da Intermonte – MATICA FINTEC company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a MATICA FINTEC a cura di Intermonte.

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Un caro saluto,                                      
Lucrezia Pisani

M. +39 347 6732 479

Solid Growth and Profitability, Undervalued on Fundamentals

• Combining growth and profitability. Flexibility for M&A. Matica Fintec competes globally as a supplier of technological systems and software for the issuing of ID documents and financial cards. The company is positioned in the high-end segment of the market (28% EBITDA margin reported in 1H22), where it competes with a few other players (Entrust Datacard, HID, Muhlbauer, Evolis, and Zebra) in a steadily growing market. After reporting strong 1H22 results, and following the acquisition of CTC in the US, we think Matica Fintec is accelerating on its profitable growth path. The company also has the financial flexibility to grow through M&A. We are raising our estimates (FY22-23E EPS +34%) and TP from Eu3.5 to Eu4.1 (fair P/E 2023e 15.6x vs. 9.1x based on current price), reiterating our BUY recommendation on the stock.

• Integration of CTC and UBIQ in the US. In July, Matica Fintec announced the closing of the purchase of the entire capital of CTC, which owns 100% of UBIQ. The two companies, based in Minnesota, operate in the US market as suppliers of integrated hardware and software solutions for banking and digital-ID. The transaction was structured in cash (Eu1.5mn) and shares (5% of Matica Fintec’s shares post transaction) for an overall value of Eu2.6mm. Through the acquisition of CTC, Matica Fintec has set up a base for future investments in local production (low CapEx involved).

• Upgrading estimates. After the company reported better-than-expected 1H22 results, we are upgrading our model, which now includes the contribution of CTC consolidated as of July 2022. CTC is expected to add c.Eu5.0mn to sales on an annual basis, with no impact on the group’s profitability once fully integrated and a slightly positive boost to the NFP. We now estimate Matica Fintec will close FY22e with sales of Eu18mn (+26% YoY), EBITDA close to Eu5.0mn (+52%) a 27% margin, net profit of Eu2.2mn, and no debt. We are raising our previous 2022-23e sales estimate by +10% on avg., EBITDA by +32%, and EPS by +34%.

• BUY; target Eu4.1 (from Eu3.5). The business model is built on excellent operations management combined with a strong technological identity. This proved resilient during the pandemic, and recurring revenues (software and consumables) come to >30% of the total (> 2x the sales of equipment over the product cycle). Our TP of Eu4.1 (from Eu3.5 previously) is based on a DCF valuation of the business. At target, we value Matica Fintec at FY22-23e EV/sales multiples of 2.3x/1.8x, EV/EBITDA of 8.8x/7.4x and P/E of 20.0x/15.6x, which we deem undemanding in light of its technological positioning (good visibility on growth), solid profitability and cash conversion. Matica Fintec is indirectly controlled by its chairman and founder Sandro Camilleri with 60.5% of shares. Ai Holding owns 5%, with a free float of 34%.