Vectron Systems AG

More documents

Recommendations

Info

Vectron Systems AG Attraction of the equity story – We consider Vectron´s equity story as attractive since it combines the growth prospect of a fast growing company with the typical characteristics of a value investment (e.g. high dividend yield). The key attraction of Vectron´s equity story is the expansion of business activities to new geographic markets, the untapped potentials within its existing markets as well as company´s sound installation basis and the traditionally high dividend yield (in the past pay-out ratio of approx. 80%). Although Vectrons´s existing markets has saturated, the company will still generate higher revenues in the future in course of the squeeze out of small regional operators and the diversified customer focus. Moreover, given an installation basis of more than 100,000 systems, Vectron intends to monetize on this hidden potential within its existing customer basis by reducing the overall product life cycle by means of new innovations and valueadding product improvements (e.g. Vectron ServiceCall). Fiscal memory chip – The company´s equity story becomes even more attractive by considering the tremendous growth prospects related to the introduction of a mandatory fiscal memory chip (Fiskalspeicher) which shall enables tamper-proof storage of cash turnover. Such a development represents great chances for Vectron since the company has already collected corresponding experiences in Turkey and in some Nordic countries. According to the relevant market participants German authorities consider to introduce this kind of systems by 2012. However at current stage, we did not account for such a scenario in our valuation approach. Risks related to the equity story – We see major risks related to Vectron´s equity story in the ongoing recessive economic environment as well as from deflating prices as a result of the competitive market environment. Vectron operates in a cyclical business in which the company generates its revenues mainly from the sale of POS systems that has non-recurring characteristics. However, in the past Vectron successfully managed to evade from a margin diluting price competition. Financials – We expect Vectron to return to its past growth path by 2010E and benefit from its current counter-cyclical strategy by expanding its product portfolio and distribution network. Prior to the current ongoing recession, Vectron achieved a top-line growth of CAGR 21.9% over the period 2005 to 2007. We expect this trend to slow-down to a CAGR of 12.3% until 2012E as a consequence of the current recessive macroeconomic environment and the slowing growth pace in its underlying market. After further challenging FY 2009E with significant decline in the top line as well as bottom line, we expect Vectron to yield the fruits of its counter-cyclical business expansion strategy from 2010E on. We think that the current investment backlog as result of the ongoing recession will start to ease from the beginning of FY 2010E and forecast revenues of EUR 23.2m and EUR 25.8m for 2010E and 2011E, respectively. Valuation: By combining a multiple valuation and a Discounted Cash Flow (DCF) model we derived a fair value of EUR 20.71 per share. Although the challenging market environment will last throughout the entire FY 2009E, we think Vectron´s mid-term growth prospects are still intact. By considering the company´s attractive business model and the promising growth rate from 2010E on, we think that the current price level offers an attractive buying opportunity. www.cbseydlerresearch.ag Equity story: Growth company with valueinvestment characteristics A possible introduction of a mandatory fiscal memory chip indicates tremendous mid-term growth Deflating prices as major risk Despite gloomy short- term growth prospects mid-term perspective are still promising Our fair value amounts to EUR 20.71 Close Brothers Seydler Research AG | 4
Vectron Systems AG SWOT analysis Strengths � Strong technological expertise: The company´s dual platform strategy provides the basis to Vectron´s innovation power and enables to deliver software and hardware from one single source � Sophisticated product portfolio: The company has streamlined its product portfolio over the last years by introducing new innovations as well as value adding features (e.g. Hybrid devices, mobile devices or Service Call). Moreover, Vectron utilize the most up-to-date technology in its products � Profitable business model with attractive margins: Along with an attractive market positioning the company generates sound cash flows in its operating business. Moreover, the company has a strong financial background with high equity ratio building a sound basis for further business expansion � High market entry barriers: New market entrants have to overcome severe obstacles particularly in establishing appropriate distribution channels � Over the last year the product mix has moved towards higher margin solutions � Highly experienced management that are at the same time founders of the company Weaknesses � Volatile revenues: Vectron operates in a cyclical business where the company generates its revenues mainly from the sale of POS systems which has non-recurring characteristics � Low geographic business diversification: The company still generates the largest proportion of its revenues in German speaking countries. Due to the cyclical characteristic of its business Vectron is particularly exposed to the macroeconomic risks of these countries � Still low number of international distribution partners: In order to boost its international business, the company still has to achieve a critical number of distribution partners � High degree of market penetration and saturation: The company´s geographical markets show a high level of market saturation and fragmentation � High level of depreciation on intangible assets: In course of the Management Buy Out (MBO) the company had acquired Software- Sourcecodes which are subject to depreciation over the next years � The company´s past financial struggle still weighs on Vectron´s reputation within the stock market community www.cbseydlerresearch.ag Close Brothers Seydler Research AG | 5
Page 1 and 2: Vectron Systems AG Recommendation:
Page 3: Vectron Systems AG Investment thesi
Page 7 and 8: Vectron Systems AG Valuation Valuat
Page 9 and 10: Vectron Systems AG partners. Wincor
Page 11 and 12: Vectron Systems AG Discounted Cash
Page 13 and 14: Vectron Systems AG Shareholders The
Page 15 and 16: Vectron Systems AG According to the
Page 17 and 18: Vectron Systems AG Strategy With it
Page 19 and 20: Vectron Systems AG Vectron´s distr
Page 21 and 22: Vectron Systems AG Market environme
Page 23 and 24: Vectron Systems AG By analyzing the
Page 25 and 26: Vectron Systems AG Financials Histo
Page 27 and 28: Vectron Systems AG Overall the comp
Page 29 and 30: Vectron Systems AG 2009E, too. Howe
Page 31 and 32: Vectron Systems AG Balance sheet As
Page 33 and 34: Vectron Systems AG Disclaimer and s
Page 35: Vectron Systems AG Responsible Supe

Vectron Systems AG

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?