Collateral damage due to FMA decision against Commerzialbank Mattersburg very likely
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Frequentis AG (ISIN ATFREQUENT09, General Standard, FQT GY) has substantial deposits of around €31 million with an Austrian bank that was prohibited from continuing operations by the Austrian Financial Market Authority (FMA). The allegation against Commerzialbank Mattersburg in Burgenland (50 employees; balance sheet total €800 million) is related to balance sheet fraud and it can be assumed that a large proportion of the deposits is lost. However, even in the worst case of a total loss of the deposit, Frequentis' operations would not be adversely affected. For reasons of caution, our updated estimates assume that Frequentis will lose its entire deposit with Commerzialbank - the resulting valuation effect corresponds to approximately €2.30 per share (based on 13.28 million shares). The price of the Frequentis share declined by €2.90 (XETRA close) shortly after the announcement, so the worst case scenario had been more than priced in. Since then, the share price has recovered significantly. Even with the reduced price target we confirm our “Buy” rating.
Considerable financial losses. The incident is also affecting other companies that have their deposits with Commerzialbank. These companies cannot access their funds in the short term and should expect considerable financial losses. The Governor of Burgenland, for example, suspects that the €5 million deposit of Energie Burgenland is "gone". The Austrian subsidiary of CTS Eventim (Barracuda) has deposits of €34 million with the institute. For these large deposits, the deposit insurance (up to €100k) hardly helps to mitigate losses.
Positive news prevail. Positive news of the last few weeks, such as the projects in Hamburg (police/fire brigade), Leeds (Leeds Bradford Airport) and Greece (coast guard) are hardly recognised given today's announcement. In Hamburg, Frequentis was awarded the contract for the Perle project. The company will supply the communication systems for the emergency control centres of the police and fire brigade, and take over system maintenance for at least 10 years. Although it was agreed not to disclose the exact project volume, it is likely to be in the upper single-digit million range.
Frequentis AG is an Austria-based supplier of communications and information systems, diversifying its activities into two business segments: ATM (Air Traffic Management) business segment, which includes ATM Civil, including Information Management, and Defense business fields, and PST (Public Safety & Transport) business segment, which includes Public Safety, Public Transport and Maritime business fields. As of December 31, 2010, the Company had seven wholly owned subsidiaries in the area of Sales & Operations, four wholly owned subsidiaries and one majority owned subsidiary, as well as one affiliate, APUS Software GmbH, in the area of Software, and two wholly owned, one majority owned, one minority owned, as well as one affiliate, 3T Communications AG, in the area of Services. The Company's subsidiaries are located in the United States, the United Kingdom, Canada, Australia, Germany, Singapore, Slovak Republic, Romania, and the Czech Republic.
Since 2007, BankM AG (Frankfurt am Main, Germany) is the partner of small and medium-sized enterprises and specializing in capital market financing with its experienced, interdisciplinary team. SME customers benefit from individual service and rapid access to selected investors that fit their needs. BankM's services include capital market advisory, arranging IPOs and capital increases for equity financing, debt advisory and debt capital mediation, designated sponsoring and research as well as M&A, hereby specializing in the identification of suitable strategic partners in China.
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