Update: Cash is king...and underappreciated
CENIT’s Q3 results were very encouraging. PLM continued its growth trend with a 9.5% y-o-y increase in revenue and EIM returned to growth (11%y-o-y) after five consecutive quarters of y-o-y decline. Cost control and a focus on higher-margin business contributed to EBIT margin improving from 7.0% in Q313 to 7.7% in Q314. The results are somewhat flattered by a weak comparative and a couple of significant deals, but we are optimistic about the opportunity and CENIT’s ability to execute. Proprietary software sales in particular offer a route to accelerated revenue growth and margin expansion. The market does not seem to be appreciating the large cash balance, with FY14e EV/EBIT of only 7.8x compared to 11.8x for its peers.
Cenit is a holding company, engaged in the IT services and consulting industry. Co. provides all types of services in the field of introducing and operating information technology and to sell and market information technology software and systems. Co. has two business divisions: Product Lifecycle Management (PLM) and Enterprise Information Management (EIM). The PLM segment focuses on industrial customers and the corresponding technologies. Its industry focus is on the automotive, aerospace, mechanical engineering and shipbuilding industries. The Enterprise Information Management (EIM) segment focuses on the customer segment of trade and commerce, banks, insurance firms and utilities.
Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.
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