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Austriacard Holdings | Solid underlying momentum highlights valuation disparity

Strong 9M results validate mgt guidance for 10-12% FY adj EBITDA growth – ACAG reported quite solid 9M’24 results, with revenues increasing +14% yoy to €298m and adjusted EBITDA reaching €43m (+18% yoy). Results were driven by a quite impressive Q3’24 performance, underpinned by higher card volumes, nearly c3x digitization revenues, and new document management projects in MEA. Mgt reiterated its FY guidance for 10% revenue and 10-12% adjusted EBITDA growth, which we find more than achievable. Given encouraging industry trends and the resilient geographically diversified model, we consider ACAG’s current valuation to be overly punitive and not indicative of its underlying growth characteristics.

Underlying trends underpin our baseline c10% 3-yr adj. EBITDA CAGR forecast – We recalibrate our FY’24 forecasts in light of the strong 9-mth results, which have put the group firmly on track to achieve the figures outlined by mgt. We thus increase our FY’24e EBITDA/Net profit by c3-4%, while pushing through similar upgrades for 2025-26e (c4-5%). Our estimates now call for 9% adj. revenue CAGR between 2024-27e, predicated on greater payment solutions volumes as ACAG leverages its position in financial institutions, and particularly its leading position in challengers, greater pricing due to growing contributions from higher-value cards (i.e. metal, biometric), the expansive digitization project backlog to be executed ahead, and the improved outlook for security printing solutions in MEA. We expect stronger top line growth to feed through to c10% adj. EBITDA CAGR over 2024-27e supported by better pricing/mix across payment solutions and growing contributions from digital transformation technologies, which have been bolstered by the newly added data analytics capabilities which offer AI exposure and new cross-selling capabilities.

Market trends remain supportive; OCF conversion to facilitate spending – Card industry dynamics continue to support our growth prospects, with payment solutions poised to benefit from mid-single-digit volume growth and the growing global prominence of neobanks/challengers. In non-card activities, we expect demand for digital transformation projects in CEE to provide a notable growth avenue for ACAG through the medium term. We see the combination of resilient trends and improving margins translating to stronger OCF generation ahead as WC dynamics rationalize. With our capex estimates in the €15-18m area through 2027e, and assuming no M&A activity, we expect ACAG to deliver positive FCFE of >€20m from 2025e onwards.

Valuation – We still base our valuation on ACAG on a DCF at 9.5% WACC. Filtering through the c4-5% uplift to our forecasts and after a roll-over of our valuation to 2025e, our model yields a baseline value of €8.6/share (vs. €8.2 before). Flexing our WACC and perpetuity growth inputs by 0.5% each results in a fair value range between c€7.8 and c€9.7 per share, thus indicating plenty of upside to be crystallized if our future estimates materialize. Our baseline valuation effectively places ACAG at 6.3x 2025e EV/EBITDA, still at discount vs. the median valuation of the broad peer group.