Public authority customers are a strength in the crisis
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Frequentis AG (ISIN ATFREQUENT09, General Standard, FQT GY) is likely to be much less affected by the Covid-19 crisis than the initial price reaction implies. The company looks back on a good start into 2020; Frequentis customers [in civil ATM (Air Traffic Management)] are not airlines and airport operators who recently announced austerity initiatives, but public authorities (such as air traffic control). Politicians and central bankers agree that the Covid-19 crisis should be resolved by fiscal means - cancellations of orders by government organisations therefore seem very unlikely to us. The company has a broader operational base than in 9/11 and is currently experiencing increasing tenders from blue-light authorities (rescue services, police) and from military aviation. Although supply chain difficulties do not currently exist and the company is monitoring the situation closely, they could still occur, as in other industries. In addition, travel restrictions could lead to delays in revenue recognition, which we have reflected in our forecast. Our updated estimates and the lower peer multiples lead to a lower price target.
We see the fair value - calculated from DCF and peer valuation - at €22.52 per share and re-iterate 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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