“Safety†against cyclicality
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In the first half of the year, Frequentis AG achieved 7% revenue growth to € 132.4 million, driven by both segments. EBIT and EPS improved, but were still negative in the first half of the year due to the typical seasonal nature of project approvals (focus on H2 and Q4). The 10% decline in incoming orders is only of limited significance due to a base effect (two major orders lasting several years in the previous period, including OneSKY Australia). Frequentis is not cyclically sensitive due to its strong exposure to the public sector. The outlook, which includes an increase in incoming orders for the year as a whole, underscores this and is also based on larger orders placed after the reporting date (e.g. US Navy). With an EV/revenue of 0.5 and a P/E of 16.9, Frequentis, as a non-cyclical technology company, is, in our view, favourably valued.
We see the fair value - calculated from DCF and peer valuation - at €25.78 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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