da Intermonte – IEG company research report

Buon pomeriggio, di seguito e in allegato inviamo il company research report relativo a IEG a cura di Intermonte. Rimaniamo a disposizione per ulteriori informazioni. Un caro saluto, Lucrezia Pisani M. +39 347 6732 479
2Q22 Sales Above Expectations; 2022 Guidance Confirmed
* 2Q22 results: strong top line but cash flow below expectations. Yesterday IEG reported 2Q22 results that were well above our forecast in terms of revenues, but with cash generation coming in slightly worse than expected. Revenues closed at Eu34.6mn vs. Eu23.4mn expected, adj. EBITDA at Eu-1.3mn vs. Eu0.1mn, adj. bottom line at Eu-5.6mn vs. Eu-3.9mn, and NFP (including non-cash items) at Eu117mn vs. Eu109mn expected.
* Small buyback announced: the BoD also launched a buyback plan (max 400,000 shares for a maximum transaction value of Eu1.2mn) aimed at setting up a stock “inventory” for future financial transactions.
* 2022-2027 Strategic Plan: at the end of July IEG revealed its new 2022-27 Strategic Plan, focused on organised events and a post-pandemic return to normality during 2023, followed by a period of growth with the aim of bringing revenues to Eu267mn by the end of the plan (+49% vs. the revenues in the final pre-pandemic year). The plan envisages Eu135mn of investments (including Eu11mn for M&A) which the company aims to finance through cash generation, although it will also consider the issue of a convertible bond (estimated at Eu40mn). The final decision on investments and the potential convertible bond will not be made before mid-2023 though, to ensure maximum visibility on the economic situation.
* Focus on organised events, foreign markets and digital transformation: Among the plan’s main objectives are: 1) return to pre-Covid normality between 2023 and 2024; 2) Eu267mn of revenues at the end of the plan (+49% vs. 2019) of which Eu16mn to be generated abroad (c.10% of organised events); 3) focus on Organised Events; 4) Eu135mn investment plan in the 2022-27 period (digital transformation, expansion of the sites in Vicenza and Rimini, M&A, with a debt /EBITDA at 2.6x in 2023 and as low as 0.6x in 2027; 5) EBITDA margin in line with leading European competitors i.e. around 26% in 2027; NFP falling from 2023 and return to a dividend payment in 2024 (in line with expectations).
* Change in estimates: we have updated our model primarily to include the following: 1) acquisition of My Plant & Garden exhibition; 2) contribution from new foreign activities in Dubai and Brazil; 3) higher price inflation in 2023-2024; 4) inclusion of the Vicenza expansion CapEx and extra revenues. Overall, we have remained more cautious than management on: 1) price trajectory; 2) revenues from digital projects; 3) no contribution from potential new congress centre; 4) no expansion of the Rimini Expo centre; 5) no inclusion of the still-to-be-finalised deal with Hannover; 6) lower growth of revenues from foreign activities. All this results in an increase of c.8% in average 2023-2027 EPS, while we confirm our target price, as the higher EPS is offset by slightly higher CapEx and increased WACC (risk-free rate up 50bp to 3.0%).
* Investment case: we continue to believe that despite the very complex macro environment over the shorter term, IEG’s prospects remain attractive thanks to the continued recovery of demand from exhibitors and a leadership position in its key events. Over the longer term, the group’s targets look quite bold but are partly linked to positive macro developments which will be assessed over the next 12 months. The potential issue of a convertible bond represents an element of uncertainty, as it could potentially lead to significant EPS dilution