 9.5% 2.2% 2.5% 2.9%
Temenos temn sw 33.9 16.0 13.3 12.0 22.3 19.5 17.1 35.1% 37.7% 38.2% 1.4% 1.5% 1.7%
Sw isslog Holding sop fp 1.3 8.5 7.9 6.8 21.0 19.1 16.3 5.0% 5.2% 5.6% 1.5% 1.9%
Cognizant Tech Solutions ctsh us 59.6 13.6 11.8 10.3 20.6 17.7 15.2 20.5% 20.6% 20.5% 0.0% 0.0% 0.0%
Fiserv intu us 79.1 12.6 11.8 11.0 20.6 19.0 17.8 33.4% 33.8% 34.2% 0.0% 0.0% 0.0%
International Median 9.8 9.1 8.9 18.9 16.5 15.1 20.5% 20.6% 20.3% 1.7% 1.9% 2.1%
International Average 10.5 9.6 8.9 18.1 15.5 13.9 22.3% 22.7% 22.7% 9.8% 11.3% 13.1%
Sygnity (BBG) sgn pw 12.6 3.3 3.1 2.9 8.1 7.1 6.3 8.4% 8.7% 8.9% 0.0% 0.0% 0.0%
Comarch (BBG) cmr pw 126.3 6.8 7.0 6.5 13.8 14.9 11.8 12.1% 12.3% 12.4% 1.2% 1.7% 1.8%
Asseco Poland (BBG) acp pw 61.9 7.8 7.6 7.4 14.8 14.2 13.6 14.5% 14.3% 14.2% 4.7% 4.9% 5.2%
Comp cmp pw 69.7 8.1 8.6 8.0 12.9 13.6 11.8 11.7% 11.3% 1.6% 2.2% 2.3%
Asseco South Eastern Europe ase pw 9.7 6.3 5.9 5.6 13.0 12.4 11.8 14.1% 14.4% 15.2% 3.8% 4.0% 4.8%
Asseco Business Solutions abs pw 15.7 9.4 9.1 8.6 15.3 13.3 15.0 31.8% 31.9% 31.7% 5.6% 5.7% 6.1%
Domestic Median 7.3 7.3 6.9 13.4 13.4 11.8 13.1% 13.3% 14.2% 2.7% 3.1% 3.5%
Domestic Average 6.9 6.9 6.5 13.0 12.6 11.7 15.4% 15.5% 16.5% 2.8% 3.1% 3.4%
MEDIAN 9.4 8.8 8.2 15.6 14.9 13.7 16.5% 16.6% 16.6% 1.7% 2.0% 2.2%
AVERAGE 9.7 9.0 8.3 16.9 14.9 13.5 20.8% 21.1% 21.4% 8.2% 9.5% 10.9%
Comarch (BESI) 6.0 5.5 5.0 14.0 13.3 12.6 14.8% 13.8% 13.7% 1.2% 1.2% 1.2%
Comarch vs international peers -39% -40% -44% -26% -19% -17% -28% -33% -33% -28% -37% -43%
Comarch vs domestic peers -17% -25% -29% 5% -1% 6% 13% 4% -3% -56% -61% -66%
Fair Value/share (PLN)
Dividend Yield
164.3
Company TickerShare
price
EV/EBITDA P/E EBITDA margin
Page 6 of 24
Financials
Income statement
Figure 7 Comarch – P&L
Source: Company data, BESI Research for estimates
Revenue mix
Figure 8 Comarch – revenue mix
Source: Company data, BESI Research for estimates
Comarch - P&L (PLN m) 2011 2012 2013 2014 2015E 2016E 2017E
Revenues 786 884 939 1,038 1,079 1,131 1,173
YoY 3% 13% 6% 11% 4% 5% 4%
Gross income 192 195 210 305 284 294 306
Gross margin 24.4% 22.1% 22.4% 29.4% 26.3% 26.0% 26.1%
Sales costs -83 -85 -99 -110 -113 -118 -123
as % of revenues 10.5% 9.7% 10.5% 10.6% 10.5% 10.5% 10.5%
G&A costs -75 -73 -72 -77 -80 -79 -82
as % of revenues 9.5% 8.3% 7.7% 7.4% 7.4% 7.0% 7.0%
SG&A ratio 20.0% 18.0% 18.2% 18.0% 17.9% 17.5% 17.4%
EBITDA 81 84 99 153 149 155 159
% YoY change 13% 4% 18% 55% -3% 4% 3%
% EBITDA margin 10.3% 9.5% 10.5% 14.8% 13.8% 13.7% 13.6%
D&A -42 -53 -64 -54 -58 -58 -58
EBIT 39 31 34 99 92 97 101
% YoY change 28% -21% 12% 189% -8% 6% 5%
% EBIT margin 4.9% 3.5% 3.7% 9.6% 8.5% 8.5% 8.6%
Financial income/(expense), net 1 9 2 -5 3 3 4
Income tax -7 -2 -13 -19 -21 -22 -23
Minority interest in earnings -3 -3 -2 1 1 1 1
Net income 36 41 25 73 73 77 81
% YoY change -17% 12% -38% 191% 0% 5% 6%
% net margin 4.6% 4.6% 2.7% 7.0% 6.8% 6.8% 6.9%
EPS (PLN) 4.5 5.0 3.1 9.0 9.0 9.5 10.0
% YoY change -17% 12% -38% 189% 0% 5% 6%
Comarch - revenue split 2011 2012 2013 2014 2015E 2016E 2017E
TMT 212 199 218 260 284 309 321
YoY 28% -6% 10% 19% 9% 9% 4%
Finance&Banking 136 230 142 139 140 141 142
YoY 0% 69% -38% -2% 0% 1% 1%
Trade & services 76 74 102 120 140 145 151
YoY -19% -4% 39% 17% 16% 4% 4%
Industry & Utilities 63 70 94 94 94 94 94
YoY -13% 11% 34% 0% 0% 0% 0%
Public 91 102 158 172 152 152 155
YoY 36% 12% 55% 9% -11% 0% 2%
SME - Poland 72 74 84 99 106 113 120
YoY 7% 3% 14% 18% 6% 6% 6%
Others 16 14 15 20 20 21 21
YoY 34% -9% 5% 29% 3% 3% 3%
SME - DACH 119 125 101 102 107 112 117
YoY -19% 4% -19% 1% 5% 5% 5%
Medical 0 8 25 31 37 45 51
YoY 211% 25% 20% 20% 15%
Page 7 of 24
Balance sheet
Figure 9 Comarch – Balance sheet
Source: Company data, BESI Research for estimates
Cash Flow
Figure 10 Comarch – Cash flow
Source: Company data, BESI Research for estimates
Comarch - Balance sheet (PLN m) 2011 2012 2013 2014 2015E 2016E 2017E
Total fixed assets 476 529 516 551 558 556 557
PP & E, and intangibles 328 358 361 387 465 463 464
Intangibles and goodw ill 37 44 44 44 44 44 44
Other f ixed assets 111 127 111 119 49 49 49
Total current assets 546 618 626 665 734 810 886
Inventory 44 62 54 53 57 60 62
Trade and other receivables 307 410 395 373 388 407 422
Other current assets 2 2 8 7 7 7 7
Cash and equivalents 193 143 169 232 282 336 395
Total assets 1,022 1,147 1,142 1,216 1,292 1,367 1,443
Total stockholders equity 600 622 626 693 754 819 888
Including minority interest 9 3 11 13 13 13 13
Long-term liabilities 137 136 152 161 38 38 38
Long-term debt 89 95 111 123 0 0 0
Other long-term liabilities 48 42 41 38 38 38 38
Short-Term Liabilities 276 385 353 349 487 497 505
Accounts payable 155 249 227 176 191 201 208
Short-term debt 28 37 21 22 145 145 145
Other short-term liabilities 93 99 105 151 151 151 151
Total equity & liabilities 1,022 1,147 1,142 1,216 1,292 1,367 1,443
BVPS (PLN) 74.6 77.2 77.8 85.3 92.8 100.8 109.3
Comarch - Cash Flow (PLN m) 2011 2012 2013 2014 2015E 2016E 2017E
Net income 33 37 23 74 73 77 81
D&A 42 53 64 54 58 58 58
Change in Net Working Capital -6 -11 25 41 -4 -12 -10
Other -10 -13 -8 -12 0 0 0
Cash Flow from Operations 59 67 104 157 126 123 129
Capex -89 -97 -55 -85 -65 -57 -59
Other 7 -19 -9 7 0 0 0
Cash Flow from Investing Activities -82 -116 -63 -79 -65 -57 -59
Change in Debt 18 20 3 4 0 0 0
Issue of shares 0 0 0 0 0 0 0
Dividends paid -1 -12 -12 -13 -12 -12 -12
Other -4 -7 -5 -4 0 0 0
Cash Flow from Financing Activities 13 1 -14 -14 -12 -12 -12
Beginning cash 200 193 142 168 232 282 336
Increase/(decrease) in cash -10 -47 27 65 49 55 59
Ending cash 193 142 168 232 282 336 395
DPS (PLN) 0.1 1.5 1.5 1.5 1.5 1.5 1.5
Page 8 of 24
Company description
Genesis
Comarch was set up in 1993 in Krakow and floated on the WSE in 1999. The
founder, current CEO and the biggest shareholder is Janusz Filipiak, having a
32.82% equity stake (and 41.26% stake in votes) followed by his wife Elzbieta
Filipiak with a 10.4% equity stake (and 27.96% in votes). The rest is divided
between private and institutional investors where MetLife OFE has the biggest
equity stake of 9.05%.
Figure 11 Comarch – share in equity, April 2015 Figure 12 Comarch – share in votes, April 2015
Source: BESI Research, Company Data Source: BESI Research, Company Data
Organizational structure and sales network
Comarch’s group structure consists of 40 subsidiaries located in 20 countries
and 45 cities in 4 continents where Comarch has 100% control. The only
subsidiary with a less than 100% stake is MKS Cracovia SSA football club
where Comarch controls 66.11% of the equity.
Figure 13 Comarch – international presence
Source: BESI Research, Company Data
Revenue structure
Comarch has a diversified product portfolio, reporting revenues in nine
segments. TMT is currently the biggest followed by public and
finance&banking. However, thanks to a good portfolio of products within trade
Janusz Filipiak32.9%
Elzbieta Filipiak10.4%MetLife
OFE9.1%
ING OFE6.7%
Legg Mason TFI6.4%
Others34.6%
Janusz Filipiak41.3%
Elzbieta Filipiak28.0%
MetLife OFE4.9%
ING OFE3.6%
Legg Mason TFI3.5%
Others18.8%
Page 9 of 24
& services like loyalty systems (customer loyalty points systems) which are
sold internationally, this segment currently enjoys the highest growth rate and
should in 2015 become the third biggest contributor, outpacing F&B. Due to
the transition of the EU budget and delay in announcement of
tenders/contracts, we expect the public segment’s revenues to fall by 11% YoY
in 2015. Conversely, we expect the trade & services segment to keep growing
at 16% YoY driven by margin accretive products and services (eg. loyalty
systems). We also expect the TMT segment to grow, but at 9% vs 19.4% in
2014, as consolidation of the telco market in Germany will result in the
cancellation of duplicate IT systems (ePlus and Telefonica). The good macro
situation in Poland (latest Ministry of Finance forecasts, from 20 April, see
GDP in Poland growing by 3.4% in 2015, 3.8% in 2016 with employment at 8.2%
in 2015) should further support the small and mid-size enterprises segment
where Comarch sells its ERP solutions. As a result, we expect the SME –
Poland segment to keep on growing at +6.5% in 2015. We also expect double
digit growth of +20% YoY in the Medical segment where Comarch sees
increasing demand for IT healthcare solutions. We expect the SME - DACH
segment to speed up its growth to 4.6% in 2015 (vs +1.4% in 2014) driven by
increased demand for solutions for building internet stores. Despite seeing
increased investments by utility companies, we expect the industry & utilities
segment’s sales to remain flat also in 2015 as Comarch does not have its own
products and is selling third-party software. Due to the lack of big contracts in
finance & banking, where ca. 80% of segmental revenues Comarch generates
in Poland, we expect the segment’s sales to rise by just 1% in 2015.
Figure 14 Comarch – revenue mix, % Figure 15 Comarch – revenue mix, PLN m
Source: BESI Research for estimates, Company Data Source: BESI Research for estimates, Company Data
Revenue generating units
Apart from reporting by segments, Comarch also reports by revenue
generating units divided into the Polish market, DACH market, other markets,
Investments, Sport and Medicine.
Figure 16 Comarch – Polish market (PLN m) Figure 17 Comarch – DACH market (PLN m)
Source: BESI Research, Company Data Source: BESI Research, Company Data
Segments defined as Polish, DACH, other markets and Medicine are core
Comarch activity based on products and services that the company is
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015E 2016E
Medical SME - DACH OthersSME - Poland Public Industry & UtilitiesTrade & services Finance&Banking TMT
0
200
400
600
800
1,000
1,200
1,400
2010 2011 2012 2013 2014 2015E 2016E
Medical SME - DACH OthersSME - Poland Public Industry & UtilitiesTrade & services Finance&Banking TMT
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
50 000
100 000
150 000
200 000
250 000
300 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Net income Revenues net margin
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-20 000
-10 000
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14Net income Revenues net margin
Page 10 of 24
developing and selling. Medicine is the newest segment with still substantial
R&D costs being incurred. However, Comarch says it believes that in the future
it could be one of the fastest growing ones while building out the current
product portfolio will put Comarch in a better competitive position. We are
also of the view that the Medicine sector, especially in Poland, is
underinvested and that IT solutions would either reduce costs, streamline
some processes or help doctors in their daily work. Comarch is one of the very
few, if not the only IT company in Poland, that is building a product portfolio
in the e-Health area combining IT competencies and building e-Health devices.
Figure 18 Comarch – other markets (PLN m) Figure 19 Comarch – Investments (PLN m)
Source: BESI Research, Company Data Source: BESI Research, Company Data
The e-medicine sector in Poland is still in the initial stages of development.
Although Comarch has a product portfolio, demand is still low so results are
still negative. However, we expect revenues to grow and we believe that
within ca. 2-3 years the sector could break even.
Figure 20 Comarch – sport segment (PLN m) Figure 21 Comarch – Medicine (PLN m)
Source: BESI Research, Company Data Source: BESI Research, Company Data
The sport segment involves the Cracovia Sports club where the main
disciplines are football (the oldest football club in Poland) and ice hockey. The
main idea behind the investment in Cracovia is to promote Comarch’s brand
as part of a marketing strategy. Apart from that, we also believe an important
driver is the Comarch founder, CEO and biggest shareholder’s support of a
local football club and local community. Revenues are generated from
advertising and other services including the sale of tickets or sport events
organized by the club.
Seasonality
The IT business is defined by its seasonality with most revenues and margins
generated in 4Q (calendar) while the weakest quarter is usually 1Q (calendar).
In 2014, 20% of revenues have generated in 1Q14, 21% in 2Q14, 24% in 3Q14
and 35% in 4Q14.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
-10 000
0
10 000
20 000
30 000
40 000
50 000
60 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Net income Revenues net margin
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Net income Revenues
-6 000
-4 000
-2 000
0
2 000
4 000
6 000
8 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Net income Revenues
-8 000
-6 000
-4 000
-2 000
0
2 000
4 000
6 000
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Net income Revenues
Page 11 of 24
Figure 22 Comarch – revenue seasonality, PLN Figure 23 Comarch – revenue seasonality, %
Source: BESI Research for estimates, Company Data Source: BESI Research for estimates, Company Data
Even stronger seasonality can be seen at the EBITDA level, over 2007-2014 on
average 46% of yearly EBITDA has been generated in Q4 while in 1Q ca. 12%.
Many contracts are finished in 4Q which often results in generating above
average margins as some of the provisions set aside for contracts are usually
returned to the EBITDA line.
Figure 24 Comarch – EBITDA seasonality, PLN m Figure 25 Comarch – EBITDA seasonality, %
Source: BESI Research for estimates, Company Data Source: BESI Research for estimates, Company Data
Backlog
Comarch has stopped providing information on its backlog as it believes that
it is not helpful competitively. Currently Comarch only provides verbal backlog
guidance. After meeting with management, guidance for the 2015 backlog is
for mid-single to high-single digit growth YoY, with a flat to slightly negative
rate forecast in Poland (mostly due to a transition period in the public
segment) with a double-digit rate among the international backlog.
Employment & Labour costs
Staffing has always been an important element for Comarch. Firstly, as a
software company its competitive advantage is built on intangibles and staff
know-how. Secondly, headcount costs are a very important element of total
opex. In 2013, they represented ca. 53% of total opex and in 2014 we estimate
ca. 55%.
0
200
400
600
800
1000
1200
2007 2008 2009 2010 2011 2012 2013 2014 2015E
4Q
3Q
2Q
1Q
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015E
4Q
3Q
2Q
1Q
-20
0
20
40
60
80
100
120
140
160
180
2007 2008 2009 2010 2011 2012 2013 2014 2015E
4Q
3Q
2Q
1Q
-20%
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015E
4Q
3Q
2Q
1Q
Page 12 of 24
Figure 26 Comarch - headcount Figure 27 Comarch – headcount costs as % of opex and revs
Source: Comarch Source: BESI Research, Comarch
Comarch’s hiring can be described in going in cycles. When Comarch sees
good prospects for its backlog, it starts to speed up hiring and perhaps even a
higher than necessary headcount.
Figure 28 Annual revenues per employee, PLN m Figure 29 Annual EBITDA per employee, PLN m
Source: BESI Research, Comarch, Asseco Business Solutions, Asseco Poland Source: BESI Research, Comarch, Asseco Business Solutions, Asseco Poland
When looking at the employee effectiveness ratio, Comarch performs in line
with Asseco Poland (parent company) with ca. PLN 0.2m of revenue
generated per employee. Asseco Business Solutions stands out from the
crowd with a ratio almost twice as high. In our view, this could result from
ABS’ narrower product portfolio and ABS’ specialization in only one area –
ERP which as a result needs less headcount. When looking at EBITDA per
employee, Comarch performs the worst. However, one has to remember that
this is partially the result of the abovementioned argument and also from the
fact that Comarch is carrying out R&D in areas such as e-Health which in the
future could be very attractive but demand for these products and services is
not substantial yet incurs R&D costs. Hence the segment is still ‘below water’,
but in our view is one of the very few with a bright future.
0
500
1000
1500
2000
2500
3000
3500
4000
4500
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014
as % of opex as % of revenues
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Business Solutions Asseco Poland (parent)
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Business Solutions Asseco Poland (parent)
Page 13 of 24
Figure 30 Average monthly salary, PLN Figure 31 Comarch –headcount split
Source: BESI Research, Comarch, Asseco Business Solutions, Asseco Poland Source: BESI Research, Company Data
Comarch is based in Krakow where it has its offices and where it hires most of
its headcount. This is beneficial as Krakow salaries are lower than Warsaw.
However, more and more companies are locating their subsidiaries in Krakow
and competition in the labour market is increasing which affects salaries. Also,
thanks to Comarch’s international expansion it needs to hire employees
abroad and so the average salary also grows. Asseco Business Solutions is,
apart from being one of the most effective and efficient IT companies in
Poland (based on EBITDA margin), also based in Lublin where the labour force
is much cheaper than in Warsaw and Krakow as well. Salary costs have always
been and should remain a focus for Comarch but as long as the backlog is
growing and Comarch expands its operation it should not be a crucial point of
concern, we believe.
Over 2013-14, Comarch’s revenues grew by 17% while its headcount remained
unchanged at ca. 4.2k. As the backlog is constantly growing (verbal guidance
at mid to high single-digit for 2015), Comarch says it plans to adjust its
headcount by hiring 200-400 new employees in 2015. Given the average
salary at Comarch in 2014 at PLN 10k/month, this could result in PLN 24-48m
higher annualized headcount costs. We think that similar to previous years,
Comarch will initially hire more employees than it needs so that Management
can retain only the most productive and promising people. Apart from labour
costs rising from headcount increases, we also expect some salary pressures
among existing employees with rises of 3-5% in 2015E or PLN 15-25m on
annualized numbers. Comarch says it expects the growing revenue base and
improving revenue mix to offset the expected higher labour costs in 2015.
Comarch – profitability vs competition
Comarch has slightly lower profitability than its Polish IT peers. We think it
come from the following elements: Firstly, Comarch’s group structure with
start-up projects (eg. eHealth) and Cracovia sports club where the former by
definition are not measured by current but rather future margins and revenues
while the latter are more unpredictable and not related to Comarch’s
competencies or core activity. In the case of a start-up like eHealth we think it
looks like it will start to pay off and demand for those software and services
should increase in the future, making this segment profitable. The scale of
potential investments and needs in eHealth sector is huge, making this
product category look promising in our view. In the case of Cracovia, it is hard
to expect major changes in the trends and results should remain subject to
fluctuations based on the sport results of the club. Secondly, Comarch has a
broad product portfolio and operations located in 40 subsidiaries and 20
countries which have extra costs that put pressure on margins, especially
when the scale of the business is not big enough. Thirdly, Comarch lacks big
and long-term contracts on above average margins like eg. ZUS in Asseco
Poland.
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Business Solutions Asseco Poland (parent)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2010 2011 2012 2013
backoffice Sales & marketing Production & consultants
Page 14 of 24
Figure 32 EBITDA margin – Polish IT Figure 33 SG&A ratio – Polish IT
Source: BESI Research, Company Data Source: BESI Research, Company Data
Fourthly, acquisition of SoftM (Comarch SuB) in 2008 was not very successful
and weighed on Comarch’s results until 2013. The business has now been
restructured and turned positive and is seeing increasing demand for
Comarch’s products. As a result, although historically Comarch generated
lower margins than its peers, we think there are arguments to believe that the
gap should gradually narrow. However, we do not expect Comarch to reach
Asseco Business Solution or Asseco Poland (parent) profitability levels due to
the slightly different business profile and product mix.
Figure 34 ROE – Polish IT Figure 35 ROA – Polish IT
Source: BESI Research, Company Data Source: BESI Research, Company Data
Balance sheet
Comarch is a little different to IT companies when looking at the balance sheet
structure as property, plant & equipement assets (PP&E) account for a much
higher % than at its peers and represent ca. 55% of equity and ca. 32% of total
assets versus eg. 14% and 7% for Asseco Poland. The main reasons are that
Comarch was and is spending part of its capex on development of property
assets where its offices, data centers and e-Health business are located.
Comarch’s headquarters and many offices are in the Special Economic Zone in
Krakow and by developing those assets they are creating new jobs for the
city. As a result Comarch is able to deduct part of those costs and reduce its
tax burden. Comarch says it believes there is also an advantage of having its
own assets in the data center segment as the company can control the data
center, which is much safer for the client and for Comarch (in the data center
business there are huge fines for system failures), as a result making its offer
more competitive. Another advantage of having a higher stake of fixed-assets
is a safer balance sheet structure, allowing it to take on more debt (if needed).
However, the disadvantage is probably that it is not the most efficient way to
use cash, especially in the IT business as possessing own fixed-assets is not
needed as much as IT know-how.
0%
5%
10%
15%
20%
25%
30%
35%
40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated)
Asseco Poland (parent) Asseco Business Solutions
0%
5%
10%
15%
20%
25%
30%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated)
Asseco Poland (parent) Asseco Business Solutions
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated) Asseco Poland (parent) Asseco Business Solutions
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated) Asseco Poland (parent) Asseco Business Solutions
Page 15 of 24
Figure 36 PP&E as % of equity Figure 37 PP&E as % of total assets
Source: BESI Research, Company Data Source: BESI Research, Company Data
Multiples
On Bloomberg consensus, Comarch is currently trading on 2015E EV/EBITDA
of 6.8x vs 7.8x for Asseco Poland and 9.4x for Asseco Business Solutions. On
2015E P/E Comarch is trading at 13.8x vs 14.8x for Asseco Poland and 15.3x for
Asseco Business Solutions. We present charts below with a 10-year history
including the last bull market, not because we want to show what levels could
be achieved because we don´t think it will. Rather, we want to highlight the
multiples versus financial results which were almost three times lower at the
EBITDA level and around two times lower at the net income level (adjusting
for a one-off gain on the sale of Interia.pl stake).
Figure 38 Polish IT – EV/EBITDA & Comarch’s EBITDA Figure 39 Polish IT – P/E & Comarch’s net income
Source: BESI Research, Company Data Source: BESI Research, Company Data
We also would like to point out that we believe current Bloomberg multiples
for Comarch are biased upwards due to low and most probably too low
estimates for 2015 for EBITDA of PLN 139m versus PLN 149m guided by BESI.
In our view, the street has still not updated its forecasts after a very good 2014
and we would expect upward financial results revisions, bringing Comarch’s
multiples down and making it look more attractive.
Figure 40 Polish IT versus WIG index – relative performance
Source: BESI Research, Bloomberg
0%
10%
20%
30%
40%
50%
60%
70%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated)
Asseco Poland (parent) Asseco Business Solutions
0%
5%
10%
15%
20%
25%
30%
35%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (consolidated)
Asseco Poland (parent) Asseco Business Solutions
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
0
5
10
15
20
25
30
35
EBITDA (PLN m) - RHS Comarch
Asseco Poland Asseco Business Solutions
0
50
100
150
200
250
0
5
10
15
20
25
30
35
40
Net income (PLN m) - RHS Comarch
Asseco Poland Asseco Business Solutions
WIG Index
-100%
-50%
0%
50%
100%
150%
200%
Jan
-10
Ma
r-10
Ma
y-1
0
Jul-1
0
Se
p-1
0
Nov-
10
Jan
-11
Ma
r-11
Ma
y-1
1
Jul-1
1
Se
p-1
1
Nov-
11
Jan
-12
Ma
r-12
Ma
y-12
Jul-1
2
Se
p-1
2
Nov-
12
Jan
-13
Mar-
13
Ma
y-1
3
Jul-1
3
Se
p-1
3
Nov-
13
Jan
-14
Ma
r-14
Ma
y-1
4
Jul-1
4
Se
p-1
4
Nov-
14
Jan
-15
Ma
r-15
Comarch Asseco Poland Asseco Business Solutions WIG Index
Page 16 of 24
Products
Comarch’s portfolio combines many products that are classified based on
sectors:
Small and mid-sized enterprises:
- ERP 2.0 systems – software for management of small and mid-sized
companies. Comarch ERP Altum – business platform dedicated to
Polish and international companies from the trade & service segment.
Comarch ERP XL – integrated ERP system for mid-sized and big
companies from production, trade and service segments. Comarch
ERP Optima – integrated ERP program designed for small and mid-
sized accounting firms also available as a SaaS (Software as a
Service) model. Comarch ERP iFaktury24 – innovative program for
invoicing for small companies.
- Mobile applications – service for key processes within a company
organization from mobile devices. In this product portfolio are:
Comarch ERP Mobile Kierownik Sprzedazy, Comarch ERP Mobile
Sprzedaz, Comarch ERP iFaktury24, Comarch WMS Magazynier,
Comarch ERP e-Pracownik, iBard24.
- Comarch WMS – warehouse services for ‘so-called’ high warehousing
with built-in management algorithms.
- E-Commerce – services for sales through the internet based on
wszystko.pl e-store, Comarch ERP e-sklep and Comarch ERP Pulpit
Kontrahenta products.
- Backup & Sync – automated data backup and synchronization of files
in cloud based on iBard24, Comarch Data Center, Comarch EDI.
Comarch has its own data centers based on TIER III and TIER IV
architecture in SaaS (Software as a Service), PaaS (Platform as a
Service), IaaS (Infrastructure as a Service) models.
Figure 41 Comarch – location of data centres
Source: BESI Research, Company Data
- Business Intelligence – advanced business analytics, controlling,
analysis of social media.
Page 17 of 24
- All Service – marketing with “All Service” application based on Comarch
beacon which is a small transmitter which, just like a lighthouse,
continually signals its presence. That signal, received by a dedicated
mobile application, allows for establishing close contact with a phone
user by using Bluetooth Smart technology. The Comarch beacon is a hi-
tech solution for modern business. It allows for making individual contact
with a mobile application user when he/she appears close to beacon
transmitters. Unlike GPS, this technology can also be used inside
buildings, allowing not only direct communication with a user in real time,
but also navigation and geolocation. This helps a business understand its
customers’ behavior, which enables it to adjust its offer according to a
user’s preferences. This, in turn, allows it to connect the customer
effectively with its brand and increase their engagement, which
contributes to increasing the ROI. Comarch’s beacon works with many
Comarch applications, supporting the modern business for the Internet of
Things era.
- Accounting services.
Figure 42 Comarch – development of own products
Source: Comarch
Comarch products for Big enterprises:
- Electronic Data Interchange – Comarch EDI and Comarch EDI e-
Market products that enable effective and secure data interchange in
the supply chain with a central product register and management of
data with logistics partners.
- Enterprise Content Management – management of documents and
workflow processes. Enables the streamlining and automatization of
accounts payable docs, change HR data from paper to e-version,
create central registry of workflow.
- Sales Force Applications – support of sale processes and
management of different channels of client services.
- Loyalty Management & Marketing Solutions – systems for
management of loyalty programs and management of marketing
campaigns; analysis of marketing data.
- Information & Communication Technologies – management of IT,
Data Center infrastructure.
- Enterprise Engagement – management of employee incentivisation.
Page 18 of 24
- ERP Systems & BI – software for management and advanced business
analytics.
Public administration is represented by products in three categories: public
administration, utility and education:
- Public administration – Comarch Egeria, Comarch Workflow, Comarch
Portal, Comarch BI, Comarch e-Investor, Comarch e-Turysta, Comarck
PKI
- Utility – Comarch Egeria, Comarch Egeria dla Przedsiebiorstw
Cieplowniczych, Comarch Egeria dla Przedsiebiorstw Wodno-
Kanalizacyjnych, Comarch Workflow, Comarch Portal, Comarch PKI,
Comarch BI
- Education – Comarch Egeria, Comarch Education, Comarch
Workflow, Comarch Portal, Comarch BI, Comarch PKI
Healthcare – Comarch is undertaking research and development in the e-
Health area. The current offer is a result of integration of IT and medical
solutions. Comarch aims to combine the competencies of medical offices
together with telecommunications and tele-medicine. The current product
offer consists of software for hospitals and community health centers,
software for doctors, software for radiology, Comarch EDM, e-Care platform,
medical equipment and Business Intelligence.
Figure 43 Comarch – Global references / clients by regions
Source: BESI Research, Company Data
Comarch’s product portfolio in the Finance segment
- Core Banking – is a core banking systems dedicated to both
community and commercial banks but also to start-up projects. The
system can service credits, deposits, settlement accounts.
- CRM & Loyalty – is a set of tools to support processes related to
building and maintaining customer care. The product is dedicated
aimed at banks and other financial institutions. Among product names
are: Comarch Loyalty for Banking, Comarch Virtual Marketplace,
Comarch Campaign Management, Comarch Customer Relationship
Management.
Page 19 of 24
- Loan Origination Platform – is a product for complex service of credit
processes used both for individual and institutional clients. Comarch
Loan and Origination modules are used by ING Bank, BGZ bank, BOS
Bank, Alior Bank and Bank Pekao.
- Insurance Front-End – is a platform to serve insurance agents,
employees, call center or cooperating institutions like agents and
insurance brokers. Among product names are: Comarch Mobile
Insurance Advisor, Comarch Mobile Claims Adjuster, COmarch
Insurance Customer Relationship Management, Comarch Insurance
Agent Portal.
- NonLife Insurance – product dedicated to insurance companies
offering non-life products to employees and with direct contact with
a client and backoffice departments like finance, accounting, actuary,
reassuring. The system is sued by Uniqua, TU Europa, Concordia
Polska TUW.
- Asset Management – is a multi-module platform for mutual and
pension funds, asset management companies and insurance
companies. The product supports asset management processes,
valuation, accounting, risk management and portfolio efficiency and
regulatory reporting. Comarch Fund Valuation and Comarch Portfolio
Management modules are used in Allianz TFI, Union Investment TFI,
Aviva Investors. Comarch Performance, Attribution & Risk is used in
Allianz TFI and Norwegian Skagen Funds.
- Exchange Trading – is a system for servicing business processes in
brokerage houses for execution and settlement of orders according
to the newest reporting standards. It supports operating risk. It allows
access to brokerage accounts via mobiles. The product is used by
Raiffeisen Brokerage House, ING Securities, BZWBK Brokerage House,
Alior Bank Brokerage House, BOS Brokerage House
- Internet Banking –
- Factoring – product dedicated for banks and financial institutions
offering factoring products for a complex service of business
processes. The product is used by DnB Nord, Getin Bank, BGZ Bank,
Alior Bank, Coface.
- Comarch Smart Finance – is a retail banking platform for consolidated
internet and mobile banking plus private finance management and
communication channels. Comarch Smart Finance offers also advisory
services. The application supports the client loyalty process with the
bank. The product is used by UniCredit Group.
- Life Insurance – is a product for servicing individual and group life
insurance products in insurance companies. It services all business
processes. The product was implemented at TUnZ Europa, WTUZiR
Concordia Capital, Delta Lloyd Life (Belgium).
- Commission & Incentive – it manages sales network, settlement of
bonuses, registry of traineeships and reporting. The product is for
insurance companies, banks, and other enterprises whose activity is
related to sales network management and complex commission and
incentive programs. The product is used by BZ WBK, BNP Paribas,
Lin4, Skandia Zycie, Aegon Services.
- Wealth Management – its multi module platform dedicated to private
banking and wealth management supporting customer care
processes in direct and indirect channels. The product is used by
Skangen Funds, Allianz TFI, Union Investment TFI, Aviva Investors.
- Custody – the complex service of banking operations and securities.
Implemented at mBank, PKOBP, Bank BPH.
Page 20 of 24
Figure 44 Comarch – Global references / clients by sectors
Source: BESI Research, Company Data
Comarch’s products and services for Telecommunications are: Customer
Experience Management, Convergent Charging & Billing (billing system that
enables charging clients for additional services in real time), Corporate Self
Care (used for B2B segment for online purchases, data management,
reporting and outlay management), Field Service Management (management
of work, schedule for employees working outside offices), Managed Services,
M2M Platform (supports the sale of machine-to-machine processes within
automotive, FMCG, electronics, white goods, banking and media sectors),
Next Generation Service Assurance (monitoring of complex network services),
Next Generation Service Fulfillment, NFV/SDN, Product Catalog (simplifying
IT architecture and speeding up the process of bringing products onto the
market for sale, management of product life cycle), Self Care (allowing clients
help desk and private account access 24/7).
Comarch Technologies
Comarch Technologies is the youngest product division and was set up in July
2014. It aims to speed up development of products and services through
equipment devices for the safety and privacy of data. Comarch Technologies
is made up of two entities: CyberSecurity and IoT (Internet of Things).
Comarch Technologies’ commercial offer is formed of: (1) consulting in the
CyberSecurity area; (2) development of secured systems including secured
equipment; (3) development and production of devices in designed patterns
and short production series.
Figure 45 Internet of Things – evolution of car key Figure 46 Comarch Technologies – product portfolio
Source: BESI Research, Company Data Source: BESI Research, Company Data
Such a wide product portfolio comes from Comarch’s ongoing investment in
R&D which grows every year and accounts for more than 10% of revenues
generated.
Page 21 of 24
Figure 47 Comarch – R&D costs Figure 48 Polish IT – capex/revenues
Source: BESI Research, Company Data Source: BESI Research, Company Data
Comarch also has one of the highest capex/revenue ratios among Polish IT
companies. It is partially a result of R&D but also due to the fact that Comarch
has a strategy of investing in property, office space and data centers rather
than renting them (we describe this in more details in the balance sheet
section).
Growth areas for the future
Comarch has defined a general strategy of developing its own products
worldwide.
Comarch has set defined growth areas within different locations:
- Europe – (1) increase headcount in DACH, France, Benelux and Great
Britain; (2) open new branches in Madrid and Milan; (3) reshape the
Vienna branch which will be responsible for sales in Austria and
Central European countries; (4) opportunistic approach to develop
business in Russia and Ukraine. So far, Comarch does not want to
cancel its development in this region, (5) focus to be able to sell the
full scope of Comarch products in Europe (CRM, loyalty systems,
ECM, SFA, BI, Data Centres, Telco, F&B, IoT).
- Middle East – after winning the first contracts (in Dubai, Emirates,
Malaysia, Philippines) Comarch plans to develop centers for business
development in Dubai which will be responsible for selling products in
the Arabian Peninsula and the Far East. Comarch plans to sell
products from telco and F&B.
- Latin America – Comarch has been present for 10 years in LatAm and
plans to invest in business development in Brasil which it feels is a
market full of possibilities.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0
20
40
60
80
100
120
2010 2011 2012 2013 2014
R&D as % of revenues
0%
2%
4%
6%
8%
10%
12%
14%
16%
2007 2008 2009 2010 2011 2012 2013 2014
Comarch Asseco Poland (parent)
Asseco Poland (consolidated) Asseco Poland (consolidated)
Page 22 of 24
Valuation Methodology
We value Comarch using two methods: DCF and peer multiples. Our final fair
value is an average of these two methods (each with a 50% weighting). Using
DCF we arrive at PLN 170.1/sh while our peer valuation yields PLN 164.3/sh.
Our final fair value is PLN 167.2/sh, implying 32% potential upside.
Risks to Fair Value
Downside risks:
Salary pressure and lack of qualified workforce.
Unfavorable court decision on ARiMR fine - in 2014 the Agriculture
Agency (ARiMR) calculated a PLN 32.5m fine on delays on the OFSA
contract while the total value of the 36month contract is PLN 29m
gross. Comarch does not agree with the fine and has made only a
PLN2.3m provision for it.
Slowdown in IT market and unsuccessful global expansion.
Value destructive acquisitions.
Weak EUR having a negative impact on top-line and profitability.
Unsuccessful or missed start-up projects.
Upside risks:
Stronger than expected backlog growth and successful global
expansion.
Increasing share of margin accretive services.
Higher than expected demand for Comarch Healthcare products.
Reversal of provision on Russian contract – in 2014 Comarch made a
provision of PLN 13.6m on one Russian contract. The contract is fully
provisioned. We do not rule out the possibility that negotiations with
the client will be successful.
Please visit our website at www.EspiritoSantoIB.co.uk for up to date recommendation charts.
Comarch CMR PW
Report date Recommendation Fair value Share price (PLN)
Recommendation history is not available
Source: Bloomberg, BESI Research
55
65
75
85
95
105
115
125
135
Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15
Buy Trading Buy Neutral Trading Sell Sell Restricted Dropped Coverage
Page 23 of 24
IMPORTANT DISCLOSURES
140415
This report was prepared by BESI Research, a global brand name for the equity research teams of Banco Espírito Santo de Investimento, S.A., with headquarters in Lisbon, Portugal, of its Branches in Spain and Poland and of its affiliates BES Securities do Brasil, S.A – Corretora de Câmbio e Valores Mobiliários, in Brazil, Execution Noble Limited, in the United Kingdom, and Espirito Santo Securities India Private Limited, in India, all authorized to engage in securities activities according to each domestic legislation. All of these entities are included within the perimeter of the financial group controlled by Novo Banco, S.A., a Portuguese bank authorised and regulated by Banco de Portugal (Portuguese Banking Regulator) and Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Authority), which was incorporated on the 3rd of August 2014 in the context of the resolution action taken on the former financial institution Banco Espírito Santo, S.A..
Analyst Certification
Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; the issuers were not previously informed about the content of the recommendation included in this research report and the assumptions were not validated by the issuers; (2) no part of his or her compensation is directly or indirectly related to: (a) the specific recommendations or views expressed by that research analyst in the research report; and/or (b) any services provided or to be provided by Banco Espírito Santo de Investimento, S.A. and/or by any of its affiliates to the issuer of the securities under recommendation. Moreover, each of the analysts hereby certifies that he or she has no economic or financial interest whatsoever in the companies subject to his or her opinion and does not own or trade any securities issued by the latter.
Ratings Distribution
BESI Research hereby provides the distribution of the equity research ratings in relation to the total issuers covered and to the investment banking clients as of end of March 2015.
Explanation of Rating System Ratings Distribution
12-MONTH RATING DEFINITION
BUY Analyst expects at least 10% upside potential to fair value, which should be realized in the next 12 months
NEUTRAL Analyst expects upside/downside potential of between +10% and -10% to fair value, which should be realized in the next 12 months
SELL Analyst expects at least 10% downside potential to fair value, which should be realized in the next 12 months
As at end March 2015 Total BESI Research
Total Investment Banking Clients (IBC)
Recommendation Count % of Total Count % of IBC % of Total
12 Month Rating:
Buy 186 46.7% 22 75.9% 5.5%
Neutral 139 34.9% 5 17.2% 1.3%
Sell 71 17.8% 0 0.0% 0.0%
Restricted 1 0.3% 1 3.4% 0.3%
Under Review 1 0.3% 1 3.4% 0.3%
TRADING RATING DEFINITION
TRADING BUY Analyst expects a positive short-term movement in the share price (max duration 3 months from the time Trading Buy is announced) and may move out of line with the fair value estimate during that period
TRADING SELL Analyst expects a negative short-term movement in the share price (max duration 3 months from time Trading Sell is announced) and may move out of line with the fair value estimate during that period
Trading Rating:
Trading Buy 0 0.0% 0 0.0% 0.0%
Trading Sell 0 0.0% 0 0.0% 0.0%
Total recommendations 398 100% 29 100% 7.3%
For further information on Rating System please see “Definitions and distribution of ratings” on: http://www.espiritosantoib-research.com.
Share Prices
Share prices are as at the close of business on the day preceding publication, unless otherwise specified.
Coverage Policy
BESI Research reserves the right to choose the securities it expresses opinions on. The main criteria to choose such securities are: 1) markets in which they trade 2) market capitalisation 3) liquidity, 4) sector suitability. BESI Research has no specific policy regarding the frequency in which opinions and investment recommendations are released.
Representation to Investors
BESI Research has issued this report for information purposes only. This material constitutes "investment research" for the purposes of the Markets in Financial Instruments Directive and as such contains an objective or independent explanation of the matters contained in the material.
Any recommendations contained in this document must not be relied upon as investment advice based on the recipient's personal circumstances. This report is not, and should not be construed as an offer or a solicitation to buy or sell any securities or related financial instruments. The investment discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. The material in this research report is general information intended for recipients who understand the risks associated with investment. It does not take account of whether an investment, course of action, or associated risks are suitable for the recipient. This research report does not purport to be comprehensive or to contain all the information on which a prospective investor may need in order to make an investment decision and the recipient of this report must make its own independent assessment and decisions regarding any securities or financial instruments mentioned herein. In the event that further clarification is required on the words or phrases used in this material, the recipient is strongly recommended to seek independent legal or financial advice. Where an investment is denominated in a currency other than the investor’s currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not necessarily a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. Any recommendation and opinion contained in this report may become outdated as a consequence of changes in the environment in which the issuer of the securities under analysis operates, in addition to changes in the estimates and forecasts, assumptions and valuation methodology used herein. The securities mentioned in this publication may not be eligible for sale in some states or countries.
All the information contained herein is based upon information available to the public and has been obtained from sources believed to be reliable. However, BESI Research does not guarantee the accuracy or completeness of the information contained in this report. The opinions expressed herein are BESI Research present opinions only, and are subject to change without prior notice. BESI Research is not under any obligation to update or keep current the information and the opinions expressed herein nor to provide the recipient with access to any additional information.
BESI Research has not entered into any agreement with the issuer relating to production of this report. BESI Research does not accept any form of liability for losses or damages which may arise from the use of this report or its contents.
This communication has been issued and approved by Execution Noble Limited in the United Kingdom where it is being directed at persons who have professional experience in matters relating to investments. It is not intended for retail customer use.
Ownership and Material Conflicts of Interest
Banco Espírito Santo de Investimento, S.A. and/or its Affiliates (including all entities within BESI Research) and/or their directors, officers and employees, may have, or have had, interests or qualified holdings on issuers mentioned in this report. Banco Espírito Santo de Investimento, S.A. and/or its Affiliates may have, or have had, business relationships with the companies mentioned in this report. However, the research analysts may not purchase or sell securities or have any interest whatsoever in companies subject to their opinion.
Banco Espírito Santo de Investimento, S.A. and/or its Affiliates have a qualified shareholding (1% or more) in Oi. Bradesco has a direct qualified shareholding (20%) in BES Investimento do Brasil, S.A., the parent company of BES Securities do Brasil S.A. CCVM.
Pursuant to Polish Ministry of Finance regulations, we inform that neither does Banco Espírito Santo de Investimento, S.A. nor its Affiliates have any qualified shareholding in the Polish Securities Issuers mentioned in this report in excess of 5% of its total share capital.
Banco Espírito Santo de Investimento, S.A and/or its subsidiaries are liquidity providers or market makers for Altri and Bradesco.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries participate or have participated in the last 12 months as a syndicate member in share offerings of 4imprint, Alumetal, EDP, Liberbank, Mota-Engil Africa, NAHL Group, Oi, PGE, Prime Car Management, REN, Skarbiec Holding, SKS Microfinance and Sonae Indústria.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries participate or have participated in the last 12 months as a syndicate member in the bond issues of the following companies: Bematech, Kredyt Inkaso, Mota-Engil and Sonae.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries provided in the last 12 months investment banking services to the following companies: 4imprint, ACS, Alumetal, Bematech, Brazil Hospitality Group, Burford Capital, Casino Guichard, EDP, EDP Renovaveis, Galp Energia, Inditex, Kcom Group, Kredyt Inkaso, Kruk, Liberbank, Mota-Engil, Mota-Engil Africa, NAHL Group, NOS, Oi, Prime Car Management, REN, Semapa, Skarbiec Holding, SKS Microfinance, Sonae, Sonae Indústria, Sonaecom, Sports Direct and SVG Capital.
Page 24 of 24
Affiliates of Banco Espírito Santo de Investimento, S.A. are partners to Mota-Engil in the infrastructure business in Portugal and other countries. Mota-Engil jointly with ES Concessões, S.G.P.S., S.A. (held by an Affiliate of Banco Espírito Santo de Investimento, S.A.) has created a joint holding company – Ascendi – for all stakes in transportation infrastructure concessions in Portugal and abroad. Banco Espírito Santo de Investimento, S.A. provided, or continues to provide, investment banking services to Ascendi.
Banco Espírito Santo de Investimento, S.A. and/or its subsidiaries do and seek to provide investment banking or other services to the companies referred to in this research report. As a result, investors should be aware that a conflict of interest may exist.
Market Making UK
Execution Noble Limited is a Market Maker in companies covered and may sell to or buy from customers as principal in certain financial instruments listed or admitted to listing on the London Stock Exchange. For information on Companies to which Execution Noble Limited is a Market Maker please see “Execution Noble Limited UK Market Making” on http://www.espiritosantoib-research.com.
Confidentiality
This report cannot be reproduced, in whole or in part, in any form or by any means, without BESI Research’s specific written authorization. This report is confidential and is intended solely for the designated addressee. Therefore any disclosure, replication, distribution or any action taken in reliance on it, is prohibited and unlawful. Receipt and/or review of this research report constitutes your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this report (including any investment recommendations, estimates or price targets without first obtaining express permission from an authorized officer of Banco Espírito Santo de Investimento, S.A.
Regulatory Authorities
Portugal: Banco Espírito Santo de Investimento, S.A. is regulated by the Comissão do Mercado de Valores Mobiliários (the Portuguese Securities Market Authority); Spain: the branch in Madrid is regulated by the Comisión Nacional del Mercado de Valores (the Spanish Securities Market Authority); Poland: the branch in Warsaw is regulated by the Komisja Nadzoru Finansowego (the Polish Financial Supervision Authority); Brazil: BES Securities do Brasil, S.A. - Corretora de Câmbio e Valores Mobiliários is regulated by the Comissão de Valores Mobiliários (the Brazilian Securities Market Authority); United Kingdom: Execution Noble Limited is authorised and regulated by the Financial Conduct Authority; India: Espirito Santo Securities India Private Limited is regulated by the Securities and Exchange Board of India.
NOT FOR DISTRIBUTION TO ANY US PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES OF AMERICA