Record H1 and completion of acquisitions – Pandemic-related uncertainties remain
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In the first half of the year, Frequentis AG was able to increase sales by 9.4% to €144.6 million and - contrary to the typical seasonality - to already report a positive EBIT contribution (in the amount of €5.4 million). In addition, the acquisition of the three L3Harris units was completed earlier than planned, hence we have raised our 2021 estimates. Around 3/4 of the expected sales growth in 2021 is attributable to inorganic growth (L3Harris). The strong organic growth in H1 was also driven by project acceptances; we are more cautious here for H2 - also in view of potential lockdowns. Frequentis serves end markets (safety-critical infrastructure) that are not subject to economic cycles, but suppliers can benefit from government infrastructure programs. Despite the significant price increase in recent months, the Frequentis share is not too expensive - the peers trade at higher multiples on median.
Our DCF analysis results in a value per share of €20.76 and the peer group analysis based on 2021 and 2022 suggests an average value per share of €35.37. Equally weighting both approaches, the Fair Value per Frequentis share is €28.07. Since the share price has increased by around 45% since the beginning of the year and our fair value is actually only 1.3% above the current price, our investment recommendation is "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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