A-rated TMT credit investments/Better credits at similar spreads

In this report we evaluate the single-A TMT space. We argue that the notes of Wolters Kluwer, Relx, Swisscom and ASML look attractive. The notes of SAP and Telenor look to trade at fair value. As spread curves trade rather flat, we prefer notes in the belly of the curves. In this note we provide a summary of our general findings, followed by company descriptions.

Telenor (Buy, TP: NOK 180, +30%) Q3 24: Nordic guidance lifted, and yet the rump has been de-rated

Telenor has reported a solid set of Q3 numbers (c1% EBITDA beat) and has lifted some key Nordic guidance parameters: Group FCF guidance for 2024 and 2025 is now +6% and +11% ahead of consensus respectively.

Adj. EBITDA 1% above, strong FCF

Truecaller (Buy, TP: SEK60.00) - iOS product a game changer

Sinch is set to launch a new iOS product when iOS18.2 is released later in Q4, and Truecaller aims to convert iOS users to Premium subscribers in 2025. This could be a game changer, boosting revenue growth and driving more stable subscription revenues.

Paratus Energy (Buy, TP: NOK70.00) - Mexico concerns remain

While short-term in nature, Pemex’s 45-day suspension for jackup Courageous adds to investor concerns related to Paratus Energy’s Mexico exposure. We have taken a more conservative approach to our jackup modelling (both day-rates and risk for contract gaps), more than offsetting the short-term positive effect from the raised 2024 guidance (helped by strong PLSV performance). We reiterate our BUY, but have lowered our target price to NOK70 (80).

Benchmark Holdings Plc (Buy, TP: NOK7.00) - Divesting genetics business

Today Benchmark Holdings announced the sale of its genetics business to Novo Holding for a total potential consideration of GBP260m, equivalent to 17.9x EV/EBITDA – at 16% above our SOTP, we find this attractive. Following the transaction, the company will repay loans, focus on the remaining business and terminate its strategic review.