da Intermonte – SABABA SECURITY company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a SABABA SECURITY a cura di Intermonte.

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,
Lucrezia Pisani

M. +39 347 6732 479

Demonstrating Dynamic Delivery on All Strategic Pillars

Strong sales growth driven by Monitoring activities: Expectations for rapid growth were fulfilled in 1H22, with sales up +142% YoY to €3.94mn, even coming in 20% above the 2H21 level despite the usual sector seasonality. The main driver of this healthy growth was the Monitoring division (€2.7mn/+512% YoY), demonstrating the successful roll-out of the strategy which relies on driving uptake of such activities, while simultaneously increasing the proportion of the services developed in-house (as opposed to using third-party software and capabilities).

Positive margins, cost structure reflect ramp-up of company structure: SBB’s margins remained positive in 1H22, with reported EBITDA of €0.59mn (vs. our est. €0.70mn), and EBITDA of €0.11mn net of capitalised R&D costs (vs. our est. €0.28mn). Fixed costs increased as expected, as SBB continued to build up its technical workforce in 1H by adding 17 resources (32 staff at end 1H), leading to personnel costs of €1.02mn (up from €0.43mn in 2H21, vs. our est. €0.93mn), while capitalised R&D costs were €0.47mn (from €0.26mn in 2H22, vs. our est. €0.42mn). EBIT/Net income of €0.39mn/€0.35mn (+124%/+189% YoY) was above our forecast, however (€0.25mn/€0.17mn) amid lower D&A and taxes. Cash flow was negative but better than expected, with Net Cash down slightly (€-0.6mn) to €6.2mn (our est. €5.2mn).

Optimism on growth trajectory, delivering on key strategic targets: although no explicit guidance was provided, SBB indicated it is optimistic of matching sell-side estimates for FY22. SBB has a €6mn order backlog (1.2x FY21 sales) ahead of the 4Q high season. It is delivering on the key strategic pillars outlined in the IPO: i) rapid expansion of organisational structure to continue in 2H, as SBB has already reached 54 resources and has just opened its 6th Italian office (Bari SOC). Headcount should only increase slightly in 2H, however, as focus shifts to commercial execution in the busy 4Q. ii) The internationalisation process is also well underway, with the Uzbekistan and Spain subsidiaries now operational and already set to contribute to growth in 2H. iii) Development of new technologies: processes used in monitoring activities are increasingly sourced using in-house capabilities, as seen through the declining incidence of (third-party) service costs on sales (25% in 1H, from 33% in FY21). R&D investments are only set to increase slightly in 2H compared to 1H, and will represent the bulk of CapEx. The 2022 tax rate is expected at 18-20%. SBB also announced they are working on a potential acquisition (4th strategic pillar).

Change in estimates: we are broadly confirming our estimated sales growth trajectory (2021-24 CAGR 65%), re-centring the mix around the main Security Monitoring division. We are also fine-tuning our forecasts in light of 1H developments by i) raising staff cost expectations; ii) reducing CapEx to reflect just a slight increase in capitalised R&D costs in 2H and subsequently; and iii) reducing D&A (and tax rate for 2022).

BUY confirmed; target €5.4 (from €5.7): we re-affirm our positive view as we appreciate the strong growth and delivery on all the main strategic targets witnessed in 1H, paving the way for the equity story to materialise. We are slightly lowering our target to reflect i) the recently de-rated sector valuations by applying a prudential 10% discount to the arbitrary multiples used in our valuation (€-0.6 p.s.), and ii) the slightly better cash flow reflected in our new estimates (€+0.3 p.s.)