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INVL Technology Investor Presentation 2021
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INVL Technology
Technology
September 28, 2021
Enlight Research
Baltics - Lithuania
Commissioned Research - Q2 2021 Update
Cybersecurity drive growth
The Cybersecurity segment pushed Q2 Group Revenues and Sales above our estimates, despite a weaker than expected result for NRD Companies. In this report, we will highlight the Cybersecurity segment.
Cybersecurity shines
The NRD Cybersecurity segment (CS) Q2/21 Sales grew 115% y-on-y to EUR 1.3m, almost doubling our estimate of EUR 0.7m (12% est. growth). The NRD CS Q2/21 EBIT was more than 4x higher than our estimate (EUR 0.323m vs. est. 0.075m) resulting in an EBIT margin of 24.7% (est. 11.0%). This more than offset the NRD Companies segment's lower than expected Sales and EBIT.
Cybersecurity outlook is strong
According to Mordor Intelligence, the global cybersecurity market estimated CAGR (2021-26) is 14.5%. Looking at the reported Q2/21 sales growth of cybersecurity companies, the current market growth seems to be around 20%. We believe the NRD CS segment is well positioned to profit from the strong cybersecurity market, which seems to have been triggered by the pandemic work-from-home trend.
Profit estimates raised
We raise our portfolio companies' EBIT estimates by around 20-30% in the forecast period 2021-23. Our sum-of-the-parts Base case motivated share price of EUR 3.00 is reiterated, indicating an upside of around 13%.
Key figures (MEUR)
| 2019 | 2020 | 2021E | 2022E | 2023E | |
|---|---|---|---|---|---|
| Holding company | |||||
| FV Financial assets* | 25.912 | 32.652 | 38.277 | 46.974 | 55.446 |
| Change Financial assets | 1.279 | 6.740 | 5.625 | 8.697 | 8.473 |
| Other income | 0.185 | 0.150 | 0.170 | 0.170 | 0.170 |
| Total income | 1.464 | 6.890 | 5.795 | 8.867 | 8.643 |
| Operating expenses | -0.531 | -0.588 | -0.787 | -0.680 | -0.690 |
| Accrued perf. fee | 0.000 | -1.535 | -1.591 | -1.678 | -1.763 |
| Net profit | 0.933 | 4.767 | 3.417 | 6.509 | 6.190 |
| Portfolio companies | |||||
| Revenue (m) | 32.9 | 34.3 | 35.8 | 41.1 | 46.3 |
| EBIT (m) | 0.9 | 1.7 | 3.4 | 4.7 | 5.9 |
| Revenue growth | 5.0% | 4.3% | 4.4% | 14.7% | 12.5% |
| EBIT margin | 2.7% | 5.1% | 9.4% | 11.5% | 12.8% |
| P/Sales | 1.03 | 0.99 | 0.94 | 0.82 | 0.73 |
Source: Company data, Enlight Research estimates
| Fair value range (EUR) | |
|---|---|
| Bull P/Sales 1.4x | 3.66 |
| Base P/Sales 1.2x | 3.00 |
| Bear P/Sales 0.9x | 2.33 |
| Key Data | |
| Price (EUR) | 2.66 |
| Ticker | INC1L |
| Country | Lithuania |
| Listed | Vilnius (Lithuania) |
| Market Cap (EURm) | 32 |
| Net debt (EURm) | -2.4 |
| Shares (m) | 12 |
| Free float | 35.62 % |
| Price range | |
|---|---|
| 52-week high | 2.86 |
| 52-week low | 1.94 |
Analyst
Enlight Research
September 28, 2021
INVL Technology
Cybersecurity highlight
Underlying market drivers augmented by pandemic
The trend to digitalize and move to cloud services combined with an increasing number of cyber-attacks have driven the demand for cybersecurity services for many years. These drivers have been greatly augmented by the pandemic driven work-from-home trend, catapulting the demand for cybersecurity services. The strong demand was evident in NRD CS as well as peer companies Q2/21 sales growth. For example, three out of the four small cap cybersecurity peers we identified in Sweden posted Q2/21 y-on-y Sales growth of 20-60% (one had negative growth of 13%). Advencia, which we regard as most alike to NRD CS, both in terms of client offer and size, posted a Q2/21 Sales growth of 61% (NRD CS Q2/21 sales growth was 114%). We believe the pandemic has triggered the demand for cybersecurity services for years to come i.e., it is not just a pandemic phenomenon.
Source: Enlight Research
Source: Company reports
Enlight Research
September 28, 2021
INVL Technology
Perceived threat level is heightened
According to a PwC survey done in this year, around half of the respondents experienced at least one of the following incidents: Malware via software update, Attack on software supply chain, Attack on cloud services, Business email compromise. Furthermore, at least 59% of the respondents expect an increase in reportable incidents in H2/21. We believe the perceived threat level increase is a result of the increased exposure following the pandemic driven work-from-home trend, and that companies are now realizing their cybersecurity needs to be upgraded.
More reportable cyber incidents expected in the second half of 2021
- 2020 and ytd 2021 / % who experienced the incident
- 2021 second half / % who expect an increase in reportable incidents
Q: Which of the following cyber and fraud incidents in 2020 and 2021-to-date has directly affected your organization?
Q: Please say how you expect a change in reportable incidents for these events in your organization in the second half of 2021 compared to the first half.
Source: PwC, US Digital Trust Insights Snapshot Survey 2021, June 2021. Base: 322
Source: PwC
Enlight Research
September 28, 2021
INVL Technology
Cybersecurity must catch up
When the pandemic struck in Q1/20, the main priority for companies was to quickly enable employees to work from home. As this was an unforeseen emergency, the cybersecurity was often overlooked or not prioritized. In a survey done by PWC, only about half of the companies said they have fully mitigated the risks from "Enabling remote work", and less than half say they have fully mitigated the risk from "Increased digitalization", and "Accelerated cloud adoption". In our view, we are now in the phase where companies will upgrade their cybersecurity to meet the heightened risks created by the work-from-home, digitalization, and cloud adoption trends.
An incomplete grade: More than half haven't fully mitigated the risks from the big digital moves of 2020
Enabling remote work
Increased digitization of operations
Accelerated cloud adoption
Q: On a scale of 1 to 10, to what extent have you mitigated the risks associated with the following in the last 12 months? Mitigated (score 9-10): Somewhat mitigated (score 7-8); Neither mitigated or not mitigated (score 5-6); Not mitigated (score 1-4) Source: PwC, US Digital Trust Insights Snapshot Survey 2021, June 2021. Base: 322
Source: PwC (Cyber Threat Landscape report)
NRD CS well positioned
The NRD CS segment offers the full spectrum of security services, from security assessment to implementation and training. For corporations, the offer also includes managed security services where the NRD CS's team monitors, registers, and handles cybersecurity threats. In addition to having a well-positioned product offer, being in located in Lithuania, NRD CS is also well-positioned from a geopolitical perspective, free from strong Chinese, Russian, as well as US influence.
NRD CS services
Source: Enlight Research, Company website
Enlight Research
September 28, 2021
INVL Technology
IP assets
In addition to offering solutions based on the leading global cybersecurity software providers (partnerships with over 30 cybersecurity companies), NRD CS also has owned developed stacks that are used in e.g., CSIRT (Computer Security Incident Response) solutions. These proprietary assets are mainly sold on a subscription basis together with support.
Proprietary products
| Product | Description | Status |
|---|---|---|
| CSIRT/SOC Stack | Integrated technology, processes, and skills framework, which when deployed at a client, ensures effective and mature operations of their CSIRTs, SOCs, or MSSPs. | Developed, used for customers' projects. |
| IntEye | Open Source Intelligence gathering and analysis software, which uses several AI modules to continuously learn from the user and provocatively search for the most relevant information online. | Developed, used for customers' projects. |
| CyberSET | Managed Security Service Provider's (MSSP) core technology automating, integrating and documenting the processes of MSSP service delivery (security incident management, threat intelligence, reporting, sales and service support), allowing Managed Service Providers (MSPs) to become MSSPs. | Under development |
| CySystem project, commercial brand: CollectiveSight | Collaboration-enabled sectorial, critical information infrastructure or national cybersecurity monitoring system, deployed in central and node sensors form. Is being used by sectorial CSIRTs and SOCs, as well by MSSPs.It helps monitor, promptly identify, and alert about abnormalities in networks. It combines multiple network monitoring and analysis as well as automated cyber sensor technology management. | Deployed in several countries. |
Source: Enlight Research, Company website
CERT (Computer Emergency Response Team)
CERT is a Computer Emergency Response Team (CERT) formed to handle computer security incidents. CERT organisations exist worldwide, and they cooperate closely, and share information about security incidents, and give notifications about security hazards. The name "Computer Emergency Response Team" was first used in 1988 by the CERT Coordination Center (CERT-CC) at Carnegie Mellon University.
Enlight Research
September 28, 2021
INVL Technology
CSIRT/SOC (Computer Incident Response Team/Security Operations Centre)
CSIRT/SOC provides a reliable and trusted single point of contact for reporting computer security incidents. CSIRT/SOC is the most effective way to structure incident detection, response and related security operations into manageable, coordinated and competent one-stop centers to deliver cybersecurity services.
NRD CS clients
| Client vertical | Clients |
|---|---|
| Public (Baltics) | Ministry of Interior of the Republic of Lithuania, Lithuania’s Centre of Registers, Competition Council of the Republic of Lithuania, Customs Department of the Republic of Lithuania, Police Department of the Republic of Lithuania, The Communications Regulatory Authority, Forensic Science Centres in Lithuania and Estonia, Operator of a major natural gas transmission system in Lithuania, Major Lithuanian electricity company |
| Finance (Lithuania) | Siauliu Bankas, Unnamed major bank in Lithuania |
| Rest of World | Bangladesh Computer Council, Department of IT & Telecom under the Ministry of Information & Communications, Kingdom of Bhutan, The University of Cape Town (UCT) in South Africa, United Nations Development Programme in Tanzania, Banque de la République du Burundi (BRB) |
Source: Company reports, Company website
Strong positioning visible in NRD CS result
After a 2019 Sales growth decline of 50%, the NRD CS segment posted a strong 38% growth in 2020, and so far in 2021, the y-on-y Sales growth rate has accelerated to 90% in Q1/21 and 115% in Q2/21 resulting in a H2/21 growth of 106%. This is not unique for NRD CS, as several well-known listed small cap cybersecurity peers posted strong Q2/21 sales growth. We foresee continued strong demand for cybersecurity services with above normal growth in the forecast period 2021-23 triggered by the work-from-home trend. Consequently, we raise the NRD CS Sales and EBIT forecast significantly. For 2021, we raise sales by 70% from EUR 3.8m to EUR 6.5m, followed by a +100% estimate increase in 2022-23. Our 2021 EBIT is raised from EUR 0.5m to EUR 1.3m, which is expected to increase to EUR 1.9m in 2022, and EUR 2.5m in 2023. The percentage change in estimates looks dramatic but this is a small base effect.
Cybersecurity Small cap peers Q2/21 Sales growth y-on-y
Source: Company reports
Enlight Research
September 28, 2021
INVL Technology
NRD CS Sales and EBIT (EURm)
Source: Company reports, Enlight Research (estimates)
Base case Sum-of-the-parts (SOTP) valuation
Our P/Sales 2021 Base case sum-of-the-parts (SOTP) valuation per share is kept at EUR 3.00 as the gain Fair value increase for the NRD CS segment to EUR 1.06 per share (prev. 0.37) is offset by the Fair value decrease for the NRD Companies and Novian Companies segments. Our Group weighted P/Sales discount to peers is still around $58\%$ which could be considered conservative. On the other hand, Invalda Technology portfolio companies' smaller size and the low Invalda Technology share liquidity calls for a discount.
Fair value Invalda Technology (Base case)
| Weighted P/Sales 2021 | (W)P/Sales discount | Sales 2019 | Sales 2020 | Sales 2021 | Enlight FV (EURm) | Enlight FV/share (EUR) | ||
|---|---|---|---|---|---|---|---|---|
| Base case | Peer avg. | |||||||
| Business area: Business climate improvement & e-governance | ||||||||
| NRD Companies | 1.9 | 4.8 | 62% | 6.6 | 7.0 | 6.4 | 11.9 | 0.97 |
| Business area: IT services & software | ||||||||
| Novian Companies | 0.8 | 1.9 | 59% | 23.5 | 24.1 | 23.0 | 18.2 | 1.49 |
| Business area: Cybersecurity | ||||||||
| NRD CS | 2.0 | 4.2 | 52% | 2.8 | 3.2 | 6.5 | 12.9 | 1.06 |
| Business area: Business process outsourcing | ||||||||
| FINtime | na | na | na | na | na | na | 0.250 | 0.02 |
| Group total | 1.2 | 2.8 | 58% | 32.9 | 34.3 | 35.8 | 43.2 | 3.55 |
| Sales growth | 17% | 5% | 4% | |||||
| Add Net cash: | 2.4 | 0.20 | ||||||
| Group total: | 45.6 | 3.75 | ||||||
| Less assumed NAV discount: | 20% | 20% | ||||||
| Less assumed NAV discount (EUR): | 9.1 | 0.75 | ||||||
| Enlight Base case Fair Value: | 36.5 | 3.00 |
Source: Historical figures (Company reports), Forecast figures (Enlight Research), Peer P/Sales average (MarketScreener, Enlight Research, Introduce). Based on peer valuation on 9 September 2021
Enlight Research
September 28, 2021
INVL Technology
Q2 Estimates vs. Outcome and Estimate changes
Portfolio companies estimates vs. outcome
The Q2/21 Group Sales of EUR 8.4m was in-line with our estimate as the EUR 0.6m higher NRD CS sales was offset by EUR 0.6m lower than expected NRD Companies sales. The largest segment, Novian, Q2/21 sales of EUR 5.6m was in-line with forecast. The NRD Companies Q2/21 EBIT was ERU 0.2m below our forecast. This was more than offset by better than expected profits for the Novian segment (EUR 0.1m above est.), and the NRD CS segment (EUR 0.2m above est.). Worth noting is that the NRD CS segment posted a Q2/21 EBIT that was more than 3x above our estimate.
| Sales by portfolio company (EURm) | Q2/21 Estimate | Q2/21 Outcome | Diff. Q2/21 EURm | % |
|---|---|---|---|---|
| NRD Companies | 2.121 | 1.550 | -0.571 | -26.9% |
| Novian | 5.547 | 5.574 | 0.027 | 0.5% |
| NRD CS | 0.683 | 1.309 | 0.626 | 91.6% |
| Group sales | 8.351 | 8.433 | 0.082 | 1.0% |
| Sales growth | Q2/21 Estimate | Q2/21 Outcome | Diff. Q2/21 EURm | Bps |
| --- | --- | --- | --- | --- |
| NRD Companies | -2.7% | -28.9% | nm | -2619 |
| Novian | 3.1% | 3.6% | nm | 51 |
| NRD CS | 12.0% | 114.6% | nm | 10259 |
| Group sales growth | 2.2% | 3.2% | nm | 101 |
| EBIT by portfolio company (EURm) | Q2/21 Estimate | Q2/21 Outcome | Diff. Q2/21 EURm | % |
| --- | --- | --- | --- | --- |
| NRD Companies | 0.154 | -0.014 | -0.168 | -109.1% |
| Novian | 0.404 | 0.533 | 0.129 | 32.0% |
| NRD CS | 0.075 | 0.323 | 0.248 | 329.8% |
| Group EBIT | 0.600 | 0.701 | 0.101 | 16.8% |
| EBIT margin by Segment | Q2/21 Estimate | Q2/21 Outcome | Diff. Q2/21 EURm | Bps |
| --- | --- | --- | --- | --- |
| NRD Companies | 7.2% | -0.9% | nm | -815 |
| Novian | 7.3% | 9.6% | nm | 228 |
| NRD CS | 11.0% | 24.7% | nm | 1368 |
| Group EBIT margin | 7.2% | 8.3% | nm | 113 |
Source: Company reports, Enlight Research
Portfolio companies Estimate changes
Our Total Sales estimate for all portfolio companies is lowered by $1\%$ for 2021E. For 2022-23, we have raised our Total Sales by $3 - 6\%$ , driven by the NRD CS segment. Our Total EBIT for all portfolio companies is raised by about $20 - 30\%$ in the forecast period 2021-23 underpinned by high-margin NRD CS sales.
| Sales all portfolio companies (EURm) | 2021E | 2022E | 2023E |
|---|---|---|---|
| Old estimate | 36.3 | 40.0 | 43.8 |
| New estimate | 35.8 | 41.1 | 46.3 |
| Change | -0.4 | 1.1 | 2.5 |
| Change (pct) | -1.1% | 2.7% | 5.7% |
Enlight Research
September 28, 2021
INVL Technology
Holding company Estimate changes
We raise our Fair value of financial assets by $6\%$ for 2021 and $14\%$ for 2022 driven by the NRD CS segment. The change in Fair value of financial assets has big impact on the Holding company estimated Total income and EBIT as this is mainly made up of Fair value changes. Important to note is that the Holding company Income statement mainly consists of non-cash flow items e.g., the Change in Fair value of financial assets which will not be converted to cash until exits are made, while the performance fee provisions will not become a cash outflow until it is paid out at the end of the company life (2026 or later).
Holding company Estimate changes
| Fair value financial assets | 2021E | 2022E | 2023E |
|---|---|---|---|
| Old estimate | 36.0 | 41.2 | na |
| New estimate | 38.3 | 47.0 | 55.4 |
| Change | 2.3 | 5.8 | na |
| Change (pct) | 6.2% | 14.0% | na |
| Change FV financial assets | 2021E | 2022E | 2023E |
| --- | --- | --- | --- |
| Old estimate | 3.4 | 5.2 | na |
| New estimate | 5.6 | 8.7 | 8.5 |
| Change | 2.3 | 3.5 | na |
| Change (pct) | 66.7% | 67.6% | na |
| Total income | 2021E | 2022E | 2023E |
| --- | --- | --- | --- |
| Old estimate | 3.5 | 5.4 | na |
| New estimate | 5.8 | 8.9 | 8.6 |
| Change | 2.3 | 3.5 | na |
| Change (pct) | 63.5% | 65.4% | na |
| EBIT | 2021E | 2022E | 2023E |
| --- | --- | --- | --- |
| Old estimate | 1.2 | 3.1 | na |
| New estimate | 3.4 | 6.5 | 6.2 |
| Change | 2.2 | 3.4 | na |
| Change (pct) | 187.5% | 112.7% | na |
Source: Enlight Research
Enlight Research
September 28, 2021
INVL Technology
Valuation
Peer valuation
Since our last update in April this year, the Cybersecurity peers' P/Sales multiple has increased from 2.7x to 4.2x, which we believe reflects demand triggered by the pandemic. Meanwhile, the P/Sales multiple for the software and infrastructure peers has decreased, while the consulting peers are trading at the same levels as in April.
Peer multiple development since Initiation May 2020 to Q4/20 Update
Source: MarketScreener, Enlight Research, Introduce Research, DnB research, prices on 22 September 2021
Peer tables
IT Infrastructure services
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | P/Sales 2022E | EBIT marg. 2020 | EBIT marg. 2021E | EBIT marg. 2022E |
|---|---|---|---|---|---|---|---|---|---|---|
| Dustin | DUST | SEK | 94.20 | 10,656 | 0.81 | 0.72 | 0.58 | 2.9% | 3.8% | 4.1% |
| Proact IT | PACT | SEK | 69.90 | 1,919 | 0.53 | 0.52 | 0.50 | 5.1% | 4.8% | 5.6% |
| Atea | ATEA | NOK | 154.80 | 17,283 | 0.44 | 0.42 | 0.40 | 2.2% | 2.6% | 2.9% |
| CGit | CGIT B | SEK | 48.80 | 77 | 0.96 | 0.80 | 0.77 | 3.6% | 3.5% | 3.5% |
| Average | 0.68 | 0.61 | 0.56 | 3.4% | 3.7% | 4.0% | ||||
| Median | 0.67 | 0.62 | 0.54 | 3.3% | 3.6% | 3.8% |
Cybersecurity
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | P/Sales 2022E | EBIT marg. 2020 | EBIT marg. 2021E | EBIT marg. 2022E |
|---|---|---|---|---|---|---|---|---|---|---|
| Clavister Holding | CLAV | SEK | 7.06 | 387 | 3.0 | 2.6 | 2.2 | -35.7% | -25.2% | -7.8% |
| Freja eID Group | FREJA | SEK | 18.90 | 357 | 16.3 | 12.4 | 4.6 | -197.3% | -115.3% | -1.4% |
| Advenica | ADVE | SEK | 16.45 | 545 | 6.5 | 6.1 | 5.9 | -22.0% | -5.6% | 1.1% |
| F-Secure | FSC1V | EUR | 4.75 | 752 | 3.4 | 3.2 | 3.0 | 10.4% | 9.9% | 11.1% |
| FirEye | FEYE | USD | 17.70 | 4,202 | 4.5 | 8.8 | 7.3 | 8.3% | -25.0% | -12.5% |
| Cyber Security 1 | CYB1 | EUR | 0.03 | 9 | 0.3 | 0.3 | 0.3 | -16.8% | 5.0% | 9.1% |
| Average | 5.7 | 5.6 | 3.9 | -42.2% | -26.0% | -0.1% | ||||
| Median | 3.9 | 4.7 | 3.8 | -19.4% | -15.3% | -0.2% | ||||
| Average excluding extremes | 3.5 | 4.2 | -11.2% | -8.2% |
Enlight Research
September 28, 2021
INVL Technology
Software
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | P/Sales 2022E | EBIT marg. 2020 | EBIT marg. 2021E | EBIT marg. 2022E |
|---|---|---|---|---|---|---|---|---|---|---|
| Agillic | AGILC | DKK | 24 | 226 | 4.5 | 4.3 | 4.1 | -17% | -9% | 2% |
| Artificial Solutions | ASAI | SEK | 7.07 | 465 | 8.6 | 11.6 | 4.3 | -157% | -188% | -18% |
| Brix | BRIX | SEK | 5.74 | 261 | 58.5 | 44.2 | 25.1 | -518% | -342% | -188% |
| Efecte Oyj | EFECTE | EUR | 14.8 | 92 | 6.2 | 5.3 | 4.6 | -2% | 2% | 7% |
| FormPipe Software | FPIP | SEK | 31.95 | 1,717 | 4.3 | 4.1 | 3.7 | 13% | 13% | 11% |
| Fortnox | FNOX | SEK | 568 | 34,633 | 49.9 | 36.4 | 27.7 | 38% | 33% | 36% |
| LeadDesk Oyj | LEADD | EUR | 22.7 | 120 | 8.7 | 4.7 | 3.8 | 2% | 3% | 5% |
| Lime Technologies | LIME | SEK | 369.8 | 4,912 | 14.5 | 11.9 | 10.0 | 25% | 24% | 25% |
| Litium | LITI | SEK | 18.5 | 244 | 5.0 | 3.9 | 3.0 | -37% | -19% | 4% |
| Siili Solutions Oyj | SIILI | EUR | 13.72 | 96 | 1.2 | 1.0 | 1.0 | 6% | 10% | 11% |
| Zutec | ZUTEC | SEK | 6.98 | 309 | 11.6 | 10.3 | 9.4 | -133% | -17% | 3% |
| Average | 15.7 | 12.5 | 8.8 | -70.8% | -44.6% | -9.3% | ||||
| Median | 8.6 | 5.3 | 4.3 | -2.2% | 2.3% | 5.0% | ||||
| Average excluding extremes | 7.2 | 6.3 | 4.9 |
IT Consulting
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | P/Sales 2022E | EBIT marg. 2020 | EBIT marg. 2021E | EBIT marg. 2022E |
|---|---|---|---|---|---|---|---|---|---|---|
| B3 Consulting Group | B3 | SEK | 65.2 | 559 | 0.65 | 0.58 | 0.53 | 4.9% | 5.8% | 9.4% |
| CAG Group | CAG | SEK | 89.8 | 633 | 1.19 | 0.96 | 0.88 | 6.9% | 7.3% | 8.5% |
| Digia Oyj | DIGIA EMPIR | EUR | 6.76 | 180 | 1.30 | 1.19 | 1.13 | 10.1% | 8.2% | 9.2% |
| Empir Group | B | SEK | 23.2 | 128 | 0.64 | 0.88 | 0.81 | -0.9% | -8.2% | -2.2% |
| Solteq Oyj | SOLTEQ | EUR | 5.42 | 105 | 1.74 | 1.50 | 1.38 | 8.8% | 13.1% | 13.8% |
| Time People Group | TPGR | SEK | 29.4 | 213 | 1.03 | 1.10 | 1.07 | 6.3% | 6.5% | 6.5% |
| Innofactor Plc | IFA1V | EUR | 1.49 | 56 | 0.84 | 0.81 | 0.78 | 3.8% | 10.1% | 9.6% |
| Average | 1.05 | 1.00 | 0.94 | 5.7% | 6.1% | 7.8% | ||||
| Median | 1.03 | 0.96 | 0.88 | 6.3% | 7.3% | 9.2% |
Source: MarketScreener, Enlight Research, Introduce Research, DnB research, prices on 22 September 2021
Enlight Research
September 28, 2021
INVL Technology
Sum-of-the-parts valuation (SOTP)
Our Base case Fair value for all portfolio companies is EUR 43.2m which including the Net cash of EUR 2.4m sums up to EUR 45.6m or EUR 3.75 per share. Applying our assumed NAV discount of $20\%$ leaves a Fair value of EUR 3.00 per share indicating an upside of around $13\%$ (based on share price of EUR 2.66). The corresponding values for our Bull and Bear scenarios are EUR 3.66, and EUR 2.33, respectively. The wide span between our scenarios depicts the high risk but also opportunity inherent in small technology companies, especially in the software area. Note that the SOTP valuation also includes FINTime equal to the external valuation of EUR 0.25m reported in the Q2 2021 report.
SOTP valuation scenarios
| Scenario | Sales 2021E (EURm) | P/Sales | FV (EURm) | FINTime (EURm) | FV (EURm) | External valuation (EURm) | Net cash (EURm) | Net cash/ share (EURm) | NAV (EURm) | NAV/ share (EUR) | NAV discount | Motivated share price (EUR) | Upside/ Downside |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bull | 37.0 | 1.4 | 53.1 | 0.3 | 53.4 | 31.8 | 2.4 | 0.20 | 55.8 | 4.58 | 20% | 3.66 | 38% |
| Base | 37.0 | 1.2 | 42.9 | 0.3 | 43.2 | 31.8 | 2.4 | 0.20 | 45.6 | 3.75 | 20% | 3.00 | 13% |
| Bear | 37.0 | 0.9 | 32.7 | 0.3 | 33.0 | 31.8 | 2.4 | 0.20 | 35.4 | 2.91 | 20% | 2.33 | -13% |
Source: Company reports (historical), Enlight Research (forecast), *calculated on share price of EUR 2.66
Enlight Fair value vs. External valuation
Compared to the external valuation of the financial assets of EUR 31.8m given in the Q2/21 report, our estimated Fair value is EUR 11.4m or $36\%$ higher (before net cash, and NAV discount). The main valuation difference is for NRD CS (Cybersecurity) where our valuation is EUR 7.4m higher, followed by NRD Companies where our valuation is EUR 4.7m higher. For Novian Companies, we are slightly more conservative than the external valuator. Compared to the Q4/20 Update, our valuation has remained nearly unchanged - a slight increase of EUR 0.1m, while the external valuation has slightly decreased by $3\%$ or EUR 0.8m.
Fair Value vs. External valuation
| Company | Enlight Research Fair Value (EURm) | Q2 2021 External valuation Fair Value (EURm) | Diff. (EURm) | Diff. (%) |
|---|---|---|---|---|
| NRD CS | 12.9 | 5.5 | 7.4 | 136% |
| NRD Companies | 11.9 | 7.2 | 4.7 | 65% |
| FINTime | 0.3 | 0.3 | 0.0 | 0% |
| Novian Companies | 18.2 | 18.9 | -0.8 | -4% |
| Total | 43.2 | 31.8 | 11.4 | 36% |
Source: Enlight Research, Company report
Enlight Research
September 28, 2021
INVL Technology
Risk factors
Below is a list of what we believe are some of the most important risks, however, this list should not be regarded as a complete list of risks.
COVID-19 risk
So far, the effect of the Covid-19 on INVL Technology’s portfolio companies has been limited. However, a prolonged period of travel restrictions due to Covid-19 will most likely affect the sales of new products as it is dependent on face-to-face meetings.
Risk of change of technology
The technology sector is in constant change. Failure to adapt and learn a new technology could result in a drop in sale and earnings and hence lower the Fair value of the company.
The state of the M&A market
If the market for mergers and acquisitions is depressed during the exit phase (mainly 2026 with possible 2 years extension), the deal valuations could be lower than expected and it could be hard to sell portfolio companies.
Political risk
A significant share of clients are public institutions and hence the company has exposure to public sector contracts, which entails political risks.
Intellectual Property risk
A significant share of the company’s assets consists of intellectual property in the form of proprietary software and technology know-how. Therefore, the risk that somebody will try and steal intellectual property is present.
Valuation risk
The fair value of the holding companies is done by an independent external valuation firm. However, there is no guarantee that the final exit price of company will be according to the external valuation, nor to our valuation.
NAV discount risk
Even though the NAV of INVL Technology increases, there is no guarantee that the share price will increase as the NAV discount could increase as well.
Liquidity risk
The trading activity (liquidity) on the Nasdaq Baltic Exchange is low relative to most Western European markets. Therefore, it may be hard to buy and sell large amounts of INVL Technology shares without affecting the share price.
Enlight Research
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September 28, 2021
INVL Technology
| Income Statement | 2019 | 2020 | 2021E | 2022E | 2023E |
|---|---|---|---|---|---|
| Net sales | 1 | 7 | 6 | 9 | 9 |
| Total operating costs | -1 | -2 | -2 | -2 | -2 |
| EBITDA | 1 | 5 | 3 | 7 | 6 |
| Depreciation | 0 | 0 | 0 | 0 | 0 |
| Amortizations (total) | 0 | 0 | 0 | 0 | 0 |
| Impairment charges | 0 | 0 | 0 | 0 | 0 |
| EBIT | 1 | 5 | 3 | 7 | 6 |
| Associated companies' profit/loss | 0 | 0 | 0 | 0 | 0 |
| Net financial items | 0 | 0 | 0 | 0 | 0 |
| Exchange rate differences | 0 | 0 | 0 | 0 | 0 |
| Pre-tax profit (PTP) | 1 | 5 | 3 | 7 | 6 |
| Net earnings | 1 | 5 | 3 | 7 | 6 |
| Balance Sheet | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| Assets | |||||
| Cash and cash equivalent | 1 | 2 | 2 | 6 | 13 |
| Receivables | 0 | 0 | 0 | 0 | 0 |
| Inventories | 0 | 0 | 0 | 0 | 0 |
| Other current assets | 2 | 1 | 1 | 1 | 1 |
| Current assets | 3 | 3 | 2 | 7 | 13 |
| Tangible assets | 0 | 0 | 0 | 0 | 0 |
| Associated Companies | 0 | 0 | 0 | 0 | 0 |
| Investments | 26 | 33 | 38 | 38 | 38 |
| Goodwill | 0 | 0 | 0 | 0 | 0 |
| O intangible rights | 0 | 0 | 0 | 0 | 0 |
| O non-current assets | 0 | 0 | 0 | 0 | 0 |
| Total non-current assets | 26 | 33 | 38 | 38 | 38 |
| Deferred tax assets | 0 | 0 | 0 | 0 | 0 |
| Total (assets) | 29 | 35 | 41 | 45 | 52 |
| Liabilities | |||||
| Short-term debt | 0 | 0 | 2 | 0 | 0 |
| Non-ib current liabilities | 0 | 0 | 0 | 0 | 0 |
| O current liabilities | 0 | 0 | 0 | 0 | 0 |
| Current liabilities | 0 | 0 | 2 | 0 | 0 |
| Long-term debt | 0 | 0 | 0 | 0 | 0 |
| Lease liabilities | 0 | 0 | 0 | 0 | 0 |
| O long-term liabilities | 0 | 0 | 0 | 0 | 0 |
| Convertibles | 0 | 0 | 0 | 0 | 0 |
| Total Liabilities | 0 | 0 | 2 | 0 | 0 |
| Deferred tax liabilities | 0 | 0 | 0 | 0 | 0 |
| Provisions | 0 | 2 | 2 | 2 | 2 |
| Shareholders' equity | 29 | 34 | 37 | 44 | 50 |
| Minority interest (BS) | 0 | 0 | 0 | 0 | 0 |
| Minority and equity | 29 | 34 | 37 | 44 | 50 |
| Total (liabilities) | 29 | 35 | 41 | 45 | 52 |
| Capital structure | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| Equity ratio | 99.6% | 95.3% | 91.3% | 96.3% | 96.7% |
| Debt / Equity ratio | 0.0% | 0.0% | 5.0% | 0.0% | 0.0% |
| Capital invested | 27.6 | 31.5 | 37.2 | 37.2 | 37.2 |
| Capital turnover rate | 0.1 | 0.2 | 0.1 | 0.2 | 0.2 |
| Profitability | 2019 | 2020 | 2021E | 2022E | 2023E |
| ROE % | 3.3% | 15.2% | 9.6% | 16.1% | 13.2% |
| ROCE% | 3.3% | 15.2% | 9.4% | 15.8% | 13.2% |
| ROC% | 3.6% | 17.3% | 10.8% | 17.5% | 16.7% |
| EBITDA % | 63.7% | 69.2% | 59.0% | 73.4% | 71.6% |
| EBIT % | 63.7% | 69.2% | 59.0% | 73.4% | 71.6% |
| Net Margin | 63.7% | 69.2% | 59.0% | 73.4% | 71.6% |
| Valuation | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| EV | 21.0 | 23.1 | 32.4 | 25.9 | 19.7 |
| P/E | 24.0 | 5.3 | 9.5 | 5.0 | 5.2 |
| P/E diluted | 24.0 | 5.3 | 9.5 | 5.0 | 5.2 |
| P/Sales | 15.3 | 3.7 | 5.6 | 3.7 | 3.7 |
| EV/Sales | 14.3 | 3.4 | 5.6 | 2.9 | 2.3 |
| EV/EBITDA | 22.5 | 4.9 | 9.5 | 4.0 | 3.2 |
| EV/EBIT | 22.5 | 4.9 | 9.5 | 4.0 | 3.2 |
| P/BV | 0.8 | 0.8 | 0.9 | 0.7 | 0.7 |
| Per share measures | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| EPS | 0.08 | 0.39 | 0.28 | 0.53 | 0.51 |
| EPS, adjusted | 0.08 | 0.39 | 0.28 | 0.53 | 0.51 |
| CEPS | 0.08 | 0.39 | 0.28 | 0.53 | 0.51 |
| Operating CF/share | 0.05 | 0.49 | 0.28 | 0.53 | 0.51 |
| Capital empl./share | 2.26 | 2.59 | 3.05 | 3.05 | 3.05 |
| BV/share | 2.38 | 2.77 | 3.05 | 3.59 | 4.09 |
| Tangible BV/share | 2.38 | 2.77 | 3.05 | 3.59 | 4.09 |
| Div. per share | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Payout | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Dividend yield | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Shareholders | Capital | Votes | |||
| --- | --- | --- | |||
| UAB LIB Investments | 6.448 | 19.91 % | |||
| AB Invalda INVL | 4.641 | 14.33 % | |||
| Irena Ona Miseikiene | 3.899 | 12.04 % | |||
| AB Lietuvos draudimas | 2.419 | 7.47 % | |||
| Kazimieras Tonkunas | 1.797 | 5.55 % | |||
| Alvydas Banys | 1.645 | 5.08 % | |||
| Key people | |||||
| --- | --- | ||||
| CEO | Kazimieras Tonkunas | ||||
| Chairman | Kazimieras Tonkunas |
Enlight Research
September 28, 2021
INVL Technology
| P/E
Price per share
Earnings per share | EPS
Profit before extraordinary items and taxes – income taxes +
minority interest
Number of shares |
| --- | --- |
| P/Sales
Market cap
Sales | DPS
Dividend for financial period per share |
| P/BV
Price per share
Shareholders’ equity + taxed provisions per share | CEPS
Gross cash flow from operations
Number of shares |
| P/CF
Price per share
Operating cash flow per share | EV/Share
Enterprise value
Number of shares |
| EV (Enterprise value)
Market cap + Net debt + Minority interest at market value – share of
associated companies at market value | Sales/Share
Sales
Number of shares |
| Net debt
Interest-bearing debt – financial assets | EBITDA/Share
Earnings before interest, tax, depreciation and amortization
Number of shares |
| EV/Sales
Enterprise value
Sales | EBIT/Share
Operating profit
Number of shares |
| EV/EBITDA
Enterprise value
Earnings before interest, tax, depreciation and amortization | EAFI/Share
Pre-tax profit
Number of shares |
| EV/EBIT
Enterprise value
Operating profit | Capital employed/Share
Total assets – non-interest-bearing debt
Number of shares |
| Div yield, %
Dividend per share
Price per share | Total assets
Balance sheet total |
| Payout ratio, %
Total dividends
Earnings before extraordinary items and taxes – income taxes + minority interest | Interest coverage (x)
Operating profit
Financial items |
| Net cash/Share
Financial assets – interest-bearing debt
Number of shares | Asset turnover (x)
Turnover
Balance sheet total (average) |
| ROA, %
Operating profit + financial income + extraordinary items
Balance sheet total – interest-free short-term debt – long-term advances received and accounts payable (average) | Debt/Equity, %
Interest-bearing debt
Shareholders’ equity + minority interest + taxed provisions |
| ROCE, %
Profit before extraordinary items + interest expenses + other financial costs
Balance sheet total – non-interest-bearing debt (average) | Equity ratio, %
Shareholders’ equity + minority interest + taxed provisions
Total assets – interest-free loans |
| ROE, %
Profit before extraordinary items – income taxes
Shareholders’ equity + minority interest + taxed provisions (average) | CAGR, %
Cumulative annual growth rate = Average growth rate per year |
Enlight Research
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September 28, 2021
INVL Technology
Disclaimer
Enlight Research OÜ’s main valuation methods are discounted cash flow valuation and peer valuation with common multiples such as Price to Earnings, Enterprise Value to EBITDA, dividend yield etc. Aforementioned methods are used to estimate a company’s fair value according to the following three scenarios: Bull (positive), Base (main scenario), and Bear (negative).
This report is commissioned by the company covered in this report which means Enlight Research OÜ receives compensation to write research on the company. The compensation is pre-determined and does not depend on the content in the report. This report is not to be considered investment research under MiFID regulations. Enlight Research OÜ does not issue investment recommendations or advice.
This report is for informational purposes only i.e. it should not be considered as an offer to sell or buy. Investors are encouraged to make their own research and not rely solely on this report when making their investment decisions. The decision to invest or not to invest is fully the responsibility of the investor i.e. Enlight Research OÜ takes no responsibility nor gives any guarantees with regards to investment decisions made by investors. Investing in equities entails risk e.g. the price of an equity decreases. Past performance is not a guarantee for future performance.
This report is based on information and sources that Enlight Research OÜ deemed to be reliable. However, Enlight Research OÜ cannot guarantee the accuracy or completeness of the information. All forward-looking statements and financial forecasts entail uncertainty and are subject to change without notice. Enlight Research OÜ accept no liability for any loss or damage resulting from the use of this report.
The analyst(s) writing this report own shares in the company in this report: Yes
The analyst(s) responsible for this report are not allowed to trade in any financial instruments of the company in this report until the report has been published, or if other conflict of interest exist e.g. advisory related.
Investors should assume that Enlight Research OÜ is seeking, or is performing, or have performed advisory services or other revenue generating services for the company in this report. An analyst’s compensation is never directly related to advisory projects. An analyst working on advisory projects will be taken over the “Chinese wall” as soon as relevant regulations and/or guidelines require this.
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This report may not be copied, reproduced, distributed, or published other than for personal reasons without written permission by Enlight Research OÜ. To apply for permission, send an email to below address:
© Copyright 2019 Enlight Research OÜ
Enlight Research
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September 28, 2021
INVL Technology
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Contact information
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Enlight Research
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