IDEAL HOLDINGS | Mastering the art of deal making
Another deal, another crystallization of value… – IDEAL Holdings (IDH) announced in end April an agreement to sell its Industrial arm “Astir Vitogiannis” to “Guala Closures” for an EV of €136m. Given the €40m investment of IDH in this business, the c7.2x trailing EV/EBITDA valuation helps the group monetize its asset in less than 3 years securing a 2.6x multiple on invested capital and a >40% IRR. The deal is set to close in H2’24 and is testament to the strong deal-making capacity of the IDH management team.Significant valuation dislocation; IT stub at depressed implied valuation – Post the divestment of Astir, IDH will be left with a pro-forma 2024e EBITDAaL (cash, after leases) of c€41m on our estimates, with IT representing c35-40%. With the latter primed for c16% EBITDA CAGR in the next 6 years and Specialty Retail (ADS) growing c8%, we estimate the pro-forma group annual EBITDA growth profile at c13%, quite a compelling proposition. With this in mind, the monetization of IDH’s Industrial arm makes even more pronounced the valuation dislocation. Indicatively, using our fundamental DCF-based valuation for Specialty Retail (c6.7x EV/EBITDAaL), we estimate that the current price places the IT stub at just c4.2x EV/EBITDA, namely a massive discount vs the EU IT sector and other Greek pure play software companies. Even assuming a value for ADS equal to the acquisition price paid by Ideal last year (€100m), the IT stub would remain at a palatable valuation (€340m and >€50m net cash, thus having plenty of optionality regarding M&A.
Estimate update and valuation – We have made modest changes post FY23 and the deal announcement, continuing to consolidate Astir (awaiting regulatory approval) in group figures (but present our pro-forma estimates in our report). We recalibrate our valuation now valuing the Industrial segment in sync with the announced deal, while ticking higher our IT valuation reflecting estimate upgrades. We continue to base our valuation on a SOTP of the 3 segments to which we apply a 10% holding discount, coming up with an indicative baseline fair value near €8.0/share, a tad higher than our previous valuation. Pro-forma for the sale of Astir, this effectively values the group at c8.8x x 2024e EV/EBITDA, quite a conservative valuation given the high growth and the c35-40% exposure to the secular theme of digitization. Flexing our WACC and perpetuity growth inputs by 0.5% yields a fair value range between €7.2 and €9.0/share.
Ideal Group SA is a Greece-based company engaged in the trade of high technology products and services. The Company's main activities are representation, distribution and support of high technology products; office automation solutions; provision of computer security solutions through collaborations with international manufacturers, such as VeriSign and Check Point; integrated business information technology (IT) solutions using tools like business intelligence and content management, and the provision of equipment and integrated solutions for customer support. IDEAL Group S.A. has four main subsidiaries: IDEAL Electronics, which represents and distributes Toshiba IT products, including notebooks, projectors and peripherals; My Multi Shop SA supplies Bizerba and Toshiba office automation products; Adacom is a provider of digital security services, and IDEAL Systems is engaged in the provision of integrated software solutions based on Unix and Wintel systems and after sale support.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
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