Significant growth in an uncertain market environment underlines resilience of the business model
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The half-year figures of Frequentis AG (ISIN ATFREQUENT09, General Standard, FQT GY) show a 15.7% increase in revenue (to €167.3 million), growth was a solid 4.3%. EBITDA (€8.4 million) and EBIT (€-0.5 million) in the first half of the year are characterised by the seasonality typical of the business model - project acceptances accumulate at the end of the year, while fixed costs are evenly distributed. This typically results in a significantly higher margin in H2. Despite continuing uncertainties [including pandemic measures, cost inflation (wage agreements, electronic components) and supply chains], we expect Frequentis to achieve its annual targets for 2022 (including increases in revenue and order intake, EBIT margin between 6% and 8%). We leave our revenue and earnings expectations unchanged, but the interest rate environment, peer valuation and higher-than-expected inventories (working capital) have a negative impact on the valuation. Given the resilience of the business model, a 2022 P/E of 25.5 seems reasonable to us.
Our DCF analysis yields a value per share of €29.52 and the peer group analysis on the basis of 2022, 2023 and 2024 yields an average value per share of €31.43. With equal weighting of both approaches, the Fair Value per Frequentis share is € 30.47. Our fair value is thus 5.7% below the current share price and leads to our investment recommendation of "Hold".
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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