AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
This research has been commissioned and paid for by the company and is deemed to constitute an acceptable minor non-monetary benefit as defined in MiFID II


Bloomberg   KEYW BB
Smart Cards-Security  /  Belgium  Web Site   |   Investors Relation
From hardware provider to fintech specialist
Upside 101%
Price (€) 1.00
Market Cap (€M) 22.4
Benchmarks Current multiplesWeightValues (€)Upside 
DCF (Edit and simulate)  35%3.02204%
NAV/SOTP per share   20%1.9899%
EV/EBITDA based   20%n/a0%
P/E Peers 10%0.50-50%
Dividend Yield Peers 10%0.00-100%
P/book based   5%n/a0%
Target Price  100%2.0076% 
Valuation matters

The DCF now includes the strategic change made by Keyware from a complete hardware supplier to more of a software company.

The company no longer benefits from the terminals division as its potential to increase its ASP is currently limited compared to bigger competitors and the democratisation of online payments. These reasons and the headwinds encountered from late 2016 (difficulties with small businesses, longer lead-times in the institutional market) have led us to downgrade our expectations, as we now expect a drop in growth between 2019 and 2020 (by around -10%). For authorisations, we chose to apply a steady growth at around 13% in the coming years, as the company has demonstrated its capacity to realise remarkable revenue and operating profit in this division. The business witnessed strong growth rates in recent years (CAGR of 67% for 2012-17), in the wake of a strong start (this business originates from the takeover of BRV Transactions in 2007) and of an increasing installed basis. As mentioned in the Business & Trends and Money Making sections, the software division, although currently representing a minor part of Keyware’s operating profitability, has important potential. The good perspectives for this division and the results in FY18 lead us to apply, after Magellan and EasyOrder’s integration, a 15% growth rate in the following years. We expect that the Software division will rapidly become a major value creator for Keyware.

We have decided to integrate the financial income in the EBITDA, as it represents the difference between the total value of the contract and the discounted value recognised each month. This difference is only the product of the actualisation. Having received the cash, it is necessary for the company to reintegrate the difference in the EBITDA to represent the truly accessible cash generation.

Concerning the NAV, we have chosen to value Keyware in the same way as we do for Ingenico, which has a very similar business. As a consequence, we value the business lines by EV/Sales multiples with a computed 3-year average forecast, with a multiple of 2.3x for the Terminals business and 1.5x for Authorisations, for which we have applied a discount due to its inferior margins and dependence on terminal sales. We also integrate the new Software business at the acquisition prices.
As for the peer valuation, we have included companies in our coverage with a similar business line (Ingenico) or sector (IT-Hardware), although, apart from Ingenico, the actual businesses are rather different. This approach delivers a strong upside in every metric, with the exception of the dividend yield, but, given the difference in scale, we have chosen to apply a discount to Keyware.

Comparison Based Valuation
Computed on 18 month forecastsMcap (€M]P/E (x)Ev/Ebitda (x)P/Book (x)Yield(%)
Peers ratios 43.5 20.2 11.6 1.25
Keyware's ratios n/a n/a n/a n/a
Premium 0.00% 0.00% 0.00% 0.00%
Default comparison based valuation (€) 0.50 n/a n/a 0.00
Amadeus IT Group 27,030
EdenRed 11,743 35.618.8-17.21.83
Ingenico 7,818 26.912.72.441.34
DCF Valuation Per Share Help View DCF history
WACC % 7.90
PV of cashflow FY1-FY11 €th 25,521
FY11CF €th 6,219
Normalised long-term growth"g" % 2.00
Sustainability "g" % 1.80
Terminal value €th 101,878
PV terminal value €th 47,608
PV terminal value in % of total... % 65.1
Total PV €th 73,130
Avg net debt (cash) at book v... €th 2,264
Provisions €th 147
Unrecognised actuarial losses... €th 0.00
Financial assets at market price €th 150
Minorities interests (fair value) €th 0.00
Equity value €th 70,868
Number of shares Th 23,453
Implied equity value per share 3.02
Sustainability impact on DCF % -2.22
Assessing The Cost Of Capital Help
Synthetic default risk free rate % 3.50
Target equity risk premium % 5.00
Tax advantage of debt financ... % 30.0
Average debt maturity Year 5
Sector asset beta x 0.89
Debt beta x 0.50
Market capitalisation €th 22,430
Net debt (cash) at book value €th 2,868
Net debt (cash) at market value €th 2,489
Company debt spread bp 250
Marginal Company cost of debt % 6.00
Company beta (leveraged) x 0.96
Company gearing at market v... % 12.8
Company market gearing % 11.3
Required return on geared eq... % 8.32
Cost of debt % 4.20
Cost of ungeared equity % 7.97
WACC % 7.90
DCF Calculation Help
  12/18A 12/19E 12/20E 12/21E Growth 12/22E
Sales €th   19,635 20,597 21,421 22,827 9.00% 24,882   
EBITDA €th   4,171 4,496 4,723 4,967 7.20% 5,324   
EBITDA Margin %   21.2 21.8 22.0 21.8 21.4   
Change in WCR €th   1,100 -803 -903 -988 0.50% -993   
Total operating cash flows (pre tax) €th   5,315 3,493 3,670 3,973 4,331   
Corporate tax €th   -305 -408 -414 -460 1.50% -466   
Net tax shield €th   -53.4 -77.1 -106 -105 1.50% -107   
Capital expenditure €th   -1,198 -618 -643 -799 1.50% -811   
Capex/Sales %   -6.10 -3.00 -3.00 -3.50 -3.26   
Pre financing costs FCF (for DCF purposes) €th   3,759 2,390 2,508 2,610 2,947   
Various add backs (incl. R&D, etc.) for DCF... €th     
Free cash flow adjusted €th   3,759 2,390 2,508 2,610 2,947   
Discounted free cash flows €th   3,759 2,390 2,324 2,241 2,346   
Invested capital   32.9 34.5 35.6 36.6 37.2   
NAV/SOTP Calculation
 % ownedValuation technique Multiple used Valuation at 100%
In currency per share
% of gross assets
Terminals 100% EV/Sales 2.3 23,175 23,175 0.99 46.9%
Authorisations 100% EV/Sales 1.5 15,570 15,570 0.66 31.5%
Software 100% Adj. historical price 10,700 10,700 0.46 21.6%
Total gross assets 49,445 2.11 100%
Net cash/(debt) by year end -2,868 -0.12 -5.80%
Commitments to pay -147 -0.01 -0.30%
Commitments received
NAV/SOTP 46,430 1.98 93.9%
Number of shares net of treasury shares - year end (Th) 23,453
NAV/SOTP per share (€) 1.98
Current discount to NAV/SOTP (%) 49.7 View history

Changes to Story : 22/01/2020, Changes to Forecasts : 22/01/2020.