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INVL Technology Investor Presentation 2021
2265_rns_2021-04-28_9898336f-fcf7-46b9-9b42-75f67142b55c.pdf
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INVL Technology
Technology
April 26, 2021
Enlight Research
Baltics - Lithuania
Commissioned Research - Q4 2020 Update
A good year
Despite Covid, the listed private equity fund, INVL Technology, improved on all metrics in 2020 posting higher sales, profits, and NAV. The share was rewarded accordingly with a gain of 18% in 2020 and 12% so far in 2021.
All 2020 metrics improved
Sales for all portfolio companies increased by 4% in 2020 to EUR 34.3m, while EBIT almost doubled to EUR 1.7m. All segments contributed to both the sales and the EBIT improvement. The NAV increased by 16% in 2020 to EUR 2.77 at the end of the year, driven by an increase in the Fair value of portfolio companies done by an external valuator.
Fair value financial assets +26%
The external valuator increased the Fair value of financial assets (portfolio companies) by 26% or EUR 6.7m in 2020 to EUR 32.7m. The increase was driven by improved financial performance for all segments – NRD Companies (software, consultant), Novian (IT integration, IT infra, software), NRD CS (Cybersecurity).
Base case share price raised
Our sum-of-the-parts (SOTP) Base case motivated value per share is raised to EUR 3.00, implying an upside of around 30%. We lower our estimates due to a longer than expected pandemic but see potential upside from the recently announced EUR 673bn EU Recovery & Resilience program, whereof EUR 2.2bn is provided for Lithuania, of which EUR 440m for digitalization of public services (will benefit from program in Estonia and Latvia as well).
Key figures (MEUR)
| 2019 | 2020 | 2021E | 2022E | 2023E | |
|---|---|---|---|---|---|
| Holding company | |||||
| Fair value Financial assets* | 25.912 | 32.652 | 36.026 | 41.216 | 46.665 |
| Change Financial assets | 1.279 | 6.740 | 3.374 | 5.190 | 5.450 |
| Other income | 0.185 | 0.150 | 0.170 | 0.170 | 0.170 |
| Total income | 1.464 | 6.890 | 3.544 | 5.360 | 5.620 |
| Operating expenses | -0.531 | -0.588 | -0.787 | -0.680 | -0.690 |
| Accrued perf. fee | 0.000 | -1.535 | -1.569 | -1.621 | -1.675 |
| Net profit | 0.933 | 4.767 | 1.188 | 3.059 | 3.255 |
| Portfolio companies | |||||
| Revenue (m) | 32.9 | 34.3 | 36.4 | 40.2 | 43.9 |
| EBIT (m) | 0.9 | 1.7 | 2.9 | 3.9 | 4.6 |
| Revenue growth | 5.0% | 4.3% | 6.1% | 10.4% | 9.2% |
| EBIT margin | 2.7% | 5.1% | 8.0% | 9.8% | 10.4% |
| P/Sales | 0.85 | 0.82 | 0.77 | 0.70 | 0.64 |
Source: Company data, Enlight Research estimates
| Fair value range (EUR) | |
|---|---|
| Bull P/Sales 1.5x | 3.66 |
| Base P/Sales 1.3x | 3.00 |
| Bear P/Sales 1.0x | 2.33 |
| Key Data | |
| Price (EUR) | 2.34 |
| Ticker | INC1L |
| Country | Lithuania |
| Listed | Vilnius (Lithuania) |
| Market Cap (EURm) | 28.5 |
| Net debt (EURm) | -2.4 |
| Shares (m) | 12 |
| Free float | 35.62 % |
| Price range | |
|---|---|
| 52-week high | 2.34 |
| 52-week low | 1.76 |
| Analyst |
Enlight Research
April 26, 2021
INVL Technology
Q4 2020 Key takeaways
Solid year
All segments posted increasing sales and profits in 2020 vs. 2019, which we believe illustrates the pandemic resilience of the tech sector. The Novian segment was the biggest contributor to the revenue growth, as Novian BAIP (IT Infrastructure) increased sales by $7\%$ or EUR 1.2m to EUR 18.2m. Novian BAIP is the biggest company in the group making up around two thirds of the Novian segment revenues and a bit more than half of all portfolio companies' revenues. The NRD Companies (IT solutions for public, retail, and finance sector) and NRD Cybersecurity segments both contributed EUR 0.4m in additional revenues in 2020 vs. 2019, growing sales by $6\%$ , and $14\%$ , respectively. We regard NRD Cybersecurity's sales growth as especially encouraging given that sales declined by $27\%$ in 2019.
At the EBIT level, the Novian segment added EUR 0.6m in 2020 vs. 2019, while the NRD Companies and the NRD Cybersecurity segments added EUR 0.4m each. It is worth noting that the NRD Companies segment swung from an EBIT loss of EUR 0.07m to a profit of EUR 0.33m. Overall, we regard it as a positive that all segments contributed to both the Revenue and EBIT improvement in 2020 vs. 2019.
Source: Company reports
Enlight Research
April 26, 2021
INVL Technology
FX and one-offs affected Q4 2020
Q4/20 Sales and EBIT for the NRD Companies and the Novian segment came in below our forecast, while NRD Cybersecurity came in above the forecast on sales and slightly below on EBIT. The biggest negative deviation came from the Novian segment (mainly IT Infrastructure) that posted EUR 2.4m lower sales, and EUR 0.8m lower EBIT than forecast. Most of the EUR 1.2m negative deviation at the EBIT level can be explained by currency exchange rate movements and items of one-off nature. We estimate the weaker USD and NOK against the EUR resulted in a negative EBIT effect of EUR 0.3m. In addition, we estimate the change of government resulted in a negative EBIT effect of EUR 0.3m (even more on sales) due to frozen projects. Also, we believe the lockdown affected the EBIT negatively by EUR 0.3m as sales of new products is hard to do without face-to-face meetings. Our estimated total negative effect from one-offs is EUR 0.9m, which explains all but EUR 0.3m of the negative Q4/20 EBIT deviation vs. our forecast. We foresee some catch-up effect this year from projects put on hold last year, and from resumption of new product sales as the economy re-opens.
Estimated EBIT Q4/20 one-offs
| Item | (EURm) |
|---|---|
| FX effect | -0.300 |
| Change of government in Lithuania (frozen or delayed projects) | -0.300 |
| Lock-down effect on new product sales | -0.300 |
| Total | -0.900 |
Q4 2020 Estimate vs. Outcome
| (EURm) | Q4/20 Sales | Q4/20 EBIT |
|---|---|---|
| Estimate | 12.1 | 1.4 |
| Outcome | 9.7 | 0.2 |
| Difference | -2.4 | -1.2 |
| Estimated one-offs | -0.9 | |
| Adjusted difference | -0.3 |
Source: Company report, Enlight Research
EBIT improvements motivate higher multiples
The EBIT margin for NRD Systems and Novian improved significantly in 2020 vs. 2019, while it was unchanged for NRD CS. For the Group, the 2020 EBIT margin improved to $5.1\%$ from $2.7\%$ in 2019. We believe the improved EBIT margin motivates higher P/Sales multiples as there is a clear relationship between the P/Sales multiple and the EBIT margin. Accordingly, we estimate an increase in the Fair value of financial assets of EUR 3.4m this year and EUR 5.2m in 2022.
Fair Value financial assets & Change in Fair value
Source: Company report, Enlight Research
Enlight Research
April 26, 2021
INVL Technology
Our estimated increase in the Fair value of financial assets is backed up by an increase in peer multiples and the external valuator's 2020 increase in the Fair value of financial assets (based on improved operational performance). Since our Initiation report in May 2020 (when Covid uncertainty was extremely high), the valuation multiples for all Invalda Technology's relevant peer groups have increased significantly. The increase was accentuated in Q4/20 when e.g. the P/Sales multiple for the largest segment, Novian, increased to $0.69x$ from $0.46x$ in the previous quarter. In Q4/20, the external valuator's Fair value of financial assets was increased by EUR 5.5m resulting in a full-year 2020 increase of EUR 6.7m, which was significantly higher than our estimated increase of EUR 1.3m. The 2020 year-end Fair value of financial assets amounted to EUR 32.7m, up from EUR 25.9m at the end of 2019. We believe that the outlook is good for a continued increase in the Fair value of financial assets by the external valuator.
Peer multiple development since Initiation May 2020 to Q4/20 Update
Source: MarketScreener, Enlight Research, Introduce.se, DnB
Base case Sum-of-the-parts (SOTP) valuation
Our P/Sales 2020 Base case sum-of-the-parts (SOTP) valuation per share is raised to EUR 3.00 (EUR 2.59) on the back of improved EBIT margins leading to higher motivated P/Sales multiples (lower discount to peers). Our weighted P/Sales discount to peers is still around $50\%$ which could be considered conservative, but we keep the smaller company size and lower share liquidity in mind.
Fair value Invalda Technology (Base case)
| Weighted P/Sales 2020 | W(P/Sales Discount) | Sales 2018 | Sales 2019 | Sales 2020 | Enlight FV (EURm) | Enlight FV/share (EUR) | ||
|---|---|---|---|---|---|---|---|---|
| Base case | Peer avg. | |||||||
| Business area: Business climate improvement & e-governance | ||||||||
| NRD Companies | 2.3 | 4.9 | 53% | 7.2 | 6.6 | 7.0 | 16.3 | 1.34 |
| Business area: IT services & software | ||||||||
| Novian Companies | 0.9 | 2.0 | 55% | 20.3 | 23.5 | 24.1 | 22.1 | 1.81 |
| Business area: Cybersecurity | ||||||||
| NRD CS | 1.4 | 2.7 | 47% | 3.9 | 2.8 | 3.2 | 4.6 | 0.37 |
| Business area: Business process outsourcing | ||||||||
| FiNtime | na | na | na | na | na | na | 0.233 | 0.02 |
| Group total | 1.2 | 2.7 | 53% | 31.4 | 32.9 | 34.3 | 43.1 | 3.54 |
| Sales growth | 17% | 5% | 4% | |||||
| Add Net cash: | 2.4 | 0.20 | ||||||
| Group total: | 45.6 | 3.74 | ||||||
| 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 08 April 2021 for Q4/20 and 04 November 2020 for Q3/20.
Enlight Research
April 26, 2021
INVL Technology
NAV discount stable since Q2 2020
Since the end of Q2/20, the NAV discount has been stable around $17 - 18\%$ except for the end of Q4/20 when it was $25\%$ . Our Base case motivated value assumes a $20\%$ NAV discount which could be considered conservative given that it is currently trading at a $17\%$ discount. Compared to other listed investment companies in the region, INVL Technology stand out as lowly valued as the other investment companies trade at a premium to NAV. It should be noted that our peer investment companies are Swedish listed, so a comparison is not fully relevant. In our view, we believe the INVL Technology discount could narrow once the company starts exiting/divesting companies at prices close to the reported fair value.
Invalid Technology share NAV discount
Source: Company reports, *price on 08 April 2021 (EUR 2.30 per share) based on last reported NAV in quarterly report
Nordic investment companies NAV premium/discount
Source: Company reports, prices on 16 April, last reported NAV
Enlight Research
April 26, 2021
INVL Technology
EU Covid recovery program to boost Lithuanian Public IT spending
The EU Recovery and Resilience Facility is aimed to mitigate the economic and social impact of the coronavirus pandemic. The total size of the facility is EUR 672.5bn whereof EUR 312.5bn are grants and EUR 360bn are loans. One of the flagship areas of the facility is the digitalization of public administration. The program entered into force on 19 February this year and countries must submit national plans of investments during this year. The first payments from the facility to the countries must be done at latest five months after the plan is submitted i.e., this is a relatively expedient program as one objective is to kick-start the EU economies (funding will run until 2026). If Lithuania's investment plan is approved by the EU Council, EUR 2.2bn in grants and EUR 3bn in loans can be provided whereof $20\%$ shall be allocated to digitalization. We believe the EUR +1bn allocated for digitalization will boost the Lithuanian IT market in general, especially when it comes to the digitalization of public administration, which is one of INVL Technologies' core areas. In 2020, NRD Systems and NRD Cybersecurity had over $50\%$ or revenues from Public clients, while Novian had around $30\%$ .
Source: ec.europa.eu
Source: Company presentation
Enlight Research
April 26, 2021
INVL Technology
Q4 Estimates vs. Outcome and Estimate changes
Portfolio companies estimates vs. outcome
Q4/20 Group Sales was 19.7% below our estimate. The main reason for the negative deviation was the Novian segment that came in EUR 2.4m below our forecast, which was mainly due to one-off effects such as negative foreign exchange (FX) movements, and delayed Public sector projects as Lithuania changed government in the quarter. The lower than expected sales for the NRD Companies segment was offset by higher than expected sales for the NRD CS (these deviations were relatively small at around EUR 0.1m negative/positive).
Q4/20 Group EBIT was EUR 1.2m below our forecast, whereof EUR 0.9m was due to one-offs (FX effect, frozen projects due to change of government in Lithuania, lockdown) i.e., our estimated underlying negative deviation was just EUR 0.3m.
| Sales by holding companies (EURm) | Q4/20 Estimate | Q4/20 Outcome | Diff. Q4/20 EURm | % |
|---|---|---|---|---|
| NRD Companies | 1.638 | 1.524 | -0.114 | -7.0% |
| Novian | 9.124 | 6.741 | -2.383 | -26.1% |
| NRD CS | 1.339 | 1.448 | 0.109 | 8.2% |
| Group sales | 12.100 | 9.713 | -2.387 | -19.7% |
| Sales growth | Q4/20 Estimate | Q4/20 Outcome | Diff. Q4/20 EURm | Bps |
| --- | --- | --- | --- | --- |
| NRD Companies | -11.9% | -18.2% | nm | -622 |
| Novian | 11.2% | -17.9% | nm | -2906 |
| NRD CS | 31.4% | 42.1% | nm | 1074 |
| Group sales growth | 9.2% | -12.4% | nm | -2157 |
| EBIT by holding company (EURm) | Q4/20 Estimate | Q4/20 Outcome | Diff. Q4/20 EURm | % |
| --- | --- | --- | --- | --- |
| NRD Companies | 0.192 | -0.072 | -0.264 | -137.4% |
| Novian | 1.014 | 0.177 | -0.837 | -82.5% |
| NRD CS | 0.178 | 0.116 | -0.062 | -34.8% |
| Group EBIT | 1.384 | 0.205 | -1.179 | -85.2% |
| EBIT margin by Segment | Q4/20 Estimate | Q4/20 Outcome | Diff. Q4/20 EURm | Bps |
| --- | --- | --- | --- | --- |
| NRD Companies | 11.7% | -4.7% | nm | -1646 |
| Novian | 11.1% | 2.6% | nm | -849 |
| NRD CS | 13.3% | 8.0% | nm | -528 |
| Group EBIT margin | 11.4% | 2.1% | nm | -933 |
Source: Company reports, Enlight Research
Holding company estimates vs. outcome
The Holding company (listed entity) full-year 2020 Total income was EUR 6.9m above our forecast, which was due to a EUR 5.4m higher than estimated change in the Fair value of financial assets. Until divestments are made (expected 2025-26), the Total income line will mainly consist of change in Fair value of financial assets. The Operating expenses were EUR 0.1m lower than forecast. There was an accrued performance fee of EUR 1.5m compared (estimate was zero) which we regard as a positive sign as it means the company estimates the total investor return to exceed the minimum return barrier (initial investment + 8% annual return over the company
Enlight Research
April 26, 2021
INVL Technology
entire life which should be at least until 2026). If returns do not reach the company's estimate, the performance fee provision will be reversed. The 2020 EBIT was almost EUR 4m higher than forecast, which is an effect of the positive change in the Fair value of financial assets. Nothing happens below the EBIT line i.e.; the deviation is the same at the Net profit line.
| Holding company (EURm) | 2020 Estimate | 2020 Outcome | Diff. EURm | % |
|---|---|---|---|---|
| Fair value Financial assets | 27.218 | 32.652 | 5.434 | 20.0% |
| Change in Financial assets | 1.306 | 6.740 | 5.434 | 416.1% |
| Other income | 0.170 | 0.150 | -0.020 | -11.8% |
| Total income | 1.476 | 6.890 | 5.414 | 366.8% |
| Operating expenses | -0.687 | -0.588 | 0.099 | -14.4% |
| Accr. performance fee | 0.000 | -1.535 | -1.535 | na |
| EBIT | 0.789 | 4.767 | 3.978 | 504.2% |
Source: Company reports, Enlight Research
Portfolio companies Estimate changes
Our Sales estimate for all portfolio companies is lowered by $10 - 12\%$ in the forecast period 2021-23E, which is mainly due to a lowering of the Novian segment estimate. Our EBIT for all portfolio companies is lowered by $22\%$ this year, $6\%$ in 2022, and $1\%$ in 2023.
Estimate changes
| Sales all portfolio companies (EURm) | 2021E | 2022E | 2023E |
|---|---|---|---|
| Old estimate | 41.6 | 45.7 | 48.8 |
| New estimate | 36.4 | 40.2 | 43.9 |
| Change | -5.2 | -5.5 | -4.9 |
| Change (pct) | -12.5% | -12.0% | -10.1% |
| EBIT all portfolio companies (EURm) | 2021E | 2022E | 2023E |
| --- | --- | --- | --- |
| Old estimate | 3.8 | 4.3 | 4.6 |
| New estimate | 2.9 | 3.9 | 4.6 |
| Change | -0.9 | -0.3 | -0.1 |
| Change (pct) | -23.8% | -7.7% | -1.7% |
Source: Company reports, Enlight Research
Holding company Estimate changes
We raise our Fair value of financial assets by $75\%$ for 2021 and $100\%$ for 2022 following the encouraging value increase in 2020, and positive outlook supported by EU's pandemic recovery program. Our estimated Total income for the Holding company is close to the change in the Fair value of financial assets. Our EBIT estimate is slightly lowered by EUR 0.2m in 2021 and raised by EUR 0.9m in 2022 (Net profit line is the same as EBIT). 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 will not be converted to cash until an exit is made, and 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). See next page for estimate changes table for Holding company.
Enlight Research
April 26, 2021
INVL Technology
Holding company Estimate changes
| Fair value financial assets | 2021E | 2022E |
|---|---|---|
| Old estimate | 27.2 | 29.2 |
| New estimate | 36.0 | 41.2 |
| Change | 8.8 | 12.1 |
| Change (pct) | 32.4% | 41.4% |
| Change FV financial assets | 2021E | 2022E |
| --- | --- | --- |
| Old estimate | 1.9 | 2.6 |
| New estimate | 3.4 | 5.2 |
| Change | 1.4 | 2.6 |
| Change (pct) | 74.7% | 99.5% |
| Total income | 2021E | 2022E |
| --- | --- | --- |
| Old estimate | 2.1 | 2.8 |
| New estimate | 3.5 | 5.4 |
| Change | 1.4 | 2.6 |
| Change (pct) | 68.7% | 93.4% |
| EBIT | 2021E | 2022E |
| --- | --- | --- |
| Old estimate | 1.4 | 2.1 |
| New estimate | 1.2 | 3.1 |
| Change | -0.2 | 0.9 |
| Change (pct) | -15.4% | 43.4% |
Source: Enlight Research
Enlight Research
April 26, 2021
INVL Technology
Valuation
Peer valuation
Since our Initiation of coverage report in May 2020, the average multiples for all the relevant peer groups have increased substantially, especially for the software peer group where the average P/Sales multiple has more than doubled to $6.9x$ . During the same time period, the Infrastructure average peer multiple has increased from $0.45x$ to $0.69x$ , which has a significant impact on the INVL Technology valuation as infrastructure (Novian segment) make up around $55\%$ of all portfolio companies' sales. Interesting to note is that the Cybersecurity peers' P/Sales multiple has recovered to $2.7x$ after having bottomed at $1.9x$ in Aug-Nov 2020.
P/Sales 2020 multiple development since Initiation May 2020 to Q4/20 Update
Source: MarketScreener, Enlight Research, Introduce Research, DnB research
Peer tables
IT Infrastructure services
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | EBIT marg. 2020 | EBIT marg. 2021E |
|---|---|---|---|---|---|---|---|---|
| Dustin | DUST | SEK | 94.03 | 8,335 | 0.63 | 0.60 | 2.9% | 4.0% |
| Proact IT | PACT | SEK | 299.00 | 2,736 | 0.75 | 0.70 | 5.1% | 5.3% |
| Atea | ATEA | NOK | 152.00 | 16,877 | 0.43 | 0.40 | 2.2% | 2.5% |
| CGit | CGIT B | SEK | 47.50 | 75 | 0.93 | 0.71 | 3.5% | 3.5% |
| Average | 0.69 | 0.60 | 3.4% | 3.8% | ||||
| Median | 0.69 | 0.65 | 3.2% | 3.7% |
Cybersecurity
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | EBIT marg. 2020 | EBIT marg. 2021E |
|---|---|---|---|---|---|---|---|---|
| Clavister Holding | CLAV | SEK | 7.46 | 390 | 3.0 | 2.3 | -35.7% | -14.8% |
| Freja eID Group | FREJA | SEK | 117.50 | 629 | 28.7 | 16.8 | -197.3% | -59.4% |
| Advenica | ADVE | SEK | 5.08 | 168 | 2.0 | 1.9 | -22.0% | -5.6% |
| F-Secure | FSC1V | EUR | 4.05 | 641 | 2.9 | 2.8 | 10.4% | 9.5% |
| Average | 9.2 | 5.9 | -61.1% | -17.5% | ||||
| Median | 3.0 | 2.5 | -28.9% | -10.2% | ||||
| Average excluding extremes | 2.7 | 2.3 | -16% | -4% |
Source: MarketScreener, Enlight Research, Introduce Research, DnB research
Enlight Research
April 26, 2021
INVL Technology
Software
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | EBIT marg. 2020 | EBIT marg. 2021E |
|---|---|---|---|---|---|---|---|---|
| Agillic | AGILC | DKK | 23.2 | 219 | 4.3 | 4.4 | -17% | -12% |
| Artificial Solutions | ASAI | SEK | 9.66 | 469 | 8.7 | 8.0 | -157% | -81% |
| Briox | BRIX | SEK | 7.22 | 264 | 59.1 | 44.0 | -518% | -378% |
| Efecte Oyj | EFECTE | SEK | 14.5 | 88 | 5.9 | 5.2 | -2% | 2% |
| FormPipe Software | FPIP | SEK | 34.25 | 1,831 | 4.5 | 4.3 | 13% | 9% |
| Fortnox | FNOX | SEK | 420.8 | 25,592 | 36.9 | 27.7 | 38% | 36% |
| LeadDesk Oyj | LEADD | EUR | 25.8 | 115 | 8.4 | 4.5 | 2% | 3% |
| Lime Technologies | LIME | SEK | 367.9 | 4,887 | 14.4 | 12.0 | 25% | 24% |
| Litium | LITI | SEK | 24.5 | 323 | 6.7 | 5.2 | -37% | -19% |
| Sili Solutions Oyj | SILI | EUR | 17.84 | 125 | 1.5 | 1.3 | 6% | 9% |
| Zutec | ZUTEC | SEK | 4.83 | 214 | 8.0 | 5.2 | -133% | -14% |
| Average | 14.4 | 22.2 | -70.8% | -38.3% | ||||
| Median | 8.0 | 5.2 | -2.2% | 1.8% | ||||
| Average excluding extremes | 6.9 | 5.6 |
IT Consulting
| Company | Ticker | Ccy | Price (last) | Mcap (m) (last) | P/Sales 2020 | P/Sales 2021E | EBIT marg. 2020 | EBIT marg. 2021E |
|---|---|---|---|---|---|---|---|---|
| B3 Consulting Group | B3 | SEK | 49.3 | 415 | 0.48 | 0.43 | 4.9% | 5.8% |
| CAG Group | CAG | SEK | 73 | 485 | 0.91 | 0.77 | 6.9% | 8.6% |
| Digia Oyj | DIGIA | EUR | 7.98 | 213 | 1.53 | 1.39 | 10.1% | 8.8% |
| EMPIR | ||||||||
| Empir Group | B | SEK | 13.6 | 75 | 0.37 | 0.43 | -0.9% | -1.4% |
| Solteq Oyj | SOLTEQ | EUR | 5.02 | 97 | 1.61 | 1.45 | 8.8% | 10.9% |
| Time People Group | TPGR | SEK | 22 | 160 | 0.77 | 0.66 | 6.3% | 5.6% |
| Innofactor Plc | IFA1V | EUR | 1.925 | 72 | 1.09 | 1.03 | 3.8% | 8.3% |
| Average | 0.97 | 0.88 | 5.7% | 6.7% | ||||
| Median | 0.91 | 0.77 | 6.3% | 8.3% |
Source: MarketScreener, Enlight Research, Introduce Research, DnB research
Sum-of-the-parts valuation (SOTP)
In our Base case scenario, our Fair value for all the business areas is EUR 43.1m, which including the Net cash of EUR 2.4m (including bonds) sums up to EUR 45.6m or EUR 3.74 per share. Applying a NAV discount of $20\%$ leaves a Fair value of EUR 3.00 per share indicating an upside of around $30\%$ (based on a share price of EUR 2.30). 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 0.2m reported in the Q4 2020 report.
SOTP valuation scenarios
| Scenario | Sales 2020E (EURm) | P/Sales | FV (EURm) | FINTime (EURm) | FV (EURm) | External valuation (EURm) | Net cash/ share (EURm) | Net cash/ share (EURm) | NAV/ share (EUR) | NAV/ share (EUR) | Motivated share price (EUR) | Upside/ Downside |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bull | 34.3 | 1.5 | 53.0 | 0.2 | 53.2 | 32.7 | 2.4 | 0.20 | 55.7 | 4.57 | 20% | 3.66 |
| Base | 34.3 | 1.2 | 42.9 | 0.2 | 43.1 | 32.7 | 2.4 | 0.20 | 45.6 | 3.74 | 20% | 3.00 |
| Bear | 34.3 | 1.0 | 32.8 | 0.2 | 33.0 | 32.7 | 2.4 | 0.20 | 35.5 | 2.92 | 20% | 2.33 |
Source: Company reports (historical), Enlight Research (forecast), *calculated on share price of EUR 2.30
Enlight Research
April 26, 2021
INVL Technology
Enlight Fair value vs. External valuation
Compared to the external valuation of the financial assets of EUR 32.7m given in the Q4/20 report, our estimated Fair value is EUR 10.5m or 32% higher (before net cash, and NAV discount). The main valuation difference is for NRD Companies where our valuation is EUR 9.1m higher, followed by Novian companies where our valuation is EUR 2.3m higher. For NRD CS (Cybersecurity), we are slightly more conservative than the external valuator.
Compared to the valuation made in connection with Q3/20 report, our valuation has increased by 17% or EUR 6.1m, while the external valuation has increased by 20% or EUR 5.6m.
| Fair Value vs. External valuation Q4/20 | ||||
|---|---|---|---|---|
| Company | Enlight Research Fair Value (EURm) | Q4 2020 External valuation Fair Value (EURm) | Diff. (EURm) | Diff. (%) |
| NRD Companies | 16.3 | 7.1 | 9.1 | 128% |
| Novian Companies | 22.1 | 19.7 | 2.3 | 12% |
| FINTime | 0.2 | 0.2 | 0.0 | 0% |
| NRD CS | 4.6 | 5.5 | -1.0 | -18% |
| Total | 43.1 | 32.7 | 10.5 | 32% |
| Fair Value vs. External valuation Q3/20 | ||||
| --- | --- | --- | --- | --- |
| Company | Enlight Research Fair Value (EURm) | Q3 2020 External valuation Fair Value (EURm) | Diff. (EURm) | Diff. (%) |
| NRD Companies | 11.3 | 5.8 | 5.5 | 94% |
| Novian Companies | 20.8 | 16.1 | 4.7 | 29% |
| FINTime | 0.2 | 0.2 | 0.0 | 0% |
| NRD CS | 4.7 | 5.0 | -0.3 | -7% |
| Total | 37.0 | 27.1 | 9.9 | 36% |
Source: Enlight Research, Company report
Enlight Research
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April 26, 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 sales 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 a 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 a portfolio 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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April 26, 2021
INVL Technology
| Income Statement | 2019 | 2020 | 2021E | 2022E | 2023E |
|---|---|---|---|---|---|
| Net sales | 1 | 7 | 4 | 5 | 6 |
| Total operating costs | -1 | -2 | -2 | -2 | -2 |
| EBITDA | 1 | 5 | 1 | 3 | 3 |
| Depreciation | 0 | 0 | 0 | 0 | 0 |
| Amortizations (total) | 0 | 0 | 0 | 0 | 0 |
| Impairment charges | 0 | 0 | 0 | 0 | 0 |
| EBIT | 1 | 5 | 1 | 3 | 3 |
| 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 | 1 | 3 | 3 |
| Net earnings | 1 | 5 | 1 | 3 | 3 |
| Balance Sheet | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| Assets | |||||
| Cash and cash equivalent | 1 | 2 | 1 | 3 | 6 |
| 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 | 4 | 7 |
| Tangible assets | 0 | 0 | 0 | 0 | 0 |
| Associated Companies | 0 | 0 | 0 | 0 | 0 |
| Investments | 26 | 33 | 36 | 36 | 36 |
| 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 | 36 | 36 | 36 |
| Deferred tax assets | 0 | 0 | 0 | 0 | 0 |
| Total (assets) | 29 | 35 | 38 | 40 | 43 |
| Liabilities | |||||
| Short-term debt | 0 | 0 | 1 | 0 | 0 |
| Non-ib current liabilities | 0 | 0 | 0 | 0 | 0 |
| O current liabilities | 0 | 0 | 0 | 0 | 0 |
| Current liabilities | 0 | 0 | 1 | 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 | 1 | 0 | 0 |
| Deferred tax liabilities | 0 | 0 | 0 | 0 | 0 |
| Provisions | 0 | 2 | 2 | 2 | 2 |
| Shareholders' equity | 29 | 34 | 35 | 38 | 41 |
| Minority interest (BS) | 0 | 0 | 0 | 0 | 0 |
| Minority and equity | 29 | 34 | 35 | 38 | 41 |
| Total (liabilities) | 29 | 35 | 38 | 40 | 43 |
| Capital structure | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| Equity ratio | 99.6% | 95.3% | 92.6% | 95.8% | 96.1% |
| Debt / Equity ratio | 0.0% | 0.0% | 3.2% | 0.0% | 0.0% |
| Capital invested | 27.6 | 31.5 | 34.9 | 34.9 | 34.9 |
| Capital turnover rate | 0.1 | 0.2 | 0.1 | 0.1 | 0.1 |
| Profitability | 2019 | 2020 | 2021E | 2022E | 2023E |
| ROE % | 3.3% | 15.2% | 3.5% | 8.4% | 8.2% |
| ROCE% | 3.3% | 15.2% | 3.4% | 8.3% | 8.2% |
| ROC% | 3.6% | 17.3% | 3.8% | 8.8% | 9.3% |
| EBITDA % | 63.7% | 69.2% | 33.5% | 57.1% | 57.9% |
| EBIT % | 63.7% | 69.2% | 33.5% | 57.1% | 57.9% |
| Net Margin | 63.7% | 69.2% | 33.5% | 57.1% | 57.9% |
| Valuation | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| EV | 21.0 | 23.1 | 28.5 | 25.4 | 22.2 |
| P/E | 24.0 | 5.3 | 24.0 | 9.3 | 8.8 |
| P/E diluted | 24.0 | 5.3 | 24.0 | 9.3 | 8.8 |
| P/Sales | 15.3 | 3.7 | 8.0 | 5.3 | 5.1 |
| EV/Sales | 14.3 | 3.4 | 8.0 | 4.7 | 3.9 |
| EV/EBITDA | 22.5 | 4.9 | 24.0 | 8.3 | 6.8 |
| EV/EBIT | 22.5 | 4.9 | 24.0 | 8.3 | 6.8 |
| P/BV | 0.8 | 0.8 | 0.8 | 0.8 | 0.7 |
| Per share measures | 2019 | 2020 | 2021E | 2022E | 2023E |
| --- | --- | --- | --- | --- | --- |
| EPS | 0.08 | 0.39 | 0.10 | 0.25 | 0.27 |
| EPS, adjusted | 0.08 | 0.39 | 0.10 | 0.25 | 0.27 |
| CEPS | 0.08 | 0.39 | 0.10 | 0.25 | 0.27 |
| Operating CF/share | 0.05 | 0.49 | 0.10 | 0.25 | 0.27 |
| Capital empl./share | 2.26 | 2.59 | 2.87 | 2.87 | 2.87 |
| BV/share | 2.38 | 2.77 | 2.87 | 3.12 | 3.39 |
| Tangible BV/share | 2.38 | 2.77 | 2.87 | 3.12 | 3.39 |
| 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 | 5.672 | 19.91 % | |||
| AB Invalda INVL | 4.083 | 14.33 % | |||
| Irena Ona Miseikiene | 3.430 | 12.04 % | |||
| AB Lietuvos draudimas | 2.128 | 7.47 % | |||
| Kazimieras Tonkunas | 1.581 | 5.55 % | |||
| Alvydas Banys | 1.447 | 5.08 % | |||
| Key people | |||||
| --- | --- | ||||
| CEO | Kazimieras Tonkunas | ||||
| Chairman | Kazimieras Tonkunas |
Enlight Research
April 26, 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
April 26, 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 one trading day after the analyst 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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Enlight Research
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INVL Technology
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Enlight Research
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