London, UK, 24 June 2022

EQS Group (EQS): Regulatory stimulus set for H222

EQS is in a strong position to build its client base as the EU whistleblowing directive comes into force across Europe. Delays in adoption of formal legislation are a frustration but do not detract from the strength of the underlying proposition. EQS retains its ambition to be the leading European cloud provider for global investor relations and corporate compliance solutions by 2025. The €45m raised in March will help fund the repayment of short-term bank and vendor loans during Q222. We see management’s targets of €130m of group revenues and EBITDA margins of at least 30% for FY25 as demanding but achievable.

EQS’s share price has retreated by 35% since the start of the year, while financial B2B company valuations have fallen by 32% and those of application software companies by the same percentage. Profitability is currently subdued by the additional investment phase, so traditional valuation multiples remain of limited use. For our DCF, we have raised the WACC by 1% to 9% to reflect rising interest rates, rather than any company-specific reason. Using this and terminal growth of 2%, the DCF now indicates a value of €47.66/share, from our April figure of €57.93, a level still well above the current market price.

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