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Edison Investment Research Limited
London, UK, 15 June 2021
4iG (4iG): Executing at pace on its five-year plan In FY20 and into H121, 4iG has continued to execute at pace, with a series of acquisitions that will transform the group once the acquisition of DIGI Group, a leading telecoms services provider, closes in Q321. 4iG's strategy is focused on three pillars: IT services; telecoms & infrastructure; and space & defence. The group continues to scale in Hungary, with a target to become the market leader, but we also expect 4iG to develop a more diversified regional footprint in FY21 and FY22. On top of 39% revenue growth in FY20, we estimate 44% revenue growth in FY21, even before considering the contribution from DIGI Group (FY20 revenues HUF70bn, EBITDA HUF19bn). 4iG is fast growing, with a likely step-up in margins post DIGI Group, and offers an attractive dividend yield, yet trades on an FY21e P/E of 10.5x, a 40%+ discount to its peer group.
At an FY21 P/E of 10.5x and EV/EBITDA of 6.1x, 4iG's valuation neither reflects the transformation the business has already achieved nor its future prospects as management executes on its plan for market leadership in Hungary. Even pre-DIGI Group, the stock remains at a substantial discount to regional peers, as well as a material discount to our NPV estimate of HUF1,237 per share (WACC of 8.2%).
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