da Intermonte – WIIT company research report

Buon pomeriggio,

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

Rimaniamo a disposizione per ulteriori informazioni.

Un caro saluto,
Lucrezia Pisani

M. +39 347 6732 479

Solid Momentum to Be Confirmed in 3Q Results

3Q preview. We expect a solid top-line trend (€28.7mn, +61% YoY) driven by mid-to-high teen growth in Italy (3Q: +15% YoY, 2Q: +19%) and strong accretion from Germany (€14.3mn, c. 50% of revenues) as a consequence of high single-digit organic growth at Myloc (c. 7%) and the M&A boost from R42, to be further supplemented in 4Q by consolidation of LANSOL. Adj. EBITDA should have come to €9.6mn in 3Q, with a 33% margin (c.35% in 9M), reflecting the dilutive impact of recent acquisitions, partially offset by a greater focus on cloud services, the phasing-out of low-margin business, and the higher electricity costs in Germany (in 1H22, electricity costs were €4.1mn, >2x the €2mn in 1H21 and almost entirely attributable to Germany). Excluding PPA (c. €1mn), adj. EBIT should have been €4.7mn in 3Q (16% margin), leading to adj. net profit of c.€2.6mn (reported €1.7mn). With no major swings in working capital, we assume €26.6mn cash flow from operations almost entirely absorbed by higher CapEx (€24mn). Considering a €27.5mn M&A cash-out (of which €18mn for LANSOL, €4mn for ERPTech, €5.6mn for deferred payment for minorities and earnouts), dividends (€8.1mn), and share buybacks (€4.9mn), net debt should have closed around €180mn, above YE21 (€141mn).

Positive hints from recent CEO interview: M&A in sight? On 9 October, in an interview for Il Sole24Ore, CEO Cozzi expressed absolute confidence in achieving FY22 consensus estimates: turnover expected at €113-114mn and adj. EBITDA at €41-42mn (of which c. €20mn in Germany), with an average margin of 35.5% (FY21: 38.3%). CapEx expected at €31mn in 2022, while it should come back in line with historical levels in 2023 (€20- 22mn). Geographical mix: in the medium term, the split is foreseen at 25-30% Italy and 70-75% abroad. M&A in sight: objective of further consolidating presence and gaining market share in Germany. Potential targets appear to be SMEs with €5-15mn turnover and good profitability; no appetite for turnarounds, a preference for companies with proprietary datacentres and attractive client portfolios

No change in estimates. Hints by the CEO enhance visibility on our / current consensus estimates. For FY22, we expect turnover at €115.0mn (consensus €116.0mn) and adj. EBITDA to reach €41.8mn (cons. Eu41.3mn); our adj. EBITDA estimate is in line with the indication reported in the article (€41-42mn range).

OUTPERFORM confirmed; new TP at €23 (from €32) due to higher WACC. Applying a differential step-up in WACC over time from 6.7% (previously 6.2%, risk-free rate raised from 3% to 4%) to 7.7% beyond 2026 (along with repayment of the €150mn bond, we would assume cost of debt up to 5.5% from the current fixed coupon at 2.375%), we reduce our DCF-based TP to €23, which implies 19x EV/EBITDA’23 (in line with historical average) and offers a very compelling entry point, prompting us to reiterate our positive view on the stock. WIIT should continue to benefit from its leading position as a digital champion, further consolidating small M&A targets in Italy and gaining scale in Germany. WIIT is also well placed in a market with sound growth prospects underpinned by an embedded technological shift from on-premises to cloud infrastructure and services. The company should exploit this trend through its strong market positioning in the premium cloud niche, which is suitable for mission-critical applications requiring the tightest SLAs, and by taking advantage of its extremely scalable business model.