COVID-19 casts a shadow over 2020, Frequentis positioned more comfortably than other companies
Frequentis AG (ISIN ATFREQUENT09, General Standard, FQT GY) has completed 2019 in line with our expectations in terms of net income and EPS. We expected a slightly stronger increase in revenue (+8% instead of +6.3%), whereas we were positively surprised by the order intake (+9%) and the fact that our EBIT margin expectations were exceeded [5.2%(e) vs. 5.7%(a)] - which more than offsets the revenue effect on the EBIT side. We believe that Frequentis is better prepared than most of the other companies to meet the challenges in 2020: On the one hand, the classification as an infrastructure-critical company is favourable. On the other hand, the customer base (>90% public authorities) makes project cancellations rather unlikely, whereas in the private sector cost reduction programmes are already initiated in some cases. Government agencies are currently endeavouring to counteract an impending (longer-term) recession with public investment and infrastructure programmes. In our baseline scenario we assume moderate growth of 4% in 2020. With an EV/revenue of 0.6 (peer group: median 0.9, mean: 1.2), Frequentis currently appears to be favourably priced.
Our analysis results in a fair value of €25.19; we therefore reiterate our "Buy" rating.
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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