QUEST HOLDINGS | Exquisite M&A ‘deal-questing’ lifts valuation
Solid 9-mth execution underpins 2024 growth – Quest reported a solid set of 9-month 2024 results, with sales +12% (€926m) and EBITDA +9% yoy (€65m), driven by double digit top line growth in IT services and commercial activities and mid-single digit growth in Courier services. The bottom-line figures were slightly weighed down by elevated net financials, with net profit rising 2%. With the seasonally strong Q4 ahead, the high single digit EBITDA growth embedded in our numbers seems well underpinned. This is in symphony with mgt outlook for: 1) strong demand and continuing investments in IT services, 2) mild growth in commercial operations EBITDA, 3) sustained growth in courier (mid-single digits) supported by eCommerce trends, and 4) positive outlook for the RES division.In constant quest for deals – With a strong M&A track record, Quest recently announced an agreement for the acquisition of 70% of Benrubi, a Greek household appliances company, for €27m (pending approvals) while also agreeing on the sale of a 20% stake in ACS (its courier arm) to GLS for €74m (completed within Q4’24). Embedded option clauses are in place for the remaining stakes. Following this M&A action, Quest will expand its commercial activities with margin enhancing products, while managing to crystallize the value of its courier business (valued at €370m, almost 5x the BV of the business) with a disposal possibility within the next two years.
Slightly recalibrating our forecasts, maintaining 8% 3-year EBIT CAGR – We have lifted our forecasts by 1% for FY24, now seeing revenues at €1,310m (+9.5% yoy) and EBITDA at €91m (+9.3% yoy). Our 2024e forecast points to a +9.6% yoy Q4’24e EBITDA growth, continuing 9-mth trends, as pointed out by mgt. We reckon this is an attainable target as we are in the traditionally strong ‘Black Friday-Xmas’ season. Looking further out, we keep our EBITDA estimates unchanged, anticipating +8% 3-year profit CAGR.
Balance sheet optionality – Quest maintains a healthy balance sheet (9M’24 net debt at €45m), while it has implemented investments of more than €155m in the 2019-23 period and has seen continuing operations EBITDA grow c20% annually. In the current year, Quest has planned some €25-30m investments, ex acquisitions, while agreeing to monetize a 20% stake in ACS and proceeding to a new acquisition (Bernubi). We believe that the ACS stake sale is likely to catalyze higher shareholder returns. As such we factor in a c€0.19/share special dividend out of the proceeds on top of our c50% payout ratio (€0.24/share) for 2024e.
Valuation – We value Quest via a SOTP of its 4 segments, to which we apply a 10% holding discount. Our indicative valuation range is set between €7.1 and €8.6 per share. We have upgraded our valuation regarding ACS mainly reflecting the value attired by the announced deal (€370m EV). Quest currently trades c6.4x its 2025e EV/EBITDA. We believe that the current valuation constitutes a compelling risk-reward proposition, underpinned by the solid growth outlook and value crystallization of M&A.
Quest Holdings SA. Quest Holdings SA, formerly Info-Quest SA, is a Greece-based information technology (IT) and telecommunication solutions provider. Its main activities include the digital technology industry, with activities across the entire spectrum of the ICT market, from the manufacture and distribution of products to the design, application and support of Integrated IT Solutions for large organizations in the private and public sectors. Quest Holdings coordinates its activities in this market via the strongest companies in the field: Info Quest Technologies, Uni Systems and iSquare. In the Green Energy sector, the Group implements large investment projects on electricity production from renewable sources with licensed power exceeding 400 MW regarding more than 30 wind and photovoltaic parks. In this market, Quest Holdings is active through Quest Energy and its subsidiaries. At the same time, the Group is also active in the Courier Services sector, through ACS.
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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